<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999 Commission file number 001-11975
BOYKIN LODGING COMPANY
(Exact Name of Registrant as Specified in Its Charter)
Ohio 34-1824586
- ------------------------------------- ---------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
Guildhall Building, Suite 1500,
45 W. Prospect Avenue
Cleveland, Ohio 44115
- --------------------------------------- --------------------------------------
(Address of Principal Executive Office) (Zip Code)
(216) 430-1200
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes __X__ No _____
The number of common shares, without par value, outstanding as of
August 13, 1999: 17,146,209
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
BOYKIN LODGING COMPANY
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
BOYKIN LODGING COMPANY:
Consolidated Balance Sheets as of June 30, 1999 (unaudited)
and December 31, 1998................................................ 3
Consolidated Statements of Income for the Three and Six Months
Ended June 30, 1999 and 1998 (unaudited)............................. 4
Consolidated Statement of Shareholders' Equity for the Six Months
Ended June 30, 1999 (unaudited)...................................... 5
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1999 and 1998 (unaudited)............................. 6
Notes to Consolidated Financial Statements................................ 7
BOYKIN MANAGEMENT COMPANY LIMITED LIABILITY COMPANY AND
SUBSIDIARIES:
Consolidated Balance Sheets as of June 30, 1999 (unaudited)
and December 31, 1998................................................ 12
Consolidated Statements of Operations for the Three and Six Months
Ended June 30, 1999 and 1998 (unaudited)............................. 13
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1999 and 1998 (unaudited)............................. 14
Notes to Consolidated Financial Statements................................ 15
</TABLE>
<PAGE>
BOYKIN LODGING COMPANY
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1999 AND DECEMBER 31, 1998
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
1998 1999
----------- ------------
<S> <C> <C>
ASSETS
Investment in hotel properties, net $594,271 $595,132
Cash and cash equivalents 2,170 5,643
Rent receivable from lessees:
Related party lessees 8,958 4,748
Third party lessees 1,667 547
Deferred expenses, net 3,331 3,159
Restricted cash 3,029 4,330
Other assets 1,330 1,503
--------- ---------
$614,756 $615,062
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Borrowings against credit facility $163,000 $156,000
Term note payable 130,000 130,000
Accounts payable and accrued expenses 8,363 6,521
Dividends/distributions payable 8,665 8,618
Due to lessees:
Related party lessees 802 2,971
Third party lessees 1,329 1,775
Minority interest in joint ventures 11,287 11,251
Minority interest in operating partnership 11,140 11,710
Shareholders' equity:
Preferred shares, without par value; 10,000,000 shares
authorized; no shares issued and outstanding -- --
Common shares, without par value; 40,000,000 shares
authorized; 17,144,082 and 17,044,361 shares outstanding
June 30, 1999 and December 31, 1998, respectively, -- --
Additional paid-in capital 309,402 307,512
Retained deficit (27,960) (21,296)
Unearned compensation - restricted shares (1,272) --
--------- ---------
Total shareholders' equity 280,170 286,216
--------- ---------
$614,756 $615,062
--------- ---------
--------- ---------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
3
<PAGE>
BOYKIN LODGING COMPANY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED, AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ---------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Lease revenue from related party $19,547 $13,955 $35,168 $22,601
Other lease revenue 4,305 3,409 8,078 5,622
Interest income 95 128 163 182
------- ------- ------- -------
23,947 17,492 43,409 28,405
------- ------- ------- -------
Expenses:
Real estate related depreciation and amortization 7,107 5,096 14,247 8,316
Real estate and personal property taxes, insurance
and ground rent 2,873 2,036 5,470 3,560
General and administrative 1,575 1,103 3,002 1,901
Interest expense 5,005 2,583 9,983 3,751
Amortization of deferred financing costs 159 145 318 275
------- ------- ------- -------
16,719 10,963 33,020 17,803
------- ------- ------- -------
Income before minority interests and extraordinary item 7,228 6,529 10,389 10,602
Minority interest in joint ventures (219) (201) (332) (245)
Minority interest in operating partnership (478) (470) (644) (850)
------- ------- ------- -------
Income before extraordinary item 6,531 5,858 9,413 9,507
------- ------- ------- -------
Extraordinary item- Loss on early extinguishment of
debt, net of minority interest of $110 -- (1,138) -- (1,138)
------- ------- ------- -------
Net income applicable to common shares $6,531 $4,720 $9,413 $8,369
------- ------- ------- -------
------- ------- ------- -------
Earnings per share:
Basic $.38 $.31 $.55 $.63
Diluted $.38 $.31 $.55 $.62
Weighted average number of common shares outstanding:
Basic 17,082 15,412 17,065 13,388
Diluted 17,082 15,436 17,065 13,462
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
4
<PAGE>
BOYKIN LODGING COMPANY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED, DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Unearned
Additional Compensation
Common Paid-In Retained Restricted
Shares Capital Deficit Shares Total
---------- -------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1998 17,044,361 $307,512 $(21,296) $ -- $286,216
Issuance of common shares 99,721 1,390 -- (1,390) --
Issuance of share warrant -- 500 -- -- 500
Dividends declared -- -- (16,077) -- (16,077)
Amortization of unearned compensation -- -- -- 118 118
Net income -- -- 9,413 -- 9,413
---------- -------- -------- ------- --------
Balance, June 30, 1999 17,144,082 $309,402 $(27,960) $(1,272) $280,170
---------- -------- -------- ------- --------
---------- -------- -------- ------- --------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of this statement.
5
<PAGE>
BOYKIN LODGING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED, AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,413 $ 8,369
Adjustments to reconcile net income to net cash flow provided by
operating activities-
Extraordinary item-noncash loss on early extinguishment of debt -- 1,138
Depreciation and amortization 14,565 8,591
Amortization of unearned compensation 118 --
Minority interests 976 1,095
Changes in assets and liabilities-
Rent receivable (5,330) (5,726)
Restricted cash 1,301 --
Other 96 689
Accounts payable and accrued expenses 1,842 3,389
Due to lessees (2,615) 308
-------- ---------
Net cash flow provided by operating activities 20,366 17,853
-------- ---------
Cash flows from investing activities:
Acquisitions of Red Lion Inns Operating L.P., net of commonshares
issued of $80,333 and cash acquired of $11 -- (191,004)
Acquisition of hotel properties, net of joint venture contribution -- (76,288)
Improvements and additions to hotel properties, net (13,281) (17,563)
-------- ---------
Net cash flow used for investing activities (13,281) (284,855)
-------- ---------
Cash flows from financing activities:
Payments of dividends and distributions (17,243) (12,100)
Borrowings against credit facility 7,000 148,200
Repayment of borrowings against credit facility -- (96,750)
Term note borrowing -- 130,000
Payment of deferred financing costs (520) (2,975)
Net proceeds from issuance of common shares -- 104,563
Proceeds from issuance of share warrant 500 --
Distributions to joint venture minority interest partners, net (295) (138)
Cash payments for redemption of certain limited partnership interests -- (967)
-------- ---------
Net cash flow (used for) provided by financing activities (10,558) 269,833
-------- ---------
Net change in cash and cash equivalents (3,473) 2,831
Cash and cash equivalents, beginning of period 5,643 1,855
-------- ---------
Cash and cash equivalents, end of period $ 2,170 $ 4,686
-------- ---------
-------- ---------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
6
<PAGE>
BOYKIN LODGING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
1. BACKGROUND:
Boykin Lodging Company is a real estate investment trust that owns
hotels throughout the United States and leases its properties to established
hotel operators. Boykin's principal source of revenue is lease payments from
lessees pursuant to percentage lease agreements. Percentage lease revenue is
based upon the room, food and beverage and other revenues of Boykin's hotels.
The lessees' ability to make payments to Boykin pursuant to the percentage
leases is dependent primarily upon the operations of the hotels.
INITIAL PUBLIC OFFERING AND MAJOR EVENTS SINCE THE IPO
In November 1996, Boykin completed its initial public offering
("IPO"), issuing a total of 9,516,250 common shares, including exercise of
the underwriters' over-allotment option. In conjunction with its IPO, Boykin
Lodging contributed approximately $133,898 to Boykin Hotel Properties, L.P.,
an Ohio limited partnership (the "Partnership"), in exchange for an
approximate 84.5% equity interest as the sole general partner of the
Partnership and also loaned $40,000 to the Partnership in exchange for an
intercompany convertible note. The Partnership then acquired nine hotel
properties and leased them to Boykin Management Company Limited Liability
Company ("BMC"). BMC is owned by Robert W. Boykin, Chairman, President and
Chief Executive Officer of Boykin Lodging Company (53.8%) and his brother,
John E. Boykin (46.2%). The Partnership acquired eight additional hotel
properties in 1997 using remaining proceeds from the IPO and borrowings under
Boykin's credit facility.
On February 24, 1998, Boykin completed a follow-on public equity
offering, issuing an additional 4,500,000 common shares. The net proceeds of
approximately $106,313 were contributed to the Partnership, increasing Boykin
Lodging Company's ownership percentage therein to 90.3%. The proceeds were
used by the Partnership to pay down existing indebtedness under the credit
facility, purchase limited partnership units from two unaffiliated limited
partners, fund the acquisitions of two hotels purchased in March 1998 and for
general corporate purposes.
On May 22, 1998 Boykin completed its merger with Red Lion Inns Limited
Partnership, in which Boykin acquired Red Lion Inns Operating L.P. ("OLP"),
which owns a portfolio of ten DoubleTree-licensed hotels. In the transaction,
Boykin issued 3,109,606 million common shares and paid approximately $35,305
in cash to the Red Lion limited partners and general partner. The total
consideration value, including assumed liabilities of approximately $155,710
and common shares issued valued at $80,333, was $271,348. The common shares
issued in the merger were valued at $25.83 per share, the five-day average
trading price of Boykin's shares before the merger announcement. The issuance
of Boykin's common shares in the merger increased Boykin Lodging's ownership
percentage in the Partnership to 92.2%.
As part of Boykin's acquisitions in 1997 and 1998, Boykin established
new strategic alliances with four hotel operators and purchased five hotels
with them through joint venture structures. The following table sets forth
the joint venture agreements established in 1997 and 1998:
7
<PAGE>
<TABLE>
<CAPTION>
Boykin Lessee/JV
Lessee/JV Ownership Ownership Date of Hotel
Name of Joint Venture Partner Percentage Percentage Hotel Owned Under Joint Venture Purchase
--------------------- ------- ---------- ---------- ------------------------------- --------
<S> <C> <C> <C> <C> <C>
BoyStar Ventures, L.P. MeriStar 91% 9% Holiday Inn Minneapolis West July 1997
Shawan Road Hotel L.P. Davidson 91% 9% Marriott's Hunt Valley Inn July 1997
Boykin San Diego LLC Outrigger 91% 9% Hampton Inn San Diego Airport/Sea
World November 1997
Boykin Kansas City LLC MeriStar 80% 20% DoubleTree Kansas City November 1997
RadBoy Mt. Laurel LLC Radisson 85% 15% Radisson Hotel Mt. Laurel June 1998
</TABLE>
As of June 30, 1999 Boykin owned 31 hotels containing a total of
8,689 guest rooms located in 16 different states.
BASIS OF PRESENTATION
Boykin Lodging exercises unilateral control over the Partnership.
Therefore, the separate financial statements of Boykin Lodging, the
Partnership, OLP, and the joint ventures discussed above are consolidated.
All significant intercompany transactions and balances have been eliminated.
These financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information
and with the instructions for Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six month period ended
June 30, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999. For further information,
refer to the consolidated financial statements and footnotes thereto included
in Boykin's annual report on Form 10-K for the year ended December 31, 1998.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year financial
statements to conform with the current year presentation.
2. JOINT VENTURE WITH AEW:
On February 1, 1999, Boykin formed a joint venture with AEW
Partners III, L.P. ("AEW"), an investment partnership managed by AEW Capital
Management, L.P., a Boston-based real estate investment firm. AEW will
provide $50,000 of equity capital for the joint venture, and Boykin will
provide approximately $17,000 and serve as the operating member of the joint
venture. Due to its ownership interest of 25% in the joint venture, Boykin
accounts for its investment utilizing the equity method.
Boykin and AEW plan to use the joint venture to take advantage of
acquisition opportunities in the lodging industry. The joint venture
agreement contains provisions for AEW and Boykin to double their respective
capital commitments under certain circumstances. In addition, as part of the
transaction, Boykin will receive incentive returns based on the performance
of acquired assets as well as other compensation as a result of the joint
venture's activities.
After the end of the two-year investment period, AEW has the option
to convert its capital invested in the joint venture into Boykin convertible
preferred shares. Pursuant to the venture agreements, AEW also purchased a
warrant for $500. The warrant gives AEW the right to buy up to $20,000 of
Boykin's preferred or common shares (at Boykin's election) for $16.48 a
share. The warrant is exercisable after the two-year investment period, and
expires one year after it becomes exercisable. The amount of the warrant will
be reduced and eliminated under the terms of the agreement on a dollar for
dollar basis as the last $20,000 of AEW's $50,000 of capital is invested. If
issued, the preferred shares would be convertible into common shares at
$16.48 per common share and have a minimum cumulative annual dividend
equivalent to $1.88 per common share, Boykin's current common share dividend.
As of June 30, 1999 there were no acquisitions made nor operations related to
the joint venture.
8
<PAGE>
3. NET INCOME PER SHARE AND PARTNERSHIP UNIT:
Boykin Lodging's basic and diluted earnings per share for the three and
six months ended June 30, 1999 under SFAS No. 128, "Earnings per Share" are
as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1999 June 30, 1999
------------- -------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Basic earnings per common share $ .38 $ .31 $ .55 $ .63
Diluted earnings per common share $ .38 $ .31 $ .55 $ .62
</TABLE>
Basic earnings per share is based on the weighted average number of
common shares outstanding during the period. Diluted earnings per share
adjusts the weighted average shares outstanding for the effect of all
dilutive securities. At June 30, 1999 and 1998, a total of 1,291,000 limited
partnership units were issued and outstanding. The basic and diluted weighted
average number of common shares and limited partnership units outstanding for
the three and six months ended June 30, 1999 was 18,374,000 and 18,356,000,
respectively.
4. CREDIT FACILITY:
Boykin has an unsecured credit facility with a group of banks which,
effective April 1, 1999, enables Boykin to borrow up to $200,000, subject to
borrowing base and loan-to-value limitations, at a rate of interest that
fluctuates at LIBOR plus 1.40% to 2.25% (6.7% at June 30, 1999), as defined.
Boykin is required to pay a .25% fee on the unused portion of the credit
facility. The credit facility expires in June 2000, with an additional
one-year extension at Boykin's option. As of June 30, 1999 and December 31,
1998, outstanding borrowings against the credit facility were $163,000 and
$156,000, respectively.
The credit facility requires Boykin, among other things, to maintain a
minimum net worth, a coverage ratio of EBITDA to debt service, and a coverage
ratio of EBITDA to debt service and fixed charges. Further, Boykin is
required to maintain the franchise agreement at each hotel and to maintain
its REIT status. Boykin was in compliance with its covenants at June 30, 1999
and December 31, 1998.
5. TERM NOTE PAYABLE:
On May 22, 1998, OLP entered into a $130,000 term loan agreement. The
loan expires in June 2023 and may be prepaid without penalty or defeasance
after May 21, 2008. The loan bears interest at a fixed rate of 6.9% for ten
years, and at a new fixed rate to be determined thereafter. The loan requires
interest-only payments for the first two years, with principal repayments
commencing in the third loan year based on a 25-year amortization schedule.
The loan is secured by ten DoubleTree hotels. Under covenants in the loan
agreement, assets of OLP are not available to pay the creditors of any other
Boykin entity, except to the extent of permitted cash distributions from OLP
to Boykin. Likewise, the assets of other entities are not available to pay
the creditors of OLP. The loan agreement also requires OLP to hold funds in
escrow for the payment of capital expenditures, insurance and real estate
taxes. The term note also requires OLP to maintain compliance with certain
financial covenants. OLP was in compliance with these covenants at June 30,
1999 and December 31, 1998.
6. PERCENTAGE LEASE AGREEMENTS:
9
<PAGE>
The percentage leases have noncancelable remaining terms ranging from
two to nine years, subject to earlier termination on the occurrence of
certain contingencies, as defined. The rent due under each percentage lease
is the greater of minimum rent, as defined, or percentage rent. Percentage
rent applicable to room and other hotel revenue varies by lease and is
calculated by multiplying fixed percentages by the total amounts of such
revenues over specified threshold amounts. Both the minimum rent and the
revenue thresholds used in computing percentage rents are subject to annual
adjustments based on increases in the United States Consumer Price Index
("CPI"). Percentage rent applicable to food and beverage revenues is
calculated by multiplying fixed percentages by the total amounts of such
revenues. Percentage Lease revenue for the three months ended June 30, 1999
and 1998 was $23,852 and $17,364 respectively, of which approximately $8,622
and $5,456 respectively, was in excess of minimum rent. Percentage lease
revenue for the six months ended June 30, 1999 and 1998 was $43,246 and
$28,223, respectively, of which approximately $12,802 and $7,758,
respectively, was in excess of minimum rent.
Boykin Lodging recognizes lease revenue for interim and annual reporting
purposes on an accrual basis pursuant to the terms of the respective percentage
leases.
Future minimum rentals (ignoring future CPI increases) to be received by
Boykin from BMC and from other lessees pursuant to the percentage leases for
each of the years in the period 1999 to 2003 and in total thereafter are as
follows:
<TABLE>
<CAPTION>
Related Party Other
Lessees Lessees Totals
------- ------- ------
<S> <C> <C> <C>
Remainder of 1999 $ 24,630 $ 4,538 $ 29,168
2000 49,261 9,076 58,337
2001 42,960 9,076 52,036
2002 36,055 7,677 43,732
2003 11,439 5,884 17,323
Thereafter 26,409 23,067 49,476
-------- ------- --------
$190,754 $59,318 $250,072
</TABLE>
7. RELATED PARTY TRANSACTIONS:
The Chairman, President and Chief Executive Officer of Boykin Lodging is
the majority shareholder of BMC. BMC and Westboy LLC, a subsidiary of BMC,
were a significant source of Boykin's percentage lease revenue through June
30, 1999. At June 30, 1999 and December 31, 1998, Boykin had rent receivable
of $8,958 and $4,748, respectively, due from related party lessees.
Boykin Lodging paid Spectrum Design Services, a subsidiary of BMC, $465
for design and other services through June 30, 1999. Of this total, $228 was
for design services, $194 represented purchasing services and $43 was
reimbursement of expenses incurred while performing services for the hotels
during 1999.
At June 30, 1999 and December 31, 1998, Boykin had a payable to related
party lessees of $802 and $2,971, respectively, primarily for the
reimbursement of capital expenditure costs incurred on behalf of the
Partnership and OLP.
8. STATEMENT OF CASH FLOWS, SUPPLEMENTAL DISCLOSURES:
During the six-month periods ended June 30, 1999 and 1998, noncash
financing transactions consisted of $8,665 and $8,671 respectively, of
dividends and Partnership distributions which were declared but not paid as
of June 30, 1999 and 1998, respectively.
10
<PAGE>
Interest paid during the six-month periods ended June 30, 1999 and 1998
was $10,063 and $1,147 respectively. In the first half of 1999, Boykin issued
99,721 common shares, valued at $1,390 under Boykin's Long-Term Incentive
Plan.
9. PRO FORMA FINANCIAL INFORMATION:
The pro forma financial information set forth below for the six months
ended June 30, 1998 is presented as if the following significant transactions
had been consummated as of January 1, 1998:
- the share offering of 4,500,000 common shares in February 1998;
- the issuance of 3,109,606 common shares in May 1998 related to the
Red Lion merger;
- the acquisitions of properties by Boykin in 1998; and
- Boykin's common share repurchase of 114,500 shares in 1998.
The pro forma financial information is not necessarily indicative of
what the actual results of operations of Boykin would have been assuming
these transactions had been consummated as of January 1, 1998, nor does it
purport to represent the results of operations for future periods.
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1998
-------------
<S> <C>
Revenues:
Lease revenue $41,411
Interest income 167
--------
41,578
--------
Expenses:
Real estate related depreciation and amortization 13,307
Real estate and personal property taxes, insurance and ground rent 4,954
General and administrative 1,901
Interest expense 9,556
Amortization of deferred financing costs 334
--------
--------
Net income before minority interest and extraordinary item 11,526
Minority interest 1,046
--------
Income before extraordinary item $10,480
--------
--------
Income per share before extraordinary item
Basic $.61
Diluted $.61
</TABLE>
11
<PAGE>
BOYKIN MANAGEMENT COMPANY
LIMITED LIABILITY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1999 AND DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
ASSETS 1999 1998
- ------ ------------ ------------
<S> <C> <C>
Cash and cash equivalents $ 22,994 $ 12,973
Accounts receivable:
Trade, net of allowance for doubtful accounts of $111 and $166 at
June 30, 1999 and December 31, 1998, respectively 10,533 8,097
Related party lessors 802 2,971
Other 429 178
Inventories 2,289 2,060
Property and equipment, net 385 434
Investment in Boykin Lodging Company 284 248
Prepaid expenses and other assets 2,289 2,383
------------ ------------
Total assets $ 40,005 $ 29,344
------------ ------------
------------ ------------
LIABILITIES AND MEMBERS' CAPITAL
Rent payable to related party lessors $ 8,958 $ 4,748
Accounts payable:
Trade 3,584 3,114
Advance deposits 1,209 774
Bank overdraft liability 5,478 4,806
Accrued expenses:
Accrued payroll 1,959 633
Accrued vacation 2,785 2,250
Accrued sales, use and occupancy taxes 2,364 1,856
Accrued management fee 2,823 4,044
Other accrued liabilities 5,947 3,080
------------ ------------
Total liabilities 35,107 25,305
------------ ------------
Members' capital:
Capital contributed 3,000 3,000
Retained earnings 2,069 1,282
Accumulated other comprehensive loss (171) (243)
------------ ------------
Total members' capital 4,898 4,039
------------ ------------
Total liabilities and members' capital $ 40,005 $ 29,344
------------ ------------
------------ ------------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
12
<PAGE>
BOYKIN MANAGEMENT COMPANY
LIMITED LIABILITY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED, AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------- --------
1999 1998 1999 1998
------ ------ ------- -------
<S> <C> <C> <C> <C>
Revenues:
Room revenue $42,291 $39,968 $77,042 $72,486
Food and beverage revenue 18,883 18,768 36,149 34,696
Other hotel revenue 3,949 4,071 7,277 7,060
Other revenue 571 809 1,096 1,564
------ ------ ------- -------
Total revenues 65,694 63,616 121,564 115,806
------ ------ ------- -------
Expenses:
Departmental expenses of hotels:
Rooms 9,609 9,460 18,342 17,461
Food and beverage 13,360 13,851 26,077 26,012
Other 2,403 2,110 4,252 3,673
Cost of goods sold of non-hotel operations - 145 15 396
Percentage lease expense 19,547 18,563 35,168 33,297
General and administrative 6,419 6,380 12,623 12,317
Advertising and promotion 3,249 2,703 6,289 5,334
Utilities 2,945 2,503 5,995 5,023
Franchisor royalties and other charges 2,065 2,011 3,791 3,694
Repairs and maintenance 1,636 2,376 3,505 4,391
Depreciation and amortization 30 23 60 45
Management fee expense 2,406 2,534 4,175 4,321
Other expense 314 (128) 485 (112)
------ ------ ------- -------
Total expenses 63,983 62,531 120,777 115,852
------ ------ ------- -------
Net income (loss) $1,711 $1,085 $787 $(46)
------ ------ ------- -------
------ ------ ------- -------
Comprehensive income (loss) $1,790 $990 $859 $(141)
------ ------ ------- -------
------ ------ ------- -------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
13
<PAGE>
BOYKIN MANAGEMENT COMPANY
LIMITED LIABILITY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED, AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
------- ------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 787 $ (46)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 60 45
Realized loss on investment 36 --
Changes in assets and liabilities:
Accounts receivable (518) (4,883)
Inventories (229) (1,558)
Prepaid expenses and other assets 94 (707)
Rent payable 4,210 6,485
Accounts payable 1,577 1,841
Other accrued liabilities 4,015 5,275
------- ------
Net cash provided by operating activities 10,032 6,452
------- ------
Cash flows from investing activities:
Property additions (11) (155)
------- ------
Net cash used for investing activities (11) (155)
------- ------
Cash flows from financing activities --- ---
------- ------
Net increase in cash and cash equivalents 10,021 6,297
Cash and cash equivalents, beginning of period 12,973 6,862
------- ------
Cash and cash equivalents, end of period $22,994 $13,159
------- ------
------- ------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
14
<PAGE>
BOYKIN MANAGEMENT COMPANY
LIMITED LIABILITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(DOLLAR AMOUNTS IN THOUSANDS)
1. DESCRIPTION OF BUSINESS:
Boykin Management Company Limited Liability Company and its subsidiaries
(collectively, "BMC")
- lease and operate full and limited service hotels located throughout
the United States pursuant to long-term percentage leases;
- manage full and limited service hotels located throughout the United
States pursuant to management agreements;
- provide national purchasing services to hotels; and
- provide interior design services to hotels and other businesses.
2. ORGANIZATION:
BMC commenced operations on November 4, 1996 as an Ohio limited
liability company. BMC is indirectly owned by Robert W. Boykin (53.8%) and
John E. Boykin (46.2%). Robert W. Boykin is the Chairman, President and Chief
Executive Officer of Boykin Lodging Company.
Pursuant to formation transactions related to the November 4, 1996
initial public offering of Boykin Lodging, Boykin Management Company ("former
BMC") and Bopa Design Company (doing business as Spectrum Services), wholly
owned subsidiaries of The Boykin Company ("TBC"), were merged into
subsidiaries of BMC. In addition, Purchasing Concepts, Inc. ("PCI")
contributed its assets to a subsidiary of BMC and that subsidiary assumed
PCI's liabilities. TBC and PCI are related through common ownership. BMC and
its subsidiaries are the successors to the businesses of former BMC, Spectrum
Services and PCI. As BMC, former BMC, Spectrum Services and PCI were related
through common ownership, there were no purchase accounting adjustments to
the historical carrying values of the assets and liabilities of former BMC,
Spectrum Services and PCI upon the merger into or contribution to the
subsidiaries of BMC.
3. BASIS OF PRESENTATION:
The separate financial statements of BMC's subsidiaries have been
presented on a consolidated basis with BMC. All significant intercompany
transactions and balances have been eliminated. These financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions for
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and six month periods ended June 30, 1999 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1999. For further information, refer to BMC's
consolidated financial statements and the footnotes thereto included in
Boykin Lodging's annual report on Form 10-K for the year ended December 31,
1998.
4. PERCENTAGE LEASE AGREEMENTS:
BMC LEASES ON 15 HOTELS
BMC leases 15 hotels (the "BMC Hotels") from the Partnership pursuant to
long-term percentage leases. The BMC Hotels are located in Cleveland, Ohio
(2); Columbus, Ohio; Buffalo, New York; Berkeley, California; Raleigh, North
Carolina; Charlotte, North Carolina (2); High Point, North Carolina;
Knoxville, Tennessee; Ft. Myers, Florida; Melbourne, Florida (2); Daytona
Beach, Florida; and French Lick, Indiana.
15
<PAGE>
The percentage leases have noncancellable remaining terms ranging from
two to nine years, subject to earlier termination on the occurrence of
certain contingencies, as defined. BMC is required to pay the higher of
minimum rent, as defined, or percentage rent. Percentage rent applicable to
room and other hotel revenue varies by lease and is calculated by multiplying
fixed percentages by the total amounts of such revenues over specified
threshold amounts. Percentage rent related to food and beverage revenues and
other revenues, in some cases, is based on fixed percentages of such
revenues. Both the threshold amounts used in computing percentage rent and
minimum rent on room and other hotel revenues are subject to adjustments as
of January 1 of each year based on increases in the United States Consumer
Price Index.
For both annual and interim reporting purposes, BMC recognizes
percentage lease expense on an accrual basis pursuant to the provisions of
the related percentage lease agreements.
Other than real estate and personal property taxes, casualty insurance,
ground lease rental, and capital improvements, which are obligations of the
Partnership, the percentage leases require BMC to pay all costs and expenses
incurred in the operation of the BMC Hotels.
The percentage leases require BMC to indemnify Boykin Lodging Company
against all liabilities, costs and expenses incurred by, imposed on or
asserted against the Partnership in the normal course of operating the BMC
Hotels.
WESTBOY LEASE ON TEN DOUBLETREE HOTELS
Effective January 1, 1998, Westboy, LLC ("Westboy"), a wholly-owned
subsidiary of BMC, entered into a long term lease agreement with Red Lion
Inns Operating L.P. ("OLP") with terms similar to those described above. OLP
was acquired by Boykin Lodging Company on May 22, 1998. The ten
DoubleTree-licensed hotels (the "DoubleTree Hotels") leased by Westboy are
located in California, Oregon (3), Washington (3), Colorado, Idaho and
Nebraska. The hotels are managed by a subsidiary of Promus Hotel Corporation.
BMC made an initial capital contribution to Westboy of $1,000, of which $900
was funded with a demand promissory note. Assets of Westboy are not available
to pay the creditors of any other entity, except to the extent of permitted
cash distributions from Westboy to BMC. Similarly, except to the extent of
the unpaid promissory note, the assets of BMC are not available to pay the
creditors of Westboy.
Future minimum rentals (ignoring CPI increases) to be paid by BMC and
Westboy under their respective percentage lease agreements at June 30, 1999
for each of the years in the period 1999 to 2003 and in total thereafter are
as follows:
<TABLE>
<S> <C>
Remainder of 1999 $ 24,630
2000 49,261
2001 42,960
2002 36,055
2003 11,439
Thereafter 26,409
---------
$ 190,754
</TABLE>
5. RELATED PARTY TRANSACTIONS:
Percentage lease expense payable to the Partnership was $19,547 and
$12,481 for the three months ended June 30, 1999 and 1998, respectively.
Percentage lease expense payable for the six months ended June 30, 1999 and
1998 was $35,168, and $22,601, respectively.
At June 30, 1999 and December 31, 1998, BMC (including Westboy) had
receivables from the Partnership (including OLP) of $802 and $2,971,
respectively, primarily for the reimbursement of capital expenditure costs
incurred on behalf of the Partnership and OLP.
At June 30, 1999 and December 31, 1998, BMC (including Westboy) had
payables to the Partnership (including OLP) of $8,958 and $4,748,
respectively, for amounts due pursuant to the percentage leases.
16
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
BACKGROUND AND BUSINESS STRATEGIES
Boykin Lodging Company, an Ohio corporation, is a real estate investment
trust that owns hotels throughout the United States and leases its properties
to established hotel operators. Our primary business strategies are:
- - acquiring upscale, full-service commercial and resort hotels that will
increase our cash flow and are purchased at a discount to their replacement
cost;
- - developing strategic alliances and relationships with both a network of
high-quality hotel operators and franchisors of the hotel industry's
premier upscale brands; and
- - maximizing revenue growth in our hotels through -
- strong management performance from our lessee/operators;
- selective renovation;
- expansion and development; and
- brand repositioning.
BOYKIN'S FORMATION AND DEVELOPMENT
On November 4, 1996, we completed our IPO, issuing a total of 9.5 million
common shares. In conjunction with our IPO, we contributed approximately
$133.9 million to Boykin Hotel Properties, L.P., an Ohio limited partnership
(the "Partnership"), in exchange for an approximate 84.5% equity interest as
the sole general partner of the Partnership and we loaned $40 million to the
Partnership in exchange for an intercompany convertible note. The Partnership
then acquired nine hotel properties and another eight hotel properties in
1997 using remaining proceeds from the IPO and borrowings under our credit
facility. We do all of our business through the Partnership.
On February 24, 1998, we completed a follow-on public equity offering,
issuing an additional 4.5 million common shares. The net proceeds of
approximately $106.3 million were contributed to the Partnership, increasing
our ownership percentage therein to 90.3%. The proceeds were used by the
Partnership to pay down existing indebtedness under the credit facility,
purchase limited partnership units from two unaffiliated limited partners,
fund the acquisitions of two hotels purchased in March 1998 and for general
corporate purposes.
On May 22, 1998 we completed our merger with Red Lion Inns Limited
Partnership, in which we acquired Red Lion Inns Operating L.P. ("OLP"), which
owns a portfolio of ten DoubleTree-licensed hotels. In the transaction, we
issued 3.1 million common shares and paid approximately $35.3 million in cash
to the Red Lion limited partners and general partner. The total consideration
value, including assumed liabilities of approximately $155.7 million and
common shares issued valued at $80.3 million, was $271.3 million. The
issuance of our common shares in the merger had the impact of increasing our
ownership percentage in the Partnership to 92.2%.
We currently own 31 hotels containing a total of 8,689 guest rooms
located in 16 different states.
Our principal source of revenue is lease payments from lessees pursuant
to percentage lease agreements. Percentage lease revenue is based upon the
room, food and beverage and other revenues of our hotels. The lessees'
ability to make payments to us pursuant to the percentage leases is dependent
primarily upon the operations of the hotels.
SECOND QUARTER HIGHLIGHTS AND OUTLOOK FOR THE REMAINDER OF 1999
Refer to the "Results of Operations" section below for discussion of our
second quarter results compared to 1998 as well as the operational results of
BMC.
During the first half of 1999, we continued our renovation program,
spending $13.4 million, or approximately nine percent of hotel revenues. The
majority of these capital expenditures went into four of our
17
<PAGE>
DoubleTree hotels, which underwent major guestroom renovations. The Holiday
Inn Minneapolis West, Cleveland Marriott East and Radisson Hotel Mt. Laurel
renovations are in progress. We plan to spend a total of approximately $25
million in 1999, which is approximately eight percent of our expected hotel
revenues. The majority of this amount will be spent renovating six of our
DoubleTree hotels, as part of a $20 million renovation program expected to be
complete by mid-2000. We believe it is important to keep our hotels in
first-class condition in an effort to outperform the competition and to
deliver superior REVPAR gains, and we are focusing our renovation activities
on hotels in areas with the highest revenue potential. We also believe the
long-term demand for rooms in most of our markets will continue to grow and
therefore we expect to continue to implement our renovation plans
aggressively.
In spite of new hotels opening this year in certain of our markets, we
anticipate a positive impact on our results of operations stemming from the
hotels we renovated and repositioned in 1998 and those we are renovating in
1999. We continue to actively seek acquisitions, but we are being selective
in terms of yield and earnings criteria. We continue to actively market the
sale of our four non-strategic DoubleTree hotels acquired last May. We also
are considering expansions at a few of our hotels as well as the development
or sale of land parcels to maximize the value of our portfolio.
RESULTS OF OPERATIONS
The following discusses our results of operations and those of BMC for
the quarter ended June 30, 1999 compared to the same period in 1998.
BOYKIN LODGING COMPANY
Quarter ended June 30, 1999 compared to 1998
Our percentage lease revenue increased 37.4% to $23.9 million in 1999,
from $17.4 million for the same period in 1998. Percentage lease revenue
payable by BMC and Westboy represented $19.5 million, or 82.0% of total
percentage lease revenue in the 1999 period, compared to $14.0 million, or
80.4% of total percentage lease revenue, in 1998. The increase in percentage
lease revenue from BMC and Westboy is primarily attributable to the lease
revenue from Westboy, which commenced upon completion of the Red Lion merger.
Net income increased to $6.5 million for the three months ended June 30,
1999, from $4.7 million in 1998. As a percent of total revenue, net income
increased to 27.3% in 1999 from 27.0% in 1998, primarily resulting from the
extraordinary item in 1998 which reduced 1998 net income by $1.1 million,
offset by an increase in 1999 operating expenses.
The increase in the size of our hotel portfolio caused expenses to
increase. New debt associated with our 1998 acquisitions, the Red Lion
merger, and significant renovation activity in 1998 and 1999 increased our
interest expense in 1999, despite lower average interest rates in 1999
compared to 1998. General and administrative expenses increased $.5 million
to $1.6 million, or 6.6% of revenues because of increased payroll costs
associated with hiring management personnel to support our strategic growth
objectives. Property taxes, insurance and ground rent increased because of
higher property tax assessments associated with property purchases and
renovations that have occurred over the past 18 months.
Six Months Ended June 30, 1999 Compared to 1998
Our percentage lease revenue increased 53.2% to $43.2 million in 1999,
from $28.2 million for the same period in 1998. Percentage lease revenue
payable by BMC and Westboy represented $35.2 million, or 81.3% of total
percentage lease revenue in the 1999 period, compared to $22.6 million, or
80.0% of total percentage lease revenue, in 1998. The increase in percentage
lease revenue from BMC and Westboy is primarily attributable to the lease
revenue from Westboy, which commenced upon completion of the Red Lion merger.
Net income increased to $9.4 million for the six months ended June 30,
1999, compared to $8.4 million in 1998. As a percent of total revenue, net
income decreased to 21.7% in 1999 from 29.5% in 1998, primarily resulting
from the following items:
- - An increase in interest expense to $10.0 million in 1999 or 23.0% of total
revenues, from $3.8 million or
18
<PAGE>
13.2% of total revenues in 1998.
- - An increase in real estate related depreciation and amortization from $8.3
million or 29.3% of total revenues in 1998, to $14.2 million or 32.8% of
total revenues in 1999.
The increase in the size of our hotel portfolio caused these increases. New
debt associated with our 1998 acquisitions and the Red Lion merger increased
our interest expense in 1999, despite lower average interest rates in 1999
compared to 1998. General and administrative expenses increased $1.1 million
to $3.0 million, or 6.9% of revenues primarily because of the hiring of
management personnel.
Our funds from operations ("FFO") for the quarter ended June 30, 1999
were $14.0 million compared to $11.3 million in 1998. The White Paper on Funds
From Operations approved by the Board of Governors of the National
Association of Real Estate Investment Trusts ("NAREIT") in March 1995 defines
FFO as net income (loss) (computed in accordance with GAAP), excluding gains
(or losses) from debt restructuring and sales of properties, plus real estate
related depreciation and amortization and after comparable adjustments for
our portion of these items related to unconsolidated entities and joint
ventures. We believe that FFO is helpful to investors as a measure of the
performance of an equity REIT because, along with cash flow from operating
activities, financing activities and investing activities, it provides
investors with another indication of the ability of a company to incur and
service debt, to make capital expenditures and to fund other cash needs.
We compute FFO in accordance with the NAREIT White Paper, which may not
be comparable to FFO reported by other REITs that do not define the term in
accordance with the current NAREIT definition or that interpret the current
NAREIT definition differently than us. FFO does not represent cash generated
from operating activities determined by GAAP and should not be considered as
an alternative to net income (determined in accordance with GAAP) as an
indication of our financial performance or to cash flow from operating
activities (determined in accordance with GAAP) as a measure of our
liquidity, nor is it indicative of funds available to fund our cash needs,
including our ability to make cash distributions. FFO may include funds that
may not be available for management's discretionary use due to functional
requirements to conserve funds for capital expenditures and property
acquisitions, and other commitments and uncertainties. The following is a
reconciliation between net income and FFO for the three months ended June 30,
1999 and 1998, respectively, (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1999 1998 1999 1998
-------- ------ --------- -------
<S> <C> <C> <C> <C>
Net income $ 6,531 $ 4,720 $ 9,413 $ 8,369
Extraordinary item --- 1,138 --- 1,138
Real estate related depreciation and amortization 7,107 5,096 14,247 8,316
Minority interest 697 671 976 1,095
FFO applicable to joint venture minority interest (316) (292) (515) (363)
-------- ------ -------- -------
Funds from operations $ 14,019 $11,333 $ 24,121 $18,555
-------- ------- -------- -------
-------- ------- -------- -------
</TABLE>
19
<PAGE>
The following table illustrates key operating statistics of our portfolio for
the three and six months ended June 30, 1999, regardless of ownership:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- ------------------------
1999 1998 (a) 1999 1998(a)
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
All hotels (31 hotels)
Hotel revenues $ 80,620 $ 76,517 $ 149,081 $ 142,980
REVPAR $ 66.79 $ 62.66 $ 61.70 $ 59.08
Occupancy 72.5% 67.8% 67.0% 64.2%
Average daily rate $ 92.07 $ 92.42 $ 92.07 $ 92.05
Initial Hotels (9 hotels)
Hotel revenues $ 24,744 $ 22,749 $ 46,024 $ 43,988
REVPAR $ 77.41 $ 71.22 $ 72.45 $ 69.19
Occupancy 77.8% 73.4% 74.0% 72.0%
Average daily rate $ 99.46 $ 97.02 $ 97.87 $ 96.03
DoubleTree Portfolio (10 hotels)
Hotel revenues $ 29,170 $ 30,087 $ 54,697 $ 55,120
REVPAR $ 65.83 $ 65.56 $ 59.27 $ 59.11
Occupancy 76.1% 73.6% 69.5% 68.1%
Average daily rate $ 86.47 $ 89.06 $ 85.22 $ 86.82
Acquired Hotels (12 hotels)(b)
Hotel revenues $ 26,706 $ 23,681 $ 48,360 $ 43,871
REVPAR $ 59.75 $ 53.44 $ 55.95 $ 51.44
Occupancy 65.2% 58.0% 59.3% 54.5%
Average daily rate $ 91.69 $ 92.13 $ 94.32 $ 94.36
</TABLE>
(a) Includes predecessors' results.
(b) Represents the operating results of hotels acquired by us since our
IPO, other than the DoubleTree portfolio.
20
<PAGE>
BMC
Quarter ended June 30, 1999 compared to 1998
For the quarter ended June 30, 1999, BMC's hotel revenues increased
3.7%, to $65.1 million, from $62.8 million for the same period in 1998. The
increase in 1999 was due to increased revenues of the Florida hotels and
hotels under renovation last year offset by lower revenues of the DoubleTree
portfolio in 1999 compared to 1998.
Percentage lease expense for the quarter ended June 30, 1999 increased
5.3%, to $19.5 million, compared to $18.6 million for the same period in
1998. Departmental and other hotel operating expenses, consisting primarily
of rooms expenses, food and beverage costs, franchise fees, utilities,
repairs and maintenance, management fees, and other general and
administrative expenses of the hotels were $44.4 million in the quarter ended
June 30, 1999 compared to $43.8 million for the same period in 1998. As a
percent of hotel revenues, the departmental and other hotel operating
expenses decreased to 68.2% in 1999 from 69.8% in 1998. The combination of
increased revenues and decreased operating expenses, as a percentage of
revenues, resulted in higher net income of $1.7 million for the quarter ended
June 30, 1999 compared to net income of $1.1 million in 1998.
Six months ended June 30, 1999 compared to 1998
For the six months ended June 30, 1999, BMC's hotel revenues increased
5.4%, to $120.5 million, compared to $114.2 million for the same period in
1998. The increase was due to increased revenues in the Florida hotels and in
hotels under renovation in 1998. This was offset by a slight decrease in the
revenues from DoubleTree hotels, four of which have been under renovation in
1999.
The percentage lease expense for the six months ended June 30, 1999
increased 5.6%, to $35.2 million, from $33.3 million for the same period in
1998 due to the increase in hotel revenues. Departmental and other hotel
operating expenses, consisting primarily of rooms expenses, food and beverage
costs, franchise fees, utilities, repair and maintenance, management fees,
and other general and administrative expenses of the hotels were $85.6
million in the six months ended June 30, 1999 compared to $82.2 million for
the same period in 1998. As a percent of hotel revenues, the departmental and
other hotel operating expenses decreased to 71.0% in 1999 from 71.9% in 1998.
This was primarily due to a decrease in departmental expenses as a percentage
of hotel revenues from 41.3% to 40.4% due to efficiencies gained in higher
volumes. Also, repairs and maintenance expenses decreased 20% to 2.9% of 1999
hotel revenues compared to 3.8% of 1998 hotel revenues, and general and
administrative expenses decreased from 10.8% of hotel revenues in 1998 to
10.5% in 1999.
BMC recorded net income of $787 for the six months ended June 30, 1999
compared to a net loss of $46 in 1998. The increase in income is primarily
due to increased revenue performance of the hotels in 1999 combined with
expense reductions.
LIQUIDITY AND CAPITAL RESOURCES
Our principal source of cash to meet our cash requirements, including
distributions to shareholders, is our share of the Partnership's cash flow
from the percentage leases. The lessees' obligations under the percentage
leases are largely unsecured and the lessees' ability to make rent payments
to the Partnership under the percentage leases are substantially dependent
on the lessees' ability to generate sufficient cash flow from the operation
of the hotels.
As of June 30, 1999, we had $2.2 million of unrestricted cash and cash
equivalents, $3.0 million of restricted cash for the payment of capital
expenditures, real estate tax and insurance and we had outstanding borrowings
totaling $163.0 million and $130.0 million against our credit facility and
term note payable, respectively.
Effective April 1, 1999, we have a $200 million credit facility
available, as limited under the terms of the credit agreement, to fund
acquisitions of additional hotels, renovations and capital expenditures, and
for our working capital needs. For information relating to the terms of our
credit facility and our $130 million term note payable, see Notes 4 and 5,
respectively, of the notes to consolidated financial statements of Boykin
Lodging Company included in this Form
21
<PAGE>
10-Q. We may seek to negotiate additional credit facilities or issue debt
instruments. Any debt incurred or issued by us may be secured or unsecured,
long-term, medium-term or short-term, bear interest at a fixed or variable
rate, and be subject to such other terms as the Board of Directors considers
prudent.
In November 1997, we filed a shelf registration statement with the
Securities and Exchange Commission for the issuance of up to $300 million in
securities. Securities issued under this registration statement may be
preferred shares, depository shares, common shares or any combination
thereof, and may be issued at various times, depending on market conditions.
Warrants to purchase these securities may also be issued. The terms of
issuance of any securities covered by this registration statement would be
determined at the time of their offering. The 4.5 million common shares sold
in the February 28, 1998 offering were sold under this registration statement.
We anticipate that funds generated from operations and our credit
facility will enable us to meet our anticipated cash needs for the next year.
Our percentage lease revenues and cash flow are dependent in large part upon
the hotel revenues recognized by our lessees. There can be no assurance that
those revenues will meet expected levels. The availability of borrowings
under the credit facility is restrained by borrowing base and loan-to-value
limits, as well as other financial performance covenants contained in the
agreement. There can be no assurance that funds will be available in
anticipated amounts from the credit facility. Additionally, no assurance can
be given that we will make distributions in the future at the current rate,
or at all.
INFLATION
Our revenues are from percentage leases, which can change based on changes
in the revenues of our hotels. Therefore, we rely entirely on the performance
of the hotels and the lessees' ability to increase revenues to keep pace with
inflation. Operators of hotels in general, and our lessees, can change room
rates quickly, but competitive pressures may limit the lessees' ability to
raise rates to keep pace with inflation.
Our general and administrative costs as well as real estate and personal
property taxes, property and casualty insurance and ground rent are subject
to inflation.
YEAR 2000 COMPLIANCE
Many computer systems were originally designed to recognize calendar
years by the last two digits in the date code field. Beginning in the year
2000, these date code fields will need to accept four-digit entries to
distinguish twenty-first century dates from twentieth century dates. As a
result, computerized systems, which include information and non-information
technology systems, and applications used by us, are being reviewed,
evaluated and modified or replaced, if necessary, to ensure all such
financial, information and operational systems are Year 2000 compliant.
STATE OF READINESS
We are addressing the Year 2000 compliance issue by focusing on our
corporate facility, which includes all of our administrative, non-hotel
operating functions, and on our hotel properties.
Corporate Facility:
For our corporate facility, our year 2000 compliance procedures are
substantially complete for identified business critical systems. We believe
that these procedures will avoid a major disruption of our business. Any
further procedures performed will be performed as needed throughout the
remainder of 1999.
Hotel Properties:
We are communicating with our lessees and other vendors with whom we do
significant business to determine their readiness of Year 2000 compliance.
For all of our hotels, we have gained an understanding of the process which
our lessees have undertaken to address the risk assessment, validation,
remediation and contingency plans related to Year 2000 compliance. These
processes have included the following:
- - completion of an inventory and assessment of all computerized systems,
applications and hardware by internal personnel;
- - prioritization of items representing critical business applications; and
22
<PAGE>
- - estimation of remediation costs.
Most of our lessees are using internal personnel, who have been
determining the level of resources needed, necessary modifications or
upgrades, remediation and contingency plans to become Year 2000 compliant.
Our lessees have given us their estimates of costs and resources needed
and are currently upgrading and remediating noncompliant systems. The lessees
which have not yet completed their year 2000 programs, expect to complete
purchasing of new systems by the end of the third quarter with testing and
installation of those new systems occurring in the fourth quarter of 1999.
There can be no assurance that the efforts related to the hotel
properties will be sufficient to make these properties' computerized systems
and applications Year 2000 compliant in a timely manner or that the allocated
resources will be sufficient. A failure to become Year 2000 compliant could
affect the integrity of the hotel property guest check-in, billing and
accounting functions. Certain physical hotel property machinery and equipment
could also fail, resulting in safety risks and customer dissatisfaction. We
cannot predict at this time the most reasonably likely worst case scenario
relating to Year 2000 issues.
Year 2000 Project Costs
We estimate that total unexpended costs for the Year 2000 compliance
review, evaluation, assessment and remediation efforts for the corporate
facility and the hotels should not exceed $1.0 million, although there can be
no assurance that actual costs will not exceed this amount. During the first
half of 1999, we spent approximately $.9 million related to computerized
systems and equipment, which are Year 2000 compliant. The vast majority of
our costs to remediate this issue are capital in nature and therefore do not
affect our funds from operations.
Contingency Plan
We are in the process of developing our contingency plan for the
corporate facility and hotel properties to provide for the most reasonably
likely worst case scenarios regarding Year 2000 compliance. This contingency
plan is expected to be completed in the third quarter of 1999.
SEASONALITY
Our hotels' operations historically have been seasonal. Twenty-six of
our hotels maintain higher occupancy rates during the second and third
quarters. The five hotels located in Florida experience their highest
occupancy in the first quarter. This seasonality pattern can be expected to
cause fluctuations in our quarterly lease revenue under the percentage
leases. To the extent that cash flow from operations is insufficient during
any quarter because of temporary or seasonal fluctuations in percentage lease
revenue, we expect to utilize cash on hand or borrowings to make quarterly
distributions. No assurance can be given that we will make distributions in
the future at the current rate, or at all.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
In 1998 we entered into a $130 million term note payable which bears
interest at a fixed rate of 6.9% for ten years, and a new fixed rate to be
determined thereafter. The term note requires interest only payments for the
first two years, with principal repayments commencing in the third loan year
based on a 25-year amortization schedule. The term note expires in June 2023.
Assuming a 10% increase in interest rates as of June 30, 1999, the fair
market value of the term note payable would be approximately $126.1 million.
In 1998, we also entered into a new unsecured credit facility with a
group of banks, which, effective April 1, 1999 enables us to borrow up to
$200 million, subject to borrowing base and loan-to-value limitations, at a
rate of interest that fluctuates at LIBOR plus 1.40% to 2.25%. Due to changes
in the U.S. and global economy, interest rates fluctuate regularly, which
creates risk that these rates may increase in the future, which would
adversely impact our interest expense and cash flows.
23
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
Our company is subject to various legal proceedings and claims that
arise in the ordinary course of business. In the opinion of management, the
amount of any ultimate liability with respect to these actions will not
materially affect our financial condition or results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) On May 25, 1999, the Board of Directors of the Company adopted
a Shareholder Rights Agreement (the "Rights Agreement"). Pursuant to the
Rights Agreement, the Board of Directors declared a dividend distribution of
one Preferred Share Purchase Right (a "Right") for each outstanding common
share, without par value, of the Company (the "Common Shares") to
shareholders of record as of the close of business on June 15, 1999 (the
"Record Date"). In addition, one Right will automatically attach to each
Common Share issued after the Record Date and prior to the date the Rights
become exercisable. Each Right entitles the registered holder thereof to
purchase from the Company a unit (a "Preferred Unit") consisting of one
one-thousandth of a Class A Series 1999-A Noncumulative Preferred Share,
without par value, at a cash exercise price of $40.00 per Preferred Unit,
subject to adjustment.
Initially, the Rights are not exercisable and are attached to and
trade with the Common Shares outstanding as of, and all Common Shares issued
after, the Record Date. The Rights will separate from the Common Shares,
separate certificates will be distributed to holders of the Common Shares and
the Rights will become exercisable under certain circumstances following the
acquisition of, or the announcement of the commencement of a tender or
exchange offer that if consummated would result in, beneficial ownership of
15% or more of the outstanding Common Shares by any person or group. After
the acquisition of 15% or more of the outstanding Common Shares by any person
or group, proper provision will be made so that each holder of a Right (other
than that person or group, whose Rights will become null and void) thereafter
has the right to receive upon exercise that number of Preferred Units having
a market value of two times the exercise price of the Right. The acquisition
of Common Shares by AEW Partners III, L.P. under its agreements entered into
with the Company in February 1999 will not cause the Rights to become
exercisable.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the
Company in a transaction not approved by the Board of Directors of the
Company. The Rights should not interfere with any merger or other business
combination approved by the Board of Directors of the Company, since the
Rights Agreement may be amended, subject to certain limitations, or the
Rights may be redeemed, also subject to certain limitations prior to the
Company's entering into a merger or other business combination.
A copy of the Rights Agreement was filed with the Securities and
Exchange Commission on June 10, 1999 as an Exhibit to a Registration
Statement on Form 8-A. This description of the Rights does not purport to be
complete and is qualified in its entirety by reference to that Registration
Statement on Form 8-A and the Rights Agreement.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Boykin held its annual meeting of the shareholders on May 25, 1999 at
the Cleveland Airport Marriott hotel in Cleveland, Ohio. At the meeting, the
shareholders approved a proposal to increase the number of common shares
reserved for issuance by 700,000, from 1,000,000 shares to 1,700,000 shares
under Boykin's Long-Term Incentive Plan. The results of the vote were as
follows:
Votes for 12,358,871
Votes against 1,981,833
Abstain 510,348
Shares not voted 2,210,586
The individuals listed below were elected to Boykin's Board of Directors,
each to hold office until the annual meeting next succeeding his election and
until his successor is elected and qualified, or until his earlier
resignation. The table below indicates the votes for, votes against, as well
as the abstentions and shares not voted for each nominee.
<TABLE>
<CAPTION>
Name Votes For Votes Against Abstention Shares not Voted
---- --------- ------------- ---------- ----------------
<S> <C> <C> <C> <C>
Robert W. Boykin 14,430,054 0 421,003 2,210,581
Raymond P. Heitland 14,681,878 0 169,179 2,210,581
Ivan J. Winfield 14,681,889 0 169,168 2,210,581
Lee C. Howley, Jr. 14,684,574 0 166,483 2,210,581
Frank E. Mosier 14,678,488 0 172,569 2,210,581
William H. Schecter 14,687,724 0 163,333 2,210,581
Albert T. Adams 14,684,245 0 166,812 2,210,581
</TABLE>
24
<PAGE>
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
3.1 Amended and Restated Articles of Incorporation, as amended
3.2* Code of Regulations
4.1* Specimen Share Certificate
4.2 Dividend Reinvestment and Optional Share Purchase Plan
4.3** Shareholder Rights Agreement, dated as of May 25, 1999 between
Boykin Lodging Company and National City Bank, as rights agent
27 Financial Data Schedule
</TABLE>
* Incorporated by reference from Amendment No. 3 to Boykin
Lodging's Registration Statement on Form S-11 (Registration
No. 333-6341) (the "Form S-11") filed on October 24, 1996.
Each of the above exhibits has the same exhibit number in
the Form S-11.
** Incorporated by reference as Exhibit 1 from the Registration
Statement on Form 8-A filed on June 10, 1999.
(b) Reports on Form 8-K
None.
25
<PAGE>
FORWARD LOOKING STATEMENTS
This Form 10-Q contains statements that constitute forward-looking
statements. Those statements appear in a number of places in this Form 10-Q
and the documents incorporated by reference herein and include statements
regarding the intent, belief or current expectations of Boykin Lodging, its
directors or its officers with respect to:
- - Leasing, management or performance of the hotels,
- - Adequacy of reserves for renovation and refurbishment,
- - Potential acquisitions and dispositions by Boykin,
- - Boykin's financing plans,
- - Boykin's policies regarding investments, acquisitions, dispositions,
financings, conflicts of interest and other matters, and
- - Trends affecting Boykin's or any hotel's financial condition or results
of operations
You are cautioned that any such forward-looking statement is not a
guarantee of future performance and involves risks and uncertainties, and
that actual results may differ materially from those in the forward-looking
statement as a result of various factors. The information contained in this
Form 10-Q and in the documents incorporated by reference herein identifies
important factors that could cause such differences.
With respect to any such forward-looking statement that includes a
statement of its underlying assumptions or bases, we caution that, while we
believe such assumptions or bases to be reasonable and have formed them in
good faith, assumed facts or bases almost always vary from actual results,
and the differences between assumed facts or bases and actual results can be
material depending on the circumstances. When, in any forward-looking
statement, we or our management express an expectation or belief as to future
results, that expectation or belief is expressed in good faith and is
believed to have a reasonable basis, but there can be no assurance that the
stated expectation or belief will result or be achieved or accomplished.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
/s/ Robert W. Boykin
-----------------------------
August 16, 1999 Robert W. Boykin
Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Paul A. O'Neil
-----------------------------
August 16, 1999 Paul A. O'Neil
Chief Financial Officer and Treasurer
(Principal Accounting Officer)
26
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibits
--------
<S> <C>
3.1 Amended and Restated Articles of Incorporation, as amended
3.2* Code of Regulations
4.1* Specimen Share Certificate
4.2 Dividend Reinvestment and Optional Share Purchase Plan
4.3** Shareholder Rights Agreement, dated as of May 25, 1999 between
Boykin Lodging Company and National City Bank, as rights agent
27 Financial Data Schedule
</TABLE>
* Incorporated by reference from Amendment No. 3 to Boykin Lodging's
Registration Statement on Form S-11 (Registration No. 333-6341) (the
"Form S-11") filed on October 24, 1996. Each of the above exhibits
has the same exhibit number in the Form S-11.
** Incorporated by reference as Exhibit 1 from the Registration
Statement on Form 8-A filed on June 10, 1999.
27
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
BOYKIN LODGING COMPANY
FIRST: The name of the corporation shall be Boykin Lodging Company
(the "Corporation").
SECOND: The place in the State of Ohio where the principal office of
the Corporation is located is Cleveland, Cuyahoga County.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be formed under Sections 1701.01 to
1701.98, inclusive, of the Ohio Revised Code.
FOURTH: The authorized number of shares of the Corporation is
50,000,000, consisting of 40,000,000 Common Shares, without par value
(hereinafter called "Common Shares"), 5,000,000 Class A Cumulative Preferred
Shares, without par value (hereinafter called "Cumulative Preferred Shares"),
and 5,000,000 Class A Noncumulative Preferred Shares, without par value
(hereinafter called "Noncumulative Preferred Shares").
DIVISION A: PREFERRED SHARES
I. THE CLASS A CUMULATIVE PREFERRED SHARES. The Cumulative
Preferred Shares shall have the following express terms:
Section 1. SERIES. The Cumulative Preferred Shares may be
issued from time to time in one or more series. All Cumulative Preferred
Shares shall be of equal rank and shall be identical, except in respect of
the matters that may be fixed by the Board of Directors as hereinafter
provided, and each share of a series shall be identical with all other shares
of such series, except as to the dates from which dividends shall accrue and
be cumulative. All Cumulative Preferred Shares shall rank on a parity with
the Noncumulative Preferred Shares and shall be identical to all
Noncumulative Preferred Shares except (1) in respect of the matters that may
be fixed by the Board of Directors as provided in clauses (a) through (i),
inclusive, of this Section 1 and (2) only dividends on Cumulative Preferred
Shares shall be cumulative as set forth herein. Subject to the provisions of
Sections 2 through 5, both inclusive, and of Items III and IV of this
Division, which provisions shall apply to all Cumulative Preferred Shares,
the Board of Directors hereby is authorized to cause such shares to be issued
in one or more series and with respect to each such series to determine and
fix prior to the issuance thereof (and thereafter, to the extent provided in
clause (b) of this Section) the following:
(a) The designation of the series, which may be by
distinguishing number, letter or title;
(b) The authorized number of shares of the series, which
number the Board of Directors may (except when otherwise provided in the
creation of the series) increase or decrease from time to time before or
after the issuance thereof (but not below the number of shares thereof then
outstanding);
(c) The dividend rate or rates of the series, including the
means by which such rates may be established;
1
<PAGE>
(d) The date or dates from which dividends shall accrue and be
cumulative and the dates on which and the period or periods for which
dividends, if declared, shall be payable, including the means by which such
dates and periods may be established;
(e) The redemption rights and price or prices, if any, for
shares of the series;
(f) The terms and amount of the sinking fund, if any, for the
purchase or redemption of shares of the series;
(g) The amounts payable on shares of the series in the event
of any voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation;
(h) Whether the shares of the series shall be convertible into
Common Shares or shares of any other class and, if so, the conversion rate or
rates or price or prices, any adjustments thereof and all other terms and
conditions upon which such conversion may be made; and
(i) Restrictions (in addition to those set forth elsewhere in
these Amended and Restated Articles of Incorporation) on the issuance of
shares of the same series or of any other class or series.
The Board of Directors is authorized to adopt from time to time amendments to
the Amended and Restated Articles of Incorporation, as amended, fixing, with
respect to each such series, the matters described in clauses (a) through
(i), both inclusive, of this Section and is authorized to take such actions
with respect thereto as may be required by law in order to effect such
amendments.
Section 2. DIVIDENDS.
(a) The holders of Cumulative Preferred Shares of each series,
in preference to the holders of Common Shares and of any other class of
shares ranking junior to the Cumulative Preferred Shares, shall be entitled
to receive out of any funds legally available therefor, when and as declared
by the Board of Directors, dividends in cash at the rate or rates for such
series fixed in accordance with the provisions of Section 1 above and no
more, payable on the dates fixed for such series. Such dividends shall accrue
and be cumulative, in the case of shares of each particular series, from and
after the date or dates fixed with respect to such series. Any dividend
payment made on the Cumulative Preferred Shares shall first be credited
against the earliest accrued but unpaid dividends on such Cumulative
Preferred Shares. No dividends shall be paid upon or declared or set apart
for any series of the Cumulative Preferred Shares for any dividend period
unless at the same time (i) a like proportionate dividend for the dividend
periods terminating on the same or any earlier date, ratably in proportion to
the respective annual dividend rates fixed therefor, shall have been paid
upon or declared or set apart for all Cumulative Preferred Shares of all
series then issued and outstanding and entitled to receive such dividend and
(ii) the dividends payable for the dividend periods terminating on the same
or any earlier date (but only with respect to the then current dividend
period), ratably in proportion to the respective dividend rates fixed
therefor, shall have been paid upon or declared or set apart for all
Noncumulative Preferred Shares then issued and outstanding and entitled to
receive such dividends.
(b) So long as any Cumulative Preferred Shares shall be
outstanding no dividend, except a dividend payable in Common Shares or other
shares ranking junior to the Cumulative Preferred Shares, shall be paid or
declared or any distribution be made, except as aforesaid, in respect of the
Common Shares or any other shares ranking junior to the Cumulative Preferred
Shares, nor shall any Common Shares or any other shares ranking junior to the
Cumulative Preferred Shares be purchased, retired or otherwise acquired by
the Corporation, except out of the proceeds of the sale of Common Shares or
other shares of the Corporation ranking junior to the Cumulative Preferred
Shares received by the Corporation subsequent to the date of first issuance
of Cumulative Preferred Shares of any series, unless:
2
<PAGE>
(1) All accrued and unpaid dividends on Cumulative
Preferred Shares, including the full dividends for all current dividend
periods, shall have been declared and paid or a sum sufficient for payment
thereof set apart;
(2) All unpaid dividends on Noncumulative Preferred
Shares for the then current dividend period shall have been declared and paid
or a sum sufficient for payment therefor set apart; and
(3) There shall be no arrearages with respect to the
redemption of Cumulative Preferred Shares or Noncumulative Preferred Shares
of any series from any sinking fund provided for shares of such series in
accordance with Section 1 of this Division A.I or Section 1 of Division A.II.
(c) The foregoing restrictions on the payment of dividends or
other distributions on, or on the purchase, redemption, retirement or other
acquisition of, Common Shares or any other shares ranking on a parity with or
junior to the Cumulative Preferred Shares shall be inapplicable to (i) any
payments in lieu of issuance of fractional shares thereof, whether upon any
merger, conversion, stock dividend or otherwise, (ii) the conversion of
Cumulative Preferred Shares or Noncumulative Preferred Shares into Common
Shares, and (iii) the exercise by the Corporation of its rights pursuant to
Division C or any similar provision hereafter contained in these Amended and
Restated Articles of Incorporation with respect to any other class or series
of shares hereafter created or authorized.
(d) If, for any taxable year, the Corporation elects to
designate as "capital gain dividends" (as defined in Section 857 of the
Internal Revenue Code), any portion (the "Capital Gains Amount") of the
dividends paid or made available for the year to holders of all classes of
stock (the "Total Dividends"), then the portion of the Capital Gains Amount
that shall be allocable to holders of the Cumulative Preferred Shares shall
be the amount that the total dividends paid or made available to the holders
of the Cumulative Preferred Shares for the year bears to the Total Dividends.
Section 3. REDEMPTION.
(a) Subject to the express terms of each series of Cumulative
Preferred Shares, the Corporation:
(1) May, from time to time at the option of the Board of
Directors, redeem all or any part of any redeemable series of Cumulative
Preferred Shares at the time outstanding at the applicable redemption price
for such series fixed in accordance with Section 1 of this Division A.I.; and
(2) Shall, from time to time, make such redemptions of
each series of Cumulative Preferred Shares as may be required to fulfill the
requirements of any sinking fund provided for shares of such series at the
applicable sinking fund redemption price fixed in accordance with Section 1
of this Division A.I.;
and shall in each case pay all accrued and unpaid dividends to the redemption
date.
(b) (1) Notice of every such redemption shall be mailed,
postage prepaid, to the holders of record of the Cumulative Preferred Shares
to be redeemed at their respective addresses then appearing on the books of
the Corporation, not less than 30 days nor more than 60 days prior to the
date fixed for such redemption, or such other time prior thereto as the Board
of Directors shall fix for any series pursuant to Section 1 of this Division
prior to the issuance thereof. At any time after notice as provided above has
been deposited in the mail, the Corporation may deposit the aggregate
redemption price of Cumulative Preferred Shares to be redeemed, together with
accrued and unpaid dividends thereon to the redemption date, with any bank or
trust company in Cleveland, Ohio, or New York, New York, having capital and
surplus of not less than $100,000,000, named in such notice and direct that
there be paid to the respective holders of the Cumulative Preferred Shares so
to be redeemed amounts equal to the
3
<PAGE>
redemption price of the Cumulative Preferred Shares so to be redeemed,
together with such accrued and unpaid dividends thereon, on surrender of the
share certificate or certificates held by such holders; and upon the deposit
of such notice in the mail and the making of such deposit of money with such
bank or trust company, such holders shall cease to be shareholders with
respect to such shares; and from and after the time such notice shall have
been so deposited and such deposit of money shall have been so made, such
holders shall have no rights or claim against the Corporation with respect to
such shares, except only the right to receive such money from such bank or
trust company without interest or to exercise before the redemption date any
unexpired privilege of conversion. If less than all of the outstanding
Cumulative Preferred Shares are to be redeemed, the Corporation shall select
by lot the shares so to be redeemed in such manner as shall be prescribed by
the Board of Directors.
(2) If the holders of Cumulative Preferred Shares which
have been called for redemption shall not within six years after such deposit
claim the amount deposited for the redemption thereof, any such bank or trust
company shall, upon demand, pay over to the Corporation such unclaimed
amounts and thereupon such bank or trust company and the Corporation shall be
relieved of all responsibility in respect thereof and to such holders.
(c) Any Cumulative Preferred Shares which are (1) redeemed by
the Corporation pursuant to this Section, (2) purchased and delivered in
satisfaction of any sinking fund requirement provided for shares of such
series, (3) converted in accordance with the express terms thereof, or (4)
otherwise acquired by the Corporation, shall resume the status of authorized
but unissued Cumulative Preferred Shares without serial designation.
(d) Except in connection with the exercise of the
Corporation's rights pursuant to Division C or any similar provisions
hereafter contained in these Amended and Restated Articles of Incorporation,
the Corporation may not purchase or redeem (for sinking fund purposes or
otherwise) less than all of the Cumulative Preferred Shares then outstanding
except in accordance with a purchase offer made to all holders of record of
Cumulative Preferred Shares, unless all dividends on all Cumulative Preferred
Shares then outstanding for all previous and current dividend periods shall
have been declared and paid or funds therefor set apart and all accrued
sinking fund obligations applicable thereto shall have been complied with.
Section 4. LIQUIDATION.
(a) (1) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, the
holders of Cumulative Preferred Shares of any series shall be entitled to
receive in full out of the assets of the Corporation, including its capital,
before any amount shall be paid or distributed among the holders of the
Common Shares or any other shares ranking junior to the Cumulative Preferred
Shares, the amounts fixed with respect to shares of such series in accordance
with Section 1 of this Division A.I., plus an amount equal to all dividends
accrued and unpaid thereon to the date of payment of the amount due pursuant
to such liquidation, dissolution or winding up of the affairs of the
Corporation. If the net assets of the Corporation legally available therefor
are insufficient to permit the payment upon all outstanding Cumulative
Preferred Shares and Noncumulative Preferred Shares of the full preferential
amount to which they are respectively entitled, then such net assets shall be
distributed ratably upon all outstanding Cumulative Preferred Shares and
Noncumulative Preferred Shares in proportion to the full preferential amount
to which each such share is entitled.
(2) After payment to the holders of Cumulative Preferred
Shares of the full preferential amounts as aforesaid, the holders of
Cumulative Preferred Shares, as such, shall have no right or claim to any of
the remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation into or
with any other Corporation, the merger of any other Corporation into it, or
the sale, lease or conveyance of all or substantially all the
4
<PAGE>
assets of the Corporation, shall not be deemed to be a dissolution,
liquidation or winding up for purposes of this Section.
Section 5. VOTING.
(a) The holders of Cumulative Preferred Shares shall have no
voting rights, except as provided in this Section or required by law.
(b) (1) If, and so often as, the Corporation shall be in
default in the payment of dividends on any series of Cumulative Preferred
Shares at the time outstanding, whether or not earned or declared, for a
number of dividend payment periods (whether or not consecutive) which in the
aggregate contain at least 540 days, the holders of all series of Cumulative
Preferred Shares, voting separately as a class, shall be entitled to elect,
as herein provided, two members of the Board of Directors of the Corporation;
but the holders of the Cumulative Preferred Shares shall not exercise such
special class voting rights except at meetings of such shareholders for the
election of directors at which the holders of not less than 50% of the
Cumulative Preferred Shares are present in person or by proxy; and the
special class voting rights provided for in this paragraph when the same
shall have become vested shall remain so vested until all accrued and unpaid
dividends on the Cumulative Preferred Shares then outstanding shall have been
paid or declared and a sum sufficient for the payment thereof set aside for
payment, whereupon the holders of the Cumulative Preferred Shares shall be
divested of their special class voting rights in respect of subsequent
elections of directors, subject to the revesting of such special class voting
rights in the event above specified in this paragraph.
(2) On a dividend payment default entitling holders of
Cumulative Preferred Shares to elect two directors as specified in paragraph
(1) of this Subsection, a special meeting of such holders for the purpose of
electing such directors shall be called by the Secretary of the Corporation
upon written request of, or may be called by, the holders of record of at
least 10% of the Cumulative Preferred Shares with respect to which such
default exists and notice thereof shall be given in the same manner as that
required for the annual meeting of shareholders; but the Corporation shall
not be required to call such special meeting if the annual meeting of
shareholders shall be called to be held within 90 days after the date of
receipt of the foregoing written request from the holders of Cumulative
Preferred Shares. At any meeting at which the holders of Cumulative Preferred
Shares shall be entitled to elect directors, holders of 50% of the Cumulative
Preferred Shares, present in person or by proxy, shall be sufficient to
constitute a quorum, and the vote of the holders of a majority of such shares
so present at any such meeting at which there shall be such a quorum shall be
sufficient to elect the members of the Board of Directors which the holders
of Cumulative Preferred Shares are entitled to elect as herein provided.
Notwithstanding any provision of these Articles of Incorporation or the Code
of Regulations of the Corporation or any action taken by the holders of any
class of shares fixing the number of directors of the Corporation, the two
directors who may be elected by the holders of Cumulative Preferred Shares
pursuant to this Subsection shall serve in addition to any other directors
then in office or proposed to be elected otherwise than pursuant to this
Subsection. Nothing in this Subsection shall prevent any change otherwise
permitted in the total number of or classifications of directors of the
Corporation nor require the resignation of any director elected otherwise
than pursuant to this Subsection. Notwithstanding any classification of the
other directors of the Corporation, the two directors elected by the holders
of Cumulative Preferred Shares shall be elected annually for terms expiring
at the next succeeding annual meeting of shareholders.
(3) Upon any divesting of the special class voting rights
of the holders of the Cumulative Preferred Shares in respect of elections of
directors as provided in this Subsection, the terms of office of all
directors then in office elected by such holders shall terminate immediately
thereupon. If the office of any director elected by such holders voting as a
class becomes vacant by reason of death, resignation, removal from office or
otherwise, the remaining director elected by such holders voting as a class
may elect a successor who shall hold office for the unexpired term in respect
of which such vacancy occurred.
5
<PAGE>
(c) The affirmative vote of the holders of at least two-thirds
of the Cumulative Preferred Shares at the time outstanding, voting separately
as a class, given in person or by proxy either in writing or at a meeting
called for the purpose, shall be necessary to effect either of the following:
(1) Any amendment, alteration or repeal, whether by
merger, consolidation or otherwise, of any of the provisions of the Amended
and Restated Articles of Incorporation or of the Code of Regulations of the
Corporation which affects adversely and materially the preferences or voting
or other rights of the holders of Cumulative Preferred Shares which are set
forth in these Amended and Restated Articles of Incorporation; but neither an
amendment of these Amended and Restated Articles of Incorporation so as to
authorize, create or change the authorized or outstanding number of
Cumulative Preferred Shares or of any shares ranking on a parity with or
junior to the Cumulative Preferred Shares nor an amendment of the Code of
Regulations so as to change the number or classification of directors of the
Corporation shall be deemed to affect adversely and materially preferences or
voting or other rights of the holders of Cumulative Preferred Shares; or
(2) The authorization, creation or increase in the
authorized number of any shares, or of any security convertible into shares,
in either case ranking prior to such Cumulative Preferred Shares.
(d) If, and only to the extent, that (1) Cumulative Preferred
Shares are issued in more than one series and (2) Ohio law permits the
holders of a series of a class of shares to vote separately as a class, the
affirmative vote of the holders of at least two-thirds of each series of
Cumulative Preferred Shares at the time outstanding, voting separately as a
class, given in person or by proxy either in writing or at a meeting called
for the purpose of voting on such matters, shall be required for any
amendment, alteration or repeal, whether by merger, consolidation or
otherwise, of any of the provisions of these Amended and Restated Articles of
Incorporation or of the Code of Regulations of the Corporation which affects
adversely and materially the preferences or voting or other rights of the
holders of such series which are set forth in these Amended and Restated
Articles of Incorporation; but neither an amendment of these Amended and
Restated Articles of Incorporation, so as to authorize, create or change the
authorized or outstanding number of Cumulative Preferred Shares or of any
shares ranking on a parity with or junior to the Cumulative Preferred Shares
nor an amendment of the Code of Regulations so as to change the number or
classification of directors of the Corporation, shall be deemed to affect
adversely and materially the preferences or voting or other rights of the
holders of such series.
II. THE CLASS A NONCUMULATIVE PREFERRED SHARES. The Noncumulative
Preferred Shares shall have the following express terms:
Section 1. SERIES. The Noncumulative Preferred Shares may be
issued from time to time in one or more series. All Noncumulative Preferred
Shares shall be of equal rank and shall be identical, except in respect of
the matters that may be fixed by the Board of Directors as hereinafter
provided, and each share of a series shall be identical with all other shares
of such series, except as to the dates on which and the periods for which
dividends may be payable. All Noncumulative Preferred Shares shall rank on a
parity with the Cumulative Preferred Shares and shall be identical to all
Cumulative Preferred Shares except (1) in respect of the matters that may be
fixed by the Board of Directors as provided in clauses (a) through (i),
inclusive, of this Section 1 and (2) only dividends on the Cumulative
Preferred Shares are cumulative as set forth in Division A.I. herein. Subject
to the provisions of Sections 2 through 5, both inclusive, and of Items III
and IV of this Division, which provisions shall apply to all Noncumulative
Preferred Shares, the Board of Directors hereby is authorized to cause such
shares to be issued in one or more series and with respect to each such
series to determine and fix prior to the issuance thereof (and thereafter, to
the extent provided in clause (b) of this Section) the following:
(a) The designation of the series, which may be by
distinguishing number, letter or title;
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(b) The authorized number of shares of the series, which
number the Board of Directors may (except when otherwise provided in the
creation of the series) increase or decrease from time to time before or
after the issuance thereof (but not below the number of shares thereof then
outstanding);
(c) The dividend rate or rates of the series, including the
means by which such rates may be established;
(d) The dates on which and the period or periods for which
dividends, if declared, shall be payable, including the means by which such
dates and periods may be established;
(e) The redemption rights and price or prices, if any, for
shares of the series;
(f) The terms and amount of the sinking fund, if any, for the
purchase or redemption of shares of the series;
(g) The amounts payable on shares of the series in the event
of any voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation;
(h) Whether the shares of the series shall be convertible into
Common Shares or shares of any other class and, if so, the conversion rate or
rates or price or prices, any adjustments thereof and all other terms and
conditions upon which such conversion may be made; and
(i) Restrictions (in addition to those set forth elsewhere in
these Amended and Restated Articles of Incorporation) on the issuance of
shares of the same series or of any other class or series.
The Board of Directors is authorized to adopt from time to time amendments to
the Amended and Restated Articles of Incorporation, as amended, fixing, with
respect to each such series, the matters described in clauses (a) through
(i), both inclusive, of this Section and is authorized to take such actions
with respect thereto as may be required by law in order to effect such
amendments.
Section 2. DIVIDENDS.
(a) The holders of Noncumulative Preferred Shares of each
series, in preference to the holders of Common Shares and of any other class
of shares ranking junior to the Noncumulative Preferred Shares, shall be
entitled to receive out of any funds legally available therefor, if, when and
as declared by the Board of Directors, dividends in cash at the rate or rates
for such series fixed in accordance with the provisions of Section 1 above
and no more, payable on the dates fixed for such series. Such dividends shall
accrue, in the case of shares of each particular series, from and after the
date or dates fixed with respect to such series; provided, however, that if
the Board of Directors fails to declare a dividend payable on a dividend
payment date on any Noncumulative Preferred Shares, the holders of the
Noncumulative Preferred Shares shall have no right to receive a dividend in
respect of the dividend period ending on such dividend payment date, and the
Corporation shall have no obligation to pay the dividend accrued for such
period, whether or not dividends on such Noncumulative Preferred Shares are
declared payable on any future dividend payment date. Any dividend payment
made on the Noncumulative Preferred Shares shall first be credited against
the earliest declared but unpaid dividend on such Noncumulative Preferred
Shares. No dividends shall be paid upon or declared or set apart for any
series of the Noncumulative Preferred Shares for any dividend period unless
at the same time (i) a like proportionate dividend for the then current
dividend period, ratably in proportion to the respective annual dividend
rates fixed therefor, shall have been paid upon or declared or set apart for
all Noncumulative Preferred Shares of all series then issued and outstanding
and entitled to receive such dividend and (ii) the dividends payable for the
dividend periods terminating on the same or any earlier date, ratably in
proportion to the respective dividend rates fixed therefor, shall have been
paid upon or declared and set apart for all Cumulative Preferred Shares then
issued and outstanding and entitled to receive such dividends.
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(b) So long as any Noncumulative Preferred Shares shall be
outstanding no dividend, except a dividend payable in Common Shares or other
shares ranking junior to the Noncumulative Preferred Shares, shall be paid or
declared or any distribution be made, except as aforesaid, in respect of the
Common Shares or any other shares ranking junior to the Noncumulative
Preferred Shares, nor shall any Common Shares or any other shares ranking
junior to the Noncumulative Preferred Shares be purchased, retired or
otherwise acquired by the Corporation, except out of the proceeds of the sale
of Common Shares or other shares of the Corporation ranking junior to the
Noncumulative Preferred Shares received by the Corporation subsequent to the
date of first issuance of Noncumulative Preferred Shares of any series,
unless:
(1) All accrued and unpaid dividends on Cumulative
Preferred Shares, including the full dividends for all current dividend
periods, shall have been declared and paid or a sum sufficient for payment
thereof set apart;
(2) All unpaid dividends on Noncumulative Preferred
Shares for the then current dividend period shall have been declared and paid
or a sum sufficient for payment therefor set apart; and
(3) There shall be no arrearages with respect to the
redemption of Cumulative Preferred Shares or Noncumulative Preferred Shares
of any series from any sinking fund provided for shares of such series in
accordance with the provisions of Section 1 of this Division A.II or Section
1 of Division A.I.
(c) The foregoing restrictions on the payment of dividends or
other distributions on, or on the purchase, redemption, retirement or other
acquisition of, Common Shares or any other shares ranking on a parity with or
junior to the Noncumulative Preferred Shares shall be inapplicable to (i) any
payments in lieu of issuance of fractional shares thereof, whether upon any
merger, conversion, stock dividend or otherwise, (ii) the conversion of
Cumulative Preferred Shares or Noncumulative Preferred Shares into Common
Shares, and (iii) the exercise by the Corporation of its rights pursuant to
Division C or any similar provisions hereafter contained in these Amended and
Restated Articles of Incorporation with respect to any other class or series
of shares hereafter created or authorized.
(d) If, for any taxable year, the Corporation elects to
designate as "capital gain dividends" (as defined in Section 857 of the
Internal Revenue Code), any portion (the "Capital Gains Amount") of the
dividends paid or made available for the year to holders of all classes of
stock (the "Total Dividends"), then the portion of the Capital Gains Amount
that shall be allocable to holders of the Noncumulative Preferred Shares
shall be the amount that the total dividends paid or made available to the
holders of the Noncumulative Preferred Shares for the year bears to the Total
Dividends.
Section 3. REDEMPTION.
(a) Subject to the express terms of each series, the
Corporation:
(1) May, from time to time at the option of the Board of
Directors, redeem all or any part of any redeemable series of Noncumulative
Preferred Shares at the time outstanding at the applicable redemption price
for such series fixed in accordance with Section 1 of this Division A.II.; and
(2) Shall, from time to time, make such redemptions of
each series of Noncumulative Preferred Shares as may be required to fulfill
the requirements of any sinking fund provided for shares of such series at
the applicable sinking fund redemption price fixed in accordance with Section
1 of this Division A.II.;
and shall in each case pay all unpaid dividends for the then current dividend
period to the redemption date.
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(b) (1) Notice of every such redemption shall be mailed,
postage prepaid, to the holders of record of the Noncumulative Preferred
Shares to be redeemed at their respective addresses then appearing on the
books of the Corporation, not less than 30 days nor more than 60 days prior
to the date fixed for such redemption, or such other time prior thereto as
the Board of Directors shall fix for any series pursuant to Section 1 of this
Division prior to the issuance thereof. At any time after notice as provided
above has been deposited in the mail, the Corporation may deposit the
aggregate redemption price of Noncumulative Preferred Shares to be redeemed,
together with unpaid dividends thereon for the then current dividend period
to the redemption date, with any bank or trust company in Cleveland, Ohio, or
New York, New York, having capital and surplus of not less than $100,000,000,
named in such notice and direct that there be paid to the respective holders
of the Noncumulative Preferred Shares so to be redeemed amounts equal to the
redemption price of the Noncumulative Preferred Shares so to be redeemed
together with such accrued and unpaid dividends thereon for the then current
dividend period, on surrender of the share certificate or certificates held
by such holders; and upon the deposit of such notice in the mail and the
making of such deposit of money with such bank or trust company, such holders
shall cease to be shareholders with respect to such shares; and from and
after the time such notice shall have been so deposited and such deposit of
money shall have been so made, such holders shall have no rights or claim
against the Corporation with respect to such shares, except only the right to
receive such money from such bank or trust company without interest or to
exercise before the redemption date any unexpired privilege of conversion. If
less than all of the outstanding Noncumulative Preferred Shares are to be
redeemed, the Corporation shall select by lot the shares so to be redeemed in
such manner as shall be prescribed by the Board of Directors.
(2) If the holders of Noncumulative Preferred Shares
which have been called for redemption shall not within six years after such
deposit claim the amount deposited for the redemption thereof, any such bank
or trust company shall, upon demand, pay over to the Corporation such
unclaimed amounts and thereupon such bank or trust company and the
Corporation shall be relieved of all responsibility in respect thereof and to
such holders.
(c) Any Noncumulative Preferred Shares which are (1) redeemed
by the Corporation pursuant to this Section, (2) purchased and delivered in
satisfaction of any sinking fund requirement provided for shares of such
series, (3) converted in accordance with the express terms thereof, or (4)
otherwise acquired by the Corporation, shall resume the status of authorized
but unissued Noncumulative Preferred Shares without serial designation.
(d) Except in connection with the exercise of the
Corporation's rights pursuant to Division C or any similar provisions
hereafter contained in these Amended and Restated Articles of Incorporation,
the Corporation may not purchase or redeem (for sinking fund purposes or
otherwise) less than all of the Noncumulative Preferred Shares then
outstanding except in accordance with a purchase offer made to all holders of
record of Noncumulative Preferred Shares, unless all unpaid dividends on all
Noncumulative Preferred Shares then outstanding shall have been paid or funds
therefor set apart and all accrued sinking fund obligations applicable
thereto shall have been complied with.
Section 4. LIQUIDATION.
(a) (1) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, the
holders of Noncumulative Preferred Shares of any series shall be entitled to
receive in full out of the assets of the Corporation, including its capital,
before any amount shall be paid or distributed among the holders of the
Common Shares or any other shares ranking junior to the Noncumulative
Preferred Shares, the amounts fixed with respect to shares of such series in
accordance with Section 1 of this Division A.II., plus an amount equal to all
dividends declared and unpaid thereon. If the net assets of the Corporation
legally available therefor are insufficient to permit the payment upon all
outstanding Cumulative Preferred Shares and Noncumulative Preferred Shares of
the full preferential amount to which they are respectively entitled, then
such net assets shall be distributed
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ratably upon all outstanding Cumulative Preferred Shares and Noncumulative
Preferred Shares in proportion to the full preferential amount to which each
such share is entitled.
(2) After payment to the holders of Noncumulative
Preferred Shares of the full preferential amounts as aforesaid, the holders
of Noncumulative Preferred Shares, as such, shall have no right or claim to
any of the remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation into or
with any other Corporation, the merger of any other Corporation into it, or
the sale, lease or conveyance of all or substantially all the assets of the
Corporation, shall not be deemed to be a dissolution, liquidation or winding
up for purposes of this Section.
Section 5. VOTING.
(a) The holders of Noncumulative Preferred Shares shall have
no voting rights, except as provided in this Section or required by law.
(b) (1) If, and so often as, the Corporation shall not have
fully paid, or shall not have declared and set aside a sum sufficient for the
payment of, dividends on any series of Noncumulative Preferred Shares at the
time outstanding, for a number of dividend payment periods (whether or not
consecutive) which in the aggregate contain at least 540 days, the holders of
all series of such Noncumulative Preferred Shares, voting separately as a
class, shall be entitled to elect, as herein provided, two members of the
Board of Directors of the Corporation; but the holders of the Noncumulative
Preferred Shares shall not exercise such special class voting rights except
at meetings of such shareholders for the election of directors at which the
holders of not less than 50% of the Noncumulative Preferred Shares are
present in person or by proxy; and the special class voting rights provided
for in this paragraph when the same shall have become vested shall remain so
vested until the Corporation shall have fully paid, or shall have set aside a
sum sufficient for the payment of, dividends on such Noncumulative Preferred
Shares then outstanding for a number of consecutive dividend payment periods
which in the aggregate contain at least 360 days, whereupon the holders of
the Noncumulative Preferred Shares shall be divested of their special class
voting rights in respect of subsequent elections of directors, subject to the
revesting of such special class voting rights in the event above specified in
this paragraph.
(2) On an event entitling holders of Noncumulative
Preferred Shares to elect two directors as specified in paragraph (1) of this
Subsection, a special meeting of such holders for the purpose of electing
such directors shall be called by the Secretary of the Corporation upon
written request of, or may be called by, the holders of record of at least
10% of the Noncumulative Preferred Shares of the affected series and notice
thereof shall be given in the same manner as that required for the annual
meeting of shareholders; but the Corporation shall not be required to call
such special meeting if the annual meeting of shareholders shall be called to
be held within 90 days after the date of receipt of the foregoing written
request from the holders of Noncumulative Preferred Shares. At any meeting at
which the holders of Noncumulative Preferred Shares shall be entitled to
elect directors, holders of 50% of the Noncumulative Preferred Shares,
present in person or by proxy, shall be sufficient to constitute a quorum,
and the vote of the holders of a majority of such shares so present at any
such meeting at which there shall be such a quorum shall be sufficient to
elect the members of the Board of Directors which the holders of
Noncumulative Preferred Shares are entitled to elect as herein provided.
Notwithstanding any provision of these Amended and Restated Articles of
Incorporation or the Code of Regulations of the Corporation or any action
taken by the holders of any class of shares fixing the number of directors of
the Corporation, the two directors who may be elected by the holders of
Noncumulative Preferred Shares pursuant to this Subsection shall serve in
addition to any other directors then in office or proposed to be elected
otherwise than pursuant to this Subsection. Nothing in this Subsection shall
prevent any change otherwise permitted in the total number of or
classifications of directors of the Corporation nor require the resignation
of any director elected otherwise than pursuant to this Subsection.
Notwithstanding any
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classification of the other directors of the Corporation, the two directors
elected by the holders of Noncumulative Preferred Shares shall be elected
annually for terms expiring at the next succeeding annual meeting of
shareholders.
(3) Upon any divesting of the special class voting rights
of the holders of the Noncumulative Preferred Shares in respect of elections
of directors as provided in this Subsection, the terms of office of all
directors then in office elected by such holders shall terminate immediately
thereupon. If the office of any director elected by such holders voting as a
class becomes vacant by reason of death, resignation, removal from office or
otherwise, the remaining director elected by such holders voting as a class
may elect a successor who shall hold office for the unexpired term in respect
of which such vacancy occurred.
(c) The affirmative vote of the holders of at least two-thirds
of the Noncumulative Preferred Shares at the time outstanding, voting
separately as a class, given in person or by proxy either in writing or at a
meeting called for the purpose, shall be necessary to effect either of the
following:
(1) Any amendment, alteration or repeal, whether by
merger, consolidation or otherwise, of any of the provisions of the Amended
and Restated Articles of Incorporation or of the Code of Regulations of the
Corporation which affects adversely and materially the preferences or voting
or other rights of the holders of Noncumulative Preferred Shares which are
set forth in these Amended and Restated Articles of Incorporation; but
neither an amendment of these Amended and Restated Articles of Incorporation
so as to authorize, create or change the authorized or outstanding number of
Noncumulative Preferred Shares or of any shares ranking on a parity with or
junior to the Noncumulative Preferred Shares nor an amendment of the Code of
Regulations so as to change the number or classification of directors of the
Corporation shall be deemed to affect adversely and materially preferences or
voting or other rights of the holders of Noncumulative Preferred Shares; or
(2) The authorization, creation or increase in the
authorized number of any shares, or any security convertible into shares, in
either case ranking prior to such Noncumulative Preferred Shares.
(d) If, and only to the extent, that (1) Noncumulative
Preferred Shares are issued in more than one series and (2) Ohio law permits
the holders of a series of a class of shares to vote separately as a class,
the affirmative vote of the holders of at least two-thirds of each series of
the Noncumulative Preferred Shares at the time outstanding, voting separately
as a class, given in person or by proxy either in writing or at a meeting
called for the purpose of voting on such matters, shall be required for any
amendment, alteration or repeal, whether by merger, consolidation or
otherwise, of any of the provisions of these Amended and Restated Articles of
Incorporation or of the Code of Regulations of the Corporation which affects
adversely and materially the preferences or voting or other rights of the
holders of such series which are set forth in these Amended and Restated
Articles of Incorporation; but neither an amendment of these Amended and
Restated Articles of Incorporation, so as to authorize, create or change the
authorized or outstanding number of Noncumulative Preferred Shares or of any
shares remaining on a parity with or junior to the Noncumulative Preferred
Shares nor an amendment of the Code of Regulations so as to change the number
or classification of directors of the Corporation shall be deemed to affect
adversely and materially preferences or voting or other rights of the holders
of such series.
III. DEFINITIONS. For the purposes of this Division:
(a) Whenever reference is made to shares "ranking prior to"
Cumulative Preferred Shares or Noncumulative Preferred Shares, such reference
shall mean all shares of the Corporation in respect of which the rights of the
holders thereof as to the payment of dividends or as to distributions in the
event of a voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the
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Corporation are given preference over the rights of the holders of Cumulative
Preferred Shares or Noncumulative Preferred Shares, as the case may be;
(b) Whenever reference is made to shares "on a parity with"
Cumulative Preferred Shares or Noncumulative Preferred Shares, such reference
shall mean all shares of the Corporation in respect of which the rights of
the holders thereof as to the payment of dividends or as to distributions in
the event of a voluntary or involuntary liquidation, dissolution or winding
up of the affairs of the Corporation rank equally (except as to the amounts
fixed therefor) with the rights of the holders of Cumulative Preferred Shares
or Noncumulative Preferred Shares, as the case may be; and
(c) Whenever reference is made to shares "ranking junior to"
Cumulative Preferred Shares or Noncumulative Preferred Shares, such reference
shall mean all shares of the Corporation other than those defined under
Subsections (a) and (b) of this Section as shares "ranking prior to" or "on a
parity with" Cumulative Preferred Shares or Noncumulative Preferred Shares,
as the case may be.
IV. RESTRICTIONS ON TRANSFER TO PRESERVE TAX BENEFIT. The
Cumulative Preferred Shares and the Noncumulative Preferred Shares are
subject to the restrictions on transfer set forth with respect to those
shares in Division C of this Article FOURTH.
DIVISION B: COMMON SHARES
The Common Shares are subject to the express terms of the Cumulative
Preferred Shares and any series thereof and to the express terms of the
Noncumulative Preferred Shares and any series thereof, and have the following
express terms:
Section 1. DIVIDEND RIGHTS. The holders of Common Shares
shall be entitled to receive, when, as and if declared by the Board of
Directors of the Corporation, out of the assets of the Corporation which are
by law available therefor, dividends or distributions payable in cash, in
property or in securities of the Corporation.
Section 2. RIGHTS UPON LIQUIDATION. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of, or any
distribution of the assets of, the Corporation, each holder of Common Shares
shall be entitled to receive, ratably with each other holder of Common
Shares, that portion of the assets of the Corporation available for
distribution to its holders of Common Shares as the number of Common Shares
held by such holder bears to the total number of Common Shares then
outstanding.
Section 3. VOTING RIGHTS. The holders of Common Shares shall
be entitled to vote on all matters presented to the shareholders of the
Corporation (except any matter expressly reserved in these Amended and
Restated Articles of Incorporation to holders of shares other than Common
Shares), and shall be entitled to one vote for each Common Share entitled to
vote thereon.
Section 4. RESTRICTIONS ON TRANSFER TO PRESERVE TAX BENEFIT.
The Common Shares are subject to the restrictions on transfer set forth with
respect to those shares in Division C of this Article FOURTH.
DIVISION C: RESTRICTIONS ON TRANSFER OF PREFERRED SHARES
AND COMMON SHARES
I. RESTRICTIONS ON TRANSFER.
Section 1. DEFINITIONS. For purposes of this Division C of
this Article FOURTH, the following terms shall have the following meanings
set forth below:
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"Beneficial Ownership" shall mean ownership of Equity Shares by
a Person who would be treated as an owner of such Equity Shares either
directly or indirectly through the application of Section 544 of the Internal
Revenue Code, as modified by Section 856(h)(1)(B) of the Internal Revenue
Code. The terms "Beneficial Owner," "Beneficially Owns," and "Beneficially
Owned" shall have correlative meanings.
"Beneficiary" shall mean, with respect to any Trust, one or
more organizations described in each of Section 170(b)(1)(A) (other than
clause (vii) or (viii) thereof) and Section 170(c)(2) of the Internal Revenue
Code that are named by the Corporation as the beneficiary or beneficiaries of
such Trust, in accordance with Section (1) of Division C.II. hereof.
"Board of Directors" shall mean the Board of Directors of the
Corporation.
"Boykin Hotel Properties, L.P. Agreement" shall mean the
Amended and Restated Agreement of Limited Partnership of Boykin Hotel
Properties, L.P., an Ohio limited partnership.
"Constructive Ownership" shall mean ownership of Equity Shares
by a Person who would be treated as an owner of such Equity Shares either
directly or indirectly through the application of Section 318 of the Internal
Revenue Code, as modified by Section 856(d)(5) of the Internal Revenue Code.
The terms "Constructive Owner," "Constructively Owns," and "Constructively
Owned" shall have correlative meanings.
"Equity Shares" shall mean Cumulative Preferred Shares,
Noncumulative Preferred Shares and Common Shares of the Corporation. The term
"Equity Shares" shall include all Cumulative Preferred Shares, Noncumulative
Preferred Shares and Common Shares of the Corporation that are held as
Shares-in-Trust in accordance with this Division C of this Article FOURTH.
"Initial Public Offering" means the sale of Common Shares
pursuant to the Corporation's first effective registration statement for
Common Shares filed under the Securities Act of 1933, as amended.
"Market Price" on any date shall mean the average of the
Closing Price for the five consecutive Trading Days ending on such date. The
"Closing Price" on any date shall mean the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the applicable Equity
Shares are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which
those Equity Shares are listed or admitted to trading or, if those Equity Shares
are not listed or admitted to trading on any national securities exchange, the
last quoted price, or if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System or, if such
system is no longer in use, the principal other automated quotations system that
may then be in use or, if the shares of Equity Shares are 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 those Equity Shares selected by the
Board of Directors.
"Non-Transfer Event" shall mean an event other than a orted
Transfer that would cause any Person to Beneficially Own or Constructively
Own Equity Shares in excess of the Ownership Limit, including, but not
limited to, the issuance, granting of any option or entering into of any
agreement for the sale, transfer or other disposition of Equity Shares or the
sale, transfer, assignment or other disposition of any securities or rights
convertible into or exchangeable for Equity Shares.
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"Ownership Limit" shall mean 9% of the number of outstanding
shares of any class of Equity Shares.
"Permitted Transferee" shall mean any Person designated as a
Permitted Transferee in accordance with this Division C.
"Person" shall mean an individual, corporation, partnership,
estate, trust, a portion of a trust permanently set aside for or to be used
exclusively for the purposes described in Section 642(c) of the Internal
Revenue Code, association, private foundation within the meaning of Section
509(a) of the Internal Revenue Code, joint stock company or other entity and
also includes a "group" as that term is used for purposes of Section 12(d)(3)
of the Securities Exchange Act of 1934, as amended.
"Prohibited Owner" shall mean, with respect to any purported
Transfer or Non-Transfer Event, any Person who, but for this Division C of
this Article FOURTH, would own record title to Equity Shares.
"Redemption Rights" shall mean the rights granted under the
Boykin Hotel Properties, L.P. Agreement to the limited partners to exchange,
under certain circumstances, their limited partnership interests for cash
(or, at the option of the Corporation, for Common Shares).
"Restriction Termination Date" shall mean the first day after
the date of the Initial Public Offering on which the Board of Directors
determines that it is no longer in the best interests of the Corporation to
attempt to, or continue to, qualify as a REIT.
"Shares-in-Trust" shall mean any Equity Shares designated as
Shares-in-Trust pursuant to this Division C.
"Trading Day" shall mean a day on which the principal national
securities exchange on which the applicable Equity Shares are listed or
admitted to trading is open for the transaction of business or, if those
Equity Shares are not listed or admitted to trading on any national
securities exchange, shall mean any day other than a Saturday, a Sunday or a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Transfer" (as a noun) shall mean any sale, transfer, gift,
assignment, devise or other disposition of Equity Shares, whether voluntary
or involuntary, whether of record, constructively or beneficially and whether
by operation of law or otherwise. "Transfer" (as a verb) shall have the
correlative meaning.
"Trust" shall mean any separate trust created pursuant to this
Division C for the exclusive benefit of any Beneficiary.
"Trustee" shall mean any Person or entity unaffiliated with
both the Corporation and any Prohibited Owner, such Trustee to be designated
by the Corporation to act as trustee of any Trust, or any successor trustee
thereof.
Section 2. RESTRICTION ON TRANSFERS AND NON-TRANSFER EVENT.
(a) Except as set forth in Section 7 below and subject to
Section 8 below, from the date of the Initial Public Offering to the
Restriction Termination Date, (i) no Person shall Beneficially Own or
Constructively Own outstanding Equity Shares in excess of the Ownership
Limit, but any Transfer or Non-Transfer Event that, if effective, would
result in any Person Beneficially Owning or Constructively Owning outstanding
Equity Shares in excess of the Ownership Limit shall be void AB INITIO as to
the Transfer or Non-Transfer Event affecting that number of Equity Shares
which would be otherwise
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Beneficially Owned or Constructively Owned by such Person in excess of the
Ownership Limit and the intended transferee shall acquire no rights in such
excess Equity Shares.
(b) Except as set forth in Section 7 below, from the date of
the Initial Public Offering to the Restriction Termination Date, any Transfer
or Non-Transfer Event that, if effective, would result in any class of Equity
Shares being beneficially owned by fewer than 100 Persons (determined without
reference to any rules of attribution) shall be void AB INITIO as to the
Transfer or Non-Transfer Event affecting that number of shares which would be
otherwise beneficially owned (determined without reference to any rules of
attribution) by the transferee, and the intended transferee shall acquire no
rights in such Equity Shares.
(c) From the date of the Initial Public Offering to the
Restriction Termination Date, any Transfer of or Non-Transfer Event affecting
Equity Shares that, if effective, would result in the Corporation being
"closely held" within the meaning of Section 856(h) of the Internal Revenue
Code shall be void AB INITIO as to the Transfer of or Non-Transfer Event
affecting that number of Equity Shares which would cause the Corporation to
be "closely held" within the meaning of Section 856(h) of the Internal
Revenue Code, and the intended transferee shall acquire no rights in such
Equity Shares.
(d) From the date of the Initial Public Offering to the
Restriction Termination Date, any Transfer of or Non-Transfer Event affecting
Equity Shares that, if effective, would cause the Corporation to
Constructively Own 10% or more of the ownership interests in a tenant of the
real property of the Corporation or of any direct or indirect subsidiary of
the Corporation (a "Subsidiary"), within the meaning of Section 856(d)(2)(B)
of the Internal Revenue Code, shall be void AB INITIO as to the Transfer of
or Non-Transfer Event affecting that number of Equity Shares which would
cause the Corporation to Constructively Own 10% or more of the ownership
interests in a tenant of the Corporation's or of a Subsidiary's real
property, within the meaning of Section 856(d)(2)(B) of the Internal Revenue
Code, and the intended transferee shall acquire no rights in such excess
Equity Shares.
Section 3. TRANSFER TO TRUST.
(a) If, notwithstanding the other provisions contained in this
Division C, at any time after the Initial Public Offering and prior to the
Restriction Termination Date there is a purported Transfer or Non-Transfer
Event such that any Person would either Beneficially Own or Constructively
Own Equity Shares in excess of the Ownership Limit, then, (i) except as set
forth in Section 7 below, the purported transferee shall acquire no right or
interest (or, in the case of a Non-Transfer Event, the Person holding record
title to the Equity Shares Beneficially Owned or Constructively Owned by such
Beneficial Owner or Constructive Owner, shall cease to own any right or
interest) in such number of Equity Shares which would cause such Beneficial
Owner or Constructive Owner to Beneficially Own or Constructively Own Equity
Shares in excess of the Ownership Limit, (ii) such number of Equity Shares in
excess of the Ownership Limit (rounded up to the nearest whole share) shall
be designated Shares-in-Trust and, in accordance with this Division C,
transferred automatically by operation of the terms of this Section IV.C.I.3.
to a Trust to be held in accordance with this Division C, and (iii) the
Prohibited Owner shall submit such number of Equity Shares to the Corporation
for registration in the name of the Trustee. Such transfer to a Trust and the
designation of shares as Shares-in-Trust shall be effective as of the close
of business on the business day prior to the date of the Transfer or
Non-Transfer Event, as the case may be.
(b) If, notwithstanding the other provisions contained in this
Division C, at any time after the Initial Public Offering and prior to the
Restriction Termination Date, there is a purported Transfer or Non-Transfer
Event that, if effective, would (i) result in any class of the Equity Shares
being beneficially owned by fewer than 100 Persons (determined without
reference to any rules of attribution), (ii) result in the Corporation being
"closely held" within the meaning of Section 856(h) of the Internal Revenue
Code, or (iii) cause the Corporation to Constructively Own 10% or more of the
ownership interests in a tenant of the Corporation's or of a Subsidiary's
real property, within the meaning of Section 856(d)(2)(B) of the
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Internal Revenue Code, then (x) the purported transferee shall not acquire
any right or interest (or, in the case of a Non-Transfer Event, the Person
holding record title to the Equity Shares with respect to which such
Non-Transfer Event occurred, shall cease to own any right or interest) in
such number of Equity Shares, the ownership of which by such purported
transferee or record holder would (A) result in any class of Equity Shares
being beneficially owned by fewer than 100 Persons (determined without
reference to any rules of attribution), (B) result in the Corporation being
"closely held" within the meaning of Section 856(h) of the Internal Revenue
Code, or (C) cause the Corporation to Constructively Own 10% or more of the
ownership interests in a tenant of the Corporation's or of a Subsidiary's
real property, within the meaning of Section 856(d)(2)(B) of the Internal
Revenue Code, (y) such number of Equity Shares (rounded up to the nearest
whole share) shall be designated Shares-in-Trust and, in accordance with this
Division C, transferred automatically by operation of the terms of this
Section IV.C.I.3. to a Trust to be held in accordance with this Division C,
and (z) the Prohibited Owner shall submit such number of Equity Shares to the
Corporation for registration in the name of the Trustee. Such transfer to a
Trust and the designation of shares as Shares-in-Trust shall be effective as
of the close of business on the business day prior to the date of the
Transfer or Non-Transfer Event, as the case may be.
Section 4. REMEDIES FOR BREACH. If the Corporation, or its
designee, shall at any time determine in good faith that a Transfer or
Non-Transfer Event has taken place in violation of this Division C or that a
Person intends to acquire or has attempted to acquire Beneficial Ownership or
Constructive Ownership of any Equity Shares in violation of this Division C,
the Corporation shall take such action as it considers advisable to refuse to
give effect to or to prevent such Transfer or Non-Transfer Event or
acquisition, including, but not limited to, refusing to give effect to such
Transfer on the books of the Corporation or instituting proceedings to enjoin
such Transfer or Non-Transfer Event or acquisition.
Section 5. NOTICE OF RESTRICTED TRANSFER. Any Person who
acquires or attempts to acquire Equity Shares in violation of this Division
C, or any Person who owned Equity Shares that were transferred to a Trust
pursuant to this Division C, shall immediately give written notice to the
Corporation of such event and shall provide to the Corporation such other
information as the Corporation may request in order to determine the effect,
if any, of such event on the Corporation's status as a REIT.
Section 6. OWNERS REQUIRED TO PROVIDE INFORMATION. From the
date of the Initial Public Offering to the Restriction Termination Date:
(a) Every Beneficial Owner or Constructive Owner of more than
5%, or such lower percentage as is specified pursuant to regulations issued
under the Internal Revenue Code, of the outstanding shares of any class of
shares of the Corporation shall, within 30 days after January 1 of each year,
provide to the Corporation a written statement or affidavit stating the name
and address of such Beneficial Owner or Constructive Owner, the number of
Equity Shares Beneficially Owned or Constructively Owned, and a description
of how such shares are held.
(b) Each Person who is a Beneficial Owner or Constructive Owner
of Equity Shares and each Person (including the shareholder of record) who is
holding Equity Shares for a Beneficial Owner or Constructive Owner shall
provide to the Corporation a written statement or affidavit stating such
information as the Corporation may request in order to determine the
Corporation's status as a REIT and to ensure compliance with the Ownership
Limit as applicable.
Section 7. EXCEPTIONS. The Ownership Limit shall not apply to
the acquisition of Equity Shares by an underwriter that participates in a
public offering of such shares for a period of 90 days following the purchase
by such underwriter of such shares. In addition, the Board of Directors, upon
receipt of a ruling from the Internal Revenue Service or an opinion of
counsel, in either case to the effect that the Corporation's status as a REIT
would not be jeopardized thereby, may allow a Person to own a certain amount
in excess of the Ownership Limit if (i) the Board of Directors obtains such
representations and undertakings from such Person as are reasonably necessary
to ascertain that no Person's Beneficial
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Ownership or Constructive Ownership of Equity Shares could result in the REIT
(a) losing its REIT status for federal income tax purposes, or (b) being
"related" to any tenant or lessee under the REIT rules of the Internal
Revenue Code, and (ii) such Person agrees in writing that any violation or
attempted violation that could cause such a result will cause a transfer to a
Trust of Equity Shares pursuant to this Division C.
Section 8. NEW YORK STOCK EXCHANGE TRANSACTIONS.
Notwithstanding any provision contained herein to the contrary, nothing in
these Amended and Restated Articles of Incorporation shall preclude the
settlement of any transaction entered into through the facilities of the New
York Stock Exchange.
II. SHARES-IN-TRUST.
Section 1. TRUST. Any Equity Shares transferred to a Trust and
designated Shares-in-Trust pursuant to this Division C shall be held for the
exclusive benefit of the Beneficiary. The Corporation shall name a
Beneficiary for each Trust within five days after the Corporation first has
actual notice of the existence thereof. Any transfer to a Trust, and
designation of Equity Shares as Shares-in-Trust, shall be effective as of the
close of business on the business day prior to the date of the Transfer or
Non-Transfer Event that results in the transfer to the Trust. Shares-in-Trust
shall continue to constitute issued and outstanding Equity Shares of the
Corporation and shall be entitled to the same rights and privileges as are
all other issued and outstanding Equity Shares of the same class and series.
When transferred to a Permitted Transferee in accordance with this Division
C, such Shares-in-Trust shall cease to be designated as Shares-in-Trust.
Section 2. DIVIDEND RIGHTS. The Trust, as record holder of
Shares-in-Trust, shall be entitled to receive all dividends and distributions
declared by the Board of Directors on such Shares-in-Trust and shall hold
such dividends and distributions in trust for the benefit of the Beneficiary.
The Prohibited Owner with respect to Shares-in-Trust shall repay to the Trust
the amount of any dividends or distributions received by it that (i) are
attributable to those Shares-in-Trust and (ii) the record date of which was
on or after the date that such shares became Shares-in-Trust. The Corporation
shall take all measures that it determines reasonably necessary to recover
the amount of any such dividend or distribution paid to a Prohibited Owner,
including, if necessary, withholding any portion of future dividends or
distributions payable on Equity Shares Beneficially Owned or Constructively
Owned by the Person who, but for the provisions of this Division C, would
Constructively Own or Beneficially Own the Shares-in-Trust; and, as soon as
reasonably practicable following the Corporation's receipt or withholding
thereof, shall pay over to the Trust for the benefit of the Beneficiary the
dividends so received or withheld, as the case may be.
Section 3. RIGHTS UPON LIQUIDATION. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of, or any
distribution of the assets of, the Corporation, each holder of
Shares-in-Trust shall be entitled to receive, ratably with each other holder
of Equity Shares of the same class or series, that portion of the assets of
the Corporation which is available for distribution to the holders of such
class and series of Equity Shares. The Trust shall distribute to the
Prohibited Owner the amounts received upon such liquidation, dissolution, or
winding up, or distribution; PROVIDED, HOWEVER, that the Prohibited Owner
shall not be entitled to receive amounts pursuant to this Division C in
excess of, in the case of a purported Transfer in which the Prohibited Owner
gave value for Equity Shares and which Transfer resulted in the transfer of
the shares to the Trust, the price per share, if any, such Prohibited Owner
paid for the Equity Shares and, in the case of a Non-Transfer Event or
Transfer in which the Prohibited Owner did not give value for such shares
(E.G., if the shares were received through a gift or devise) and which
Non-Transfer Event or Transfer, as the case may be, resulted in the transfer
of shares to the Trust, the price per share equal to the Market Price on the
date of such Non-Transfer Event or Transfer. Any remaining amount in such
Trust shall be distributed to the Beneficiary.
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Section 4. VOTING RIGHTS. The Trustee shall be entitled to
vote all Shares-in-Trust. Any vote by a Prohibited Owner as a holder of
Equity Shares prior to the discovery by the Corporation that the Equity
Shares are Shares-in-Trust shall, so far as is practicable under applicable
law, be rescinded and shall be void AB INITIO with respect to such
Shares-in-Trust and the Prohibited Owner shall be deemed to have given, as of
the close of business on the business day prior to the date of the Transfer
or Non-Transfer Event that results in the transfer to the Trust of Equity
Shares pursuant to this Division C, an irrevocable proxy to the Trustee to
vote the Shares-in-Trust in the manner in which the Trustee, in its sole and
absolute discretion, considers advisable.
Section 5. DESIGNATION OF PERMITTED TRANSFEREE. The Trustee
shall have the exclusive and absolute right to designate a Permitted
Transferee of any Shares-in-Trust. In an orderly fashion so as not to
materially adversely affect the Market Price of the Shares-in-Trust, the
Trustee shall designate a Person as Permitted Transferee, so long as (i) the
Permitted Transferee so designated purchases for valuable consideration
(whether in a public or private sale) the Shares-in-Trust and (ii) the
Permitted Transferee so designated can acquire such Shares-in-Trust without
such acquisition resulting in a transfer to a Trust and the redesignation of
such Equity Shares as Shares-in-Trust. Upon the designation by the Trustee of
a Permitted Transferee, the Trustee shall (i) cause to be transferred to the
Permitted Transferee that number of Shares-inTrust acquired by the Permitted
Transferee, (ii) cause to be recorded on the books of the Corporation that
the Permitted Transferee is the holder of record of such number of Equity
Shares, (iii) cause the Shares-in-Trust to be canceled, and (iv) distribute
to the Beneficiary any and all amounts held by the Trustee with respect to
the Shares-in-Trust after making any payment to the Prohibited Owner required
under Sections IV.C.II.3. and IV.C.II.6.
Section 6. COMPENSATION TO RECORD HOLDER OF EQUITY SHARES THAT
BECOME SHARES-IN-TRUST. Any Prohibited Owner shall be entitled (following
designation of Equity Shares proposed or purported to be held by that
Prohibited Owner as Shares-in-Trust and subsequent designation of a Permitted
Transferee or the Trustee's acceptance of an offer to purchase such shares)
to receive from the Trustee following the sale or other disposition of such
Shares-in-Trust the lesser of (i) in the case of (a) a purported Transfer in
which the Prohibited Owner gave value for Equity Shares and which Transfer
resulted in the transfer of the shares to the Trust, the price per share, if
any, such Prohibited Owner paid for the Equity Shares, or (b) a Non-Transfer
Event or Transfer in which the Prohibited Owner did not give value for such
shares (E.G., if the shares were received through a gift or devise) and which
Non-Transfer Event or Transfer, as the case may be, resulted in the transfer
of shares to the Trust, the price per share equal to the Market Price on the
date of such Non-Transfer Event or Transfer, and (ii) the price per share
received by the Trustee from the sale or other disposition of such
Shares-in-Trust. Any amounts received by the Trustee in respect of such
Shares-in-Trust and in excess of such amounts to be paid to the Prohibited
Owner shall be distributed to the Beneficiary. Each Beneficiary and
Prohibited Owner waive any and all claims that they may have against the
Trustee and the Trust arising out of the disposition of Shares-in-Trust,
except for claims arising out of the gross negligence or willful misconduct
of, or any failure to make payments in accordance with this Division C, by
such Trustee or the Corporation.
Section 7. PURCHASE RIGHT IN SHARES-IN-TRUST. Shares-in-Trust
shall be considered to have been offered for sale to the Corporation, or its
designee, on the date of the event that created such Shares-in-Trust status
at a price per share equal to the lesser of (i) the price per share in the
event that created such Shares-in-Trust status (or, in the case of a devise,
gift or Non-Transfer Event, the Market Price at the time of such devise, gift
or Non-Transfer Event) 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 for a period of ninety days after the later of (i) the date
of the event which created such Shares-in-Trust status and (ii) the date the
Corporation determines in good faith that an event occurred that created such
Shares-in-Trust status, if the Corporation does not receive a notice of such
event.
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III. REMEDIES NOT LIMITED. Subject to Article I, Sections 7 and 8,
nothing contained in this Division C shall limit the authority of the
Corporation to take such other action as it deems necessary or advisable to
protect the Corporation and the interests of its shareholders by preservation
of the Corporation's status as a REIT and to ensure compliance with the
Ownership Limit.
IV. AMBIGUITY. In the case of any ambiguity in the application of
any provision of this Division C, including any definition contained herein,
the Board of Directors shall have the power to determine the application of
that provision.
V. LEGEND. Each certificate for Equity Shares shall bear the
following legend:
"The [Common Shares or Cumulative Preferred Shares or
Noncumulative Preferred Shares] represented by this
certificate are subject to restrictions on 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"). No Person may (i)
Beneficially Own or Constructively Own Common Shares in excess
of 9% of the number of outstanding Common Shares, (ii)
Beneficially Own or Constructively Own shares of any class or
series of Preferred Shares in excess of 9% of the number of
outstanding shares of that class or series of Preferred
Shares, (iii) beneficially own Equity Shares that would result
in the Equity Shares being beneficially owned by fewer than
100 Persons (determined without reference to any rules of
attribution), (iv) Beneficially Own Equity Shares that would
result in the Corporation being "closely held" under Section
856(h) of the Code, or (v) Constructively Own Equity Shares
that would cause the Corporation to Constructively Own 10% or
more of the ownership interests in a tenant of the
Corporation's or of a Subsidiary's real property, within the
meaning of Section 856(d)(2)(B) of the Code. Each holder of
Equity Shares is required to furnish the Corporation such
information as the Corporation may request pursuant to Section
6 of the Corporation's Amended and Restated Articles of
Incorporation. Any Person who attempts to Beneficially Own or
Constructively Own Equity Shares in excess of the above
limitations must immediately notify the Corporation in
writing. If those restrictions are violated, the Equity Shares
represented hereby in excess of those limitations will be
transferred automatically by operation of the Corporation's
Amended and Restated Articles of Incorporation to a Trust and
will be designated Shares-in-Trust. All capitalized terms in
this legend have the meanings defined in the Corporation's
Amended and Restated Articles of Incorporation, as they may be
amended from time to time, a copy of which, including the
restrictions on transfer, will be sent without charge to each
shareholder who so requests."
VI. SEVERABILITY. Each provision of this Article FOURTH shall be
several, and an adverse determination as to any such provision shall in no
way affect the validity of any other provision.
FIFTH: At all times following the consummation of the Initial Public
Offering (as defined in Article FOURTH), at least a majority of the members
of the Board of Directors shall, except as may result from a vacancy or
vacancies therein, be Independent Directors. An "Independent Director" shall
mean a person who is (i) independent of management of the Corporation, (ii)
not employed by or an officer of the Corporation, (iii) not an "affiliate"
(as defined in Rule 405 under the Securities Act of 1933, as amended) of the
Corporation or of any Subsidiary of the Corporation, and (iv) not a person
who acts on a regular basis as an individual or representative of an
organization serving as a professional advisor, legal counsel or consultant
to management if, in the opinion of the Board of Directors, the relationship
is material to the Corporation, that person, or the organization represented.
Any determination to be made by the Board of
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Directors in connection with any matter presenting a conflict of interest for
any officer of the Corporation or any director of the Corporation who is not
an Independent Director shall be made by the Independent Directors.
SIXTH: No holder of shares of the Corporation of any class shall be
entitled as such, as a matter of right, to subscribe for or purchase shares
of any class, now or hereafter authorized, or to subscribe for or purchase
securities convertible into or exchangeable for shares of the Corporation or
to which shall be attached or appertain any warrants or rights entitling the
holder thereof to subscribe for or purchase shares, except such rights of
subscription or purchase, if any, for such considerations and upon such terms
and conditions as its Board of Directors from time to time may determine.
SEVENTH: Notwithstanding any provision of Sections 1701.01 to
1701.98, inclusive, of the Ohio Revised Code, or any successor statutes now
or hereafter in force, requiring for the authorization or taking of any
action the vote or consent of the holders of shares entitling them to
exercise two-thirds or any other proportion of the voting power of the
Corporation or of any class or classes of shares thereof, such action, unless
otherwise expressly required by law or these Amended and Restated Articles of
Incorporation, may be authorized or taken by the vote or consent of the
holders of shares entitling them to exercise a majority of the voting power
of the Corporation or of such class or classes of shares thereof.
EIGHTH: To the extent permitted by law, the Corporation, by action
of its Board of Directors, may purchase or otherwise acquire shares of any
class issued by it at such times, for such consideration and upon such terms
and conditions as its Board of Directors may determine.
NINTH: No person who is serving or has served as a director of the
Corporation shall be personally liable to the Corporation or any of its
shareholders for monetary damages for breach of any fiduciary duty of such
person as a director by reason of any act or omission of such person as a
director; but the foregoing provision shall not eliminate or limit the
liability of any person (a) for any breach of such person's duty of loyalty
as a director to the Corporation or its shareholders, (b) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) under Section 1701.95 of the Ohio Revised Code,
(d) for any transaction from which such person derived any improper personal
benefit, or (e) to the extent that such liability may not be limited or
eliminated by virtue of Section 1701.13 of the Ohio Revised Code or any
successor section or statute. Any repeal or modification of this Article
NINTH by the shareholders of the Corporation shall be prospective only, and
shall not adversely affect any limitation on the personal liability of a
director of the Corporation existing at the time of such repeal or
modification.
TENTH: Section 1701.831 of the Ohio Revised Code shall not apply to
the Corporation.
ELEVENTH: Chapter 1704 of the Ohio Revised Code shall not apply to
the Corporation.
TWELFTH: If any provision (or portion thereof) of these Amended and
Restated Articles of Incorporation shall be found to be invalid, prohibited,
or unenforceable for any reason, the remaining provisions (or portions
thereof) of these Amended and Restated Articles of Incorporation shall remain
in full force and effect, and shall be construed as if such invalid,
prohibited, or unenforceable provision had been stricken herefrom or
otherwise rendered inapplicable, it being the intent of the Corporation and
its shareholders that each such remaining provision (or portion thereof) of
these Amended and Restated Articles of Incorporation remain, to the fullest
extent permitted by law, applicable and enforceable as to all shareholders,
notwithstanding any such finding.
THIRTEENTH: No shareholder of the Corporation may cumulate his
voting power in the election of directors.
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FOURTEENTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in these Amended and Restated
Articles of Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon shareholders herein are granted
subject to this reservation.
FIFTEENTH: These Amended and Restated Articles of Incorporation
shall take the place of and supersede the Corporation's existing Articles of
Incorporation.
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CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
BOYKIN LODGING COMPANY
Robert A. Weible, Secretary, of Boykin Lodging Company, an Ohio
corporation (the "Corporation"), does hereby certify that the Executive
Committee of the Board of Directors of the Corporation adopted the following
resolution to amend the Amended and Restated Articles of Incorporation (the
"Articles") of the Corporation by written action pursuant Section 1701.63(D)
of the Ohio Revised Code and pursuant to the authority granted by Section
1701.70(B)(1) of the Ohio Revised Code and Section I.1. of Division A of the
Articles:
RESOLVED, that the Amended and Restated Articles of
Incorporation of the Corporation be, and they hereby are, amended by adding
at the end of Division A.I. of Article FOURTH a new Section 6 that reads as
follows:
SECTION 6. CLASS A CUMULATIVE PREFERRED SHARES, SERIES 1999-A.
A. DESIGNATION AND AMOUNT. Of the 5,000,000 authorized Class
A Cumulative Preferred Shares, 75,000 are designated as "Class A Cumulative
Preferred Shares, Series 1999-A" (the "Series 1999-A Preferred Shares"). The
Series 1999-A Preferred Shares have the express terms set forth in this
Division as being applicable to all Class A Cumulative Preferred Shares as a
class and, in addition, the following express terms. The number of Series
1999-A Preferred Shares may be increased or decreased by resolution of the
Board of Directors and by the filing of a certificate of amendment pursuant
to the General Corporation Law of the State of Ohio stating that the increase
or reduction has been so authorized, but no decrease may reduce the number of
Series 1999-A Preferred Shares to a number less than that of the Series
1999-A Preferred Shares then outstanding plus the number of Series 1999-A
Preferred Shares issuable upon exercise of outstanding rights, options or
warrants or upon conversion of outstanding securities issued by the
Corporation.
B. DIVIDENDS AND DISTRIBUTIONS.
(1) Subject to the rights of the holders of any series of
preferred shares (or any similar shares) ranking prior to the Series 1999-A
Preferred Shares with respect to dividends, the holders of Series 1999-A
Preferred Shares, in preference to the holders of Common Shares and of any
other shares ranking junior to the Series 1999-A Preferred Shares, will be
entitled to receive, when, as and if declared by the Board of Directors out
of funds legally available for the purpose, (1) quarterly dividends payable
in cash on the same day as the quarterly dividend payment date for any
regular quarterly dividend payable on the Common Shares with respect to the
same period or, if no such regular quarterly dividend is payable on the
Common Shares, on the fifth day of May, August, November and February in each
year (each such date, a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a Series
1999-A Preferred Share or fraction thereof, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $47.00 or (b) subject to
adjustment as hereinafter set forth, 100 times the per share amount of all
regular quarterly cash dividends, and 100 times the per share value of all
regular quarterly noncash dividends or other distributions (as determined by
the Board of Directors in good faith), other than any dividend payable in
Common Shares or a subdivision of the outstanding Common Shares (by
reclassification or otherwise), declared on the Common Shares with respect to
the same period, and (2) if a dividend or distribution
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other than a regular quarterly dividend and other than a dividend payable in
Common Shares or a subdivision of the outstanding Common Shares (by
reclassification or otherwise) is authorized, declared or paid to the holders
of Common Shares (including without limitation a dividend or distribution of
cash, rights, options or other securities or any noncash property), a per
share cash dividend in an amount equal to the value of the per share amount
payable on each Common Share (as determined by the Board of Directors in good
faith) multiplied by the Dividend Multiple (as defined below), payable on the
same day as the payment date for that dividend on the Common Shares. The
multiple of dividends declared on the Common Shares to which holders of the
Series 1999-A Preferred Shares are entitled, which is 100 initially but which
will be adjusted from time to time as hereinafter provided, is hereinafter
referred to as the "Dividend Multiple." If the Company at any time after
February 1, 1999: (i) declares or pays any dividend on the Common Shares
payable in Common Shares, or (ii) effects a subdivision or combination or
consolidation of the outstanding Common Shares (by reclassification or
otherwise than by payment of a dividend in Common Shares) into a greater or
lesser number of Common Shares, then in each such case the Dividend Multiple
will thereafter be the Dividend Multiple applicable immediately prior to that
event multiplied by a fraction, the numerator of which is the number of
Common Shares outstanding immediately after that event and the denominator of
which is the number of Common Shares that were outstanding immediately prior
to that event.
(2) The Board of Directors may fix in accordance with
applicable law a record date for the determination of holders of Series
1999-A Preferred Shares entitled to receive payment of a dividend or other
distribution declared thereon, which will be the same day as the record date
for any dividend or distribution payable on the Common Shares with respect to
the same period if any such dividend or distribution is so payable. Dividends
on the Series 1999-A Preferred Shares will accrue and be cumulative (i) with
respect to shares included in the initial issuance of Series 1999-A Preferred
Shares and shares issued any time thereafter to and including the record date
for the payment of the first dividend on the shares included in that initial
issuance (the "First Record Date"), from the date of that initial issuance,
(ii) with respect to shares issued any time after the First Record Date and
not between a record date and the dividend payment date to which that record
date applies (that period, the "Ex-dividend Period"), from the dividend
payment date immediately preceding the date of issue of those shares, and
(iii) with respect to shares issued after the First Record Date and during an
Ex-dividend Period, from the dividend payment date on which that Ex-dividend
Period ends. Accrued but unpaid dividends will not bear interest. Dividends
paid on the Series 1999-A Preferred Shares in an amount less than the total
amount of dividends at the time accrued and payable on those shares will be
allocated pro rata on a share-by-share basis among all such shares at the
time outstanding. The amount of accrued and unpaid dividends on any Series
1999-A Preferred Share at any date is the amount of any dividends payable
thereon in accordance with this Section 6.B. (whether or not declared) that
have not been paid.
C. REDEMPTION. The Series 1999-A Preferred Shares are
redeemable, in whole but not in part, in accordance with Section 3 of
Division A.1.of Article FOURTH, at any time on or after (but not before) the
fifth anniversary of the initial issuance of a Series 1999-A Preferred Share,
at the option of the Board of Directors, upon payment of an amount in cash
for each share redeemed equal to the Conversion Multiple (as defined in
Section E.1., below) times the Adjusted Share Price, together with all
accrued and unpaid dividends thereon to the redemption date (the "Redemption
Price"). The Board of Directors may, at its option, pay all or any portion of
the Redemption Price for any Series 1999-A Preferred Shares redeemed in
accordance with this Section 6.C. by delivering to the holder thereof the
number of Common Shares derived by dividing the portion of the redemption
price to be so paid by the Adjusted Share Price, so long as that form of
payment will not result in the holder beneficially owning more than nine
percent (9.0%) of the total number of the outstanding Common Shares
(determined pursuant to Section 13(d) of the Securities Exchange Act of 1934,
as amended), or violating Division C of this Article FOURTH, whichever is
more restrictive. For purposes of this Section 6.C., "Adjusted Share Price"
means a dollar amount equal to the average last sale price (or bid price if
there were no sales) per Common Share on the NYSE over the twenty-one (21)
days on which the NYSE is open and for which
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trades in Common Shares are reported immediately preceding the date on which
the Corporation delivers the applicable redemption notice (adjusted to take
into account any splits, combinations, reclassifications, or other changes in
the Corporation's capitalization that occur between the date of that notice
and the redemption date). If the Common Shares are no longer trading on the
NYSE, then the Adjusted Share Price will be determined using the prices
reported on the exchange or automated quotation system on which the Common
Shares then trade. Each holder of Series 1999-A Preferred Shares may exercise
the conversion rights described in Section 6.E. for those shares at any time
prior to the date set for redemption of those shares.
D. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution may be made (x) to the holders of shares ranking
junior (either as to dividends or upon liquidation, dissolution or winding
up) to the Series 1999-A Preferred Shares unless, prior thereto, the holders
of Series 1999-A Preferred Shares shall have received an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, plus an amount equal to the greater of
(1) $1,648.00 per share or (2) an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times the
aggregate amount to be distributed per share to holders of Common Shares, or
(y) to the holders of shares ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series 1999-A Preferred
Shares, except distributions made ratably on the Series 1999-A Preferred
Shares and all other such parity shares in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up (the holders of Series 1999-A Preferred Shares
being entitled to receive, for this purpose, the amount determined pursuant
to clause (x) of this sentence). If the Corporation at any time after
February 1, 1999 (i) declares or pays any dividend on Common Shares payable
in Common Shares, or (ii) effects a subdivision or combination or
consolidation of the outstanding Common Shares (by reclassification or
otherwise than by payment of a dividend in Common Shares) into a greater or
lesser number of Common Shares, then in each such case the aggregate amount
per share to which holders of Series 1999-A Preferred Shares were entitled
immediately prior to such event under clause (x)(2) of the immediately
preceding sentence will be adjusted by multiplying that amount by a fraction,
the numerator of which is the number of Common Shares outstanding immediately
after that event and the denominator of which is the number of Common Shares
that were outstanding immediately prior to that event.
Neither the consolidation of nor merger of the Corporation with
or into any other corporation or corporations, nor the sale or other transfer
of all or substantially all of the assets of the Corporation, will be
considered a liquidation, dissolution or winding up of the Corporation within
the meaning of this paragraph D.
E. CONVERSION RIGHTS.
(1) The holders of Series 1999-A Preferred Shares have the
right, at their option, to convert all or any portion of their Series 1999-A
Preferred Shares into Common Shares at any time and from time to time, on the
basis set forth below, but (a) no such holder may so convert Series 1999-A
Preferred Shares if, immediately after that conversion, that holder would be
the record or beneficial owner of more than nine percent (9.0%) of the total
number of the outstanding Common Shares (determined pursuant to Section 13(d)
of the Securities Exchange Act of 1934, as amended), or violate Division C of
this Article FOURTH, whichever is more restrictive, and (b) the right to
convert Series 1999-A Preferred Shares that have been called for redemption
pursuant to Section 6.C. terminates at the close of business on the
redemption date for those Series 1999-A Preferred Shares pursuant to Section
6.C., unless the Corporation defaults in making payment of any cash payable
on that redemption. Each Series 1999-A Preferred Share is initially
convertible into 100 Common Shares (the number of Common Shares into which
each Series 1999-A Preferred Share is convertible, the "Conversion
Multiple"). If the Corporation, at any time after February 1, 1999: (i)
declares or pays any dividend on the Common Shares payable in
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Common Shares, or (ii) effects a subdivision or combination or consolidation
of the outstanding Common Shares (by reclassification or otherwise than by
payment of a dividend in Common Shares) into a greater or lesser number of
Common Shares, then in each such case the Conversion Multiple will thereafter
be the Conversion Multiple applicable immediately prior to that event
multiplied by a fraction, the numerator of which is the number of Common
Shares outstanding immediately after that event and the denominator of which
is the number of Common Shares that were outstanding immediately prior to
that event.
(2) In order for a holder of Series 1999-A Preferred Shares to
convert Series 1999-A Preferred Shares into Common Shares, that holder shall
surrender the certificate or certificates for those Series 1999-A Preferred
Shares at the office of the transfer agent for the Series 1999-A Preferred
Shares (or at the principal office of the Corporation if the Corporation
serves as its own transfer agent), together with written notice that the
holder elects to convert all or any number of the Series 1999-A Preferred
Shares represented by that certificate or certificates. That notice must
state the holder's name or the names of the nominees in which the holder
wishes the certificate or certificates for Common Shares to be issued and the
number of Series 1999-A Preferred Shares to be converted. If required by the
Corporation, certificates surrendered for conversion must be endorsed or
accompanied by a written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or
his or its attorney duly authorized in writing. The date of receipt of those
certificates and notice by the transfer agent or by the Corporation (if the
Corporation serves as its own transfer agent) will be the conversion date
(the "Conversion Date") and the conversion will be effective as of the close
of business on the Conversion Date. The Corporation shall, as soon as
practicable after the Conversion Date, issue and deliver at that office, or
send, on the converting holder's written instruction, to that holder or to
his or its nominees, a certificate or certificates for the number of Common
Shares to which that holder is entitled, together with cash in lieu of any
fraction of a share.
(3) The Corporation shall at all times when any Series 1999-A
Preferred Shares are outstanding, reserve and keep available out of its
authorized but unissued shares, for the purpose of effecting the conversion
of the Series 1999-A Preferred Shares, such number of its duly authorized
Common Shares as are from time to time sufficient to effect the conversion of
all outstanding Series 1999-A Preferred Shares.
(4) Upon any conversion effected in accordance with this
Section 6.E., the Corporation shall pay all accrued and unpaid dividends on
the Series 1999-A Preferred Shares surrendered for conversion.
(5) All Series 1999-A Preferred Shares that have been
surrendered for conversion as herein provided will no longer be considered
outstanding, and all rights with respect to those shares, including the
rights, if any, to receive notices and to vote, will cease and terminate at
the close of business on the Conversion Date, except only the right of the
holders thereof to receive Common Shares in exchange therefor and the
dividend payment provided for in paragraph (4), above. If certificates
representing more than one Series 1999-A Preferred Share are surrendered for
conversion at one time by the same holder, the number of Common Shares
issuable on conversion thereof will be computed on the basis of the aggregate
number of Series 1999-A Preferred Shares so surrendered.
F. FRACTIONAL SHARES. Series 1999-A Preferred Shares may be
issued in whole shares or in any fraction of a share, which will entitle the
holder, in proportion to that holder's fractional shares, to exercise voting
rights, receive dividends, participate in distributions and have the benefit
of all other rights of holders of Series 1999-A Preferred Shares. In lieu of
issuing fractional shares of less than one one-hundredth (1/100) of a
Preferred Share, the Corporation may elect to make a cash payment in an
amount equal to the same fraction of the last sale price (or bid price if
there were no sales) per Common Share on the New York Stock Exchange on the
business day that immediately precedes the Conversion Date or, if the Common
Shares are not the listed on the New York Stock Exchange, of the market price
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per share determined using the prices reported on the exchange or automated
quotation system on which the Common Shares then trade, as equitably adjusted
to reflect any change or adjustment to the Conversion Multiple after February
1, 1999.
G. CERTAIN TRANSACTIONS. If the Corporation is a party to any
transaction (including without limitation a merger, consolidation, statutory
share exchange, self tender offer for all or substantially all Common Shares
outstanding, sale of all or substantially all of the Corporation's assets or
recapitalization of the Common Shares but excluding the payment of any
dividend payable in Common Shares or a subdivision, combination or
consolidation of the outstanding Common Shares (by reclassification or
otherwise)) (each of the foregoing being referred to herein as a
"Transaction"), in each case as a result of which Common Shares are converted
into the right to receive shares, securities or other property (including
cash or any combination thereof), each Series 1999-A Preferred Share that is
not redeemed or converted into the right to receive shares, securities or
other property in connection with that Transaction will thereafter be
convertible into the kind and amount of shares, securities and other property
(including cash or any combination thereof) receivable upon the consummation
of that Transaction by a holder of that number of Common Shares into which
one Series 1999-A Preferred Share was convertible immediately prior to that
Transaction, assuming that holder of Common Shares (i) is not a Person with
which the Corporation consolidated or into which the Corporation merged or
that merged into the Corporation or to which that sale or transfer was made,
as the case may be (a "Constituent Person"), or an affiliate of a Constituent
Person and (ii) failed to exercise his or her rights of election, if any, as
to the kind or amount of shares, securities and other property (including
cash) receivable upon that Transaction (but if the kind or amount of shares,
securities and other property (including cash) receivable upon that
Transaction is not the same for each Common Share held immediately prior to
that Transaction by other than a Constituent Person or an affiliate thereof
and in respect of which those rights of election have not been exercised
("Non-Electing Share"), then for the purpose of this Section 6.G., the kind
and amount of shares, securities and other property (including cash)
receivable upon that Transaction by each Non-Electing Share will be
considered to be the kind and amount so receivable per share by a plurality
of the Non-Electing Shares). The Corporation shall not be a party to any
Transaction unless the terms of that Transaction are consistent with the
provisions of this Section 6.G. and it shall not consent or agree to the
occurrence of any Transaction until the Corporation has entered into an
agreement with the successor or purchasing entity, as the case may be, for
the benefit of the holders of the Series 1999-A Preferred Shares that will
contain provisions enabling the holders of the Series 1999-A Preferred Shares
that remain outstanding after that Transaction to convert their Series 1999-A
Preferred Shares into the consideration received by holders of Common Shares
at the Conversion Multiple in effect immediately prior to that Transaction.
The provisions of this Section 6.G. similarly apply to successive
Transactions.
H. NOTICE. Whenever the Dividend Multiple or the Conversion
Multiple is adjusted as herein provided, the Corporation shall promptly
deliver to each holder of the Series 1999-A Preferred Shares, at that
holder's last address shown on the share records of the Corporation, a notice
of that adjustment, setting forth the adjusted Dividend Multiple or
Conversion Multiple, as applicable, and the effective date of that adjustment
and a brief statement of the facts requiring that adjustment.
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IN WITNESS WHEREOF, the undersigned has executed this
instrument as of February 1, 1999.
/s/ Robert A. Weible
------------------------------------
Robert A. Weible, Secretary
Boykin Lodging Company
27
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CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
BOYKIN LODGING COMPANY
Paul A. O'Neil, Treasurer, and Andrew A. Alexander, Assistant
Secretary, of Boykin Lodging Company, an Ohio corporation (the "Company"), do
hereby certify that at a meeting of the Board of Directors of the Company
held on May 25, 1999, the following resolution to amend the Amended and
Restated Articles of Incorporation, as amended, of the Company was adopted
pursuant to the authority granted by Section 1701.70(B)(1) of the Ohio
Revised Code:
RESOLVED, that the Amended and Restated Articles of
Incorporation, as amended, of the Company be, and they hereby are, amended by
adding at the end of Division A-II of Article FOURTH a new Section 6 that
reads as follows:
SECTION 6. CLASS A SERIES 1999-A NONCUMULATIVE PREFERRED
SHARES.
(a) DESIGNATION AND AMOUNT. Of the 5,000,000 authorized Class
A Noncumulative Preferred Shares, without par value, 500,000 are designated
as a series designated as "Class A Series 1999-A Noncumulative Preferred
Shares" (the "Series 1999-A Noncumulative Preferred Shares"). The Series
1999-A Noncumulative Preferred Shares have the express terms set forth in
this Division as being applicable to all Preferred Shares as a class and, in
addition, the following express terms applicable to all Series 1999-A
Noncumulative Preferred Shares as a series of Preferred Shares. The number of
Series 1999-A Noncumulative Preferred Shares may be increased or decreased by
resolution of the Board of Directors and by the filing of a certificate of
amendment pursuant to the provisions of the General Corporation Law of the
State of Ohio stating that such increase or reduction has been so authorized;
however, no decrease shall reduce the number of Series 1999-A Noncumulative
Preferred Shares to a number less than that of the Series 1999-A
Noncumulative Preferred Shares then outstanding plus the number of Series
1999-A Noncumulative Preferred Shares issuable upon exercise of outstanding
rights, options or warrants or upon conversion of outstanding securities
issued by the Company.
(b) DIVIDENDS AND DISTRIBUTIONS.
(1)(i) Subject to the rights of the holders of any series of
preferred shares (or any similar shares) ranking prior to the Series
1999-A Noncumulative Preferred Shares with respect to dividends, the
holders of Series 1999-A Noncumulative Preferred Shares, in
preference to the holders of Common Shares and of any other junior
shares, will be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the fifteenth day of March,
June, September and December in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the
first issuance of a Series 1999-A Noncumulative Share or fraction
thereof, in an amount per share (rounded to the nearest cent) equal
to the greater of (a) $1.00 or (b) subject to the provisions for
adjustment hereinafter set forth, 1,000 times the aggregate per
share amount of all cash dividends, and 1,000 times the aggregate
per share amount (payable in kind) of all noncash dividends or other
distributions other than a dividend payable in Common Shares or a
subdivision of the outstanding Common Shares (by reclassification or
otherwise), declared on the Common Shares after the immediately
preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend
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Payment Date, after the first issuance of any Series 1999-A
Noncumulative Share or fraction thereof. The multiple of cash and
noncash dividends declared on the Common Shares to which holders of
the Series 1999-A Noncumulative Preferred Shares are entitled, which
is 1,000 initially but which will be adjusted from time to time as
hereinafter provided, is hereinafter referred to as the "Dividend
Multiple." If the Company at any time after May 25, 1999 (the
"Rights Declaration Date"): (i) declares or pays any dividend on the
Common Shares payable in Common Shares, or (ii) effects a
subdivision or combination or consolidation of the outstanding
Common Shares (by reclassification or otherwise than by payment of a
dividend in Common Shares) into a greater or lesser number of Common
Shares, then in each such case the Dividend Multiple thereafter
applicable to the determination of the amount of dividends that
holders of Series 1999-A Noncumulative Preferred Shares are entitled
to receive will be the Dividend Multiple applicable immediately
prior to that event multiplied by a fraction, the numerator of which
is the number of Common Shares outstanding immediately after that
event and the denominator of which is the number of Common Shares
that were outstanding immediately prior to that event.
(ii) Notwithstanding anything else contained in this paragraph
(1), the Company shall, out of funds legally available for that
purpose, declare a dividend or distribution on the Series 1999-A
Noncumulative Preferred Shares as provided in this paragraph (1)
immediately after it declares a dividend or distribution on the
Common Shares (other than a dividend payable in Common Shares); but
if no dividend or distribution has been declared on the Common
Shares during the period between any Quarterly Dividend Payment Date
and the next subsequent Quarterly Dividend Payment Date, a dividend
of $1.00 per share on the Series 1999-A Noncumulative Preferred
Shares shall nevertheless accrue on such subsequent Quarterly
Dividend Payment Date.
(2) Dividends will begin to accrue and be cumulative on
outstanding Series 1999-A Noncumulative Preferred Shares from the Quarterly
Dividend Payment Date next preceding the date of issue of such Series 1999-A
Noncumulative Preferred Shares, unless the date of issue of such shares is
prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares will begin to accrue from the date of
issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of
holders of Series 1999-A Noncumulative Preferred Shares entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in either
of which events such dividends will begin to accrue and be cumulative from
such Quarterly Dividend Payment Date. Accrued but unpaid dividends will not
bear interest. Dividends paid on the Series 1999-A Noncumulative Preferred
Shares in an amount less than the total amount of such dividends at the time
accrued and payable on such shares will be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board
of Directors may fix in accordance with applicable law a record date for the
determination of holders of Series 1999-A Noncumulative Preferred Shares
entitled to receive payment of a dividend or distribution declared thereon,
which record date will be not more than such number of days prior to the date
fixed for the payment thereof as may be allowed by applicable law.
(c) REACQUIRED SHARES. Any Series 1999-A Noncumulative
Preferred Shares purchased or otherwise acquired by the Company in any manner
whatsoever will be retired and canceled promptly after the acquisition
thereof. All such shares will upon their cancellation become authorized but
unissued preferred shares and may be reissued as part of a new series of
Preferred Shares to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
(d) LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the
Company, no distribution may be made (x) to the holders of shares ranking
junior (either as to dividends or upon liquidation, dissolution or winding
up) to the Series
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1999-A Noncumulative Preferred Shares unless, prior thereto, the holders of
Series 1999-A Noncumulative Preferred Shares shall have received an amount
equal to accrued and unpaid dividends and distributions thereon, whether or
not declared, to the date of such payment, plus an amount equal to the
greater of (1) $1,000.00 per share or (2) an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 1,000
times the aggregate amount to be distributed per share to holders of Common
Shares, or (y) to the holders of shares ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series
1999-A Noncumulative Preferred Shares, except distributions made ratably on
the Series 1999-A Noncumulative Preferred Shares and all other such parity
stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up. If the
Company at any time after the Rights Declaration Date (i) declares or pays
any dividend on Common Shares payable in Common Shares, or (ii) effects a
subdivision or combination or consolidation of the outstanding Common Shares
(by reclassification or otherwise than by payment of a dividend in Common
Shares) into a greater or lesser number of Common Shares, then in each such
case the aggregate amount per share to which holders of Series 1999-A
Noncumulative Preferred Shares were entitled immediately prior to such event
under clause (x) of the preceding sentence will be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of Common
Shares outstanding immediately after such event and the denominator of which
is the number of Common Shares that were outstanding immediately prior to
such event.
Neither the consolidation of nor merging of the Company with or
into any other corporation or corporations, nor the sale or other transfer of
all or substantially all of the assets of the Company, will be considered to
be a liquidation, dissolution or winding up of the Company within the meaning
of this paragraph (d).
(e) CONSOLIDATION, MERGER, ETC. If the Company shall enter
into any consolidation, merger, combination or other transaction in which the
Common Shares are exchanged for or changed into other shares, stock or
securities, cash or any other property, then in any such case the Series
1999-A Noncumulative Preferred Shares will at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 1,000 times the aggregate amount
of shares, stock, securities, or other property, as the case may be, into
which or for which each Common Share is changed or exchanged, plus accrued
and unpaid dividends, if any, payable with respect to the Series 1999-A
Noncumulative Preferred Shares. If the Company at any time after the Rights
Declaration Date (i) declares or pays any dividend on Common Shares payable
in Common Shares, or (ii) effects a subdivision or combination or
consolidation of the outstanding Common Shares (by reclassification or
otherwise than by payment of a dividend in Common Shares) into a greater or
lesser number of Common Shares, then in each such case the amount set forth
in the preceding sentence with respect to the exchange or change of Series
1999-A Noncumulative Preferred Shares will be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of Common Shares
outstanding immediately after such event and the denominator of which is the
number of Common Shares that were outstanding immediately prior to such event.
(f) REDEMPTION. The Series 1999-A Noncumulative Preferred
Shares are not redeemable, but the foregoing does not limit the ability of
the Company to purchase or otherwise deal in the Series 1999-A Noncumulative
Preferred Shares to the extent otherwise permitted hereby and by law.
(g) AMENDMENT. The Amended and Restated Articles of
Incorporation of the Company, as amended, may not be amended in any manner
that would materially alter or change the powers, preferences or special
rights of the Series 1999-A Noncumulative Preferred Shares so as to affect
them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding Series 1999-A Noncumulative Preferred Shares,
voting separately as a class.
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(h) FRACTIONAL SHARES. Series 1999-A Noncumulative Preferred
Shares may be issued in whole shares or in any fraction of a share that is
one one-thousandth (1/1,000th) of a share or any integral multiple of such
fraction, which will entitle the holder, in proportion to such holder's
fractional shares, to exercise voting rights, receive dividends, participate
in distributions and have the benefit of all other rights of holders of
Series 1999-A Noncumulative Preferred Shares. In lieu of fractional shares,
the Company may elect to make a cash payment as provided in that certain
Rights Agreement dated as of May 25, 1999, between the Company and National
City Bank, a national banking association, as rights agent, for fractions of
a share smaller than one one-thousandth (1/1,000th) of a share or any
integral multiple thereof.
IN WITNESS WHEREOF, we have executed this instrument in one or
more counterparts as of June 9, 1999.
BOYKIN LODGING COMPANY,
an Ohio corporation
/s/ Paul A. O'Neil
Paul A. O'Neil, Treasurer
/s/ Andrew A. Alexander
Andrew A. Alexander, Assistant Secretary
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Exhibit 4.2
BOYKIN LODGING COMPANY
DIVIDEND REINVESTMENT AND OPTIONAL SHARE PURCHASE PLAN
1. PURPOSE AND ADMINISTRATION.
This Dividend Reinvestment and Optional Share Purchase Plan (the
"Plan") provides the shareholders of Boykin Lodging Company (the "Company") an
opportunity to automatically invest their cash dividends on their Common Shares,
without par value, of the Company ("Common Shares") in additional Common Shares,
and to make monthly or other voluntary cash investments in Common Shares. The
Company will pay the cost of the administration of the Plan. Persons who are not
already shareholders of the Company may purchase Common Shares under the Plan
through voluntary cash investments. The Company may issue not more than
2,500,000 Common Shares under the Plan. The Plan will be administered by
National City Bank, transfer agent for the Company. National City Bank or any
successor administrator of the Plan is referred to as the "Agent."
2. ELIGIBILITY.
Except as otherwise provided in this Section 2, only shareholders of
record of the Company ("Record Holders") who complete and return an
Authorization Card to the Agent are eligible to become participants
("Participants") in the Plan. Beneficial owners of Common Shares (i.e., persons
whose Common Shares are held on their behalf by a nominee, such as a bank or a
brokerage firm) are not Record Holders and must have one or more Common Shares
transferred into their names on the share records of the Company in order to
become Participants. Other persons may become Participants by completing and
returning an Authorization Card to the Agent and making an initial purchase of
Common Shares through a voluntary cash investment.
3. PURCHASE OF COMMON SHARES.
The Agent's purchases of Common Shares for the Plan may be made, at the
Company's option, either (i) from the Company out of its authorized but unissued
Common Shares, or (ii) in the open market (on the New York Stock Exchange or any
securities exchange where the Common Shares are then traded, in the
over-the-counter market or in negotiated transactions). The Company may change
its designation as to whether Common Shares will be purchased from the Company
or in the open market only once in any three-month period. The Company will pay
the brokerage fees or commissions related to the Agent's purchases of Common
Shares in the open market.
In making purchases of Common Shares, the Agent may commingle the
Participants' funds. The Agent will purchase Common Shares to be purchased in
the open market on or as promptly as practicable after the applicable Investment
Date (defined below), consistent with any applicable securities laws and market
conditions, and, in any event, dividends and voluntary cash investments will be
invested within 30 days after receipt by the Agent except when applicable laws
or regulations require otherwise. The exact timing of open market purchases,
including
<PAGE>
determining the number of Common Shares, if any, to be purchased on any day
or at any time of day, the prices paid for such shares, the markets on which
such purchases are made, and the persons (including brokers and dealers) from
or through whom such purchases are made will be determined by the Agent or
the broker selected by it for that purpose. The Agent may purchase Common
Shares in advance of an Investment Date for settlement on or after such date.
No interest will be paid on funds held by the Agent pending investment. The
Agent may hold Common Shares of all Participants on deposit in its name or in
the name of its nominee. The Agent is not responsible for the value of Common
Shares acquired for the Participant's account.
If the Agent is unable to invest dividend payments or funds received
for voluntary cash investments in accordance with the guidelines of the Plan,
voluntary cash investments will be returned within 35 days after receipt by the
Agent and dividend payments will be returned within 35 days after the applicable
dividend payment date. The Agent has no liability for conditions that prevent
the purchase of Common Shares or interfere with the timing of purchases.
4. DIVIDEND REINVESTMENT.
As the Participant's agent, the Agent will receive, on or before each
dividend payment date, cash from the Company equal to the dividend on the
participating Common Shares, including any fractional Common Share (computed to
three decimal places) held by the Participant. The Agent will apply such funds
(subject to tax withholding requirements, as described in Section 9) toward the
purchase of Common Shares for the Participant's account. A Participant may
direct the Agent to reinvest dividends on some but not all of his or her Common
Shares. The purchase price per share to the Participant for Common Shares
purchased by the Agent for the Plan with reinvested dividends will be 98%
(subject to change) of the Market Price for the applicable Investment Date. The
number of Common Shares credited to a Participant's account on each purchase of
Common Shares with reinvested dividends will be the number (computed to three
decimal places) resulting from dividing the Participant's aggregate dividends
invested by 98% (subject to change) of the Market Price for the applicable
Investment Date.
The "Market Price" will be, (a) with respect to Common Shares purchased
from the Company, the average of the daily high and low sale prices of Common
Shares on the New York Stock Exchange for the ten trading days immediately
preceding the applicable Investment Date, and (b) with respect to Common Shares
purchased in the open market or in negotiated transactions, the weighted average
price of all Common Shares purchased under the Plan on the applicable Investment
Date.
The "Investment Date," with respect to all funds received as cash
dividends from the Company, will be the dividend payment date declared by the
Company for those payments from time to time. The Investment Date, with respect
to voluntary cash investments, will be once per month on (i) the dividend
payment date for any month in which the Company pays a cash dividend and (ii)
for any month in which no cash dividend is paid, the tenth day of that month or
the next business day if the tenth day is not a business day. A business day is
any day on which both the Agent and the New York Stock Exchange are open.
Page 2
<PAGE>
The Agent must receive authorization for any reinvestment of dividends
at least one day prior to the record date for payment of those dividends;
otherwise, such authorization will not be effective until the Investment Date
following the next dividend record date.
5. VOLUNTARY CASH INVESTMENT.
As the Participant's agent, the Agent may receive monthly or other (as
determined by the Participant) voluntary cash investments. The Agent will apply
such funds toward the purchase of Common Shares for the Participant's account.
Voluntary cash investments received by the Agent at least eleven business days
prior to an applicable Investment Date will be invested on or as promptly as
practicable after the applicable Investment Date. The purchase price per share
to the Participant for Common Shares purchased by the Agent for the Plan with
voluntary cash investments will be 98% (subject to change) of the Market Price
for the applicable Investment Date, and the purchase price per share to a person
making an initial purchase of Common Shares pursuant to the Plan for Common
Shares purchased by the Agent for the Plan will be 100% of the Market Price for
the applicable Investment Date. The number of Common Shares credited to a
Participant's account on each purchase of Common Shares with voluntary cash
investments will be the number (computed to three decimal places) resulting from
dividing the Participant's voluntary cash investment by 98% (subject to change)
of the Market Price for the applicable Investment Date. The number of Common
Shares credited to the account of a person making an initial purchase of Common
Shares pursuant to the Plan will be the number (computed to three decimal
places) resulting from dividing that person's voluntary cash investment by 100%
of the Market Price for the applicable Investment Date.
Subject to Section 7 below, any voluntary cash investment by a
Participant may not be less than $50 nor more than $5,000 in the aggregate in
any month, and any voluntary cash investment by a person making an initial
purchase of Common Shares pursuant to the Plan may not be less than $2,000 nor
more than $5,000 in the aggregate. No interest will be paid on funds held by the
Agent prior to investment. Voluntary cash investments received by the Agent will
be returned to the Participant (or first-time purchasers) upon written request
received by the Agent at least four business days prior to the applicable
Investment Date.
6. DISCOUNTS AND COMMISSIONS.
The discount per share from the Market Price for either a dividend
reinvestment or a voluntary cash investment is subject to change (but will not
vary from the range of 0% to 5%) from time to time at the Company's sole
discretion after a review of current market conditions, the level of
participation in the Plan and the Company's current and projected capital needs.
The Agent will provide Participants with prompt written notice of any change in
the discount.
In no event may the combined discount from the Market Price and
brokerage fees or commissions per share for Common Shares credited to a
Participant's account exceed 5% of the Market Price on the applicable Investment
Date, and the Agent is authorized to adjust the discount from the Market Price
to ensure that that limit is not exceeded.
Page 3
<PAGE>
For each Investment Date for which the Agent is directed to purchase
Common Shares in the open market, the Company will pay the Agent an amount equal
to the amount of the aggregate discounts per share (if any) from the Market
Price.
7. PERMITTED PAYMENTS IN EXCESS OF LIMITS.
Voluntary cash investments in excess of $5,000 may be made by a
Participant only upon the prior approval by the Company of a waiver purchase
form (a "Waiver Purchase Form") from such Participant. At the Company's sole
discretion, voluntary cash investments pursuant to a Waiver Purchase Form
request may be made at a discount of from 0% to 5% of the Market Price. The
Company reserves the right to review and adjust the discount relating to Waiver
Purchase Form requests at any time. The Waiver Purchase Form may require the
requesting Participant to represent, among other things, that the Participant is
not purchasing the Common Shares to engage in arbitrage activities and will not
sell Common Shares during any applicable ten-day pricing period. No maximum
limit applies to voluntary cash investments that may be made pursuant to a
Waiver Purchase Form request. Notwithstanding the above, no Participant may
acquire more than 9% of the outstanding Common Shares.
A Waiver Purchase Form request will be considered on the basis of a
variety of factors, including: the Company's current and projected capital
requirements, the alternatives available to the Company to meet those
requirements, prevailing market prices for Common Shares, general economic and
market conditions, expected aberrations in the price or trading volume of Common
Shares, the number of Common Shares held by the Participant submitting the
Waiver Purchase Form, the aggregate amount of voluntary cash investments for
which such Waiver Purchase Forms have been submitted, and the administrative
constraints associated with granting such Waiver Purchase Form request. Any
grant of permission to purchase Common Shares in excess of $5,000 per month will
be made in the sole discretion of the Company.
The Company may establish for each Investment Date a threshold Common
Share purchase price (the "Threshold Price") which applies only to voluntary
cash investments made pursuant to a Waiver Purchase Form request. The Threshold
Price will be a stated dollar amount that the Market Price of the Common Shares
for the respective Investment Date must equal or exceed in order for the Agent
to make any purchases pursuant to a Waiver Purchase Form request. The Threshold
Price will initially be established by the Company at least ten business days
prior to the applicable Investment Date; however, the Company reserves the right
to change the Threshold Price at any time. The Threshold Price will be
determined in the Company's sole discretion after a review of current market
conditions and other relevant factors. If the Threshold Price is not met for the
applicable Investment Date, each Participant's voluntary cash investments made
pursuant to a Waiver Purchase Form for that Investment Date will be returned,
without interest, to the Participant. Setting a Threshold Price for an
Investment Date will not affect the setting of a Threshold Price for any
subsequent Investment Date.
Page 4
<PAGE>
8. ACCOUNTS.
As soon as practicable after the purchase of Common Shares on any
Investment Date, the Agent will send to each Participant a statement of account
confirming that Participant's transactions and itemizing that Participant's
investment and reinvestment activity for the calendar year. Common Shares
credited to a Participant's account may not be pledged or assigned, and any
attempted pledge or assignment is void. A Participant who wishes to pledge or
assign Common Shares credited to the Participant's account must first withdraw
the Common Shares from the account.
9. INCOME TAX.
The reinvestment of dividends does not relieve a Participant of any
income tax which may be payable on the dividends. In the case of both foreign
Participants who elect to have their dividends reinvested (and whose dividends
are subject to United States income tax withholding) and other Participants who
elect to have their dividends reinvested (and who are subject to "backup"
withholding under Section 3406(a)(1) of the Internal Revenue Code of 1986, as
amended, (the "Code")), the Agent will invest in Common Shares in an amount
equal to the dividends of the Participants, less the amount of tax required to
be withheld. To the extent required under federal tax law, Participants will be
treated as having received a distribution to which Section 301 of the Code
applies with respect to (i) brokerage fees or commissions paid by the Company to
acquire Common Shares for the Participant and (ii) the dollar value of the
discount applicable to such acquisitions.
10. VOTING.
The Participant may vote all Common Shares credited to a Participant's
account under the Plan. If on the record date for a meeting of shareholders
there are Common Shares credited to the account of a Participant, the Agent will
send to that Participant the proxy material for the meeting and a proxy covering
the Participant's shares credited to the Participant's account.
11. CERTIFICATES.
Common Shares purchased under the Plan are registered in the name of
a nominee and shown on each Participant's account. However, a Participant may
request in writing a certificate for any of the whole Common Shares that have
accumulated in the Participant's account. Each certificate issued is
registered in the name or names in which the account is maintained, unless
the Participant otherwise instructs the Agent in writing. If the certificate
is to be issued in a name other than the name of the Plan account, the
Participant or Participants must have his, her or their signatures guaranteed
by an eligible guarantor institution (banks, stockbrokers, savings and loan
associations and credit unions with membership in an approved signature
guarantee medallion program) pursuant to Rule 17Ad-15 of the Securities Act
of 1933, as amended. Certificates for fractional shares will not be issued.
Dividends will be paid on the cumulative holdings of both full and fractional
Common Shares remaining in the Participant's account and will be reinvested
in accordance with the elections made by the Participant in accordance with
Page 5
<PAGE>
the Plan. Participants may deposit certificates for Common Shares registered
in their names with the Agent for credit under the Plan. There is no charge
for such deposits. Dividends on Common Shares deposited with the Agent will
be reinvested.
12. TERMINATION OF PARTICIPATION.
A Participant may terminate his or her account at any time by notifying
the Agent in writing. Unless the Agent receives the termination notice at least
five days prior to any dividend record date, it will not be processed until
after purchases made from the dividends paid with respect to that record date
have been completed and credited to the Participant's account. All dividends
with a record date after timely receipt of notice for termination will be sent
directly to the Participant. In addition, upon instructions from the Company,
the Agent may terminate the account of any Participant by written notice mailed
to the Participant. Within 14 days after mailing the termination notice, the
Agent will issue to the Participant, without charge, a certificate for the full
Common Shares held in the Participant's account or, if the Participant so
requests the Agent in writing or by telephone before the Agent's issuance of a
certificate, the Agent will sell the full Common Shares held in the
Participant's account, deduct brokerage commissions, transfer taxes (if any) and
a service charge, and deliver the proceeds to the Participant. In every case of
termination, the Participant's interest in any fractional Common Share will be
paid in cash at the market value of the Company's Common Shares existing on the
date the termination becomes effective as determined by the Agent. A Participant
will also be entitled to the uninvested portion of any voluntary investment if
notice of termination is received at least two business days prior to the date
when the Agent becomes obligated to pay for Common Shares purchased with respect
to that investment.
If a Participant disposes of all of the Common Shares registered in his
or her name on the books and records of the Company, the Participant will remain
in the Plan with respect to any Common Shares held in the Participant's account
under the Plan unless the Participant provides written notice of termination to
the Agent.
13. SHARE DIVIDENDS.
Any share dividends or share splits distributed by the Company on the
Common Shares held by the Agent for the Participant will be credited to the
Participant's account. If the Company makes available to its shareholders rights
to purchase additional Common Shares or other securities, the Agent will send to
the Participant appropriate instructions in connection with all such rights in
order to permit the Participant to determine what action he or she desires to
take.
14. RESPONSIBILITY OF AGENT.
The Agent is not liable hereunder for any act done in good faith, or
for any good faith omission to act, including, without limitation, for: (i) any
failure to terminate any Participant's account upon the Participant's death
prior to receipt of notice in writing of his or her death, and (ii) the prices
and times at which it purchases or sells Common Shares for any Participant's
account.
Page 6
<PAGE>
15. AMENDMENT OF PLAN.
The Company may amend or supplement the Plan at any time, but, except
when necessary or appropriate to comply with law or the rules or regulations of
the Securities and Exchange Commission (the "Commission"), the Internal Revenue
Service or other regulatory authority or with respect to any modification or
amendment that does not materially affect the rights of Participants, any
amendment or supplement will be effective only upon the mailing of written
notice thereof at least 30 days prior to the effective date thereof to each
Participant. The amendment or supplement will be considered to be accepted by
the Participant unless, prior to the effective date thereof, the Agent receives
written notice of the termination of the Participant's account. Any such
amendment may include an appointment by the Company of a successor Agent, in
which event the Company is authorized to pay the successor Agent for the account
of the Participant all dividends and distributions payable on Common Shares held
by the Participant for application by the successor Agent as provided in the
Plan.
16. SUSPENSION, TERMINATION AND COMPANY DISCRETION.
The Company reserves the right to suspend or terminate the Plan at any
time, and reserves the right to refuse voluntary cash investments from any
person who, in the sole judgment of the Company, is attempting to circumvent the
interests of the Plan by making excessive voluntary cash investments through
multiple accounts or by engaging in arbitrage activities. The Company may also
suspend, terminate or refuse participation in the Plan to any person if
participation or any increase in the number of Common Shares held by such person
would, in the sole judgment of the Company, jeopardize the status of the Company
as a real estate investment trust.
17. COMPLIANCE WITH APPLICABLE LAW AND REGULATIONS.
(a) The Company's obligation to offer or sell Common Shares hereunder
is subject to the Company's obtaining any necessary approval, authorization or
consent from any regulatory authority having jurisdiction over that offer and
sale. The Company may elect not to offer or sell Common Shares hereunder to
persons residing in any jurisdiction where, in the sole judgment of the Company,
the burden or expense of compliance with applicable blue sky or securities laws
makes that offer or sale impracticable or inadvisable.
(b) To the extent required to comply with law or the rules and
regulations of the Commission, neither the Company nor any "affiliated"
purchaser (as defined under the Securities Exchange Act of 1934, as amended)
shall purchase any Common Shares on any day on which the market price of the
Common Shares will be a factor in determining the Market Price as provided in
Section 4 of the Plan.
Page 7
<PAGE>
18. INTERPRETATION.
The Company will determine any questions of interpretation arising
under the Plan, and that determination will be final. The Company may adopt
rules and regulations to facilitate the administration of the Plan. The terms
and conditions of the Plan will be governed by the laws of the State of Ohio.
19. EFFECTIVE DATE.
The effective date of the Plan is March 2, 1999. All correspondence and
questions regarding the Plan and any Participant's account should be directed
to: National City Bank, Reinvestment Services, P.O. Box 94946, Cleveland, Ohio
44101-4946, telephone number: 800-622-6757, or such other address or telephone
number of which notice is given to Participants in writing.
Page 8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF BOYKIN LODGING COMPANY AS OF JUNE 30, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,170
<SECURITIES> 0
<RECEIVABLES> 10,625
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 641,119
<DEPRECIATION> (46,848)
<TOTAL-ASSETS> 614,756
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 293,000
0
0
<COMMON> 0
<OTHER-SE> 280,170
<TOTAL-LIABILITY-AND-EQUITY> 614,756
<SALES> 0
<TOTAL-REVENUES> 43,409
<CGS> 0
<TOTAL-COSTS> 22,719
<OTHER-EXPENSES> 976
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,301
<INCOME-PRETAX> 9,413
<INCOME-TAX> 0
<INCOME-CONTINUING> 9,413
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,413
<EPS-BASIC> .55
<EPS-DILUTED> .55
<FN>
<F1>REGISTRANT UTILIZES AN UNCLASSIFIED BALANCE SHEET THEREFORE CURRENT ASSETS AND
CURRENT LIABILITIES ARE NOT APPLICABLE.
</FN>
</TABLE>
