NEWCASTLE INVESTMENT CORP.

 

                      ARTICLES OF AMENDMENT AND RESTATEMENT

 

         FIRST: Newcastle Investment Corp., a Maryland corporation (the

"Corporation"), desires to amend and restate its charter as currently in effect

and as hereinafter amended.

 

         SECOND: The following provisions are all the provisions of the charter

currently in effect and as hereinafter amended:

 

 

                                    ARTICLE I

 

                                  INCORPORATOR

 

         The undersigned, Tracy A. Bacigalupo, whose address is c/o Piper

                               Rudnick LLP, 6225 Smith Avenue, Baltimore, Maryland 21209, being at least 18

years of age, does hereby form a corporation under the general laws of the State

of Maryland.

 

                                   ARTICLE II

 

                                      NAME

 

         The name of the corporation (which is hereinafter called the

"Corporation") is:

 

                           Newcastle Investment Corp.

 

                                  ARTICLE III

 

                                    PURPOSE

 

         The purposes for which the Corporation is formed are to engage in any

lawful act or activity (including, without limitation or obligation, engaging in

business as a real estate investment trust under the Internal Revenue Code of

1986, as amended, or any successor statute (the "Code")) for which corporations

may be organized under the general laws of the State of Maryland as now or

hereafter in force. For purposes of these Articles, "REIT" means a real estate

investment trust under Sections 856 through 860 of the Code.

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                                   ARTICLE IV

 

                  PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT

 

         The address of the principal office of the Corporation in the State of

Maryland is c/o Piper Rudnick LLP, 6225 Smith Avenue, Baltimore, Maryland 21209,

Attention: Tracy A. Bacigalupo. The name of the resident agent of the

Corporation in the State of Maryland is Tracy A. Bacigalupo, whose post address

is c/o Piper Rudnick LLP, 6225 Smith Avenue, Baltimore, Maryland 21209. The

resident agent is a citizen of and resides in the State of Maryland.

 

                                    ARTICLE V

 

                        PROVISIONS FOR DEFINING, LIMITING

 

                      AND REGULATING CERTAIN POWERS OF THE

 

                CORPORATION AND OF THE STOCKHOLDERS AND DIRECTORS

 

         Section 5.1 Number and Classification of Directors. The business and

affairs of the Corporation shall be managed under the direction of the Board of

Directors. The number of directors of the Corporation initially shall be two

(2), which number may be increased or decreased pursuant to the Bylaws, but

shall never be less than the minimum number required by the Maryland General

Corporation Law. The names of the initial directors who shall serve until their

successors are duly elected and qualified are:

 

                  Randal A. Nardone            Class I

                  Wesley R. Edens              Class III

 

         The directors may increase the number of directors and may fill any

vacancy, whether resulting from an increase in the number of directors or

otherwise, on the Board of Directors occurring before the first annual meeting

of stockholders in the manner provided in the Bylaws.

 

         The directors (other than any director elected solely by holders of one

or more classes or series of Preferred Stock) shall be classified, with respect

to the terms for which they severally

 

 

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hold office, into three classes, as nearly equal in number as possible, the

Class I directors to hold office initially for a term expiring at the annual

meeting of stockholders in 2003, the Class II directors to hold office initially

for a term expiring at the annual meeting of stockholders in 2004 and the Class

III directors to hold office initially for a term expiring at the annual meeting

of stockholders in 2005, with the members of each class to hold office until

their successors are duly elected and qualify. At each annual meeting of the

stockholders, the successors to the class of directors whose term expires at

such meeting shall be elected to hold office for a term expiring at the annual

meeting of stockholders held in the third year following the year of their

election and until their successors are duly elected and qualify.

 

         Section 5.2 Extraordinary Actions. Except as specifically provided in

Section 5.8 (relating to removal of directors), notwithstanding any provision of

law permitting or requiring any action to be taken or approved by the

affirmative vote of the holders of shares entitled to cast a greater number of

votes, any such action shall be effective and valid if taken or approved by the

affirmative vote of holders of shares entitled to cast a majority of all the

votes entitled to be cast on the matter.

 

         Section 5.3 Authorization by Board of Stock Issuance. The Board of

Directors may authorize the issuance from time to time of shares of stock of the

Corporation of any class or series, whether now or hereafter authorized, or

securities or rights convertible into shares of its stock of any class or

series, whether now or hereafter authorized, for such consideration as the Board

of Directors may deem advisable (or without consideration in the case of a stock

split or stock dividend), subject to such restrictions or limitations, if any,

as may be set forth in the charter of the Corporation (the "Charter") or the

Bylaws of the Corporation (the "Bylaws").

 

 

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         Section 5.4 Preemptive Rights. Except as may be provided by the Board

of Directors in setting the terms of classified or reclassified shares of stock

pursuant to Section 6.4, or as may otherwise be provided by contract, no holder

of shares of stock of the Corporation shall, as such holder, have any preemptive

right to purchase or subscribe for any additional shares of stock of the

Corporation or any other security of the Corporation which it may issue or sell.

 

         Section 5.5. Indemnification. The Corporation shall have the power, to

the maximum extent permitted by Maryland law in effect from time to time, to

obligate itself to indemnify, and to pay or reimburse reasonable expenses in

advance of final disposition of a proceeding to, (a) any individual who is a

present or former director or officer of the Corporation or (b) any individual

who, while a director of the Corporation and at the request of the Corporation,

serves or has served as a director, officer, partner or trustee of another

corporation, real estate investment trust, partnership, joint venture, trust,

employee benefit plan or any other enterprise from and against any claim or

liability to which such person may become subject or which such person may incur

by reason of his status as a present or former director or officer of the

Corporation. The Corporation shall have the power, with the approval of the

Board of Directors, to provide such indemnification and advancement of expenses

to a person who served a predecessor of the Corporation in any of the capacities

described in (a) or (b) above and to any employee or agent of the Corporation or

a predecessor of the Corporation.

 

         Section 5.6 Determinations by Board. The determination as to any of the

following matters, made in good faith by or pursuant to the direction of the

Board of Directors consistent with the Charter and in the absence of actual

receipt of an improper benefit in money, property or services or active and

deliberate dishonesty established by a court, shall be final and conclusive and

shall be binding upon the Corporation and every holder of shares of its stock:

the amount of

 

 

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the net income of the Corporation for any period and the amount of assets at any

time legally available for the payment of dividends, redemption of its stock or

the payment of other distributions on its stock; the amount of paid-in surplus,

net assets, other surplus, annual or other net profit, net assets in excess of

capital, undivided profits or excess of profits over losses on sales of assets;

the amount, purpose, time of creation, increase or decrease, alteration or

cancellation of any reserves or charges and the propriety thereof (whether or

not any obligation or liability for which such reserves or charges shall have

been created shall have been paid or discharged); the fair value, or any sale,

bid or asked price to be applied in determining the fair value, of any asset

owned or held by the Corporation; any matter relating to the acquisition,

holding and disposition of any assets by the Corporation; or any matter relating

to the business and affairs of the Corporation.

 

         Section 5.7 REIT Qualification. The Corporation shall seek to elect and

maintain status as a REIT under Sections 856-860 of the Code. The Board of

Directors shall use its reasonable best efforts to cause the Corporation to

satisfy the requirements for qualification as a REIT under the Code, including,

but not limited to, the ownership of its outstanding stock, the nature of its

assets, the sources of its income, and the amount and timing of its

distributions to its stockholders; however, if the Board of Directors determines

that it is no longer in the best interests of the Corporation to continue to be

qualified as a REIT, the Board of Directors may revoke or otherwise terminate

the Corporation's REIT election. The Board of Directors also may determine that

compliance with any restriction or limitation on stock ownership and transfers

set forth in Article VII is no longer required for REIT qualification.

 

         Section 5.8 Removal of Directors. Subject to the rights of holders of

one or more classes or series of Preferred Stock to elect or remove one or more

directors, any director, or the

 

 

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entire Board of Directors, may be removed from office at any time, but only for

cause and then only by the affirmative vote of at least two thirds of the votes

entitled to be cast generally in the election of directors. For the purpose of

this paragraph, "cause" shall mean, with respect to any particular director, a

final judgment of a court of competent jurisdiction holding that such director

caused demonstrable, material harm to the Corporation through bad faith or

active and deliberate dishonesty.

 

         Section 5.9 Advisor Agreements. Subject to such approval of

stockholders and other conditions, if any, as may be required by any applicable

statute, rule or regulation, the Board of Directors may authorize the execution

and performance by the Corporation of one or more agreements with any person,

corporation, association, company, trust, partnership (limited or general) or

other organization (including, without limitation, any affiliate of the

Corporation and/or its directors) whereby, subject to the supervision and

control of the Board of Directors, any such other person, corporation,

association, company, trust, partnership (limited or general) or other

organization (including, without limitation, any affiliate of the Corporation

and/or its directors) shall render or make available to the Corporation

managerial, investment, advisory and/or related services, office space and other

services and facilities (including, if deemed advisable by the Board of

Directors, the management or supervision of the investments of the Corporation)

upon such terms and conditions as may be provided in such agreement or

agreements (including, if deemed fair and equitable by the Board of Directors,

the compensation payable thereunder by the Corporation).

 

 

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                                   ARTICLE VI

 

                                     STOCK

 

         Section 6.1 Authorized Shares. The Corporation has authority to issue

600,000,000 shares of stock, consisting of 500,000,000 shares of Common Stock,

$0.01 par value per share ("Common Stock"), and 100,000,000 shares of Preferred

Stock, $0.01 par value per share ("Preferred Stock"). The aggregate par value of

all authorized shares of stock having par value is $6,000,000. If shares of one

class of stock are classified or reclassified into shares of another class of

stock pursuant to Sections 6.2, 6.3 or 6.4 of this Article VI, the number of

authorized shares of the former class shall be automatically decreased and the

number of shares of the latter class shall be automatically increased, in each

case by the number of shares so classified or reclassified, so that the

aggregate number of shares of stock of all classes that the Corporation has

authority to issue shall not be more than the total number of shares of stock

set forth in the first sentence of this paragraph.

 

         Section 6.2. Common Stock. Subject to the provisions of Article VII,

each share of Common Stock shall entitle the holder thereof to one vote. The

Board of Directors may reclassify any unissued shares of Common Stock from time

to time in one or more classes or series of stock.

 

         Section 6.3 Preferred Stock. The Board of Directors may classify any

unissued shares of Preferred Stock and reclassify any previously classified but

unissued shares of Preferred Stock of any series from time to time, in one or

more classes or series of stock.

 

         Section 6.4 Classified or Reclassified Shares. Prior to issuance of

classified or reclassified shares of any class or series, the Board of Directors

by resolution shall: (a) designate that class or series to distinguish it from

all other classes and series of stock of the Corporation;

 

 

                                      -7-

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(b) specify the number of shares to be included in the class or series; (c) set

or change, subject to the provisions of Article VII and subject to the express

terms of any class or series of stock of the Corporation outstanding at the

time, the preferences, conversion or other rights, voting powers, restrictions,

limitations as to dividends or other distributions, qualifications and terms and

conditions of redemption for each class or series; and (d) cause the Corporation

to file articles supplementary with the State Department of Assessments and

Taxation of Maryland ("SDAT"). Any of the terms of any class or series of stock

set or changed pursuant to clause (c) of this Section 6.4 may be made dependent

upon facts or events ascertainable outside the Charter (including determinations

by the Board of Directors or other facts or events within the control of the

Corporation) and may vary among holders thereof, provided that the manner in

which such facts, events or variations shall operate upon the terms of such

class or series of stock is clearly and expressly set forth in the articles

supplementary filed with the SDAT.

 

         Section 6.5 Charter and Bylaws. All persons who shall acquire stock in

the Corporation shall acquire the same subject to the provisions of the Charter

and the Bylaws.

 

                                   ARTICLE VII

 

                RESTRICTIONS ON TRANSFER AND OWNERSHIP OF SHARES

 

         Section 7.1 Definitions. For the purpose of this Article VII, the

following terms shall have the following meanings:

 

         Aggregate Stock Ownership Limit. The term "Aggregate Stock Ownership

Limit" shall mean not more than 8.0 percent of the aggregate value of the

outstanding shares of any class or series of Capital Stock. The value of the

outstanding shares of Capital Stock shall be determined by the Board of

Directors of the Corporation in good faith, which determination shall be

conclusive for all purposes hereof.

 

 

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         Beneficial Ownership. The term "Beneficial Ownership" shall mean

ownership of Capital Stock by a Person, whether the interest in the shares of

Capital Stock is held directly or indirectly (including by a nominee), and shall

include interests that would be treated as owned through the application of

Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The

terms "Beneficial Owner," "Beneficially Owns" and "Beneficially Owned" shall

have the correlative meanings.

 

         Business Day. The term "Business Day" shall mean any day, other than a

Saturday or Sunday, that is neither a legal holiday nor a day on which banking

institutions in New York City are authorized or required by law, regulation or

executive order to close.

 

         Capital Stock. The term "Capital Stock" shall mean all classes or

series of stock of the Corporation, including, without limitation, Common Stock

and Preferred Stock.

 

         Charitable Beneficiary. The term "Charitable Beneficiary" shall mean

one or more beneficiaries of a Trust as determined pursuant to Section 7.3.6,

provided that each such organization must be described in Section 501(c)(3) of

the Code and contributions to each such organization must be eligible for

deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the Code.

 

         Charter. The term "Charter" shall mean the charter of the Corporation,

as that term is defined in the MGCL.

 

         Code. The term "Code" shall mean the Internal Revenue Code of 1986, as

amended from time to time.

 

         Constructive Ownership. The term "Constructive Ownership" shall mean

ownership of Capital Stock by a Person, whether the interest in the shares of

Capital Stock is held directly or indirectly (including by a nominee), and shall

include interests that would be treated as owned

 

 

                                      -9-

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through the application of Section 318(a) of the Code, as modified by Section

856(d)(5) of the Code. The terms "Constructive Owner," "Constructively Owns" and

"Constructively Owned" shall have the correlative meanings.

 

         Excepted Holder. The term "Excepted Holder" shall mean a stockholder of

the Corporation for whom an Excepted Holder Limit is created by these Articles

or by the Board of Directors pursuant to Section 7.2.7.

 

         Excepted Holder Limit. The term "Excepted Holder Limit" shall mean,

provided that the affected Excepted Holder agrees to comply with the

requirements established by the Board of Directors pursuant to Section 7.2.7,

and subject to adjustment pursuant to Section 7.2.8, the percentage limit

established by the Board of Directors for such Excepted Holder pursuant to

Section 7.2.7.

 

         Initial Date. The term "Initial Date" shall mean the date upon which

the Corporation completes an initial public offering of shares of Common Stock.

 

         Market Price. The term "Market Price" on any date shall mean, with

respect to any class or series of outstanding shares of Capital Stock, the

Closing Price for such Capital Stock on such date. The "Closing Price" on any

date shall mean the last sale price for such Capital Stock, regular way, or, in

case no such sale takes place on such day, the average of the closing bid and

asked prices, regular way, for such Capital Stock, in either case as reported in

the principal consolidated transaction reporting system with respect to

securities listed or admitted to trading on the NYSE or, if such Capital Stock

is not listed or admitted to trading on the NYSE, as reported on the principal

consolidated transaction reporting system with respect to securities listed on

the principal national securities exchange on which such Capital Stock is listed

or admitted to trading or, if such Capital Stock is not listed or admitted to

trading on any national

 

 

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securities exchange, the last quoted price, or, if not so quoted, the average of

the high bid and low asked prices in the over-the-counter market, as reported by

the National Association of Securities Dealers, Inc. Automated Quotation System

or, if such system is no longer in use, the principal other automated quotation

system that may then be in use or, if such Capital Stock is not quoted by any

such organization, the average of the closing bid and asked prices as furnished

by a professional market maker making a market in such Capital Stock selected by

the Board of Directors of the Corporation or, in the event that no trading price

is available for such Capital Stock, the fair market value of the Capital Stock,

as determined in good faith by the Board of Directors of the Corporation.

 

         MGCL. The term "MGCL" shall mean the Maryland General Corporation Law,

as amended from time to time.

 

         NYSE. The term "NYSE" shall mean the New York Stock Exchange, Inc.

 

         Person. The term "Person" shall mean an individual, corporation,

partnership, estate, trust (including a trust qualified under Sections 401(a) or

501(c)(17) of the Code), a portion of a trust permanently set aside for or to be

used exclusively for the purposes described in Section 642(c) of the Code,

association, private foundation within the meaning of Section 509(a) of the

Code, joint stock company or other entity and also includes a group as that term

is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934,

as amended.

 

         Prohibited Owner. The term "Prohibited Owner" shall mean, with respect

to any purported Transfer, any Person who, but for the provisions of Section

7.2.1, would Beneficially Own or Constructively Own shares of Capital Stock, and

if appropriate in the context, shall also mean any Person who would have been

the record owner of the shares that the Prohibited Owner would have so owned.

 

 

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         REIT. The term "REIT" shall mean a real estate investment trust within

the meaning of Section 856 of the Code.

 

         Restriction Termination Date. The term "Restriction Termination Date"

shall mean the first day after the Initial Date on which the Corporation

determines pursuant to Section 5.7 of the Charter that it is no longer in the

best interests of the Corporation to attempt to, or continue to, qualify as a

REIT or that compliance with the restrictions and limitations on Beneficial

Ownership, Constructive Ownership and Transfers of shares of Capital Stock set

forth herein is no longer required in order for the Corporation to qualify as a

REIT.

 

         Transfer. The term "Transfer" shall mean any issuance, sale, transfer,

gift, assignment, devise or other disposition, as well as any other event that

causes any Person to acquire Beneficial Ownership or Constructive Ownership, or

any agreement to take any such actions or cause any such events, of Capital

Stock or the right to vote or receive dividends on Capital Stock, including (a)

the granting or exercise of any option (or any disposition of any option), (b)

any disposition of any securities or rights convertible into or exchangeable for

Capital Stock or any interest in Capital Stock or any exercise of any such

conversion or exchange right and (c) Transfers of interests in other entities

that result in changes in Beneficial or Constructive Ownership of Capital Stock;

in each case, whether voluntary or involuntary, whether owned of record,

Constructively Owned or Beneficially Owned and whether by operation of law or

otherwise. The terms "Transferring" and "Transferred" shall have the correlative

meanings.

 

         Trust. The term "Trust" shall mean any trust provided for in Section

7.3.1.

 

         Trustee. The term "Trustee" shall mean the Person unaffiliated with the

Corporation and a Prohibited Owner that is appointed by the Corporation to serve

as trustee of a Trust.

 

         Section 7.2 Capital Stock.

 

 

                                      -12-

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                  Section 7.2.1. Ownership Limitations. During the period

commencing on the Initial Date and prior to the Restriction Termination Date:

 

                  (a)      Basic Restrictions.

 

                           (i)      (1) No Person, other than an Excepted

Holder, shall Beneficially Own or Constructively Own shares of Capital Stock in

excess of the Aggregate Stock Ownership Limit and (2) no Excepted Holder shall

Beneficially Own or Constructively Own shares of Capital Stock in excess of the

Excepted Holder Limit for such Excepted Holder.

 

                           (ii)     No Person shall Beneficially or

Constructively Own shares of Capital Stock to the extent that such Beneficial or

Constructive Ownership of Capital Stock would result in the Corporation being

"closely held" within the meaning of Section 856(h) of the Code (without regard

to whether the ownership interest is held during the last half of a taxable

year), or would otherwise result in the Corporation failing to qualify as a REIT

(including, but not limited to, Beneficial or Constructive Ownership that would

result in the Corporation owning (actually or Constructively) an interest in a

tenant that is described in Section 856(d)(2)(B) of the Code if the income

derived by the Corporation from such tenant would cause the Corporation to fail

to satisfy any of the gross income requirements of Section 856(c) of the Code).

 

                           (iii)    Subject to Section 7.4, no Person shall

Transfer any Beneficial Ownership or Constructive Ownership of, or any direct or

indirect interest in, any shares of Capital Stock if, as a result of the

Transfer, the Capital Stock would be beneficially owned by less than 100 Persons

(determined under the principles of Section 856(a)(5) of the Code).

 

                  (b)      Transfer in Trust. Subject to 7.4, if any Transfer of

shares of Capital Stock (whether or not such Transfer is the result of a

transaction entered into through the

 

 

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facilities of the NYSE or any other national securities exchange or automated

inter-dealer quotation system) occurs which, if effective, would result in any

Person Beneficially Owning or Constructively Owning shares of Capital Stock in

violation of Section 7.2.1(a)(i), (ii) or (iii),

 

                           (i)      then that number of shares of the Capital

Stock the Beneficial or Constructive Ownership of which otherwise would cause

such Person to violate Section 7.2.1(a)(i), (ii) or (iii) (rounded to the

nearest whole share) shall be automatically transferred to a Trust for the

benefit of a Charitable Beneficiary, as described in Section 7.3, effective as

of the close of business on the Business Day prior to the date of such Transfer,

and such Person shall acquire no rights in such shares; or

 

                           (ii)     if the transfer to the Trust described in

clause (i) of this sentence would not be effective for any reason to prevent the

violation of Section 7.2.1(a), then the Transfer of that number of shares of

Capital Stock that otherwise would cause any Person to violate Section 7.2.1(a)

shall be void ab initio, and the intended transferee shall acquire no rights in

such shares of Capital Stock.

 

                           (iii)    In determining which shares of Capital Stock

are to be transferred to a Trust in accordance with this Section 7.2.1(b) and

Section 7.3 hereof, shares shall be so transferred to a Trust in such manner as

minimizes the aggregate value of the shares that are transferred to the Trust

(except to the extent that the Board of Directors determines that the shares

transferred to the Trust shall be those directly or indirectly held or

Beneficially Owned or Constructively Owned by a Person or Persons that caused or

contributed to the application of this Section 7.2.1(b)), and to the extent not

inconsistent therewith, on a pro rata basis.

 

                           (iv)     To the extent that, upon a transfer of

shares of Capital Stock pursuant to this Section 7.2.1(b), a violation of any

provision of Section 7.2.1(a) would

 

 

                                      -14-

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nonetheless be continuing (for example where the ownership of shares of Capital

Stock by a single Trust would result in the Capital Stock being beneficially

owned (determined under the principles of Section 856(a)(5) of the Code) by less

than 100 Persons), then shares of Capital Stock shall be transferred to that

number of Trusts, each having a distinct Trustee and a Charitable Beneficiary or

Beneficiaries that are distinct from those of each other Trust, such that there

is no violation of any provision of Section 7.2.1(a).

 

                  Section 7.2.2 Remedies for Breach. If the Board of Directors

of the Corporation or any duly authorized committee thereof shall at any time

determine in good faith that a Transfer or any other event has taken place that

results in a violation of Section 7.2.1 or that a Person intends to acquire or

has attempted to acquire Beneficial or Constructive Ownership of any shares of

Capital Stock in violation of Section 7.2.1 (whether or not such violation is

intended), the Board of Directors or a committee thereof shall take such action

as it deems advisable to refuse to give effect to or to prevent such Transfer or

other event, including, without limitation, causing the Corporation to redeem

shares, refusing to give effect to such Transfer on the books of the Corporation

or instituting proceedings to enjoin such Transfer or other event; provided,

however, that any Transfer or attempted Transfer or other event in violation of

Section 7.2.1 shall automatically result in the transfer to the Trust described

above, and, where applicable, and subject to the first sentence of Section 7.4,

such Transfer (or other event) shall be void ab initio as provided above

irrespective of any action (or non-action) by the Board of Directors or a

committee thereof.

 

                  Section 7.2.3. Notice of Restricted Transfer. Any Person who

acquires or attempts or intends to acquire Beneficial Ownership or Constructive

Ownership of shares of Capital Stock that will or may violate Section 7.2.1(a)

or any Person who would have owned

 

 

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shares of Capital Stock that resulted in a transfer to the Trust pursuant to the

provisions of Section 7.2.1(b) shall immediately give written notice to the

Corporation of such event, or in the case of such a proposed or attempted

transaction, give at least 15 days prior written notice, and shall provide to

the Corporation such other information as the Corporation may request in order

to determine the effect, if any, of such Transfer on the Corporation's status as

a REIT.

 

                  Section 7.2.4 Owners Required To Provide Information. From the

Initial Date and prior to the Restriction Termination Date:

 

                           (a)      every owner of more than five percent (or

such lower percentage as required by the Code or the Treasury Regulations

promulgated thereunder) of the outstanding shares of Capital Stock, within 30

days after the end of each taxable year, shall give written notice to the

Corporation stating the name and address of such owner, the number of shares of

Capital Stock Beneficially Owned and a description of the manner in which such

shares are held. Each such owner shall provide to the Corporation such

additional information as the Corporation may request in order to determine the

effect, if any, of such Beneficial Ownership on the Corporation's status as a

REIT and to ensure compliance with the Aggregate Stock Ownership Limit; and

 

                           (b)      each Person who is a Beneficial or

Constructive Owner of Capital Stock and each Person (including the stockholder

of record) who is holding Capital Stock for a Beneficial or Constructive Owner

shall provide to the Corporation such information as the Corporation may

request, in good faith, in order to determine the Corporation's status as a REIT

and to comply with requirements of any taxing authority or governmental

authority or to determine such compliance.

 

 

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                  Section 7.2.5 Remedies Not Limited. Subject to Section 5.7 of

the Charter, nothing contained in this Section 7.2 shall limit the authority of

the Board of Directors of the Corporation to take such other action as it deems

necessary or advisable to protect the Corporation and the interests of its

stockholders in preserving the Corporation's status as a REIT.

 

                  Section 7.2.6 Ambiguity. In the case of an ambiguity in the

application of any of the provisions of this Section 7.2, Section 7.3 or any

definition contained in Section 7.1, the Board of Directors of the Corporation

shall have the power to determine the application of the provisions of this

Section 7.2 or Section 7.3 or any such definition with respect to any situation

based on the facts known to it. In the event Section 7.2 or 7.3 requires an

action by the Board of Directors and the Charter fails to provide specific

guidance with respect to such action, the Board of Directors shall have the

power to determine the action to be taken so long as such action is not contrary

to the provisions of Sections 7.1, 7.2 or 7.3.

 

                  Section 7.2.7. Exceptions.

 

                           (a)      The Board of Directors of the Corporation

may, subject to such terms, conditions, representations and undertakings as it

shall determine in its sole discretion, exempt a Person from the application of

any one or more of the provisions of Section 7.2.1(a), and may establish or

increase an Excepted Holder Limit for such Person. Any violation of such

representations or undertakings (or other action which is contrary to the

restrictions contained in Sections 7.2.1 through Section 7.2.6) will result in

such Person, and any shares of Capital Stock that such Person may Beneficially

or Constructively Own, or in which it may otherwise hold any direct or indirect

interest, being subject to the provisions of Section 7.2.1(b).

 

                           (b)      Prior to granting any exception pursuant to

Section 7.2.7(a), the Board of Directors of the Corporation may require a ruling

from the Internal Revenue Service, or

 

 

                                      -17-

<PAGE>

an opinion of counsel, in either case in form and substance satisfactory to the

Board of Directors in its sole discretion, as it may deem necessary or advisable

in order to determine or ensure the Corporation's status as a REIT.

Notwithstanding the receipt of any ruling or opinion, the Board of Directors may

impose such conditions or restrictions as it deems appropriate in connection

with granting such exception.

 

                           (c)      Subject to Section 7.2.1(a)(ii), an

underwriter which participates in a public offering or a private placement of

Capital Stock (or securities convertible into or exchangeable for Capital Stock)

may Beneficially Own or Constructively Own shares of Capital Stock (or

securities convertible into or exchangeable for Capital Stock) in excess of the

Aggregate Stock Ownership Limit, but only to the extent necessary to facilitate

such public offering or private placement.

 

                           (d)      Subsequent to the Initial Date, the Board of

Directors may only reduce the Excepted Holder Limit for an Excepted Holder: (1)

with the written consent of such Excepted Holder at any time, or (2) pursuant to

the terms and conditions of the agreements and undertakings entered into with

such Excepted Holder in connection with the establishment of the Excepted Holder

Limit for that Excepted Holder. No Excepted Holder Limit with respect to a class

or series of Capital Stock shall be reduced to a percentage that is less than

the Aggregate Stock Ownership Limit.

 

                  Section 7.2.8 Legend. Each certificate for shares of Capital

Stock shall bear substantially the following legend:

 

                           The shares represented by this certificate are

                  subject to restrictions on Beneficial and Constructive

                  Ownership and Transfer for the purpose of the Corporation's

                  maintenance of its status as a Real Estate Investment Trust

                  under the Internal Revenue Code of 1986, as amended (the

                  "Code"). Subject to certain further

 

 

                                      -18-

<PAGE>

                  restrictions and except as expressly provided in the

                  Corporation's Charter, (i) no Person may Beneficially or

                  Constructively Own shares of any class or series of the

                  Corporation's Capital Stock in excess of 8.0 percent of the

                  aggregate value of the outstanding shares of any such class or

                  series of Capital Stock unless such Person is an Excepted

                  Holder (in which case the Excepted Holder Limit shall be

                  applicable); (ii) no Person may Beneficially or Constructively

                  Own Capital Stock that would result in the Corporation being

                  "closely held" under Section 856(h) of the Code or otherwise

                  cause the Corporation to fail to qualify as a REIT; and (iii)

                  no Person may Transfer shares of Capital Stock if such

                  Transfer would result in the Capital Stock of the Corporation

                  being owned by fewer than 100 Persons. Any Person who

                  Beneficially or Constructively Owns or attempts to

                  Beneficially or Constructively Own shares of Capital Stock

                  which causes or will cause a Person to Beneficially or

                  Constructively Own shares of Capital Stock in excess or in

                  violation of the above limitations must immediately notify the

                  Corporation. If any of the restrictions on transfer or

                  ownership are violated, the shares of Capital Stock

                  represented hereby will be automatically transferred to a

                  Trustee of a Trust for the benefit of one or more Charitable

                  Beneficiaries. In addition, upon the occurrence of certain

                  events, attempted Transfers in violation of the restrictions

                  described above may be void ab initio. All capitalized terms

                  in this legend have the meanings defined in the charter of the

                  Corporation, as the same may be amended from time to time, a

                  copy of which, including the restrictions on transfer and

                  ownership, will be furnished to each holder of Capital Stock

                  of the Corporation on request and without charge.

 

                  Instead of the foregoing legend, the certificate may state

that the Corporation will furnish a full statement about certain restrictions on

transferability to a stockholder on request and without charge.

 

         Section 7.3 Transfer of Capital Stock in Trust.

 

                  Section 7.3.1 Ownership in Trust. Upon any purported Transfer

or other event described in Section 7.2.1(b) that would result in a transfer of

shares of Capital Stock to a Trust, such shares of Capital Stock shall be deemed

to have been transferred to a Trustee as trustee of such Trust for the exclusive

benefit of one or more Charitable Beneficiaries. Such transfer to the

 

 

                                      -19-

<PAGE>

Trustee shall be deemed to be effective as of the close of business on the

Business Day prior to the purported Transfer or other event that results in the

transfer to the Trust pursuant to Section 7.2.1(b). The Trustee shall be

appointed by the Corporation and shall be a Person unaffiliated with the

Corporation and any Prohibited Owner. Each Charitable Beneficiary shall be

designated by the Corporation as provided in Section 7.3.6.

 

                  Section 7.3.2 Status of Shares Held by the Trustee. Shares of

Capital Stock held by the Trustee shall be issued and outstanding shares of

Capital Stock of the Corporation. The Prohibited Owner shall have no rights in

the shares held by the Trustee. The Prohibited Owner shall not benefit

economically from ownership of any shares held in trust by the Trustee, shall

have no rights to dividends or other distributions and shall not possess any

rights to vote or other rights attributable to the shares held in the Trust.

 

                  Section 7.3.3 Dividend and Voting Rights. The Trustee shall

have all voting rights and rights to dividends or other distributions with

respect to shares of Capital Stock held in the Trust, which rights shall be

exercised for the exclusive benefit of the Charitable Beneficiary. Any dividend

or other distribution paid prior to the discovery by the Corporation that the

shares of Capital Stock have been transferred to the Trustee shall be paid by

the recipient of such dividend or distribution to the Trustee upon demand and

any dividend or other distribution authorized but unpaid shall be paid when due

to the Trustee. Any dividend or distribution so paid to the Trustee shall be

held in trust for the Charitable Beneficiary. The Prohibited Owner shall have no

voting rights with respect to shares held in the Trust and, subject to Maryland

law, effective as of the date that the shares of Capital Stock have been

transferred to the Trustee, the Trustee shall have the authority (at the

Trustee's sole discretion) (i) to rescind as void any vote cast by a Prohibited

Owner prior to the discovery by the Corporation that the shares of Capital

 

 

                                      -20-

<PAGE>

Stock have been transferred to the Trustee and (ii) to recast such vote in

accordance with the desires of the Trustee acting for the benefit of the

Charitable Beneficiary; provided, however, that if the Corporation has already

taken irreversible corporate action, then the Trustee shall not have the

authority to rescind and recast such vote. Notwithstanding the provisions of

this Article VII, until the Corporation has received notification that shares of

Capital Stock have been transferred into a Trust, the Corporation shall be

entitled to rely on its share transfer and other stockholder records for

purposes of preparing lists of stockholders entitled to vote at meetings,

determining the validity and authority of proxies and otherwise conducting votes

of stockholders.

 

                  Section 7.3.4 Sale of Shares by Trustee. Within 20 days of

receiving notice from the Corporation that shares of Capital Stock have been

transferred to the Trust, the Trustee of the Trust shall sell the shares held in

the Trust to a person, designated by the Trustee, whose ownership of the shares

will not violate the ownership limitations set forth in Section 7.2.1(a) or

otherwise adversely affect the Corporation's ability to qualify as a REIT. Upon

such sale, the interest of the Charitable Beneficiary in the shares sold shall

terminate and the Trustee shall distribute the net proceeds of the sale to the

Prohibited Owner and to the Charitable Beneficiary as provided in this Section

7.3.4. The Prohibited Owner shall receive the lesser of (1) the price paid by

the Prohibited Owner for the shares or, if the Prohibited Owner did not give

value for the shares in connection with the event causing the shares to be held

in the Trust (e.g., in the case of a gift, devise or other such transaction),

the Market Price of the shares on the day of the event causing the shares to be

held in the Trust and (2) the price per share received by the Trustee from the

sale or other disposition of the shares held in the Trust. Any net sales

proceeds in excess of the amount payable to the Prohibited Owner shall be

immediately paid to the Charitable Beneficiary. If, prior to the discovery by

the Corporation that shares of Capital Stock have been

 

 

                                      -21-

<PAGE>

transferred to the Trustee, such shares are sold by a Prohibited Owner, then (i)

such shares shall be deemed to have been sold on behalf of the Trust and (ii) to

the extent that the Prohibited Owner received an amount for such shares that

exceeds the amount that such Prohibited Owner was entitled to receive pursuant

to this Section 7.3.4, such excess shall be paid to the Trustee upon demand.

 

                  Section 7.3.5. Purchase Right in Stock Transferred to the

Trustee. Shares of Capital Stock transferred to the Trustee shall be deemed to

have been offered for sale to the Corporation, or its designee, at a price per

share equal to the lesser of (i) the price per share in the transaction that

resulted in such transfer to the Trust (or, in the case of a devise or gift, the

Market Price at the time of such devise or gift) and (ii) the Market Price on

the date the Corporation, or its designee, accepts such offer. The Corporation

shall have the right to accept such offer until the Trustee has sold the shares

held in the Trust pursuant to Section 7.3.4. Upon such a sale to the

Corporation, the interest of the Charitable Beneficiary in the shares sold shall

terminate and the Trustee shall distribute the net proceeds of the sale to the

Prohibited Owner.

 

                  Section 7.3.6 Designation of Charitable Beneficiaries. By

written notice to the Trustee, the Corporation shall designate one or more

nonprofit organizations to be the Charitable Beneficiary of the interest in the

Trust such that (i) the shares of Capital Stock held in the Trust would not

violate the restrictions set forth in Section 7.2.1(a) in the hands of such

Charitable Beneficiary and (ii) each such organization must be described in

Section 501(c)(3) of the Code and contributions to each such organization must

be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of

the Code.

 

         Section 7.4 NYSE Transactions. Nothing in this Article VII shall

preclude the settlement of any transaction entered into through the facilities

of the NYSE or any other

 

 

                                      -22-

<PAGE>

national securities exchange or automated inter-dealer quotation system. Subject

to the preceding sentence, the fact that the settlement of any transaction is

effected shall not negate the effect of any other provision of this Article VII

and any transferee in such a transaction shall be subject to all of the

provisions and limitations set forth in this Article VII.

 

         Section 7.5 Enforcement. The Corporation is authorized specifically to

seek equitable relief, including injunctive relief, to enforce the provisions of

this Article VII.

 

         Section 7.6 Non-Waiver. No delay or failure on the part of the

Corporation or the Board of Directors in exercising any right hereunder shall

operate as a waiver of any right of the Corporation or the Board of Directors,

as the case may be, except to the extent specifically waived in writing.

 

                                  ARTICLE VIII

 

             ERISA RESTRICTIONS ON TRANSFER AND OWNERSHIP OF SHARES

 

         Section 8.1 Definitions. For the purpose of this Article VIII, the

following terms shall have the following meanings:

 

         Benefit Plan Investor. The term "Benefit Plan Investor" shall mean (i)

an employee benefit plan (as defined by Section 3(3) of ERISA), whether or not

it is subject to Title I of ERISA; (ii) a plan as described in Section 4975 of

the Code; (iii) an entity whose underlying assets include the assets of any plan

described in clause (i) or (ii) by reason of the plan's investment in such

entity (including but not limited to an insurance company general account); or

(iv) an entity that otherwise constitutes a "benefit plan investor" within the

meaning of the Plan Asset Regulation.

 

         Capital Stock. The term "Capital Stock" shall mean all classes or

series of stock of the Corporation, including, without limitation, Common Stock

and Preferred Stock.

 

 

                                      -23-

<PAGE>

         Code. The term "Code" shall mean the Internal Revenue Code of 1986, as

amended from time to time.

 

         Fair Market Value. The term "Fair Market Value" shall mean the fair

market value as determined in good faith at the sole discretion of the Chief

Executive Officer or the Board of Directors of the Corporation.

 

         Initial Date. The term "Initial Date" shall mean the date upon which

the Amended Articles of Incorporation containing this Article VIII are filed

with the SDAT.

 

         Plan Asset Regulation. The term "Plan Asset Regulation" shall mean the

plan asset regulation promulgated by the Department of Labor under ERISA at 29

C.F.R. 2510.3-101.

 

         Shares-in-Trust. The term "Shares-in-Trust" shall mean shares of

Capital Stock automatically transferred to a Trustee of a Trust for the benefit

of one or more Charitable Beneficiaries as set forth in Article VII of the

Charter.

 

         25% Threshold. The term "25% Threshold" shall mean ownership by Benefit

Plan Investors, in the aggregate, of 25 percent or more of the value of any

class of equity interest in the Corporation (calculated by excluding the value

of any interest held by any person, other than a Benefit Plan Investor, who has

discretionary authority or control with respect to the assets of the Corporation

or any person who provides investment advice to the Corporation for a fee

(direct or indirect) with respect to such assets, or any affiliate of such

person).

 

         Section 8.2. Ownership Limitations. Commencing on the Initial Date and

terminating as provided in Section 8.5, no Benefit Plan Investor may acquire

shares of Capital Stock without the Corporation's prior written consent (which

consent may be withheld in the Corporation's sole and absolute discretion).

Prior to shares of Capital Stock qualifying as a class of "publicly-offered

securities" or the availability of another exception to the "look-through" rule

(i.e., the

 

 

                                      -24-

<PAGE>

provisions of paragraph (a)(2) of the Plan Asset Regulation), transfers of

shares of Capital Stock to Benefit Plan Investors that would increase aggregate

Benefit Plan Investor ownership of shares of Capital Stock to a level that would

meet or exceed the 25% Threshold will be void ab initio. In addition, in the

event that the aggregate number of shares of Capital Stock owned by Benefit Plan

Investors, but for the operation of this sentence, would meet or exceed the 25%

Threshold, (i) shares of Capital Stock held by Benefit Plan Investors shall be

deemed to be Shares-in-Trust, pro rata, to the extent necessary to reduce

aggregate Benefit Plan Investor ownership of shares of Capital Stock below the

25% Threshold, (ii) such number of shares of Capital Stock (rounded up, in the

case of each holder, to the nearest whole share) shall be transferred

automatically and by operation of law to a Trust (as described in Article VII of

the Charter) to be held in accordance with this Article VIII and otherwise in

accordance with applicable provisions of Article VII of the Charter, provided

that any references therein to ownership limitations shall be deemed references

to the ownership limitations set forth in this Section 8.2, and (iii) the

Benefit Plan Investors previously owning such Shares-in-Trust shall submit such

number of shares of Capital Stock for registration in the name of the Trust.

Such transfer to a Trust and the designation of shares of Capital Stock as

Shares-in-Trust shall be effective as of the close of business on the business

day prior to the date of the event that otherwise would have caused aggregate

Benefit Plan Investor ownership of shares of Capital Stock to meet or exceed the

25% Threshold.

 

         Section 8.3 Transfers to Non-Benefit Plan Investors. During the period

prior to the discovery of the existence of the Trust, any transfer of shares of

Capital Stock by a Benefit Plan Investor to a non-Benefit Plan Investor shall

reduce the number of Shares-in-Trust on a one-for-one basis, and to that extent

such shares shall cease to be designated as Shares-in-Trust and shall

 

 

                                      -25-

<PAGE>

be returned, effective at exactly the time of the transfer to the non-Benefit

Plan Investor, automatically and without further action by the Corporation or

the Benefit Plan Investor, to all Benefit Plan Investors (or the transferee, if

applicable), pro rata, in accordance with the Benefit Plan Investors' prior

holdings. After the discovery of the existence of the Trust, but prior to the

redemption of all discovered Shares-in-Trust and/or the submission of all

discovered Shares-in-Trust for registration in the name of the Trust, any

transfer of shares of Capital Stock by a Benefit Plan Investor to a non-Benefit

Plan Investor shall reduce the number of Shares-in-Trust on a one-for-one basis,

and to that extent such shares shall cease to be designated as Shares-in-Trust

and shall be returned, automatically and without further action by the

Corporation or the Benefit Plan Investor, to the transferring Benefit Plan

Investor (or its transferee, if applicable).

 

         Section 8.4 Corporation's Right to Redeem Shares-in-Trust. In the event

that any shares of Capital Stock are deemed "Shares-in-Trust" pursuant to this

Article VIII, the holder shall cease to own any right or interest with respect

to such shares and the Corporation will have the right to redeem such

Shares-in-Trust for an amount equal to their Fair Market Value, which proceeds

shall be payable to the purported owner.

 

         Section 8.5 Termination. This Article VIII shall cease to apply and all

Shares-in-Trust shall cease to be designated as Shares-in-Trust and shall be

returned, automatically and by operation of law, to their purported owners, all

of which shall occur at such time as shares of Capital Stock qualify as a class

of "publicly-offered securities" or if another exception to the "look-through"

rule under the Plan Asset Regulation applies.

 

 

                                      -26-

<PAGE>

                                   ARTICLE IX

 

                                   AMENDMENTS

 

         The Corporation reserves the right from time to time to make any

amendment to the Charter, now or hereafter authorized by law, including any

amendment altering the terms or contract rights, as expressly set forth in the

Charter, of any shares of outstanding stock. All rights and powers conferred by

the Charter on stockholders, directors and officers are granted subject to this

reservation.

 

                                   ARTICLE X

 

                            LIMITATION OF LIABILITY

 

         To the maximum extent that Maryland law in effect from time to time

permits limitation of the liability of directors and officers of a corporation,

no director or officer of the Corporation shall be liable to the Corporation or

its stockholders for money damages. Neither the amendment nor repeal of this

Article X, nor the adoption or amendment of any other provision of the Charter

or the Bylaws inconsistent with this Article X, shall apply to or affect in any

respect the applicability of the preceding sentence with respect to any act or

failure to act which occurred prior to such amendment, repeal or adoption.

 

                  THIRD: The amendment to and restatement of the charter as

hereinabove set forth have been duly advised by the Board of Directors and

approved by the stockholders of the Corporation as required by law.

 

                  FOURTH: The current address of the principal office of the

Corporation is as set forth in Article IV of the foregoing amendment and

restatement of the charter.

 

                  FIFTH: The name and address of the Corporation's current

resident agent is as set forth in Article IV of the foregoing amendment and

restatement of the charter.

 

 

                                      -27-

<PAGE>

                  SIXTH: The number of directors of the Corporation and the

names of those currently in office are as set forth in Article V of the

foregoing amendment and restatement of the charter.

 

                  SEVENTH: The undersigned President acknowledges these Articles

of Amendment and Restatement to be the corporate act of the Corporation and as

to all matters or facts required to be verified under oath, the undersigned

President acknowledges that to the best of his knowledge, information and

belief, these matters and facts are true in all material respects and that this

statement is made under the penalties for perjury.

 

                  IN WITNESS WHEREOF, the Corporation has caused these Articles

of Amendment and Restatement to be signed in its name and on its behalf by its

President and attested to by its Secretary on this 23rd day of September, 2002.

 

 

ATTEST:                                        NEWCASTLE INVESTMENT CORP.

 

/s/ Randal A. Nardone                              /s/ Kenneth M. Riis

___________________________                    By:________________________(SEAL)

Randal A. Nardone                                 Kenneth M. Riis

Secretary                                         President

 

 

                           NEWCASTLE INVESTMENT CORP.

 

                             ARTICLES SUPPLEMENTARY

 

      Newcastle Investment Corp., a Maryland corporation (the "Corporation"),

hereby certifies to the State Department of Assessments and Taxation of Maryland

that:

 

            FIRST: Under a power contained in Section 6.3 of the charter of the

Corporation (the "Charter"), the Board of Directors of the Corporation (the

"Board of Directors"), by resolution duly adopted at a meeting duly called and

held on March 4, 2003 (the "Board Resolutions"), and the Pricing Committee of

the Board of Directors established by the Board Resolutions, by resolution duly

adopted at a meeting duly called and held on March 13, 2003, classified and

designated 2,875,000 shares (the "Shares") of Preferred Stock (as defined in the

Charter) as shares of 9.75% Series B Cumulative Redeemable Preferred Stock, with

the preferences, conversions and other rights, voting powers, restrictions,

limitations as to dividends and other distributions, qualifications and terms

and conditions of redemption of shares of stock as follows and provided for the

issuance thereof. Upon any restatement of the Charter, Sections 1 through 12 of

this Article FIRST shall become part of Article VI of the Charter, with such

changes in enumeration as are necessary to complete such restatement.

 

            (1) Designation and Number. A series of shares of Preferred Stock,

designated as the "9.75% Series B Cumulative Redeemable Preferred Stock" (the

"Series B Preferred Stock"), is hereby established. The number of shares of

Series B Preferred Stock shall be 2,875,000. The par value of Series B Preferred

Stock shall be $.01 per share.

 

            (2) Rank. The Series B Preferred Stock will, with respect to

distribution rights and rights upon liquidation, dissolution or winding up of

the Corporation, rank (a) senior to all classes or series of Common Stock (as

defined in the Charter), and to all equity securities the terms of which provide

that such equity securities shall rank junior to the Series B Preferred Stock;

(b) on a parity with all equity securities issued by the Corporation other than

those referred to in clauses (a) and (c); and (c) junior to all equity

securities issued by the Corporation the terms of which specifically provide

that such equity securities rank senior to the Series B Preferred Stock. The

term "equity securities" shall not include convertible debt securities.

 

            (3) Distributions.

 

                  (a) Holders of Series B Preferred Stock shall be entitled to

receive, when and as authorized by the Board of Directors, out of legally

available funds, cumulative preferential cash distributions at the rate of 9.75%

of the liquidation preference per annum (which is equivalent to a fixed annual

amount of $2.4375 per share of Series B Preferred Stock). Such distributions

shall accrue and cumulate from the date of original issuance (March 18, 2003)

and shall be payable quarterly in arrears on January 31, April 30, July 31 and

October 31 of each year or, if not a business day, the next succeeding business

day, commencing April 30, 2003 (each a "Distribution Payment Date"). Any

distribution payable on the Series B Preferred Stock for any partial

distribution period shall be prorated and computed on the basis of a 360-day

year consisting of twelve 30-day months. Distributions shall be payable to

holders of record as they appear in the stock records of the Corporation at the

close of business on the applicable

<PAGE>

distribution record date, which shall be the first day of the calendar month in

which the applicable Distribution Payment Date falls or such other date

designated by the Board of Directors for the payment of distributions that is

not more than 30 nor less than 10 calendar days immediately preceding such

Distribution Payment Date (each, a "Distribution Record Date").

 

                  (b) Notwithstanding anything to the contrary contained herein,

distributions on the Series B Preferred Stock shall accrue and cumulate whether

or not the Corporation has earnings, whether or not there are funds legally

available for the payment of such distributions and whether or not such

distributions are authorized by the Board of Directors. Accumulated but unpaid

distributions on the Series B Preferred Stock shall cumulate as of the

Distribution Payment Date on which they first become payable or on the date of

redemption, as the case may be. No interest shall be payable in respect of any

distribution on the Series B Preferred Stock that may be in arrears.

 

                  (c) Except as provided in the following sentence, if any

Series B Preferred Stock are outstanding, no distributions, other than

distributions in kind of the Corporation's Common Stock or other shares of the

Corporation's equity securities ranking junior to the Series B Preferred Stock

as to distributions and upon liquidation, may be authorized or paid or set apart

for payment, and no other distribution may be authorized or made upon, the

Corporation's Common Stock or any other shares of equity securities of the

Corporation of any other class or series ranking, as to distributions and upon

liquidation, on a parity with or junior to the Series B Preferred Stock unless

full cumulative distributions have been or contemporaneously are authorized and

paid or authorized and a sum sufficient set apart for such payment on the Series

B Preferred Stock for all past distribution periods and the then current

distribution period. When distributions are not paid in full (or a sum

sufficient for such full payment is not so set apart) upon the Series B

Preferred Stock and all other equity securities ranking on a parity, as to

distributions, with the Series B Preferred Stock, all distributions authorized

upon the Series B Preferred Stock and any other equity securities ranking on a

parity, as to distributions, with the Series B Preferred Stock shall be

authorized pro rata so that the amount of distributions authorized per share of

Series B Preferred Stock and each such other equity security shall in all cases

bear to each other the same ratio that accumulated distributions per share of

Series B Preferred Stock and such other equity security (which shall not include

any accumulation in respect of unpaid distributions for prior distribution

periods if such other equity securities do not have a cumulative distribution)

bear to each other. No interest, or sum of money in lieu of interest, shall be

payable in respect of any distribution payment or payments on Series B Preferred

Stock which may be in arrears.

 

                  (d) Except as provided in clause (c), unless full cumulative

distributions on the Series B Preferred Stock have been or contemporaneously are

authorized and paid or authorized and a sum sufficient is set apart for payment

for all past distribution periods and the then current distribution period, no

Common Stock or any other shares of equity securities of the Corporation ranking

junior to or on a parity with the Series B Preferred Stock as to distributions

or upon liquidation shall be redeemed, purchased or otherwise acquired for any

consideration (or any monies be paid to or made available for a sinking fund for

the redemption of any such shares) by the Corporation (except by conversion into

or exchange for Common Stock or other shares of equity securities of the

Corporation ranking junior to the Series B Preferred Stock as to distributions

and amounts upon liquidation).

 

 

                                       2

<PAGE>

                  (e) Holders of Series B Preferred Stock shall not be entitled

to any distribution, whether payable in cash, property or shares, in excess of

full cumulative distributions on the Series B Preferred Stock as described

above. Any distribution payment made on the Series B Preferred Stock shall first

be credited against the earliest accumulated but unpaid distribution due with

respect to the Series B Preferred Stock which remains payable.

 

            (4) Liquidation Preference.

 

                  (a) In the event of any voluntary or involuntary liquidation,

dissolution or winding up of the Corporation (referred to herein sometimes as a

"liquidation"), the holders of Series B Preferred Stock then outstanding shall

be entitled to receive out of the assets of the Corporation available for

distribution to stockholders (after payment or provision for payment of all

debts and other liabilities of the Corporation) a liquidation preference of

$25.00 per share, plus any accumulated and unpaid distributions to the date of

payment, whether or not authorized, before any distribution of assets is made to

holders of Common Stock and any other shares of equity securities of the

Corporation that rank junior to the Series B Preferred Stock as to liquidation

rights.

 

                  (b) If, upon any such voluntary or involuntary liquidation,

dissolution or winding up of the Corporation, the assets of the Corporation are

insufficient to make full payment to holders of the Series B Preferred Stock and

any shares of other classes or series of equity securities of the Corporation

ranking on a parity with the Series B Preferred Stock as to liquidation rights,

then the holders of the Series B Preferred Stock and all other such classes or

series of equity securities ranking on a parity with the Series B Preferred

Stock as to liquidation rights shall share ratably in any distribution of assets

in proportion to the full liquidating distributions to which they would

otherwise be respectively entitled.

 

                  (c) Written notice of any such liquidation, dissolution or

winding up of the Corporation, stating the payment date or dates when, and the

place or places where, the amounts distributable in such circumstances shall be

payable, shall be given by first class mail, postage pre-paid, not less than 30

nor more than 60 calendar days immediately preceding the payment date stated

therein, to each record holder of the Series B Preferred Stock at the respective

addresses of such holders as the same shall appear on the share transfer records

of the Corporation.

 

                  (d) After payment of the full amount of the liquidating

distributions to which they are entitled, the holders of Series B Preferred

Stock shall have no right or claim to any of the remaining assets of the

Corporation.

 

                  (e) None of a consolidation or merger of the Corporation with

or into another entity, the merger of another entity with or into the

Corporation, a statutory share exchange by the Corporation or a sale, lease,

transfer or conveyance of all or substantially all of the Corporation's property

or business shall be considered a liquidation, dissolution or winding up of the

Corporation.

 

                  (f) In determining whether a distribution (other than upon

voluntary or involuntary dissolution) by dividend, redemption or other

acquisition of shares of the

 

 

                                       3

<PAGE>

Corporation or otherwise is permitted under Maryland law, amounts that would be

needed, if the Corporation were to be dissolved at the time of the distribution,

to satisfy the preferential rights upon dissolution of the holders of Series B

Preferred Stock will not be added to the Corporation's total liabilities.

 

            (5) Redemption.

 

                  (a) Except as set forth in this Section 5(a) and in Section

5(c), the Series B Preferred Stock is not redeemable prior to March 18, 2008.

 

                  (i) To ensure that the Corporation remains qualified as a real

estate investment trust ("REIT") for United States federal income tax purposes,

however, the Series B Preferred Stock shall be subject to the provisions of

Article VII of the Charter pursuant to which Series B Preferred Stock owned by a

stockholder in excess of the Aggregate Stock Ownership Limit (as defined in

Article VII of the Charter) shall automatically be transferred to a Trust for

the benefit of a Charitable Beneficiary (as "Trust" and "Charitable Beneficiary"

are each defined in Article VII of the Charter) and the Corporation shall have

the right to purchase, or to designate the purchaser of, such shares, as

provided in Article VII of the Charter.

 

                  (ii) In addition, no Person shall Beneficially Own or

Constructively Own (as "Person", "Beneficially Own" and "Constructively Own" are

all defined in Article VII of the Charter) in excess of 25 percent of the

outstanding shares of Series B Preferred Stock (the "Series B Ownership Limit"),

except in accordance with an exemption from the Series B Ownership Limit granted

by the Board of Directors or otherwise in accordance with Article VII of the

Charter, with Article VII of the Charter applied as if references therein to the

Aggregate Stock Ownership Limit also include applicable references to the Series

B Ownership Limit.

 

                  (iii) To the extent that any Person is granted an exemption

from the Aggregate Stock Ownership Limit, such Person shall nevertheless remain

subject to the Series B Ownership Limit except to the extent that such Person is

also expressly granted an exemption from the Series B Ownership Limit by the

Board of Directors, in which case such Person shall be a "Series B Excepted

Holder", and any higher limit established for such Person shall be a "Series B

Excepted Holder Limit", with the terms "Series B Excepted Holder" and "Series B

Excepted Holder Limit" interpreted in a manner corresponding to the terms

"Excepted Holder", and "Excepted Holder Limit", respectively, in Article VII of

the Charter. The preceding sentence shall apply to any Person for whom an

exemption from the Aggregate Stock Ownership Limit is granted, without regard to

whether it is granted prior or subsequent to the effectiveness of these Articles

Supplementary.

 

                  (iv) On or after March 18, 2008 the Corporation, at its

option, upon giving notice as provided below, may redeem the Series B Preferred

Stock, in whole or from time to time in part, for cash, at a redemption price of

$25.00 per share, plus all accumulated and unpaid distributions on such Series B

Preferred Stock to the date of redemption, whether or not authorized (the

"Redemption Right").

 

 

                                       4

<PAGE>

                  (b) If fewer than all of the outstanding shares of Series B

Preferred Stock are to be redeemed pursuant to the Redemption Right, the shares

to be redeemed shall be selected pro rata (as nearly as practicable without

creating fractional shares) or by lot or in such other equitable method

prescribed by the Board of Directors. If such redemption is to be by lot and, as

a result of such redemption, any holder of Series B Preferred Stock would become

a holder of a number of Series B Preferred Stock in excess of the Aggregate

Stock Ownership Limit because such holder's shares of Series B Preferred Stock

were not redeemed, or were only redeemed in part, then, except as otherwise

provided in the Charter, the Corporation shall redeem the requisite number of

shares of Series B Preferred Stock of such holder such that no holder will hold

in excess of the Aggregate Stock Ownership Limit subsequent to such redemption.

 

                  (c) Notwithstanding anything to the contrary contained herein,

unless full cumulative distributions on all shares of Series B Preferred Stock

have been or contemporaneously are authorized and paid or authorized and a sum

sufficient set apart for payment for all past distribution periods and the then

current distribution period, no shares of Series B Preferred Stock shall be

redeemed unless all outstanding shares of Series B Preferred Stock are

simultaneously redeemed. In addition, unless full cumulative distributions on

all shares of Series B Preferred Stock have been or contemporaneously are

authorized and paid or authorized and a sum sufficient set apart for payment for

all past distributions periods and the then current distribution period, the

Corporation shall not purchase or otherwise acquire directly or indirectly any

shares of Series B Preferred Stock or any other shares of equity securities of

the Corporation ranking junior to or on a parity with the Series B Preferred

Stock as to distributions or upon liquidation (except by conversion into or

exchange for shares of equity securities of the Corporation ranking junior to

the Series B Preferred Stock as to distributions and upon liquidation). The

restrictions in this Section 5 on redemptions, purchases and other acquisitions

shall not prevent the redemption, purchase or acquisition by the Corporation of

Preferred Stock of any series pursuant to Article VII of the Charter or Section

5(a) hereof, or otherwise in order to ensure that the Corporation remains

qualified as a REIT for United States federal income tax purposes, or the

purchase or acquisition of Series B Preferred Stock pursuant to a purchase or

exchange offer made on the same terms to all holders of the Series B Preferred

Stock.

 

                  (d) Immediately prior to any redemption of shares of Series B

Preferred Stock, the Corporation shall pay, in cash, any accumulated and unpaid

distributions to the redemption date, whether or not authorized, unless a

redemption date falls after a Distribution Record Date and prior to the

corresponding Distribution Payment Date, in which case each holder of Series B

Preferred Stock at the close of business on such Distribution Record Date shall

be entitled to the distribution payable on such shares on the corresponding

Distribution Payment Date notwithstanding the redemption of such shares before

the Distribution Payment Date. Except as provided in the previous sentence, the

Corporation shall make no payment or allowance for unpaid distributions, whether

or not in arrears, on Series B Preferred Stock for which a notice of redemption

has been given.

 

                  (e) The following provisions set forth the procedures for

redemption.

 

                        (i) Notice of redemption will be mailed by the

                  Corporation, postage prepaid, no less than 30 nor more than 60

                  calendar days immediately preceding the redemption date,

                  addressed to the respective

 

 

                                       5

<PAGE>

                  holders of record of the Series B Preferred Stock to be

                  redeemed at their respective addresses as they appear on the

                  stock transfer records of the Corporation. No failure to give

                  such notice or any defect thereto or in the mailing thereof

                  shall affect the validity of the proceedings for the

                  redemption of any Series B Preferred Stock except as to the

                  holder to whom notice was defective or not given.

 

                        (ii) In addition to any information required by law or

                  by the applicable rules of any exchange upon which the Series

                  B Preferred Stock may be listed or admitted to trading, each

                  notice shall state: (A) the redemption date; (B) the

                  redemption price; (C) the number of Series B Preferred Stock

                  to be redeemed; (D) the place or places where the holders of

                  Series B Preferred Stock may surrender certificates for

                  payment of the redemption price; and (E) that distributions on

                  the Series B Preferred Stock to be redeemed will cease to

                  accumulate on the redemption date. If less than all of the

                  Series B Preferred Stock held by any holder are to be

                  redeemed, the notice mailed to each holder shall also specify

                  the number of Series B Preferred Stock held by such holder to

                  be redeemed.

 

                        (iii) On or after the redemption date, each holder of

                  Series B Preferred Stock to be redeemed shall present and

                  surrender the certificates representing his Series B Preferred

                  Stock to the Corporation at the place designated in the notice

                  of redemption and thereupon the redemption price of such

                  shares (including all accumulated and unpaid distributions up

                  to the redemption date) shall be paid to or on the order of

                  the person whose name appears on such certificate representing

                  Series B Preferred Stock as the owner thereof and each

                  surrendered certificate shall be canceled. If fewer than all

                  the shares represented by any such certificate representing

                  Series B Preferred Stock are to be redeemed, a new certificate

                  shall be issued representing the unredeemed shares.

 

                        (iv) From and after the redemption date (unless the

                  Corporation defaults in payment of the redemption price), all

                  distributions on the Series B Preferred Stock designated for

                  redemption and all rights of the holders thereof, except the

                  right to receive the redemption price thereof and all

                  accumulated and unpaid distributions up to the redemption

                  date, shall terminate with respect to such shares and such

                  shares shall not thereafter be transferred (except with the

                  consent of the Corporation) on the Corporation's stock

                  transfer records, and such shares shall not be deemed to be

                  outstanding for any purpose whatsoever. At its election, the

                  Corporation, prior to a redemption date, may irrevocably

                  deposit the redemption price (including accumulated and unpaid

                  distributions to the redemption date) of the Series B

                  Preferred Stock so called for redemption in trust for the

                  holders thereof with a bank or trust company, in which case

                  the redemption notice to holders of the Series B Preferred

                  Stock to be redeemed shall (A) state the date of such deposit,

                  (B) specify the office of such bank or trust company as the

                  place of payment of the redemption

 

 

                                       6

<PAGE>

                  price and (C) require such holders to surrender the

                  certificates representing such shares at such place on or

                  about the date fixed in such redemption notice (which may not

                  be later than the redemption date) against payment of the

                  redemption price (including all accumulated and unpaid

                  distributions to the redemption date). Any monies so deposited

                  which remain unclaimed by the holders of the Series B

                  Preferred Stock at the end of two years after the redemption

                  date shall be returned by such bank or trust company to the

                  Corporation.

 

                  (f) Any Series B Preferred Stock that shall at any time have

been redeemed shall, after such redemption, have the status of authorized but

unissued Preferred Stock, without designation as to series until such shares are

once more designated as part of a particular series by the Board of Directors.

 

            (6) Voting Rights.

 

                  (a) Holders of the Series B Preferred Stock shall not have any

voting rights, except as set forth below.

 

                  (b) Whenever distributions on the Series B Preferred Stock are

in arrears for six or more quarterly periods (whether or not consecutive) (a

"Preferred Distribution Default"), the holders of Series B Preferred Stock

(voting together as a single class with all other equity securities of the

Corporation upon which like voting rights have been conferred and are

exercisable ("Parity Preferred Stock")) shall be entitled to elect a total of

two additional directors to the Corporation's Board of Directors (the "Preferred

Stock Directors") at a special meeting called by the holders of record of at

least 20% of the outstanding shares of Series B Preferred Stock (unless the

request is received less than 90 calendar days before the date fixed for the

next annual or special meeting of stockholders) or, if the request for a special

meeting is received by the Corporation less than 90 calendar days before the

date fixed for the next annual or special meeting of stockholders, at the next

annual meeting of stockholders, and at each subsequent annual meeting until all

distributions accumulated on the Series B Preferred Stock for the past

distribution periods and the then current distribution period shall have been

fully paid or authorized and a sum sufficient for the payment thereof set aside

for payment.

 

                  (c) If and when all accumulated distributions and the

distribution for the then current distribution period on the Series B Preferred

Stock shall have been paid in full or authorized and a sum sufficient for the

payment thereof set aside for payment in full, the holders of Series B Preferred

Stock shall be divested of the voting rights set forth in clause (b) above

(subject to revesting in the event of each and every Preferred Distribution

Default) and, if all accumulated distributions and the distribution for the then

current distribution period have been paid in full or authorized by the Board of

Directors and set aside for payment in full on all other series of Parity

Preferred Stock upon which like voting rights have been conferred and are

exercisable, the term of office of each Preferred Stock Director so elected

shall terminate. Any Preferred Stock Director may be removed at any time with or

without cause by the vote of, and shall not be removed otherwise than by the

vote of, the holders of a majority of the outstanding Series B Preferred Stock

when they have the voting rights set forth in clause (b) above and all other

series of Parity Preferred Stock (voting as a single class). So long as a

Preferred

 

 

                                       7

<PAGE>

Distribution Default shall continue, any vacancy in the office of a Preferred

Stock Director may be filled by written consent of the Preferred Stock Director

remaining in office, or if none remains in office, by a vote of the holders of a

majority of the outstanding Series B Preferred Stock when they have the voting

rights set forth in clause (b) above and all other series of Parity Preferred

Stock (voting as a single class). The Preferred Stock Directors shall each be

entitled to one vote per director on any matter.

 

                  (d) So long as any Series B Preferred Stock remain

outstanding, the Corporation shall not, without the affirmative vote of the

holders of at least two-thirds of the Series B Preferred Stock outstanding at

the time, given in person or by proxy, either in writing or at a meeting (such

series voting separately as a class), (i) authorize, create or increase the

authorized or issued amount of any class or series of equity securities ranking

senior to the outstanding Series B Preferred Stock with respect to the payment

of distributions or the distribution of assets upon voluntary or involuntary

liquidation, dissolution or winding up of the Corporation or reclassify any

authorized equity securities of the Corporation into any such senior equity

securities, or create, authorize or issue any obligation or security convertible

into or evidencing the right to purchase any such senior equity securities; or

(ii) amend, alter or repeal the provisions of the Charter (including these

Articles Supplementary), whether by merger or consolidation (in either case, an

"Event") or otherwise, so as to materially and adversely affect any right,

preference or voting power of the Series B Preferred Stock; provided, however,

that with respect to any such amendment, alteration or repeal of the provisions

of the Charter (including these Articles Supplementary) upon the occurrence of

an Event, so long as shares of the Series B Preferred Stock remain outstanding

with the terms thereof materially unchanged in any adverse respect, taking into

account that, upon the occurrence of an Event, the Corporation may not be the

surviving entity and such surviving entity may thereafter be the issuer of the

Series B Preferred Stock, the occurrence of any such Event shall not be deemed

to materially and adversely affect the rights, preferences or voting powers of

the Series B Preferred Stock; and provided further that any increase in the

amount of authorized Series B Preferred Stock or any other class or series of

the Corporation's equity securities, in each case ranking on a parity with or

junior to the Series B Preferred Stock with respect to the payment of

distributions and the distribution of assets upon voluntary or involuntary

liquidation, dissolution or winding up of the Corporation, shall not be deemed

to materially and adversely affect the rights, preferences or voting powers of

the Series B Preferred Stock.

 

                  (e) The foregoing voting provisions shall not apply if, at or

prior to the time when the action with respect to which such vote would

otherwise be required shall be effected, all outstanding Series B Preferred

Stock shall have been redeemed or called for redemption upon proper notice and

sufficient funds shall have been deposited in trust to effect such redemption.

 

            (7) Conversion. The Series B Preferred Stock is not convertible into

or exchangeable for any other property or securities of the Corporation.

 

            (8) Application of Article VII. The shares of Series B Preferred

Stock are subject to the provisions of Article VII of the Charter.

 

 

                                       8

<PAGE>

            (9) Status. Upon any redemption of shares of Series B Preferred

Stock, the shares of Series B Preferred Stock which are redeemed will be

reclassified as authorized and unissued shares of Preferred Stock, and the

number of shares of Series B Preferred Stock which the Corporation has the

authority to issue will be decreased by the redemption of shares of Series B

Preferred Stock, so that the shares of Series B Preferred Stock which were

redeemed may not be reissued.

 

            (10) Exclusion of Other Rights. The shares of Series B Preferred

Stock shall not have any preferences, conversion or other rights, voting powers,

restrictions, limitations as to dividends or other distributions, qualifications

or terms or conditions of redemption other than those specifically set forth in

these Articles Supplementary. The shares of Series B Preferred Stock shall have

no preemptive or subscription rights.

 

            (11) Headings of Subdivisions. The headings of the various

subdivisions hereof are for convenience of reference only and shall not affect

the interpretation of any of the provisions hereof.

 

            (12) Severability of Provisions. If any preferences, conversion or

other rights, voting powers, restrictions, limitations as to dividends or other

distributions, qualifications or terms or conditions of redemption of the Series

B Preferred Stock set forth in the Charter is invalid, unlawful or incapable of

being enforced by reason of any rule of law or public policy, all other

preferences, conversion or other rights, voting powers, restrictions,

limitations as to dividends or other distributions, qualifications or terms or

conditions of redemption of Series B Preferred Stock set forth in the Charter

which can be given effect without the invalid, unlawful or unenforceable

provision thereof shall, nevertheless, remain in full force and effect, and no

preferences, conversion or other rights, voting powers, restrictions,

limitations as to dividends or other distributions, qualifications or terms or

conditions of redemption of Series B Preferred Stock herein set forth shall be

deemed dependent upon any other provision thereof unless so expressed therein.

 

      SECOND: The Shares have been classified and designated by the Board of

Directors under the authority contained in the Charter.

 

      THIRD: These Articles Supplementary have been approved by the Board of

Directors in the manner and by the vote required by law.

 

      FOURTH: The undersigned President of the Corporation acknowledges these

Articles Supplementary to be the corporate act of the Corporation and, as to all

matters or facts required to be verified under oath, the undersigned President

acknowledges that to the best of his knowledge, information and belief, these

matters and facts are true in all material respects and that this statement is

made under the penalties for perjury.

 

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

                                       9

<PAGE>

            IN WITNESS WHEREOF, the Corporation has caused these Articles

Supplementary to be executed under seal in its name and on its behalf by its

Chief Executive Officer and attested to by its Secretary on this 13th of March,

2003.

 

<TABLE>

<S>                                     <C>

ATTEST:                                 NEWCASTLE INVESTMENT CORP.

 

 

/s/ Randal A. Nardone                   /s/ Kenneth M. Riis               (SEAL)

----------------------------------      ----------------------------------

Randal A. Nardone Secretary             Kenneth M. Riis, President

 

 

                           NEWCASTLE INVESTMENT CORP.

 

                             ARTICLES SUPPLEMENTARY

 

         Newcastle Investment Corp., a Maryland corporation (the "Corporation"),

hereby certifies to the State Department of Assessments and Taxation of Maryland

that:

 

                  FIRST: Under a power contained in Section 6.3 of the charter

of the Corporation (the "Charter"), the Board of Directors of the Corporation

(the "Board of Directors"), by resolution duly adopted at a meeting duly called

and held on October 13, 2005 (the "Board Resolutions"), and the Pricing

Committee of the Board of Directors established by the Board Resolutions, by

resolution at a meeting duly called and held on October 13, 2005, classified and

designated 1,800,000 shares (the "Shares") of Preferred Stock (as defined in the

Charter) as shares of 8.05% Series C Cumulative Redeemable Preferred Stock, with

the preferences, conversions and other rights, voting powers, restrictions,

limitations as to dividends and other distributions, qualifications and terms

and conditions of redemption of shares of stock as follows and provided for the

issuance thereof. Upon any restatement of the Charter, Sections 1 through 12 of

this Article FIRST shall become part of Article VI of the Charter, with such

changes in enumeration as are necessary to complete such restatement.

 

                  (1) Designation and Number. A series of shares of Preferred

Stock, designated as the "8.05% Series C Cumulative Redeemable Preferred Stock"

(the "Series C Preferred Stock"), is hereby established. The number of shares of

Series C Preferred Stock shall be 1,800,000. The par value of Series C Preferred

Stock shall be $.01 per share.

 

                  (2) Rank. The Series C Preferred Stock will, with respect to

distribution rights and rights upon liquidation, dissolution or winding up of

the Corporation, rank (a) senior to all classes or series of Common Stock (as

defined in the Charter), and to all equity securities the terms of which provide

that such equity securities shall rank junior to the Series C Preferred Stock;

(b) on a parity with the 9.75% Series B Cumulative Redeemable Preferred Stock of

the Corporation and all other equity securities issued by the Corporation other

than those referred to in clauses (a) and (c); and (c) junior to all equity

securities issued by the Corporation the terms of which specifically provide

that such equity securities rank senior to the Series C Preferred Stock. The

term "equity securities" shall not include convertible debt securities.

 

                  (3) Distributions.

 

                           (a) Holders of Series C Preferred Stock shall be

entitled to receive, when and as authorized by the Board of Directors, out of

legally available funds, cumulative preferential cash distributions at the rate

of 8.05% of the liquidation preference per annum (which is equivalent to a fixed

annual amount of $2.0125 per share of Series C Preferred Stock); provided,

however, that during any period of time that both (i) the Series C Preferred

Stock is not listed on the New York Stock Exchange ("NYSE") or the American

Stock Exchange ("AMEX"), or quoted on the NASDAQ Stock Market ("NASDAQ"), and

(ii) the Corporation is not subject to the reporting requirements of Section 13

or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange

Act"), and any shares of Series C Preferred Stock are outstanding, the holders

of Series C Preferred Stock shall be entitled to receive, when and as authorized

by the

 

 

<PAGE>

 

Board of Directors, out of legally available funds, cumulative preferential cash

distributions at the rate of 9.05% per year of the liquidation preference (which

is equivalent to a fixed annual amount of $2.2625 per year per share)(the

"Special Distribution"). Such distributions shall accrue and cumulate from the

date of original issuance (October 25, 2005) or, with respect to the Special

Distribution, if applicable, from the date following the date on which both (i)

the Series C Preferred Stock ceases to be listed on the NYSE or the AMEX or

quoted on NASDAQ and (ii) the Corporation ceases to be subject to the reporting

requirements of Section 13 or 15(d) of the Exchange Act, and shall be payable

quarterly in arrears on January 31, April 30, July 31 and October 31 of each

year or, if not a business day, the next succeeding business day, commencing

January 31, 2006 (each a "Distribution Payment Date"). The Special Distribution,

if applicable, shall cease to accrue on the date following the earlier of (i)

the listing of the Series C Preferred Stock on the NYSE or the AMEX or its

quotation on NASDAQ or (ii) the Corporation becoming subject to the reporting

requirements of Section 13 or 15(d) of the Exchange Act. Any distribution

payable on the Series C Preferred Stock for any partial distribution period

shall be prorated and computed on the basis of a 360-day year consisting of

twelve 30-day months. Distributions shall be payable to holders of record as

they appear in the stock records of the Corporation at the close of business on

the applicable distribution record date, which shall be the first day of the

calendar month in which the applicable Distribution Payment Date falls or such

other date designated by the Board of Directors for the payment of distributions

that is not more than 30 nor less than 10 calendar days immediately preceding

such Distribution Payment Date (each, a "Distribution Record Date").

 

                           (b) Notwithstanding anything to the contrary

contained herein, distributions on the Series C Preferred Stock shall accrue and

cumulate whether or not the Corporation has earnings, whether or not there are

funds legally available for the payment of such distributions and whether or not

such distributions are authorized by the Board of Directors. Accumulated but

unpaid distributions on the Series C Preferred Stock shall cumulate as of the

Distribution Payment Date on which they first become payable or on the date of

redemption, as the case may be. No interest shall be payable in respect of any

distribution on the Series C Preferred Stock that may be in arrears.

 

                           (c) Except as provided in the following sentence, if

any Series C Preferred Stock are outstanding, no distributions, other than

distributions in kind of the Corporation's Common Stock or other shares of the

Corporation's equity securities ranking junior to the Series C Preferred Stock

as to distributions and upon liquidation, may be authorized or paid or set apart

for payment, and no other distribution may be authorized or made upon, the

Corporation's Common Stock or any other shares of equity securities of the

Corporation of any other class or series ranking, as to distributions and upon

liquidation, on a parity with or junior to the Series C Preferred Stock unless

full cumulative distributions have been or contemporaneously are authorized and

paid or authorized and a sum sufficient set apart for such payment on the Series

C Preferred Stock for all past distribution periods and the then current

distribution period. When distributions are not paid in full (or a sum

sufficient for such full payment is not so set apart) upon the Series C

Preferred Stock and all other equity securities ranking on a parity, as to

distributions, with the Series C Preferred Stock, all distributions authorized

upon the Series C Preferred Stock and any other equity securities ranking on a

parity, as to distributions, with the Series C Preferred Stock shall be

authorized pro rata so that the amount of distributions authorized per share of

Series C Preferred Stock and each such other

 

 

 

                                       2

<PAGE>

 

equity security shall in all cases bear to each other the same ratio that

accumulated distributions per share of Series C Preferred Stock and such other

equity security (which shall not include any accumulation in respect of unpaid

distributions for prior distribution periods if such other equity securities do

not have a cumulative distribution) bear to each other. No interest, or sum of

money in lieu of interest, shall be payable in respect of any distribution

payment or payments on Series C Preferred Stock which may be in arrears.

 

                           (d) Except as provided in clause (c), unless full

cumulative distributions on the Series C Preferred Stock have been or

contemporaneously are authorized and paid or authorized and a sum sufficient is

set apart for payment for all past distribution periods and the then current

distribution period, no Common Stock or any other shares of equity securities of

the Corporation ranking junior to or on a parity with the Series C Preferred

Stock as to distributions or upon liquidation shall be redeemed, purchased or

otherwise acquired for any consideration (or any monies be paid to or made

available for a sinking fund for the redemption of any such shares) by the

Corporation (except by conversion into or exchange for Common Stock or other

shares of equity securities of the Corporation ranking junior to the Series C

Preferred Stock as to distributions and amounts upon liquidation).

 

                           (e) Holders of Series C Preferred Stock shall not be

entitled to any distribution, whether payable in cash, property or shares, in

excess of full cumulative distributions on the Series C Preferred Stock as

described above. Any distribution payment made on the Series C Preferred Stock

shall first be credited against the earliest accumulated but unpaid distribution

due with respect to the Series C Preferred Stock which remains payable.

 

                  (4) Liquidation Preference.

 

                           (a) In the event of any voluntary or involuntary

liquidation, dissolution or winding up of the Corporation (referred to herein

sometimes as a "liquidation"), the holders of Series C Preferred Stock then

outstanding shall be entitled to receive out of the assets of the Corporation

available for distribution to stockholders (after payment or provision for

payment of all debts and other liabilities of the Corporation) a liquidation

preference of $25.00 per share, plus any accumulated and unpaid distributions to

the date of payment, whether or not authorized, before any distribution of

assets is made to holders of Common Stock and any other shares of equity

securities of the Corporation that rank junior to the Series C Preferred Stock

as to liquidation rights.

 

                           (b) If, upon any such voluntary or involuntary

liquidation, dissolution or winding up of the Corporation, the assets of the

Corporation are insufficient to make full payment to holders of the Series C

Preferred Stock and any shares of other classes or series of equity securities

of the Corporation ranking on a parity with the Series C Preferred Stock as to

liquidation rights, then the holders of the Series C Preferred Stock and all

other such classes or series of equity securities ranking on a parity with the

Series C Preferred Stock as to liquidation rights shall share ratably in any

distribution of assets in proportion to the full liquidating distributions to

which they would otherwise be respectively entitled.

 

                           (c) Written notice of any such liquidation,

dissolution or winding up of the Corporation, stating the payment date or dates

when, and the place or places where, the

 

 

 

                                       3

<PAGE>

 

amounts distributable in such circumstances shall be payable, shall be given by

first class mail, postage pre-paid, not less than 30 nor more than 60 calendar

days immediately preceding the payment date stated therein, to each record

holder of the Series C Preferred Stock at the respective addresses of such

holders as the same shall appear on the share transfer records of the

Corporation.

 

                           (d) After payment of the full amount of the

liquidating distributions to which they are entitled, the holders of Series C

Preferred Stock shall have no right or claim to any of the remaining assets of

the Corporation.

 

                           (e) None of a consolidation or merger of the

Corporation with or into another entity, the merger of another entity with or

into the Corporation, a statutory share exchange by the Corporation or a sale,

lease, transfer or conveyance of all or substantially all of the Corporation's

property or business shall be considered a liquidation, dissolution or winding

up of the Corporation.

 

                           (f) In determining whether a distribution (other than

upon voluntary or involuntary dissolution) by dividend, redemption or other

acquisition of shares of the Corporation or otherwise is permitted under

Maryland law, amounts that would be needed, if the Corporation were to be

dissolved at the time of the distribution, to satisfy the preferential rights

upon dissolution of the holders of Series C Preferred Stock will not be added to

the Corporation's total liabilities.

 

                   (5) Redemption.

 

                           (a) Except as set forth in this Section 5(a) and in

Section 5(c), the Series C Preferred Stock is not redeemable prior to October

25, 2010.

 

                           (i) To ensure that the Corporation remains qualified

as a real estate investment trust ("REIT") for United States federal income tax

purposes, however, the Series C Preferred Stock shall be subject to the

provisions of Article VII of the Charter pursuant to which Series C Preferred

Stock owned by a stockholder in excess of the Aggregate Stock Ownership Limit

(as defined in Article VII of the Charter) shall automatically be transferred to

a Trust for the benefit of a Charitable Beneficiary (as "Trust" and "Charitable

Beneficiary" are each defined in Article VII of the Charter) and the Corporation

shall have the right to purchase, or to designate the purchaser of, such shares,

as provided in Article VII of the Charter.

 

                           (ii) In addition, no Person shall Beneficially Own or

Constructively Own (as "Person", "Beneficially Own" and "Constructively Own" are

all defined in Article VII of the Charter) in excess of 25 percent of the

outstanding shares of Series C Preferred Stock (the "Series C Ownership Limit"),

except in accordance with an exemption from the Series C Ownership Limit granted

by the Board of Directors or otherwise in accordance with Article VII of the

Charter, with Article VII of the Charter applied as if references therein to the

Aggregate Stock Ownership Limit also include applicable references to the Series

C Ownership Limit.

 

                           (iii) To the extent that any Person is granted an

exemption from the Aggregate Stock Ownership Limit, such Person shall

nevertheless remain subject to the Series C

 

 

 

                                       4

<PAGE>

 

Ownership Limit except to the extent that such Person is also expressly granted

an exemption from the Series C Ownership Limit by the Board of Directors, in

which case such Person shall be a "Series C Excepted Holder", and any higher

limit established for such Person shall be a "Series C Excepted Holder Limit",

with the terms "Series C Excepted Holder" and "Series C Excepted Holder Limit"

interpreted in a manner corresponding to the terms "Excepted Holder", and

"Excepted Holder Limit", respectively, in Article VII of the Charter. The

preceding sentence shall apply to any Person for whom an exemption from the

Aggregate Stock Ownership Limit is granted, without regard to whether it is

granted prior or subsequent to the effectiveness of these Articles

Supplementary.

 

                           (iv) If at any time both (i) the Series C Preferred

Stock ceases to be listed on the NYSE or the AMEX, or quoted on the NASDAQ, and

(ii) the Corporation ceases to be subject to the reporting requirements of

Section 13 or 15(d) of the Exchange Act, and any shares of Series C Preferred

Stock are outstanding, the Corporation, at its option, upon giving notice as

provided below, may redeem the Series C Preferred Stock, in whole but not in

part, within 90 days of the date upon which both the Series C Preferred Stock so

ceases to be listed and the Corporation so ceases to be subject to the reporting

requirements of Section 13 or 15(d) of the Exchange Act, for cash at a

redemption price of $25.00 per share, plus accumulated and unpaid distributions,

if any, to the redemption date, whether or not authorized (the "Special

Redemption Right").

 

                           (v) On or after October 25, 2010 the Corporation, at

its option, upon giving notice as provided below, may redeem the Series C

Preferred Stock, in whole or from time to time in part, for cash, at a

redemption price of $25.00 per share, plus all accumulated and unpaid

distributions on such Series C Preferred Stock to the date of redemption,

whether or not authorized (the "Regular Redemption Right").

 

                           (b) If fewer than all of the outstanding shares of

Series C Preferred Stock are to be redeemed pursuant to the Regular Redemption

Right, the shares to be redeemed shall be selected pro rata (as nearly as

practicable without creating fractional shares) or by lot or in such other

equitable method prescribed by the Board of Directors. If such redemption is to

be by lot and, as a result of such redemption, any holder of Series C Preferred

Stock would become a holder of a number of Series C Preferred Stock in excess of

the Aggregate Stock Ownership Limit because such holder's shares of Series C

Preferred Stock were not redeemed, or were only redeemed in part, then, except

as otherwise provided in the Charter, the Corporation shall redeem the requisite

number of shares of Series C Preferred Stock of such holder such that no holder

will hold in excess of the Aggregate Stock Ownership Limit subsequent to such

redemption.

 

                           (c) Notwithstanding anything to the contrary

contained herein, unless full cumulative distributions on all shares of Series C

Preferred Stock have been or contemporaneously are authorized and paid or

authorized and a sum sufficient set apart for payment for all past distribution

periods and the then current distribution period, no shares of Series C

Preferred Stock shall be redeemed pursuant to the Regular Redemption Right

unless all outstanding shares of Series C Preferred Stock are simultaneously

redeemed. In addition, unless full cumulative distributions on all shares of

Series C Preferred Stock have been or contemporaneously are authorized and paid

or authorized and a sum sufficient set apart for

 

 

 

                                       5

<PAGE>

 

payment for all past distribution periods and the then current distribution

period, the Corporation shall not purchase or otherwise acquire directly or

indirectly any shares of Series C Preferred Stock or any other shares of equity

securities of the Corporation ranking junior to or on a parity with the Series C

Preferred Stock as to distributions or upon liquidation (except by conversion

into or exchange for shares of equity securities of the Corporation ranking

junior to the Series C Preferred Stock as to distributions and upon

liquidation). The restrictions in this Section 5 on redemptions, purchases and

other acquisitions shall not prevent the redemption, purchase or acquisition by

the Corporation of Preferred Stock of any series pursuant to Article VII of the

Charter or Section 5(a) hereof, or otherwise in order to ensure that the

Corporation remains qualified as a REIT for United States federal income tax

purposes, or the purchase or acquisition of Series C Preferred Stock pursuant to

a purchase or exchange offer made on the same terms to all holders of the Series

C Preferred Stock.

 

                           (d) Immediately prior to any redemption of shares of

Series C Preferred Stock, the Corporation shall pay, in cash, any accumulated

and unpaid distributions to the redemption date, whether or not authorized,

unless a redemption date falls after a Distribution Record Date and prior to the

corresponding Distribution Payment Date, in which case each holder of Series C

Preferred Stock at the close of business on such Distribution Record Date shall

be entitled to the distribution payable on such shares on the corresponding

Distribution Payment Date notwithstanding the redemption of such shares before

the Distribution Payment Date. Except as provided in the previous sentence, the

Corporation shall make no payment or allowance for unpaid distributions, whether

or not in arrears, on Series C Preferred Stock for which a notice of redemption

has been given.

 

                           (e) The following provisions set forth the procedures

for redemption pursuant to the Regular Redemption Right.

 

                                    (i) Notice of redemption will be mailed by

                           the Corporation, postage prepaid, no less than 30 nor

                           more than 60 calendar days immediately preceding the

                           redemption date, addressed to the respective holders

                           of record of the Series C Preferred Stock to be

                           redeemed at their respective addresses as they appear

                           on the stock transfer records of the Corporation. No

                           failure to give such notice or any defect thereto or

                           in the mailing thereof shall affect the validity of

                           the proceedings for the redemption of any Series C

                           Preferred Stock except as to the holder to whom

                           notice was defective or not given.

 

                                    (ii) In addition to any information required

                           by law or by the applicable rules of any exchange

                           upon which the Series C Preferred Stock may be listed

                           or admitted to trading, each notice shall state: (A)

                           the redemption date; (B) the redemption price; (C)

                           the number of Series C Preferred Stock to be

                           redeemed; (D) the place or places where the holders

                           of Series C Preferred Stock may surrender

                           certificates for payment of the redemption price; and

                           (E) that distributions on the Series C Preferred

                           Stock to be redeemed will cease to accumulate on the

                           redemption date. If less than all of the Series C

                           Preferred Stock held by any holder are to be

 

 

 

                                       6

<PAGE>

 

                           redeemed, the notice mailed to each holder shall also

                           specify the number of Series C Preferred Stock held

                           by such holder to be redeemed.

 

                                    (iii) On or after the redemption date, each

                           holder of Series C Preferred Stock to be redeemed

                           shall present and surrender the certificates

                           representing his Series C Preferred Stock to the

                           Corporation at the place designated in the notice of

                           redemption and thereupon the redemption price of such

                           shares (including all accumulated and unpaid

                           distributions up to the redemption date) shall be

                           paid to or on the order of the person whose name

                           appears on such certificate representing Series C

                           Preferred Stock as the owner thereof and each

                           surrendered certificate shall be canceled. If fewer

                           than all the shares represented by any such

                           certificate representing Series C Preferred Stock are

                           to be redeemed, a new certificate shall be issued

                           representing the unredeemed shares.

 

                                    (iv) From and after the redemption date

                           (unless the Corporation defaults in payment of the

                           redemption price), all distributions on the Series C

                           Preferred Stock designated for redemption and all

                           rights of the holders thereof, except the right to

                           receive the redemption price thereof and all

                           accumulated and unpaid distributions up to the

                           redemption date, shall terminate with respect to such

                           shares and such shares shall not thereafter be

                           transferred (except with the consent of the

                           Corporation) on the Corporation's stock transfer

                           records, and such shares shall not be deemed to be

                           outstanding for any purpose whatsoever. At its

                           election, the Corporation, prior to a redemption

                           date, may irrevocably deposit the redemption price

                           (including accumulated and unpaid distributions to

                           the redemption date) of the Series C Preferred Stock

                           so called for redemption in trust for the holders

                           thereof with a bank or trust company, in which case

                           the redemption notice to holders of the Series C

                           Preferred Stock to be redeemed shall (A) state the

                           date of such deposit, (B) specify the office of such

                           bank or trust company as the place of payment of the

                           redemption price and (C) require such holders to

                           surrender the certificates representing such shares

                           at such place on or about the date fixed in such

                           redemption notice (which may not be later than the

                           redemption date) against payment of the redemption

                           price (including all accumulated and unpaid

                           distributions to the redemption date). Any monies so

                           deposited which remain unclaimed by the holders of

                           the Series C Preferred Stock at the end of two years

                           after the redemption date shall be returned by such

                           bank or trust company to the Corporation.

 

                           (f) The following provisions set forth the procedures

for redemption pursuant to the Special Redemption Right.

 

                                    (i) Notice of redemption will be mailed by

                           the Corporation, postage prepaid, no less than 30 nor

                           more than 60 calendar days immediately preceding the

                           redemption date, addressed to the respective holders

                           of record of the Series C Preferred Stock at their

                           respective

 

 

 

                                       7

<PAGE>

 

                           addresses as they appear on the stock transfer

                           records of the Corporation. No failure to give such

                           notice or any defect thereto or in the mailing

                           thereof shall affect the validity of the proceedings

                           for the redemption of the Series C Preferred Stock

                           except as to the holder to whom notice was defective

                           or not given.

 

                                    (ii) In addition to any information required

                           by law, each notice shall state: (A) the redemption

                           date; (B) the redemption price; (C) the place or

                           places where the holders of Series C Preferred Stock

                           may surrender certificates for payment of the

                           redemption price; and (D) that distributions on the

                           Series C Preferred Stock will cease to accumulate on

                           the redemption date.

 

                                    (iii) On or after the redemption date, each

                           holder of Series C Preferred Stock shall present and

                           surrender the certificates representing his Series C

                           Preferred Stock to the Corporation at the place

                           designated in the notice of redemption and thereupon

                           the redemption price of such shares (including all

                           accumulated and unpaid distributions up to the

                           redemption date) shall be paid to or on the order of

                           the person whose name appears on such certificate

                           representing Series C Preferred Stock as the owner

                           thereof and each surrendered certificate shall be

                           canceled.

 

                                    (iv) From and after the redemption date

                           (unless the Corporation defaults in payment of the

                           redemption price), all distributions on the Series C

                           Preferred Stock and all rights of the holders

                           thereof, except the right to receive the redemption

                           price thereof and all accumulated and unpaid

                           distributions up to the redemption date, shall

                           terminate with respect to such shares and such shares

                           shall not thereafter be transferred (except with the

                           consent of the Corporation) on the Corporation's

                           stock transfer records, and such shares shall not be

                           deemed to be outstanding for any purpose whatsoever.

                           At its election, the Corporation, prior to the

                           redemption date, may irrevocably deposit the

                           redemption price (including accumulated and unpaid

                           distributions to the redemption date) of the Series C

                           Preferred Stock so called for redemption in trust for

                           the holders thereof with a bank or trust company, in

                           which case the redemption notice to holders of the

                           Series C Preferred Stock shall (A) state the date of

                           such deposit, (B) specify the office of such bank or

                           trust company as the place of payment of the

                           redemption price and (C) require such holders to

                           surrender the certificates representing such shares

                           at such place on or about the date fixed in such

                           redemption notice (which may not be later than the

                           redemption date) against payment of the redemption

                           price (including all accumulated and unpaid

                           distributions to the redemption date). Any monies so

                           deposited which remain unclaimed by the holders of

                           the Series C Preferred Stock at the end of two years

                           after the redemption date shall be returned by such

                           bank or trust company to the Corporation.

 

 

 

                                       8

<PAGE>

 

                           (g) Any Series C Preferred Stock that shall at any

time have been redeemed shall, after such redemption, have the status of

authorized but unissued Preferred Stock, without designation as to series until

such shares are once more designated as part of a particular series by the Board

of Directors.

 

         (6) Voting Rights.

 

                  (a) Holders of the Series C Preferred Stock shall not have any

voting rights, except as set forth below.

 

                  (b) Whenever distributions on the Series C Preferred Stock are

in arrears for six or more quarterly periods (whether or not consecutive) (a

"Preferred Distribution Default"), the holders of Series C Preferred Stock

(voting together as a single class with all other equity securities of the

Corporation (including the Corporation's 9.75% Series B Cumulative Redeemable

Preferred Stock), as applicable, upon which like voting rights have been

conferred and are exercisable ("Parity Preferred Stock")) shall be entitled to

elect a total of two additional directors to the Corporation's Board of

Directors (the "Preferred Stock Directors") at a special meeting called by the

holders of record of at least 20% of the outstanding shares of Series C

Preferred Stock (unless the request is received less than 90 calendar days

before the date fixed for the next annual or special meeting of stockholders)

or, if the request for a special meeting is received by the Corporation less

than 90 calendar days before the date fixed for the next annual or special

meeting of stockholders, at the next annual meeting of stockholders, and at each

subsequent annual meeting until all distributions accumulated on the Series C

Preferred Stock for the past distribution periods and the then current

distribution period shall have been fully paid or authorized and a sum

sufficient for the payment thereof set aside for payment.

 

                  (c) If and when all accumulated distributions and the

distribution for the then current distribution period on the Series C Preferred

Stock shall have been paid in full or authorized and a sum sufficient for the

payment thereof set aside for payment in full, the holders of Series C Preferred

Stock shall be divested of the voting rights set forth in clause (b) above

(subject to revesting in the event of each and every Preferred Distribution

Default) and, if all accumulated distributions and the distribution for the then

current distribution period have been paid in full or authorized by the Board of

Directors and set aside for payment in full on all other series of Parity

Preferred Stock upon which like voting rights have been conferred and are

exercisable, the term of office of each Preferred Stock Director so elected

shall terminate. Any Preferred Stock Director may be removed at any time with or

without cause by the vote of, and shall not be removed otherwise than by the

vote of, the holders of a majority of the outstanding Series C Preferred Stock

when they have the voting rights set forth in clause (b) above and all other

series of Parity Preferred Stock (voting as a single class). So long as a

Preferred Distribution Default shall continue, any vacancy in the office of a

Preferred Stock Director may be filled by written consent of the Preferred Stock

Director remaining in office, or if none remains in office, by a vote of the

holders of a majority of the outstanding Series C Preferred Stock when they have

the voting rights set forth in clause (b) above and all other series of Parity

Preferred Stock (voting as a single class). The Preferred Stock Directors shall

each be entitled to one vote per director on any matter.

 

 

 

                                       9

<PAGE>

 

                  (d) So long as any Series C Preferred Stock remain

outstanding, the Corporation shall not, without the affirmative vote of the

holders of at least two-thirds of the Series C Preferred Stock outstanding at

the time, given in person or by proxy, either in writing or at a meeting (such

series voting separately as a class), (i) authorize, create or increase the

authorized or issued amount of any class or series of equity securities ranking

senior to the outstanding Series C Preferred Stock with respect to the payment

of distributions or the distribution of assets upon voluntary or involuntary

liquidation, dissolution or winding up of the Corporation or reclassify any

authorized equity securities of the Corporation into any such senior equity

securities, or create, authorize or issue any obligation or security convertible

into or evidencing the right to purchase any such senior equity securities; or

(ii) amend, alter or repeal the provisions of the Charter (including these

Articles Supplementary), whether by merger or consolidation (in either case, an

"Event") or otherwise, so as to materially and adversely affect any right,

preference or voting power of the Series C Preferred Stock; provided, however,

that with respect to any such amendment, alteration or repeal of the provisions

of the Charter (including these Articles Supplementary) upon the occurrence of

an Event, so long as shares of the Series C Preferred Stock remain outstanding

with the terms thereof materially unchanged in any adverse respect, taking into

account that, upon the occurrence of an Event, the Corporation may not be the

surviving entity and such surviving entity may thereafter be the issuer of the

Series C Preferred Stock, the occurrence of any such Event shall not be deemed

to materially and adversely affect the rights, preferences or voting powers of