Document:

Exhibit 10.17

 

FORM OF 

SECOND AMENDMENT TO THE 

AMENDED AND RESTATED

TECHNOLOGY LICENSE AGREEMENT

 

This Second Amendment to the Amended and Restated Technology License and Services Agreement, dated as of November 29, 2018 (“Execution
Date”), is made by and between Neurotrope Bioscience, a Delaware corporation (“Neurotrope”), on the one hand,
and Cognitive Research Enterprises Inc., a not-for-profit institution organized and existing under the laws of the State of West
Virginia (“CRE” FKA the Blanchette Rockefeller Neurosciences Institute, Inc.), and NRV II, LLC, a limited liability
company organized under and existing under the laws of the State of Delaware (“NRV II”), on the other hand. Each of
Neurotrope, CRE and NRV II may be referred to as a “Party” and collectively as “Parties” in this Amendment
as the case may be.

 

WHEREAS, the Parties entered into the Amended and Restated Technology License and Services Agreement, dated February 4,
2015 (the “TLSA”) and an Amendment thereto, dated November 12, 2015 (“TLSA Amendment”), pursuant to which
CRE and NRV II granted certain rights in certain technology to Neurotrope; and

 

WHEREAS, Section 5.6 of the TLSA provides for the prosecution and maintenance of patents and applications for the “Licensed
IP” as defined in Section 1.30 of the TLSA; and

 

WHEREAS, the Parties desire to amend Section 5.6 to modify the prosecution and maintenance obligations of the Parties; and

 

WHEREAS, the Parties have agreed that it is in the best interest of all of the Parties to amend Section 5.6 “Prosecution
and Maintenance.”

 

     

     

    

 

NOW, THEREFORE, in consideration of $10,000 USD payable by Neurotrope to CRE and NRV II within five (5) business days of
the Execution Date and the mutual covenants, and subject to the terms and conditions, set forth herein, and intending to be legally
bound, the Parties hereby agree as follows:

 

		1.	Effective Date and Payment of Outstanding Invoices and Expenses.

 

		(a)	Neurotrope shall pay to CRE all outstanding invoices and accrued expenses
associated with the Licensed IP listed below in Schedule I, which must occur within thirty (30) days of the Execution Date.

 

		(b)	The Effective Date of this Second Amendment shall be the date on which Neurotrope
pays to CRE such outstanding invoices and accrued expenses.

 

		2.	Amendment to Section 5.6. Section 5.6 of the TLSA is hereby amended and restated and to read as follows:

 

“5.6  Prosecution
and Maintenance.  As between Neurotrope and CRE, CRE shall have no right and Neurotrope shall have the sole and exclusive
right and the obligation, to apply for, file, prosecute, and maintain patents and applications for the Licensed IP, in each case,
in any jurisdiction throughout the world. Neurotrope shall pay for all of the attorneys’ fees, translation costs, filing
fees, maintenance fees, portfolio transfer expenses, and other costs and expenses related to any of the foregoing.  Upon Neurotrope’s
request, CRE shall cooperate fully with Neurotrope (including executing and delivering all documents, providing all information,
and taking all such action as may be necessary or appropriate) in preparing, executing, filing and prosecuting applications to
patent or register any Licensed IP, and applications for other related patents and registrations and in maintaining all such patents
and registrations as may issue. In the event Neurotrope intends to abandon or cease any patent or application payment of maintenance
fees, costs and/or expenses for any patent or application for the Licensed IP, Neurotrope shall provide CRE with written notice
of such intent to abandon or cease payments at least sixty (60) days in advance of any relevant deadline, at which time CRE may
(but shall not be obligated to) undertake such prosecution or maintenance at CRE’s sole discretion. The Licensed IP that
is the subject of such abandonment or such fee, cost or expense shall be deemed to not be Licensed IP as of the date of such notice
(and thereafter not licensed or sublicensed to Neurotrope pursuant to this Agreement).”

 

     

     

    

 

		3.	Licensed IP. The Parties acknowledge that Schedule I attached hereto is a true and complete list of all Licensed IP.

 

		4.	Miscellaneous. All terms and conditions of the TLSA not modified by this Amendment shall continue in full force and
effect in accordance with their terms. The Parties agree that pursuant to the terms of this Amendment, the TLSA shall be considered
in full force and effect, and that “CRE” shall replace “BRNI” in whatever sections in the TLSA that the
term BRNI is used. 

 

     

     

    

 

IN WITNESS THEREOF, the Parties hereto have caused this
Amendment to be executed by their duly authorized representatives as set forth below.

 

	NEUROTROPE BIOSCIENCE, INC.	 	COGNITIVE RESEARCH ENTERPRISES, INC.
	 	 	 	 	 
	By:   	                       	 	By:   	                       
	Name: Charles Ryan	 	Name: Shana Kay Phares
	Title: Chief Executive Officer	 	Title: President and Chief Executive Officer
	 	 	 
	NRV II, LLC	 	 	 
	 	 	 	 	 
	By: 	 	 	 	 
	Name: Neuroscience Research Ventures, Inc.	 	 	 
	Title: Managing Member	 	 	 

 

     

     

    

 

Schedule I

 

	Application Number	Country	Filing Date	Patent Number	Issue Date	Status
	10/167,491	United States of America	13-Jun-2002	6,825,229	30-Nov-2004	ISSUED-INAC
	10/933,536	United States of America	03-Sep-2004	 	 	Abandoned
	10/937,509	United States of America	10-Sep-2004	 	 	Abandoned
	11/802,842	United States of America	25-May-2007	 	 	FINAL REJ.
	12/538,245	United States of America	10-Aug-2009	9,066,923	30-Jun-2015	ISSUED
	12/883,444	United States of America	16-Sep-2010	9,345,685	24-May-2016	ISSUED-INAC
	13/042,892	United States of America	08-Mar-2011	 	 	REJECTED
	13/851,161	United States of America	27-Mar-2013	9,539,235	10-Jan-2017	Issued
	14/929,731	United States of America	02-Nov-2015	9,446,020	20-Sep-2016	Issued
	15/370,156	United States of America	06-Dec-2016	 	 	Pending
	03716386.2	European Patent Convention	14-Sep-2004	 	 	Pending
	10000734.3	European Patent Convention	25-Jan-2010	 	 	REJECTED
	05784925.9	European Patent Convention	22-Feb-2007	 	 	Appealed
	03742389.4	European Patent Convention	12-Jan-2005	 	 	Abandoned
	PCT/US2003/007101	Patent Cooperation Treaty	07-Mar-2003	 	 	Inactive
	PCT/US2003/020820	Patent Cooperation Treaty	02-Jul-2003	 	 	COMPLETED
	PCT/US2005/028522	Patent Cooperation Treaty	10-Aug-2005	 	 	COMPLETED
	14/222,922	United States of America	24-Mar-2014	 	 	REJECTED
	14/825,488	United States of America	13-Aug-2015	 	 	Pending
	07749484.7	European Patent Convention	17-Feb-2009	 	 	Abandoned
	12002638.0	European Patent Convention	16-Apr-2012	 	 	Abandoned
	14001452.3	European Patent Convention	22-Apr-2014	 	 	REJECTED
	12/068,742	United States of America	11-Feb-2008	 	 	FINAL REJ.
	08725395.1	European Patent Convention	04-Sep-2009	2121000	23-Sep-2015	ISSUED-INAC
	14001303.8	European Patent Convention	09-Apr-2014	 	 	REJECTED
	15002036.0	European Patent Convention	07-Jul-2015	 	 	Published

 

     

     

    

 

	Application Number	Country	Filing Date	Patent Number	Issue Date	Status
	PCT/US2008/001755	Patent Cooperation Treaty	11-Feb-2008	 	 	COMPLETED
	PCT/US2008/006158	Patent Cooperation Treaty	14-May-2008	 	 	COMPLETED
	12/510,681	United States of America	28-Jul-2009	8,163,800	24-Apr-2012	Issued
	13/401,459	United States of America	01-Feb-2012	9,119,825	01-Sep-2015	ISSUED-INAC
	14/803,762	United States of America	20-Jul-2015	 	 	REJECTED
	09790874.3	European Patent Convention	17-Feb-2011	 	 	REJECTED
	PCT/US2009/051927	Patent Cooperation Treaty	28-Jul-2009	 	 	COMPLETED
	13/817,040	United States of America	14-Feb-2013	9,597,312	21-Mar-2017	Allowed
	EP11751750.8	European Patent Convention	01-Mar-2013	 	 	Pending
	PCT/US11/48493	Patent Cooperation Treaty	19-Aug-2011	 	 	COMPLETED
	14/357,654	United States of America	12-May-2014	9,163,032	20-Oct-2015	ISSUED-INAC
	12795194.5	European Patent Convention	10-Jun-2014	 	 	Pending
	PCT/US12/64783	Patent Cooperation Treaty	13-Nov-2012	 	 	COMPLETED
	14/357,661	United States of America	12-May-2014	 	 	REJECTED
	12794822.2	European Patent Convention	12-Jun-2014	 	 	Published
	PCT/US12/64787	Patent Cooperation Treaty	13-Nov-2012	 	 	COMPLETED
	15/028,487	United States of America	11-Apr-2016	 	 	Published
	14793391.5	European Patent Convention	20-Oct-2014	 	 	Published
	PCT/US2014/061368	Patent Cooperation Treaty	20-Oct-2014	 	 	COMPLETED
	15/126,339	United States of America	15-Sep-2016	 	 	Pending
	15715942.7	European Patent Convention	27-Mar-2015	 	 	Published
	PCT/US2015/23090	Patent Cooperation Treaty	27-Mar-2015	 	 	COMPLETED
	PCT/US2016/056201	Patent Cooperation Treaty	08-Oct-2016	 	 	Pending
	62/335,040	United States of America	11-May-2016	 	 	Pendingex_232792.htm

Exhibit 4.2

 

PRESIDIO PROPERTY TRUST, INC.

 

DESCRIPTION OF SECURITIES REGISTERED PURSUANT TO SECTION 12

OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

 

DESCRIPTION OF SERIES A COMMON STOCK

 

The following is a summary of the material terms of the Series A common stock (“Series A Common Stock”) of Presidio Property Trust, Inc. (referred to herein as “we”, “us”, “our” or “our company”) registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This summary does not purport to be complete and is subject to, and is qualified in its entirety by reference to, our charter and bylaws and applicable provisions of the Maryland General Corporation Law (the “MGCL”). We encourage you to read carefully our charter and bylaws and the applicable provisions of the MGCL for a more complete understanding of our Series A Common Stock. Our charter and bylaws are incorporated by reference as exhibits to the Annual Report on Form 10-K to which this exhibit is filed or incorporated by reference.

 

General

 

Our charter authorizes us to issue up to 110,001,000 shares of stock, consisting of (i) 109,001,000 shares of common stock, $0.01 par value per share, of which 100,000,000 are classified as shares of Series A Common Stock, 1,000 are classified as shares of Series B Common Stock and 9,000,000 are classified as shares of Series C Common Stock, and (ii) 1,000,000 shares of preferred stock, $0.01 par value per share. Under Maryland law, a stockholder generally is not liable for a corporation’s debts or obligations solely as a result of his, her or its status as a stockholder.

 

Common Stock

 

Subject to the restrictions on ownership and transfer of our stock discussed below under the caption “Restrictions on Ownership and Transfer” and the voting rights of holders of outstanding shares of any other class or series of our stock, holders of our common stock are entitled to one vote for each share held of record on all matters on which stockholders are entitled to vote generally, including the election or removal of directors, and, except as provided with respect to any other class or series of our stock, the holders of shares of our common stock possess exclusive voting power. Directors are elected by a plurality of the votes cast at the meeting in which directors are being elected. Under our charter, voting for the election of directors will be cumulative if, prior to commencement of the voting, a stockholder gives us notice of his, her or its intention to cumulate votes. If any stockholder gives such a notice, then every stockholder will be entitled to such rights, in which case, each stockholder may cumulate his, her or its total votes and cast all of his, her or its votes for any one or a combination of director nominees. In cumulative voting, the total votes entitled to be cast by a stockholder equals the number of director nominees multiplied by the number of shares of common stock that such stockholder is entitled to vote.

 

Holders of our common stock are entitled to receive dividends or other distributions as and when authorized by our board of directors (“Board of Directors”) and declared by us out of assets legally available for the payment of dividends. Upon our liquidation, dissolution or winding up and after payment in full of all amounts required to be paid to creditors and to the holders of outstanding shares of any other class or series of our stock having liquidation preferences senior to our common stock, if any, the holders of our common stock will be entitled to share ratably in our remaining assets legally available for distribution. Holders of our common stock do not have preemptive, subscription, redemption or conversion rights. There are no sinking fund provisions applicable to the common stock. Holders of our Series A Common Stock generally have no appraisal rights under the MGCL as long as the shares are listed on a national securities exchange. All shares of our common stock have equal dividend and liquidation rights. The rights, powers, preferences and privileges of holders of our common stock are subject to those of the holders of any shares of our preferred stock or any other class or series of stock that we may authorize and issue in the future and to the restrictions on ownership and transfer of our stock described below under the caption “Restrictions on Ownership and Transfer.”

 

Under the MGCL, a Maryland corporation generally cannot amend its charter, consolidate, merge, convert, sell all or substantially all of its assets, engage in a share exchange or dissolve unless the action is advised by its board of directors and approved by the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter unless a lesser percentage (but not less than a majority of the votes entitled to be cast on the matter) is set forth in the corporation’s charter. As permitted by Maryland law, our charter provides that a merger, consolidation, share exchange, dissolution or sale of substantially all of our assets may be approved by the affirmative vote of stockholders entitled to cast a majority of all of the votes entitled to be cast on the matter. In addition, because many of our operating assets are held by our subsidiaries, these subsidiaries may be able to merge or sell all or substantially all of their assets without the approval of our stockholders.

 

 

 

 

Power to Reclassify and Issue Stock

 

Our charter authorizes our Board of Directors to classify and reclassify any unissued shares of our preferred stock into other classes or series of stock, including one or more classes or series of stock that have priority over our common stock with respect to dividends or upon liquidation, or have voting rights and other rights that differ from the rights of the common stock, and authorizes us to issue the newly classified shares. Before authorizing the issuance of shares of any new class or series, our Board of Directors must set, subject to the provisions in our charter relating to the restrictions on ownership and transfer of our stock, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series of stock. These actions may be taken without the approval of holders of our common stock unless such approval is required by applicable law, the terms of any other class or series of our stock or the rules of any stock exchange or automated quotation system on which any of our stock is listed or traded.

 

We believe that the power of our Board of Directors to authorize us to issue additional authorized but unissued shares of common stock or preferred stock and to classify or reclassify unissued shares of preferred stock and thereafter to authorize us to issue such classified or reclassified shares of stock will provide us with increased flexibility in structuring possible future financings and acquisitions and in meeting other needs that might arise.

 

Restrictions on Ownership and Transfer

 

In order for us to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes, our 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 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 (other than the first year for which an election to be a REIT has been made).

 

Our charter contains restrictions on the ownership and transfer of our stock that are intended to, among other purposes, assist us in complying with these requirements and qualifying as a REIT. Subject to the exceptions described below, no person or entity may beneficially own, or be deemed to own by virtue of the applicable constructive ownership provisions of the Code, more than 9.8% (in value or by number of shares, whichever is more restrictive) of our aggregate outstanding shares of common stock, which we refer to as the “common stock ownership limit,” or 9.8% in value of our aggregate outstanding shares of stock, which we refer to as the “aggregate stock ownership limit.” We refer to the common stock ownership limit and the aggregate stock ownership limit, collectively, as the “ownership limit.”

 

The constructive ownership rules under the Code are complex and may cause stock owned actually or constructively by a group of related individuals and/or entities to be owned constructively by one individual or entity. As a result, the acquisition of less than 9.8% of our aggregate outstanding shares of common stock or 9.8% of our aggregate outstanding shares of stock, or the acquisition of an interest in an entity that owns our stock, could, nevertheless, cause the acquirer or another individual or entity to own our stock in excess of the ownership limit.

 

 

 

 

Our Board of Directors may, upon receipt of such representations and undertakings reasonably necessary to make such a determination, and in its sole discretion, prospectively or retroactively, establish a different limit on ownership, or an excepted holder limit, for a particular stockholder if the stockholder’s ownership in excess of the ownership limit would not result 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 otherwise failing to qualify as a REIT. As a condition of granting a waiver of the ownership limit or creating an excepted holder limit, our Board of Directors may, but is not required to, require an opinion of counsel or a ruling from the Internal Revenue Service (“IRS”), in either case in form and substance satisfactory to our Board of Directors in its sole discretion, as it may deem necessary or advisable to determine or ensure our status as a REIT and may impose such other conditions or restrictions as it deems appropriate.

 

Our Board of Directors may increase the ownership limit from time to time.

 

Our charter also prohibits:

 

	 	
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			any person from beneficially or constructively owning shares of our stock that would result 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 otherwise cause us to fail to qualify as a REIT; and

			

 

	 	
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			subject to certain exceptions relating to transactions through the facilities of the NYSE or any other national securities exchange or automated inter-dealer quotation system, any person from transferring shares of our stock if the transfer would result in shares of our stock being beneficially owned by fewer than 100 persons.

			

 

Any person who acquires or attempts or intends to acquire beneficial or constructive ownership of shares of our stock that will or may violate the ownership limit or any of the other restrictions on ownership and transfer of our stock, and any person who is the intended transferee of shares of our stock that are transferred to a trust for the benefit of one or more charitable beneficiaries described below, must give immediate written notice of such an event or, in the case of a proposed or attempted transfer, give at least 15 days’ prior written notice to us and provide us with such other information as we may request in order to determine the effect of the transfer on our status as a REIT. The provisions of our charter relating to the restrictions on ownership and transfer of our stock will not apply if the Board of Directors determines that it is no longer in our best interests to continue to qualify as a REIT and, upon receipt of a recommendation to that effect from the Board of Directors, the holders of shares of common stock, by a vote of a majority of the votes entitled to be cast on the matter, determine that we shall revoke or otherwise terminate our REIT election. The holders of shares of common stock, upon receipt of a recommendation from the Board of Directors, may also determine that compliance with any of the restrictions set forth above is no longer required in order for us to qualify as a REIT and cause us to amend the charter to remove any such restriction or limitation.

 

Any attempted transfer of our stock that, if effective, would result in our stock being beneficially owned by fewer than 100 persons will be null and void. Any attempted transfer of our stock that, if effective, would result in a violation of the ownership limit (or other limit established by our charter or our Board of Directors), 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 otherwise failing to qualify as a REIT will cause the number of shares causing the violation (rounded to the nearest whole share) to be transferred automatically to a trust for the benefit of a charitable beneficiary, and the proposed transferee will not acquire any rights in the shares. The automatic transfer will be effective as of the close of business on the business day before the date of the attempted transfer or other event that resulted in a transfer to the trust. If the transfer to the trust as described above would not be effective, for any reason, to prevent a violation of the applicable restrictions on ownership and transfer of our stock, then the attempted transfer that, if effective, would have resulted in a violation of the ownership limit (or other limit established by our charter or our Board of Directors), 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 otherwise failing to qualify as a REIT will be null and void.

 

Shares of our stock held in the trust will be issued and outstanding shares. The proposed transferee will not benefit economically from ownership of any shares of our stock held in the trust and will have no rights to dividends or other distributions and no rights to vote or other rights attributable to the shares of our stock held in the trust. The trustee of the trust will exercise all voting rights and receive all dividends and other distributions with respect to shares held in the trust for the exclusive benefit of the charitable beneficiary of the trust. Any dividend or other distribution paid before we discover that the shares have been transferred to a trustee as described above must be repaid by the recipient to the trustee upon demand and any dividend or other distribution authorized but unpaid must be paid when due to the trustee. Subject to Maryland law, effective as of the date that the shares have been transferred to the trustee, the trustee will have the authority, at the trustee’s sole discretion, (i) to rescind as void any vote cast by a proposed transferee before our discovery that the shares have been transferred to the trustee and (ii) to recast the vote in accordance with the desires of the trustee acting for the benefit of the charitable beneficiary. However, if we have already taken irreversible corporate action, then the trustee may not rescind or recast the vote.

 

 

 

 

Within 20 days of receiving notice from us of a transfer of shares to the trust, the trustee must sell the shares to a person, designated by the trustee who would be permitted to own the shares without violating the ownership limit or the other restrictions on ownership and transfer of our stock in our charter. Upon such 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 proposed transferee an amount equal to the lesser of:

 

	 	
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			the price paid by the proposed transferee for the shares (or, if the proposed transferee did not give value in connection with the transfer or other event that resulted in the transfer to the trust (e.g., a gift, devise or other such transaction), the market price (as such term is defined in the charter) of the shares on the day of the event that resulted in the transfer of such shares to the 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 trust.

			

 

Any net proceeds in excess of the amount payable to the proposed transferee must be immediately paid to the charitable beneficiary. If the shares are sold by the proposed transferee before we discover that they have been transferred to the trust, the shares will be deemed to have been sold on behalf of the trust and the proposed transferee must pay to the trustee, upon demand, the amount, if any, that the proposed transferee received in excess of the amount that the proposed transferee would have received had the shares been sold by the trustee.

 

Shares of our stock held in the trust will be deemed to be 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 the transfer to the trust (or, in the case of a devise or gift, the market price at the time of such devise or gift); and

			

 

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

			

 

We may accept the offer until the trustee has otherwise sold the shares of our stock held in the trust. Upon a sale to us, the interest of the charitable beneficiary in the shares sold will terminate and the trustee must distribute the net proceeds of the sale to the proposed transferee and distribute any dividends or other distributions held by the trustee with respect to the shares to the charitable beneficiary.

 

Every person who beneficially owns of more than 5% (or such lower percentage as required by the Code or the regulations promulgated thereunder) of our stock, within 30 days after the end of each taxable year, must give us written notice stating the person’s name and address, the number of shares of each class and series of our stock that the person beneficially owns and a description of the manner in which the shares are held. Each such owner also must provide us with any additional information that we request in order to determine the effect, if any, of the person’s beneficial ownership on our status as a REIT and to ensure compliance with the aggregate stock ownership limit. In addition, any person or entity that is a beneficial owner or constructive owner of shares of our stock and any person or entity (including the stockholder of record) who is holding shares of our stock for a beneficial owner or constructive owner must disclose to us in writing such information as we may request, in good faith, in order to determine our status as a REIT or to comply, or determine our compliance, with the requirements of any governmental or taxing authority and to ensure compliance with the aggregate stock ownership limit.

 

If our Board of Directors authorizes any of our shares to be represented by certificates, the certificates will bear a legend referring to the restrictions described above.

 

These restrictions on ownership and transfer of our stock could delay, defer or prevent a transaction or a change of control of us that might involve a premium price for our common stock or otherwise be in the best interests of our stockholders.

 

 

 

 

Exchange Listing

 

Our Series A Common Stock is listed on the Nasdaq Capital Market under the symbol “SQFT”.

 

Transfer Agent and Registrar

 

The transfer agent and registrar for our common stock is Direct Transfer, LLC.

 

Certain Provisions of Maryland Law and Our Charter and Bylaws

 

Election and Removal of Directors

 

Our charter and bylaws provide that the number of our directors may be established by a majority of our entire Board of Directors but may not be fewer than six nor more than eleven, unless approved by stockholders entitled to cast a majority of all the votes entitled to be cast on the matter. Directors are elected by a plurality of all the votes cast in the election of directors. Under our charter, voting for the election of directors will be cumulative if, prior to commencement of the voting, a stockholder gives us notice of his, her or its intention to cumulate votes. If any stockholder gives such a notice, then every stockholder will be entitled to such rights, in which case, each stockholder may cumulate his, her or its total votes and cast all of his, her or its votes for any one or a combination of director nominees. In cumulative voting, the total votes entitled to be cast by a stockholder equals the number of director nominees multiplied by the number of shares of common stock that such stockholder is entitled to vote.

 

Our charter provides that any vacancy on our Board of Directors may be filled by the affirmative vote of a majority of the Board of Directors, even if the remaining directors do not constitute a quorum of the Board of Directors, and any vacancy created by the removal of a director may be filled only by the vote of the holders of a majority of our shares of common stock. Any director elected to fill a vacancy will serve until the next annual meeting of the stockholders and until his or her successor is elected and qualifies.

 

Our charter provides that any director or the entire Board of Directors may be removed at any time, with or without cause, by the affirmative vote of the holders of a majority of our shares of common stock, except that, no director may be removed when the votes cast against the removal would be sufficient to elect the director if voted cumulatively in accordance with our charter.

 

Amendment to Charter and Bylaws

 

Except as described herein and as provided in the MGCL, amendments to our charter must be advised by our Board of Directors and approved by the affirmative vote of our stockholders entitled to cast a majority of all of the votes entitled to be cast on the matter.

 

Our bylaws may be amended by our Board of Directors or by the affirmative vote of our stockholders entitled to cast a majority of all of the votes entitled to be cast on the matter by stockholders entitled to vote generally in the election of directors. Our Board of Directors may not amend provisions of bylaws that would change any rights with respect to any outstanding class of common stock by reducing the amount payable thereon upon our liquidation, or diminishing or eliminating any voting rights pertaining thereto, unless such amendment was also approved by two-thirds of the outstanding shares of such class. In addition, our Board of Directors may adopt a bylaw or an amendment to a bylaw changing the authorized number of directors only for the purpose of fixing our exact number of directors. Any change to the bylaws made by the stockholders may not be altered by the directors prior to the next annual meeting of stockholders.

 

 

 

 

Business Combinations

 

Under the MGCL, certain “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange, and, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested stockholder is defined as:

 

	 	
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			any person who beneficially owns 10% or more of the voting power of the corporation’s outstanding voting stock; or

			

 

	 	
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			an affiliate or associate of the corporation who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding stock of the corporation.

			

 

A person is not an interested stockholder under the MGCL if the corporation’s board of directors approved in advance the transaction by which the person otherwise would have become an interested stockholder. In approving the transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board of directors.

 

After the five-year prohibition, any business combination between the Maryland corporation and an interested stockholder generally must be recommended by the corporation’s board of directors and approved by the affirmative vote of at least:

 

	 	
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			80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and

			

 

	 	
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			two-thirds of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder.

			

 

These super-majority vote requirements do not apply if the corporation’s common stockholders receive a minimum price, as defined under the MGCL, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares.

 

The MGCL permits various exemptions from its provisions, including business combinations that are exempted by the board of directors before the time that the interested stockholder becomes an interested stockholder. Pursuant to the statute, our Board of Directors has by resolution exempted business combinations between us and any other person, provided that the business combination is first approved by our Board of Directors (including a majority of our directors who are not affiliates or associates of such person). Consequently, the five-year prohibition and the supermajority vote requirements will not apply to a business combination between us and any other person if the Board of Directors has first approved the combination. As a result, any person described in the preceding sentence may be able to enter into business combinations with us that may not be in the best interests of our stockholders, without compliance with the supermajority vote requirements and other provisions of the statute. We cannot assure you that our Board of Directors will not amend or repeal this resolution in the future.

 

Control Share Acquisitions

 

The MGCL provides that a holder of control shares of a Maryland corporation acquired in a control share acquisition has no voting rights with respect to the control shares except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquirer, by officers or by employees who are directors of the corporation are excluded from shares entitled to vote on the matter. Control shares are voting shares of stock that, if aggregated with all other shares of stock owned by the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting power:

 

	 	
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			one-tenth or more but less than one-third;

			

 

	 	
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			one-third or more but less than a majority; or

			

 

	 	
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			a majority or more of all voting power.

			

 

 

 

 

Control shares do not include shares the acquirer is then entitled to vote as a result of having previously obtained stockholder approval. A control share acquisition means the acquisition of control shares, subject to certain exceptions.

 

A person who has made or proposes to make a control share acquisition may compel the board of directors of the corporation to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the shares. The right to compel the calling of a special meeting is subject to the satisfaction of certain conditions, including an undertaking to pay the expenses of the meeting. If no request for a meeting is made, the corporation may itself present the question at any stockholders meeting.

 

If voting rights are not approved at the meeting or if the acquirer does not deliver an acquiring person statement as required by the statute, then the corporation may, subject to certain limitations and conditions, redeem for fair value any or all of the control shares, except those for which voting rights have previously been approved. Fair value is determined, without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquirer or, if a meeting of stockholders is held at which the voting rights of the shares are considered and not approved, as of the date of the meeting. If voting rights for control shares are approved at a stockholders meeting and the acquirer becomes entitled to exercise or direct the exercise of a majority of the voting power, all other stockholders may exercise appraisal rights. The fair value of the shares as determined for purposes of appraisal rights may not be less than the highest price per share paid by the acquirer in the control share acquisition.

 

The control share acquisition statute does not apply (a) to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or (b) to acquisitions approved or exempted by the charter or bylaws of the corporation.

 

Our bylaws contain a provision exempting from the control share acquisition statute any acquisition by any person of shares of our stock.

 

Subtitle 8

 

Subtitle 8 of Title 3 of the MGCL permits a Maryland corporation with a class of equity securities registered under the Exchange Act and at least three independent directors to elect, by provision in its charter or bylaws or a resolution of its board of directors and notwithstanding any contrary provision in the charter or bylaws, to be subject to any or all of five provisions, including:

 

	 	
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			a classified board of directors;

			

 

	 	
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			a two-thirds vote requirement for removing a director;

			

 

	 	
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			a requirement that the number of directors be fixed only by vote of the board of directors;

			

 

	 	
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			a requirement that a vacancy on the board of directors be filled only by a vote of the remaining directors in office and for the remainder of the full term of the class of directors in which the vacancy occurred and until a successor is elected and qualifies; and

			

 

	 	
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			a majority requirement for the calling of a stockholder-requested special meeting of stockholders.

			

 

We have not elected to be subject to any of the provisions of Subtitle 8, including the provisions that would permit us to classify our Board of Directors or increase the vote required to remove a director without stockholder approval. Through provisions in our charter and bylaws unrelated to Subtitle 8, we (1) vest in our Board of Directors the exclusive power to fix the number of directors and (2) require, unless called by our Chairman, our Chief Executive Officer, our President or our Board of Directors, the request of stockholders entitled to cast not less than a majority of all the votes entitled to be cast at the meeting to call a special meeting of stockholders.

 

 

 

 

Special Meetings of Stockholders

 

Pursuant to our bylaws, our Chairman, our Chief Executive Officer, our President or our Board of Directors may call a special meeting of our stockholders. Subject to the provisions of our bylaws, a special meeting of our stockholders to act on any matter that may properly be considered by our stockholders will also be called by our secretary upon the written request of stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting on such matter, accompanied by the information required by our bylaws. Our secretary will inform the requesting stockholders of the reasonably estimated cost of preparing and delivering the notice of meeting (including our proxy materials), and the requesting stockholder must pay such estimated cost before our secretary may prepare and deliver the notice of the special meeting.

 

Stockholder Action by Written Consent

 

The MGCL generally provides that, unless the charter of the corporation authorizes stockholder action by less than unanimous consent, stockholder action may be taken by consent in lieu of a meeting only if it is given by all stockholders entitled to vote on the matter. Our charter and our bylaws provide that stockholder action may be taken without a meeting if a consent, setting forth the action so taken, is given by stockholders entitled to cast not less than the minimum number of votes that would be necessary to authorize or take the action at a stockholders meeting.

 

Advance Notice of Director Nomination and New Business

 

Our bylaws provide that nominations of individuals for election as directors and proposals of business to be considered by stockholders at any annual meeting may be made only (1) pursuant to our notice of the meeting, (2) by or at the direction of our Board of Directors or (3) by any stockholder who was a stockholder of record at the record date set by the Board of Directors for determining stockholders entitled to vote at the meeting, at the time of giving the notice required by our bylaws and at the time of the meeting, who is entitled to vote at the meeting in the election of each individual so nominated or on such other proposed business and who has complied with the advance notice procedures of our bylaws. Stockholders generally must provide notice to our secretary not earlier than the 150th day or later than the close of business on the 120th day before the first anniversary of the date the proxy statement for the preceding year’s annual meeting.

 

Only the business specified in the notice of the meeting may be brought before a special meeting of our stockholders. Nominations of individuals for election as directors at a special meeting of stockholders may be made only (1) by or at the direction of our Board of Directors, (2) by a stockholder that has requested that a special meeting be called for the purpose of electing directors in compliance with our bylaws or (3) if the special meeting has been called in accordance with our bylaws for the purpose of electing directors, by a stockholder who is a stockholder of record at the record date set by the Board of Directors for determining stockholders entitled to vote at the meeting, at the time of giving the notice required by our bylaws and at the time of the special meeting, who is entitled to vote at the meeting in the election of each individual so nominated and who has complied with the advance notice procedures of our bylaws. Stockholders generally must provide notice to our secretary not earlier than the 120th day before such special meeting and not later than the later of the close of business on the 90th day before the special meeting or the tenth day after the first public announcement of the date of the special meeting and the nominees of our Board of Directors to be elected at the meeting.

 

A stockholder’s notice must contain certain information specified by our bylaws.

 

Effect of Certain Provisions of Maryland Law and our Charter and Bylaws

 

The restrictions on ownership and transfer of our stock discussed under the caption “Description of Capital Stock—Restrictions on Ownership and Transfer” prevent any person from acquiring more than 9.8% (in value or by number of shares, whichever is more restrictive) of our outstanding shares of common stock or 9.8% in value of our outstanding shares of stock without the approval of our Board of Directors. These provisions as well as the business combination provisions of the MGCL may delay, defer or prevent a change in control of us.

 

 

 

 

Further, our Board of Directors has the power to classify and reclassify any unissued shares of our preferred stock into other classes or series of stock, and to authorize us to issue the newly classified shares, as discussed under the captions “Description of Capital Stock—Common Stock” and “—Power to Reclassify and Issue Stock,” and could authorize the issuance of shares of a class or series of stock, including a class or series of preferred stock, that could have the effect of delaying, deferring or preventing a change in control of us. These actions may be taken without the approval of holders of our common stock unless such approval is required by applicable law, the terms of any other class or series of our stock or the rules of any stock exchange or automated quotation system on which any of our stock is listed or traded. We believe that the power of our Board of Directors to classify or reclassify unissued shares of our preferred stock and thereafter to cause us to issue such shares of stock will provide us with increased flexibility in structuring possible future financings and acquisitions and in meeting other needs which might arise.

 

Our charter and bylaws also provide that the number of directors may be established only by a majority of our entire Board of Directors, which prevents our stockholders from increasing the number of our directors and filling any vacancies created by such increase with their own nominees. The provisions of our bylaws discussed above under the captions “—Special Meetings of Stockholders” and “—Advance Notice of Director Nomination and New Business” require stockholders seeking to call a special meeting, nominate an individual for election as a director or propose other business at an annual or special meeting to comply with certain notice and information requirements. We believe that these provisions will help to assure the continuity and stability of our business strategies and policies as determined by our Board of Directors and promote good corporate governance by providing us with clear procedures for calling special meetings, information about a stockholder proponent’s interest in us and adequate time to consider stockholder nominees and other business proposals. However, these provisions, alone or in combination, could make it more difficult for our stockholders to remove incumbent directors or fill vacancies on our Board of Directors with their own nominees and could delay, defer or prevent a change in control, including a proxy contest or tender offer that might involve a premium price for our common stockholders or otherwise be in the best interest of our stockholders.

 

Exclusive Forum

 

Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that court does not have jurisdiction, the United States District Court for the District of Maryland, Baltimore Division, will be the sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf, (b) any action asserting a claim of breach of any duty owed by any of our directors, officers or other employees to us or to our stockholders, (c) any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any provision of the MGCL or our charter or bylaws or (d) any action asserting a claim against us or any of our directors, officers or other employees that is governed by the internal affairs doctrine.

 

Limitation of Liability and Indemnification of Directors and Officers

 

Maryland law permits us to include a provision in our charter limiting the liability of our directors and officers to us and our stockholders for money damages, except for liability resulting from (a) actual receipt of an improper benefit or profit in money, property or services or (b) active and deliberate dishonesty that is established by a final judgment and which is material to the cause of action. Our charter contains a provision that eliminates our directors’ and officers’ liability to the maximum extent permitted by Maryland law.

 

The MGCL requires us (unless our charter provides otherwise, which our charter does not) to indemnify a director or officer who has been successful, on the merits or otherwise, in the defense of any proceeding to which he or she is made a party by reason of his or her service in that capacity. The MGCL permits us to indemnify our present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made or threatened to be made a party by reason of their service in those or certain other capacities unless it is established that:

 

	 	
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			the act or omission of the director or officer was material to the matter giving rise to the proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty;

			

 

	 	
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			the director or officer actually received an improper personal benefit in money, property or services; or

			

 

	 	
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			in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.

			

 

 

 

 

Under the MGCL, we may not indemnify a director or officer in a suit by us or in our right in which the director or officer was adjudged liable to us or in a suit in which the director or officer was adjudged liable on the basis that personal benefit was improperly received. A court may order indemnification if it determines that the director or officer is fairly and reasonably entitled to indemnification, even though the director or officer did not meet the prescribed standard of conduct or was adjudged liable on the basis that personal benefit was improperly received. However, indemnification for an adverse judgment in a suit by us or in our right, or for a judgment of liability on the basis that personal benefit was improperly received, is limited to expenses.

 

In addition, the MGCL permits us to advance reasonable expenses to a director or officer upon our receipt of (a) a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification and (b) a written undertaking by him or her or on his or her behalf to repay the amount paid or reimbursed if it is ultimately determined that the standard of conduct was not met.

 

Our charter authorizes us to obligate ourselves, and our bylaws obligate us, to the maximum extent permitted by Maryland law in effect from time to time, to indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of final disposition of a proceeding to:

 

	 	
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			any present or former director or officer who is made or threatened to be made a party to, or witness in, a proceeding by reason of his or her service in that capacity; or

			

 

	 	
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			any individual who, while a director or officer of our company and at our request, serves or has served as a director, officer, partner, trustee, member or manager of another corporation, real estate investment trust, limited liability company, partnership, joint venture, trust, employee benefit plan or any other enterprise and who is made or threatened to be made a party to, or witness in, the proceeding by reason of his or her service in that capacity.

			

 

Our charter and bylaws also permit us to indemnify and advance expenses to any individual who served any of our predecessors in any of the capacities described above and any employee or agent of us or any of our predecessors.

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