Document:

Document

Exhibit 10.11

Amended and Restated
Crown Castle International Corp. Extended Service Separation Program
Crown Castle International Corp. (“Company”) previously adopted the Crown Castle International Corp. Extended Service Separation Program (“Program”) to provide certain compensation benefits to long-term employees of the Company and affiliates of the Company (collectively, “Company Group”) who voluntarily terminate their employment with the Company Group.  The Company has, effective February 17, 2022 (“Effective Date”), amended and restated the Program to make certain changes to its terms.  An employee is eligible to participate in the Program if he or she has (i) attained certain minimum age and employment criteria, (ii) provided timely notice to the Company, (iii) agreed to timely execute a Separation Agreement (defined below), including a general release of claims against the Company Group as well as a confidentiality agreement and an assignment of inventions, (iv) for individuals who have received awards of restricted stock units (“RSUs”) under the Company’s 2013 Long-Term Incentive Plan (“LTIP”), agreed to timely execute an agreement containing post-employment restrictions, including non-competition and non-solicitation covenants, and (v) continued to work for the Company Group in “good standing” until his or her employment termination date as selected and approved by the Company hereunder (“Designated Termination Date”; the terms of “Miscellaneous–Not a Contract of Employment” below shall apply at all times with respect to any Designated Termination Date).
Eligibility Criteria
An employee of the Company Group who is in “good standing”1 is eligible to participate in the Program if he or she satisfies the following requirements.  An employee who is in “good standing” and satisfies each of the applicable requirements listed below and terminates on a Designated Termination Date will be treated as a “Qualifying Participant” for purposes of the Program.
1.Voluntary Termination.  The Program applies to a voluntary termination of employment with the Company Group by an eligible employee.  An employee whose termination of employment is involuntary or initiated by the Company Group for any reason is not eligible to receive benefits under the Program. 
2.Employment Requirement.  As a condition to receiving benefits under the Program, an employee must satisfy the following requirements on or before the employee’s Designated Termination Date:
a.The employee must complete at least ten years of employment with the Company Group, which shall be determined without rounding up fractional years of employment2;
b.The employee must attain at least 50 years of age;

1 An employee will be in “good standing” or not in “good standing” as so determined, from time to time, by the Crown Castle USA Corp. Vice President of Total Rewards (“VPTR”, which term shall include any future title changes which relate to substantially the same officer position), in his or her total discretion, after considering any information the VTPR deems relevant, including, the employee’s current and prior performance, compliance with applicable laws, disciplinary record and compliance with the Company’s policies and procedures.  The VPTR’s determination as to “good standing” shall be determinative and final.  
2 Any calculation of years of employment shall be determined by the VPTR and shall generally be based on an employee’s date of hire, including an “adjusted” date of hire for an employee hired in connection with an acquisition and who received credit for periods of employment with an acquired company.  An employee who is considering retirement under the Program is encouraged to contact the Business Support department at Retirement@crowncastle.com to confirm the calculation of his or her years of employment.  The VPTR’s determination as to years of employment shall be determinative and final.  

c.The sum of the employee’s age and years of employment must be equal to or greater than 70 (for purposes of this calculation, fractional years may be included but not rounded up).
3.Notice Requirement.  An employee who satisfies the criteria above (or will satisfy such criteria as of the employee’s Designated Termination Date) must provide the Company with timely notice of his or her intent to terminate employment with the Company.  The Company shall, from time to time, establish a minimum notification period (“Minimum Notification Period”) and maximum extension period (“Maximum Extension Period”) which shall apply for purposes of this Program (see “Administration of the Program” below).  The notification provided by the employee must propose the employee’s preferred termination date (“Requested Termination Date”), which should be a date after such Minimum Notification Period.  This notification must be provided using the electronic mail address Retirement@crowncastle.com.  
4.Approval Requirement.  The VPTR must formally approve in writing the employee’s eligibility for participation in the Program as well as the Designated Termination Date before an employee is eligible to receive any benefits under this Program.  The VPTR shall, in his or her sole discretion, select and approve a Designated Termination Date for the employee, which Designated Termination Date may be earlier or later than the Requested Termination Date; provided, however, that (i) the Company shall not be required to provide any additional compensation to the employee if the VPTR selects a Designated Termination Date earlier than the Requested Termination Date and (ii) the Designated Termination Date selected by the VTPR shall be no later than the Maximum Extension Period after the Requested Termination Date. 
5.Continued Employment Requirement.  In order to be eligible to receive benefits under the Program, an eligible employee must continue to work as an employee for a member of the Company Group in “good standing”, as determined by the VPTR, between the date that a proposed termination notice is delivered to the Company (as described in paragraph 3 above) and the employee’s Designated Termination Date.  If an otherwise eligible employee does not satisfy this requirement, he or she will not receive any separation benefits under this Program.
6.Separation Agreement Requirement.  In order to be eligible to participate in this Program, an otherwise qualifying employee will be required to fully release any and all claims that he or she may have against the members of the Company Group and their employees, agents, directors, officers and representatives, and make certain other promises, including with respect to confidentiality of information and assignment of inventions, by timely executing a copy of the Separation Agreement relating to the Program (“Separation Agreement”) with one or more members of the Company Group, as designated by the Company.  A copy of the Separation Agreement is available upon request by contacting Retirement@crowncastle.com.  An employee who has elected to participate in the Program will receive his or her Separation Agreement at least 60 days before the employee’s Designated Termination Date and will be required to execute the Separation Agreement on his or her Designated Termination Date.  An employee will have seven days to revoke the Separation Agreement after signing; however, if an employee elects to revoke the Separation Agreement, then the employee will not receive any separation benefits under this Program.
7.Non-competition Non-solicitation and Cooperation Agreement Requirement.  If an eligible employee has received an Eligible RSU Award (defined below), he or she will be required to timely execute an agreement with one or more members of the Company Group, as designated by the Company, including terms regarding post-employment obligations and conditions, including cooperation, non-competition, and non-solicitation, the terms of which may be incorporated into the Separation Agreement referenced above.  A copy of this agreement is available upon request by contacting Retirement@crowncastle.com.
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Program Benefits
An employee who is classified as a Qualifying Participant on his or her Designated Termination Date will be eligible to receive the following benefits upon termination of employment with the Company Group:
1.Conditional Special Vesting.  If a Qualifying Participant holds any Eligible RSU Awards on his or her Designated Termination Date, then the Qualifying Participant may receive Conditional Special Vesting (defined below) pursuant to this Section.  From and after the termination of a Qualifying Participant’s employment, and so long as the Qualifying Participant is, and has continuously been from and after such termination, in strict compliance with each of the requirements described in paragraphs 6 and 7 of the “Eligibility Criteria” section above (which compliance shall be determined at all times by the VPTR, in his or her sole discretion), then all Eligible RSU Awards held by the Qualifying Participant shall continue to have the opportunity to have their transfer and forfeiture restrictions lapse (i.e., “vest”) pursuant to the terms (other than any employment requirement) of the applicable Eligible RSU Award agreements as if the Qualifying Person had remained an employee of the Company Group from and after the termination date (“Conditional Special Vesting”).
a.    Each Eligible RSU Award shall be forfeited on the earlier of (i) the date upon which the Qualifying Participant elects to revoke the Separation Agreement (or any other agreement containing the requirements of paragraphs 6 and 7 of “Eligibility Criteria” above), and (ii) the date upon which the Qualifying Participant violates any provision of the Separation Agreement (or any other agreement containing the requirements of paragraphs 6 and 7 of “Eligibility Criteria” above), as determined by the Company in its sole discretion.
b.    Except as otherwise expressly set forth herein, each of the Qualifying Participant’s Eligible RSU Awards will remain subject to the terms of its Eligible RSU Award agreement and the LTIP.
c.    For purposes of this Program, the term “Eligible RSU Award” means, except as specified in the following sentence, a time-based or performance-based RSU that is granted to an eligible employee at least six months prior to the date of the Employee’s termination of employment.  RSUs granted outside of the annual long term incentive compensation award cycle, such as new hire RSUs, promotion RSUs and retention RSUs, will not be treated as Eligible RSU Awards.
2.Retirement Benefit.  A Qualifying Participant who does not hold any Eligible RSU Awards on his or her termination date will receive a retirement contribution to his or her account under the Crown Castle International Corp. 401(k) Plan or the Crown Castle Puerto Rico 1165(e) Plan, as applicable (“Qualified Plan”).  The amount of the retirement contribution will be equal to the lesser of:
a.Twenty-five percent (25%) of the Qualifying Participant’s Final Base Compensation (defined below); or
b.The maximum annual contribution which may be made by the Company to the Qualified Plan under applicable law, including Section 415(c) of the Internal Revenue Code of 1986, as amended, without necessitating additional unintended contributions in order to satisfy applicable coverage or discrimination tests, for the year in which the Qualifying Participant terminates his or her employment with the Company.
The retirement contribution will be funded to the Qualified Plan in the form of a fully nonforfeitable, discretionary nonelective employer contribution, which shall be made to the 
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Qualifying Participant’s account at a time determined by the Company in its sole discretion but not later than the funding date which applies to discretionary nonelective employer contributions made by the Company for the plan year during which the Qualifying Participant has terminated his or her employment. 
For purposes of this Program, the term “Final Base Compensation” means either (i) a Qualifying Participant’s annualized base salary as in effect on the date that the Qualifying Participant terminates his or her employment with the Company Group, or (ii) a Qualifying Participant’s annualized base hourly pay, calculated using the Qualifying Participant’s base hourly rate of pay as in effect on the date that the Qualifying Participant terminates his or her employment with the Company group and the average number of weekly hours worked by the Qualifying Participant for the three-year period preceding the date that the Qualifying Participant terminates his or her employment with the Company Group.
Administration of the Program
General.  This Program shall be administered by the VPTR.  The VPTR shall supervise the administration and enforcement of the Program according to the terms and provisions outlined above and the rules approved by the Compensation Committee of the Company’s Board of Directors.  The VPTR shall have all powers necessary to accomplish these purposes, including, but not by way of limitation, the right, power, and authority:
•to establish, from time to time, the applicable Minimum Notification Period and Maximum Extension Period;
•to select and approve the Designated Termination Date for each Qualifying Participant who elects to participate in the Program;
•to make rules, regulations, and bylaws for the administration of the Program that are not inconsistent with the terms and provisions hereof, and to interpret and enforce the terms of the Program and the rules and regulations promulgated thereunder;
•to construe in his or her discretion all terms, provisions, conditions, and limitations of the Program;
•to correct any defect or to supply any omission or to reconcile any inconsistency that may appear in the Program in such manner and to such extent as he or she shall deem in his or her discretion expedient to effectuate the purposes of the Program;
•to determine in his or her discretion all questions relating to eligibility, including whether and when an employee has incurred a termination of employment and the reason for such termination; and
•to make a determination in his or her sole discretion as to the right of any individual to a benefit under the Program and to prescribe procedures to be followed by employees in obtaining benefits hereunder.
Claims Review Procedure.  If an employee submits a notice to the Company asking to participate in the Program and his or her participation in the Program is not approved in writing by the VPTR, he or she may submit a written claim for reconsideration of benefits under the Program to the VPTR outlining the basis for such claim.  The VPTR will make a final decision as to a claim within 90 days after receipt of the claim. If a decision is not given to the employee within such claim review period, the claim shall be treated as if it were denied on the last day of the claims review period.
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Miscellaneous
Not a Contract of Employment.  The adoption and maintenance of the Program shall not be deemed to be a contract between the Company Group and any individual or to be consideration for the employment of any individual.  Nothing herein shall be deemed to (i) give any individual the right to be retained in the employ of the Company Group, (ii) restrict the right of the Company Group to discharge any individual at any time, (iii) give the Company Group the right to require any individual to remain in the employ of the Company Group, or (iv) restrict any individual’s right to terminate his or her employment at any time.
Alienation of Interest Forbidden.  The interest of an eligible employee under the Program may not be sold, transferred, assigned, or encumbered in any manner, either voluntarily or involuntarily, and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be null and void; neither shall the benefits hereunder be liable for or subject to the debts, contracts, liabilities, engagements or torts of any individual to whom such benefits or funds are payable, nor shall they be an asset in bankruptcy or subject to garnishment, attachment or other legal or equitable proceedings.
Amendment and Termination.  The Compensation Committee of the Company’s Board of Directors may from time to time, in its sole discretion, amend or discontinue, in whole or in part, any or all of the provisions of the Program on behalf of the Company Group.  The Compensation Committee may interpret, modify or terminate the Program in its sole discretion at any time; provided, that, without the consent of the Qualifying Participant, no change in the Program may be made that would adversely affect the rights of a Qualifying Participant with respect to benefits agreed to pursuant to the terms and conditions of a Separation Agreement previously entered into between the Qualifying Participant and a member of the Company Group.
Other Agreements.  Nothing in the Program is intended to reduce the Company Group’s protections or the employee’s obligations under (i) any other agreement between the employee and the Company Group, or (ii) any applicable law.
Statute of Limitations.  No person may bring any action pertaining to a claim for benefits under the Program following the earlier of (i) 365 days after the final denial of his or her claim for benefits, or (ii) the limitations period under Delaware contract law.
Governing Law.  All provisions of the Program shall be construed in accordance with the laws of the State of Texas, except to the extent preempted by applicable law and except to the extent that the conflicts of laws provisions of the State of Texas would require the application of the relevant law of another jurisdiction. The venue for any litigation relating to the Program will be in Harris County, Texas.
Interpretation.  Unless expressed otherwise in this Agreement, the term “including” means “including without limitation.” The term “law” includes any (a) law of any jurisdiction (federal, state, local or other jurisdiction), (b) statutory or common law or (c) applicable regulations.
5aple-ex41_12.htm

 

Exhibit 4.1

 

DESCRIPTION OF THE REGISTRANT’S SECURITIES

REGISTERED PURSUANT TO SECTION 12 OF THE

SECURITIES EXCHANGE ACT OF 1934

The following description sets forth certain material terms and provisions of our common shares, no par value per share, which is our only security registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Unless the context requires otherwise, references in this Exhibit 4.1 to “we,” “our,” “us” and “our company” refer to Apple Hospitality REIT, Inc., a Virginia corporation. This description also summarizes relevant provisions of the Virginia Stock Corporation Act and certain provisions of our amended and restated articles of incorporation, as amended (the “articles of incorporation”) and our third amended and restated bylaws (the “bylaws”). The following summary does not purport to be complete and is subject to and qualified in its entirety by reference to applicable Virginia law and to our articles of incorporation and bylaws, each of which are incorporated by reference as exhibits to the Annual Report on Form 10-K of which this Exhibit 4.1 is a part. We encourage you to read our articles of incorporation, our bylaws and the applicable provisions of Virginia law for additional information.

General

 

Our articles of incorporation provide that we may issue up to 800,000,000 common shares, no par value per share, and 30,000,000 preferred shares, no par value per share, which are undesignated preferred shares. Our articles of incorporation authorize our board of directors, without shareholder approval, to amend our articles of incorporation to fix in whole or in part the preferences, limitations and relative rights, within the limits set forth in the Virginia Stock Corporation Act, of any series within the preferred shares prior to the issuance of any shares of that series.  Under the Virginia Stock Corporation Act, shareholders generally are not liable for the corporation’s debt or obligations.

 

Voting Rights of Common Shares

 

Subject to the provisions of our articles of incorporation and our bylaws regarding the restrictions on transfer and ownership of capital shares, each outstanding common share entitles the holder to one vote on all matters submitted to a vote of shareholders. The holders of our common shares have exclusive voting power with respect to the election of directors and for all other purposes, except as otherwise required by law or as provided in our articles of incorporation with respect to any series of preferred shares then outstanding. There is no cumulative voting in the election of directors. Directors are elected by the plurality of votes cast and entitled to vote in the election of directors; provided, that if an incumbent director fails to receive at least a majority of the votes cast, such director will tender his or her resignation from the Board.

 

For more information regarding voting rights of common shareholders, see — “Certain Provisions of Virginia Law and Our Articles of Incorporation and Bylaws—Amendment of Our Articles of Incorporation and Bylaws and Approval of Extraordinary Transactions” below.

 

Dividends, Distributions, Liquidation and Other Rights

 

Subject to the preferential rights of any other class or series of shares and to the provisions of our articles of incorporation and bylaws regarding the restrictions on transfer and ownership of capital shares, holders of our common shares are entitled to receive dividends on such common shares if, as and when authorized by our board of directors, and declared by us out of assets legally available therefor. Subject to the rights of holders of shares ranking senior to the holders of our common shares as to dividends and distributions, holders of our common shares also are entitled to receive, if and when declared by our board of directors, dividends and distribution of our net assets legally available for distribution to shareholders in the event of our liquidation, dissolution or winding up of the affairs of our company.

 

Holders of our common shares have no preference, conversion, exchange, sinking fund or redemption rights and have no preemptive rights to subscribe for any of our securities. Subject to the provisions of our articles of 

 

 

incorporation and bylaws regarding the restrictions on transfer and ownership of capital shares, common shares will have equal dividend, liquidation and other rights.

   

Transfer Agent and Registrar

 

The transfer agent and registrar for our common shares is American Stock Transfer & Trust Company, LLC.

Listing 

Our common shares are listed on the New York Stock Exchange and trade under the symbol "APLE." 

Restrictions on Ownership and Transfer  

In order to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), our shares 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, no more than 50% of the value of our outstanding shares (after taking into account options to acquire common shares) may be owned, directly, indirectly, or through attribution, by five or fewer individuals (as defined in the Code to include certain entities) at any time during the last half of a taxable year .

 

Because our board of directors believes that it is essential for us to qualify as a REIT, our articles of incorporation, subject to certain exceptions, contain restrictions on the number of shares of our capital stock that a person may own.

 

In order to assist us in complying with the limitations on the concentration of ownership of our shares imposed by the Code, our articles of incorporation generally prohibit any person or entity (other than a person or entity who has been granted an exception) from directly or indirectly, beneficially or constructively, owning more than 9.8% of the aggregate of our outstanding common shares, by value or by number of shares, whichever is more restrictive, or 9.8% of the aggregate of the outstanding preferred shares of any class or series, by value or by number of shares, whichever is more restrictive. However, our articles of incorporation permit (but do not require) exceptions to be made for shareholders provided that our board of directors determines that such exceptions will not jeopardize our qualification as a REIT.

 

Our articles of incorporation also prohibit any person from (1) beneficially or constructively owning shares of our capital stock that would result in our being “closely held” under Section 856(h) of the Code, (2) transferring our shares if such transfer would result in us being beneficially owned by fewer than 100 persons (determined without regard to any rules of attribution), (3) beneficially or constructively owning our shares that would result in our owning (directly or constructively) 10% or more of the ownership interest in a tenant of our real property if income derived from such tenant for our taxable year would result in more than a de minimis amount of non-qualifying income for purposes of the REIT tests that, taking into account any other non-qualifying gross income of ours, would cause us to fail to satisfy an applicable REIT gross income requirement, and (4) beneficially or constructively owning our shares that would cause us otherwise to fail to qualify as a REIT, including, but not limited to, as a result of any “eligible independent contractor” (as defined in Section 856(d)(9)(A) of the Code) that operates a “qualified lodging facility” (as defined in Section 856(d)(9)(D)(i) of the Code) on behalf of a taxable REIT subsidiary, or TRS, failing to qualify as such. Any person who acquires or attempts or intends to acquire beneficial ownership of our shares that will or may violate any of the foregoing restrictions on transferability and ownership will be required to give written notice immediately to us and provide us with such other information as we may request in order to determine the effect of such transfers on our qualification as a REIT. The foregoing restrictions on transferability and ownership will not apply if our board of directors determines that it is no longer in our best interest to attempt to qualify, or to qualify, or to continue to qualify, as a REIT. In addition, our board of directors may determine that compliance with the foregoing restrictions is no longer required for our qualification as a REIT.

 

Our board of directors, in its sole discretion, may waive the 9.8% ownership limit for common shares or preferred shares for a shareholder that is not an individual if such shareholder provides information and makes 

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representations to the board that are satisfactory to the board, in its reasonable discretion, to establish that such person’s ownership in excess of the 9.8% limit for common or preferred shares would not jeopardize our qualification as a REIT. As a condition of granting the waiver, our board of directors, in its sole and absolute discretion as it may deem necessary or advisable, may require a ruling from the Internal Revenue Service, or IRS, or an opinion of counsel in either case in form and substance satisfactory to our board of directors in order to determine or ensure our qualification as a REIT.

 

In addition, our board of directors from time to time may increase the share ownership limits. However, the share ownership limits may not be increased if, after giving effect to such increase, five or fewer individuals could own or constructively own in the aggregate, more than 49.9% in value of the shares then outstanding.

 

If any transfer of our shares of beneficial interest occurs which, if effective, would result in any person beneficially or constructively owning shares in excess, or in violation, of the above transfer or ownership limitations, known as a prohibited owner, then that number of shares, the beneficial or constructive ownership of which otherwise would cause such person to violate the transfer or ownership limitations (rounded up to the nearest whole share), will be automatically transferred to a charitable trust for the exclusive benefit of a charitable beneficiary, and the prohibited owner will not acquire any rights in such shares. This automatic transfer will be considered effective as of the close of business on the business day before the violative transfer. If the transfer to the charitable trust would not be effective for any reason to prevent the violation of the above transfer or ownership limitations, then the transfer of that number of shares that otherwise would cause any person to violate the above limitations will be void. Shares held in the charitable trust will continue to constitute issued and outstanding shares. The prohibited owner will not benefit economically from ownership of any shares held in the charitable trust, will have no rights to dividends or other distributions and will not possess any rights to vote or other rights attributable to the shares held in the charitable trust. The trustee of the charitable trust will be designated by us and must be unaffiliated with us or any prohibited owner and will have all voting rights and rights to dividends or other distributions with respect to shares held in the charitable trust, and these rights will be exercised for the exclusive benefit of the trust’s charitable beneficiary. Any dividend or other distribution paid before our discovery that shares have been transferred to the trustee will be paid by the recipient of such dividend or distribution to the trustee upon demand, and any dividend or other distribution authorized but unpaid will be paid when due to the trustee. Any dividend or distribution so paid to the trustee will be held in trust for the trust’s charitable beneficiary. Subject to Virginia law, effective as of the date that such shares have been transferred to the charitable trust, the trustee, in its sole discretion, will have the authority to:

 

	
 
	
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rescind as void any vote cast by a prohibited owner prior to our discovery that such shares have been transferred to the charitable trust; and

 

	
 
	
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recast such vote in accordance with the desires of the trustee acting for the benefit of the trust’s charitable beneficiary.

 

However, if we have already taken irreversible corporate action, then the trustee will not have the authority to rescind and recast such vote.

 

Within 20 days of receiving notice from us that shares have been transferred to the charitable trust, and unless we buy the shares first as described below, the trustee will sell the shares held in the charitable trust to a person, designated by the trustee, whose ownership of the shares will not violate the share ownership limits in our articles of incorporation. 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 prohibited owner and to the charitable beneficiary. The prohibited owner will receive the lesser of:

 

	
 
	
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the price paid by the prohibited owner for the shares or, if the prohibited owner did not give value for the shares in connection with the event causing the shares to be held in the charitable trust (for example, in the case of a gift or devise), the market price of the shares on the day of the event causing the shares to be held in the charitable trust; and

 

	
 
	
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the price per share received by the trustee from the sale or other disposition of the shares held in the charitable trust (less any commission and other expenses of a sale).

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The trustee may reduce the amount payable to the prohibited owner by the amount of dividends and distributions paid to the prohibited owner and owed by the prohibited owner to the trustee. Any net sale proceeds in excess of the amount payable to the prohibited owner will be paid immediately to the charitable beneficiary. If, before our discovery that our shares have been transferred to the charitable trust, such shares are sold by a prohibited owner, then:

 

	
 
	
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such shares will be deemed to have been sold on behalf of the charitable trust; and

 

	
 
	
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to the extent that the prohibited owner received an amount for such shares that exceeds the amount that the prohibited owner was entitled to receive as described above, the excess must be paid to the trustee upon demand.

   

In addition, shares held in the charitable 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:

 

	
 
	
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the price per share in the transaction that resulted in such transfer to the charitable trust (or, in the case of a gift or devise, the market price at the time of the gift or devise); and

 

	
 
	
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the market price on the date we, or our designee, accepts such offer.

 

We may reduce the amount payable to the prohibited owner by the amount of dividends and distributions paid to the prohibited owner and owed by the prohibited owner to the trustee. We may pay the amount of such reduction to the trustee for the benefit of the charitable beneficiary. We will have the right to accept the offer until the trustee has sold the shares held in the charitable trust. Upon such 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 prohibited owner and any dividends or other distributions held by the trustee will be paid to the charitable beneficiary.

 

All certificates, if any, representing our shares will bear a legend referring to the restrictions described above.

 

Every shareholder of record of more than 5% (or such lower percentage as required by the Code or the regulations promulgated thereunder) in value of the outstanding shares will be required to give written notice to us within 30 days after the end of each taxable year stating the name and address of each actual owner, the number of shares of each class and series of shares that each actual owner beneficially owns and a description of the manner in which such shares are held. Each such shareholder shall provide to us such additional information as we may request in order to determine the effect, if any, of such beneficial ownership on our status as a REIT and to ensure compliance with the ownership limitations. In addition, each shareholder shall upon demand be required to provide to us such information as we may request, in good faith, in order to determine our status as a REIT and to comply with the requirements of any taxing authority or governmental authority or to determine such compliance.

 

These share ownership limitations could delay, deter or prevent a transaction or a change in control that might involve a premium price for holders of our common shares or might otherwise be in the best interest of our shareholders.

 

Certain Provisions of Virginia Law and our Articles of Incorporation and Bylaws

  

Our Board of Directors

 

Our bylaws provide that the number of directors of our company may be determined by our board of directors, but may not be less than three nor more than 15.

 

Our bylaws provide that any vacancy, including a vacancy created by an increase in the number of directors, in our board of directors may be filled by a majority of the remaining directors, even if the remaining directors do not constitute a quorum, or by a sole remaining director. If, however, a vacancy is created by the 

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removal of a director by a vote or written consent of our shareholders or court order, such vacancy may be filled only by the vote of a majority of shares entitled to vote or by the written consent of all of the shareholders entitled to vote. Our shareholders may also elect, by the consent of a majority of outstanding shares entitled to vote, a director or directors at any time to fill a vacancy or vacancies not filled by our directors. Any director elected to fill a vacancy will serve until a successor is elected at an annual or special meeting of shareholders. Effective as of the 2020 annual meeting of shareholders, all directors are elected for one-year terms expiring at the next annual meeting.

 

Holders of our common shares do not have a right to cumulative voting in the election of directors. Pursuant to our bylaws, directors are elected by the plurality of votes cast and entitled to vote in the election of directors. However, our corporate governance guidelines require that if an incumbent director fails to receive at least a majority of the votes cast, such director will tender his or her resignation from the Board. The Nominating and Governance Committee of the Board will consider, and determine whether to accept, such resignation.

 

Removal of Directors

 

Our bylaws provide that our board of directors may declare vacant the office of a director who has been declared of unsound mind by an order of court or who has pled guilty or nolo contendere to or been convicted of a felony involving moral turpitude. In addition, any or all directors may be removed for cause (which is defined as a willful violation of our articles of incorporation or bylaws or gross negligence in the performance of a director’s duties) and only by the affirmative vote of either (i) the vote or written consent of all directors other than the director who is being removed, or (ii) the vote of holders of a majority of our outstanding common shares at a meeting of shareholders called for such purpose. Our bylaws also provide that any or all directors may be removed without cause upon the affirmative vote of a majority of the outstanding common shares entitled to vote at a meeting of shareholders called for such purpose.

 

Affiliated Transactions

 

The Virginia Stock Corporation Act limits “affiliated transactions” between a corporation and an “interested shareholder” for three years after the date on which the interested shareholder became an interested shareholder, except in compliance with the Virginia Stock Corporation Act. These affiliated transactions include a merger, statutory share exchange, dissolution, or, in circumstances specified in the statute, certain transfers of assets, certain share issuances and transfers and reclassifications involving interested shareholders. Virginia law defines an interested shareholder as:

 

	
 
	
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any person who beneficially owns more than 10% of any class of the corporation’s outstanding voting shares (defined as shares of a class that is entitled to vote generally in the election of directors); or

  

	
 
	
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an affiliate or associate of the corporation who, at any time within the three-year period prior to the date in question, was the beneficial owner of more than 10% of any class of the corporation’s then-outstanding voting shares.

 

The Virginia Stock Corporation Act provides that no corporation may engage in any affiliated transaction with any interested shareholder for a period of three years following the date on which an interested shareholder becomes an interested shareholder, unless approved by the affirmative vote of the holders of at least two-thirds of the voting shares of the corporation, other than the shares beneficially owned by the interested shareholder, and by a majority (but not less than two) of the “disinterested directors.” A disinterested director means, with respect to a particular interested shareholder, a member of a corporation’s board of directors who (i) was a member before the later of January 1, 1988 and the date on which an interested shareholder became an interested shareholder and (ii) was recommended for election by, or was elected to fill a vacancy and received the affirmative vote of, a majority of the disinterested directors then on the board. At the expiration of the three-year period, these provisions generally require approval of affiliated transactions by the affirmative vote of the holders of at least two-thirds of the voting shares of the corporation, other than those beneficially owned by the interested shareholder.

 

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The statute permits various exemptions from its provisions, including for affiliated transactions entered into with an interested shareholder after the three-year period that are approved by a majority of disinterested directors or are approved by the affirmative vote of the holders of two-thirds of the voting shares other than shares beneficially owned by the interested shareholders, and affiliated transactions where the consideration will be paid to the holders of each class or series of voting shares and certain other statutory fair price conditions are met. Virginia law also requires that, during the three years preceding the announcement of the proposed affiliated transaction, all required dividends have been paid and no special financial accommodations have been accorded the interested shareholder unless approved by a majority of the disinterested directors.

 

As permitted by the Virginia Stock Corporation Act, we have elected pursuant to a provision in our articles of incorporation to “opt-out” of the affiliated transactions provisions of the statute.

 

Control Share Acquisitions

 

The Virginia Stock Corporation Act provides that shares of a Virginia corporation acquired in a “control share acquisition” have no voting rights except to the extent approved by the affirmative vote of the holders of a majority of the shares entitled to vote on the matter, excluding “interested shares” in a Virginia corporation. “Interested shares” are shares of a corporation which any of the following persons is entitled to exercise or direct the exercise of the voting power in the election of directors: (1) an acquiring person with respect to a control share acquisition; (2) any officer of such corporation; or (3) any employee of such corporation who is also a director of the corporation. A “control share acquisition” means the direct or indirect acquisition of shares, other than in an excepted acquisition, by a person that when added to all other shares which then have voting rights or are beneficially owned by such person would cause such person to become entitled, immediately upon acquisition of such shares, to vote or direct the vote of, shares having voting power within any of the following ranges of the votes entitled to be cast in an election of directors:

 

	
 
	
●
	
one-fifth or more but less than one-third of such votes;

 

	
 
	
●
	
one-third or more but less than a majority of such votes; or

 

	
 
	
●
	
a majority or more of such votes.

 

A person who has made or proposes to make a control share acquisition, upon satisfaction of certain conditions (including an undertaking to pay expenses and making a “control share acquisition statement” as described in the Virginia Stock Corporation Act), may compel our board of directors to call a special meeting of shareholders to be held within 50 days of the acquiring person’s request to consider the voting rights of the shares. If no request for a special meeting is made, the corporation may itself present the question at any shareholders’ meeting.

 

If voting rights for control shares are approved at a shareholders’ meeting and the acquiror has beneficial ownership of shares entitled to cast a majority of the votes which could be cast in an election of directors, all shareholders other than the acquiring person may be entitled to exercise appraisal rights. The fair value of the shares as determined for purposes of such appraisal rights may not be less than the highest price per share paid by the acquiror in the control share acquisition.

 

The control share acquisition statute does not apply to shares acquired in a merger or share exchange if the corporation is a party to the transaction.

 

As permitted by the Virginia Stock Corporation Act, we have elected pursuant to a provision in our bylaws to exempt any acquisition of our shares from the control share acquisition provisions of the statute. However, the board of directors may further amend the bylaws to opt into the control share provisions at any time in the future.

 

Amendment of Our Articles of Incorporation and Bylaws and Approval of Extraordinary Transactions

 

Under the Virginia Stock Corporation Act, a Virginia corporation generally cannot dissolve, amend its articles of incorporation, merge, sell all or substantially all of its assets or engage in a share exchange unless 

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approved by the affirmative vote of more than two-thirds of all votes entitled to be cast on the matter, unless a greater or lesser proportion of votes (but not less than a majority of all votes cast) is specified in the corporation’s articles of incorporation. Our articles of incorporation provide that our shareholders, by vote of the holders of a majority of our common shares issued and outstanding and a majority of the votes entitled to be voted by any other voting group required by law to vote thereon as a separate voting group, may vote to approve a plan of merger, share exchange or dissolution or to sell, lease, exchange or otherwise dispose of all or substantially all of our property other than in the usual and regular course of business. Our articles of incorporation also provide that, except as otherwise provided by law or our articles of incorporation with respect to any outstanding series of our preferred shares, our articles of incorporation may be amended at any time, and from time to time, upon the vote of the holders of a majority of our common shares issued and outstanding. 

 

Our articles of incorporation provide that our bylaws may be amended or repealed, or new bylaws adopted, at any time by (1) our board of directors or (2) by a vote of the holders of a majority of our issued and outstanding common shares, and our shareholders in amending, repealing or adopting a bylaw may, except as prohibited by applicable law, expressly provide that our board of directors may not amend, repeal or reinstate that bylaw.

 

Meetings of Shareholders

 

Under our bylaws, annual meetings of shareholders will be held each year at a date and time as determined by our chief executive officer or our board of directors. Special meetings of shareholders may be called by our chief executive officer, by a majority of our board of directors or by the chairman of our board of directors. Additionally, subject to the provisions of our bylaws, special meetings of the shareholders shall be called by our chairman of the board, chief executive officer or secretary upon the written request of shareholders holding not less than 10% of the eligible votes. Only matters set forth in the notice of the special meeting may be considered and acted upon at such a meeting. Virginia law and our bylaws provide that any action required or permitted to be taken at a meeting of shareholders may be taken without a meeting by unanimous written consent, if that consent describes that action, is signed by each shareholder entitled to vote on the matter, bearing the date of each signature, and is delivered to the secretary of our company for inclusion in the minutes or filing with our corporate records.

 

Advance Notice of Director Nominations and New Business

 

Our bylaws provide that:

 

	
 
	
●
	
with respect to an annual meeting of shareholders, the proposal of business to be considered by shareholders at the annual meeting may be made only:

 

	
 
	
o
	
pursuant to our notice of the meeting;

 

	
 
	
o
	
by or at the direction of our board of directors; or

 

	
 
	
o
	
by a shareholder who is a shareholder of record of a class of shares entitled to vote on the business that such shareholder has proposed both at the time of giving of the notice of the meeting and on the record date of such annual meeting, and who complies with the advance notice procedures set forth in our bylaws.

 

	
 
	
●
	
with respect to special meetings of shareholders, only the business specified in our notice of meeting may be brought before the meeting of shareholders.

 

	
 
	
●
	
nominations of persons for election to our board of directors may be made only:

 

	
 
	
o
	
pursuant to our notice of the meeting;

 

	
 
	
o
	
by our board of directors or any committee thereof; or

 

	
 
	
o
	
by a shareholder who is a shareholder of record of a class of shares entitled to vote for the election of directors both at the time of giving of the notice required by our bylaws and 

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on the record date for the meeting at which the nominee(s) will be voted upon, and who complies with the advance notice provisions set forth in our bylaws.

 

The purpose of requiring shareholders to give advance notice of nominations and other proposals is to afford our board of directors the opportunity to consider the qualifications of the proposed nominees or the advisability of the other proposals and, to the extent considered necessary by our board of directors, to inform shareholders and make recommendations regarding the nominations or other proposals. The advance notice procedures also permit a more orderly procedure for conducting our shareholder meetings. Although our bylaws do not give our board of directors the power to disapprove timely shareholder nominations and proposals, our bylaws may have the effect of precluding a contest for the election of directors or proposals for other action if the proper procedures are not followed, and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of directors to our board of directors or to approve its own proposal.

 

Anti-takeover Effect of Certain Provisions of Virginia Law and Our Articles of Incorporation and Bylaws

 

The provisions of our bylaws on removal of directors and advance notice of director nominations could delay, defer or prevent a transaction or a change in control of our company that might involve a premium price for holders of our common shares or otherwise be in the best interests of our shareholders. Likewise, provisions of the Virginia Stock Corporation Act that restrict affiliated transactions and control share acquisitions, if we are subject to those provisions in the future, could have similar anti-takeover effects. See “—Affiliated Transactions” and “—Control Share Acquisitions” for additional information on the voting requirements related to these transactions.

 

Indemnification and Limitation of Directors’ and Officers’ Liability

 

Our articles of incorporation provide for the limitation or elimination of liability of our directors and officers to our company or our shareholders to the same extent permitted by the Virginia Stock Corporation Act.

 

The Virginia Stock Corporation Act permits, and our articles of incorporation require, to the fullest extent permitted by Virginia law, that we indemnify our officers and directors in a variety of circumstances, which may include indemnification for liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Under Sections 13.1-697 and 13.1-702 of the Virginia Stock Corporation Act, a Virginia corporation generally is authorized to indemnify its directors and officers in civil and criminal actions if such officer or director acted in good faith and believed, in the case of conduct in his or her official capacity with the corporation, that his conduct was in the best interests of the corporation or in all other cases, that his conduct was at least not opposed to its best interests, and, in the case of any criminal proceeding, he had no reasonable cause to believe that his conduct was unlawful. The Virginia Stock Corporation Act requires such indemnification, unless limited by a corporation’s articles of incorporation, when a director or officer entirely prevails in the defense of any proceeding to which he was a party because he is or was a director or officer of the corporation.

 

Our articles of incorporation provide that we must indemnify any individual who is, was or is threatened to be made a party to a civil, criminal, administrative, investigative or other proceeding (including a proceeding by or in the right of our company or by or on behalf of our shareholders) because such individual is or was a director or officer of our company or of any legal entity controlled by our company, or is or was a fiduciary of any employee benefit plan established at the direction of our company, against all liabilities and reasonable expenses incurred by him on account of the proceeding, provided that our directors (excluding the indemnified party) determine in good faith that his course of conduct which caused the loss or liability was in the best interests of our company, and provided further that such liabilities and expenses were not incurred because of his willful misconduct, bad faith, reckless disregard of duties or knowing violation of the criminal law. Before any indemnification is paid, a determination must be made that indemnification is permissible in the circumstances because the person seeking indemnification is eligible for indemnification and has met the standard of conduct set forth above. Such determination must be made in the manner provided by Virginia law for determining that indemnification of a director is permissible; provided, however, that if a majority of our directors has changed after the date of the alleged conduct giving rise to a claim for indemnification, the determination that indemnification is permissible must, at the option of the person claiming indemnification, be made by special legal counsel agreed upon by our board of directors and such person.  

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Unless a determination has been made that indemnification is not permissible, we must make advances and reimbursement for expenses incurred by any person named above upon receipt of an undertaking from him to repay the same if it is ultimately determined that such individual is not entitled to indemnification. We are authorized to contract in advance to indemnify our directors and officers to the extent it is required to indemnify them pursuant to the provisions described above.

 

Notwithstanding the above, indemnification will not be allowed for any liability imposed by judgment, and costs associated therewith, including attorneys’ fees, arising from or out of an alleged violation of federal or state securities laws associated with the public offering of our common shares unless (i) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular indemnitee, or (ii) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee, or (iii) a court of competent jurisdiction approves a settlement of the claims against a particular indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the Securities and Exchange Commission and of the published position of any state securities regulatory authority in which our securities were offered or sold as to indemnification for violations of securities laws.

 

The rights of each person or entity entitled to indemnification under our articles of incorporation shall inure to the benefit of such person’s or entity’s heirs, executors, administrators, successors or assigns. Indemnification pursuant to our articles of incorporation shall not be exclusive of any other right of indemnification to which any person or entity may be entitled, including indemnification pursuant to a valid contract, indemnification by legal entities other than our company, and indemnification under policies of insurance purchased and maintained by us or others. However, no person or entity shall be entitled to indemnification by us to the extent such person or entity is indemnified by another, including an insurer.

 

Insofar as the foregoing provisions permit indemnification of directors or officers for liability arising under the Securities Act, we have been informed that, in the opinion of the Securities and Exchange Commission, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

 

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