<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
Horizon Group Properties, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LETTERHEAD OF HORIZON GROUP PROPERTIES]
July 12, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders (the
"Meeting") of Horizon Group Properties, Inc. (the "Company") to be held on
August 29, 2000 at 10:00 a.m., local time, at 77 West Wacker Drive, 42nd
Floor Conference Room, Chicago, Illinois.
At the Meeting, you will be asked to consider and take action to (i) approve the
Articles of Amendment and Restatement of the Company; (ii) elect one Director of
the Company; (iii) ratify the appointment of Ernst & Young, LLP as independent
auditors of the Company for the fiscal year ending December 31, 2000; and (iv)
transact such other business as may properly come before the Meeting.
THE BOARD HAS UNANIMOUSLY APPROVED THE PROPOSALS SET FORTH HEREIN AND BELIEVES
THAT THEY ARE IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND
RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY VOTE FOR THE APPROVAL OF THE
PROPOSALS SET FORTH HEREIN.
Additional information with respect to these matters is set forth in the
enclosed Proxy Statement and the formal notice of Meeting. Also enclosed is a
Proxy Card. After reading these materials, please mark, date, sign, and return
the enclosed Proxy Card to ensure that your vote on the important business
matters to be considered at the Meeting will be recorded. Abstentions and broker
non-votes will have the same effect as a vote against the foregoing proposals.
I appreciate your investment in the Company and am looking forward to this
opportunity to meet you personally. Whether or not you can attend, however, I
greatly appreciate your cooperation in returning the enclosed Proxy Card.
Sincerely,
Gary J. Skoien
Chairman, President and
Chief Executive Officer
<PAGE>
HORIZON GROUP PROPERTIES, INC.
NOTICE OF THE
2000 ANNUAL MEETING OF STOCKHOLDERS
To be held on August 29, 2000
To the Stockholders:
Notice is hereby given that the 2000 Annual Meeting of Stockholders of
Horizon Group Properties, Inc., a Maryland corporation (the "Company"), will
be held at 77 West Wacker Drive, 42nd Floor Conference Room, Chicago,
Illinois, on August 29, 2000 at 10:00 a.m., local time (the "Meeting"), to
consider and take action on the following matters:
Approve the Articles of Amendment and Restatement of the Company;
Elect one Director of the Company;
Ratify the appointment of Ernst & Young, LLP as independent auditors of the
Company for the fiscal year ending December 31, 2000; and
Transact such other business as may properly come before the Meeting.
Holders of record of the Company's Common Stock at the close of business on
July 11, 2000 (the "Record Date") shall be entitled to notice of, and to
vote with respect to all matters to be acted upon at, the Meeting.
By order of the Board of Directors,
David R. Tinkham
SECRETARY
Chicago, Illinois
July 12, 2000
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE MARK,
DATE AND SIGN YOUR PROXY, AND RETURN IT PROMPTLY IN THE STAMPED ENVELOPE
ENCLOSED FOR YOUR CONVENIENCE.
<PAGE>
Horizon Group Properties, Inc.
77 West Wacker Drive
Suite 4200
Chicago, Illinois, 60601
----------------------
PROXY STATEMENT
FOR THE 2000
ANNUAL MEETING OF STOCKHOLDERS
To be held on August 29, 2000
The enclosed proxy is solicited by and on behalf of the Board of
Directors (the "Board") of Horizon Group Properties, Inc., a Maryland
corporation (the "Company"), for use at the Annual Meeting of Stockholders
(the "Meeting") to be held on August 29, 2000 at 10:00 a.m., local time, or
at any adjournment or postponement thereof for the purposes set forth in the
accompanying Notice of such meeting. This Proxy Statement and accompanying
Proxy Card are being mailed to stockholders of record on or about July 12,
2000.
If the accompanying Proxy Card is properly signed and returned to the
Company and not revoked, it will be voted in accordance with the instructions
contained therein. Unless contrary instructions are given, the persons
designated as proxy holders in the Proxy Card will vote in favor of the matters
presented in this Proxy Statement, and as recommended by the Board with regard
to all other matters. Each proxy executed and returned by a stockholder may be
revoked at any time before it is voted by timely submission of written notice of
revocation or by submission of a duly executed proxy bearing a later date (in
either case directed to the Secretary of the Company) or, if present at the
Meeting, a stockholder may elect to revoke his or her proxy and vote shares
personally. The principal executive offices of the Company are located at 77
West Wacker Drive, Suite 4200, Chicago, Illinois, 60601.
The cost of solicitation of proxies will be borne by the Company. The
Company may use the services of its Directors, officers, employees and others to
solicit proxies, personally or by telephone; arrangements may also be made with
brokerage houses and other custodians, nominees, fiduciaries and stockholders of
record to forward solicitation material to the beneficial owners of stock held
of record by such persons. If any personal interviews or telephone conversations
are used to solicit proxies, delivery of this Proxy Statement and Proxy Card
will precede the interview or telephone conversation. If as a result of the
interview or conversation additional Proxy Cards are requested or required, they
will be forwarded to the registered holder as so requested or required.
QUORUM AND VOTE REQUIRED
Only holders of record of common stock, par value $.01 per share,
of the Company ("Common Stock") on July 11, 2000 (the "Record Date") will be
entitled to vote at the Meeting. As of the Record Date, the Company had
2,870,127 shares of Common Stock outstanding and entitled to vote with
respect to all matters to be acted upon at the Meeting. Each holder of Common
Stock is entitled to one vote with respect to matters to be acted upon for
each share of Common Stock held by such holder. Under Maryland law and the
Amended and Restated Bylaws of the Company (the "Bylaws"), the presence of
holders in person or by proxy representing a majority of all the votes
entitled to be cast at the Meeting will constitute a quorum at the Meeting.
Abstentions are considered holders who are present at the Meeting and
entitled to vote and are counted for purposes of determining if a quorum
exists. "Broker non-votes" are votes represented by proxies from brokers or
nominees indicating that those brokers or nominees have not received
instructions from the beneficial owners or other persons entitled to vote
shares on a
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particular matter with respect to which the broker or nominees do not have
discretionary power. Broker non-votes will not be counted for purposes of
determining whether a quorum exists. The existence of a quorum will be
determined based upon the number of shares held by shareholders present in
person plus the largest number of shares represented by proxies in which votes
have been cast or as to which authority to vote has not been withheld on any
proposal. Accordingly, if a broker has exercised discretionary authority with
respect to a proposal or has not withheld authority to vote on all of the
proposals, the shares represented by that proxy may be counted as votes present
at the Meeting and the number of shares present at the Meeting will not be
reduced by the broker non-votes represented by that proxy on a different
proposal.
According to the terms of the current Articles of Amendment and
Restatement of the Company (the "Charter") and assuming the presence of a
quorum, the proposals may be adopted in the following manner:
Proposal 1: The approval of the amendments contained in the Articles
of Amendment and Restatement requires the affirmative vote of holders of at
least two thirds (2/3rds) of the shares entitled to vote, regardless of whether
the holders are present in person or by proxy at the Meeting. Abstentions and
broker non-votes will have the effect of a vote against the amendments contained
in the Articles of Amendment and Restatement.
Proposals 2 and 3: The election of a director and the ratification of
the appointment of Ernst & Young, LLP requires the affirmative vote of the
holders of a majority of the shares of stock entitled to be voted whose holders
are present in person or represented by proxy at the Meeting. Therefore, broker
non-votes will not be counted as present on the proposals and will have no
effect in determining the outcome. Abstentions will be counted as present and
will have the effect of a vote against the proposals.
OTHER BUSINESS
The Board is aware of no business before the Meeting other than that
specified in this Proxy Statement. If matters properly come before the Meeting,
the persons named in the accompanying proxy card intend to vote the proxies in
accordance with the recommendation of the Board.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Proxy Statement constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. When used in this proxy statement, the words "estimate," "project,"
"anticipate," "expect," "intend," "believe," and similar expressions are
intended to identify forward-looking statements. Such forward-looking statements
involve known and unknown risks, uncertainties, and other factors which may
cause the actual results, performance and achievements of the Company or
industry results to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Such
factors include, among other things, the following factors as well as those
factors discussed elsewhere in the Company's filings with the Securities and
Exchange Commission: the successful development and implementation of the
Company's business plan, changes in the real estate market, changes in the
factory outlet center market, prevailing interest rates and general economic
conditions, the level of competition confronting the Company, the accessibility
of the capital markets and other sources of financing for the Company and other
factors referred to in this Proxy Statement and previous filings by the Company.
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PROPOSAL NO. 1-APPROVAL OF AMENDMENTS TO CHARTER
GENERAL DISCUSSION OF AMENDMENTS AND REASONS THEREFOR
The Company currently has a net operating loss ("NOL") for federal income tax
purposes which can be used to offset taxable income which may be generated in
future years. The Internal Revenue Code of 1986, as amended (the "Code")
contains provisions which significantly reduce the annual amount of NOLs
which can be utilized if certain changes occur in the ownership of a
company's outstanding stock. The proposed revisions to the Charter would
impose a limit on share ownership with respect to any shareholder of no more
than 4.9% of the value of all classes of the Company's outstanding shares.
This limitation is intended to prevent the application of the limitations on
the utilization of the Company's NOLs. The revisions to the Charter would
allow the Board of Directors (the "Board") to set a higher share ownership
limit with respect to specific shareholders, provided such higher limit would
not jeopardize the Company's status as a real estate investment trust
("REIT") within the meaning of Section 856 of the Code. Additionally,
shareholders which own more than 4.9% of the Company's outstanding shares as
of the effective date of the amendments would not be subject to the 4.9%
ownership limit, but would continue to be subject to the ownership limit of
9.9% of the value of the Company's outstanding shares as provided in the
current Charter. The Company is currently seeking a Private Letter Ruling
from the Internal Revenue Service confirming that such amendments would not
affect the Company's status as a REIT. Assuming that the Company receives the
affirmative vote of at least two thirds (2/3rds) of the outstanding shares of
the Company, the amendments to the Charter will not be filed as required
under Maryland law and thus will not become effective unless the Company
receives a favorable ruling from the Internal Revenue Service.
For purposes of the following discussion, all capitalized terms not otherwise
defined have the meanings defined in the Charter, a copy of which is attached
hereto as Appendix A in a form which indicates the proposed additions and
deletions by means of underlining and striking-through, respectively. Any
descriptions of the provisions of the current Charter or of the proposed
Articles of Amendment and Restatement are qualified in their entity by reference
to Appendix A.
DESCRIPTION OF LIMITATIONS ON UTILIZATION OF NET OPERATING LOSSES
The Company currently has approximately $14 million of NOLs. The Company would
also recognize substantial additional losses if it were to sell or otherwise
dispose of its other real estate assets in taxable transactions. The ability to
utilize the full amount of these losses is of value to the Company by providing
financial flexibility. Section 382 of the Code contains provisions which, if
met, would significantly limit the amount of losses which the Company could
utilize in the future.
The provisions of Section 382 of the Code become applicable if the value of the
stock owned by shareholders owning at least five percent of a company's stock
("Five Percent Shareholders") has increased by more than 50 percentage points
over the lowest percentage of a company's stock owned by the same shareholders
at any time during the prior three years (an "Ownership Shift"). For purposes of
this test, all shareholders owning less than five percent of a company's stock
are treated as one Five Percent Shareholder.
If an Ownership Shift has occurred, the maximum amount of an NOL that can be
utilized in any year is equal to the product of the total equity value of a
company's stock and the federal long-term tax-exempt interest rate, both as of
the date the Ownership Shift occurs. Currently, the federal long-term tax-exempt
rate is approximately 5.84% and the equity value of the Company's stock is
approximately $12.8 million (based on approximately 2.85 million shares
outstanding at a price of $4.50 per share). Based on these amounts, if an
Ownership Shift were to occur, the maximum annual NOL that the Company could
utilize would be approximately $748,000.
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<PAGE>
BENEFITS TO THE COMPANY
The utilization of NOLs provides the Company with the flexibility to employ
its cash flow to reduce debt, make capital expenditures or expand corporate
operations, as the Board may determine to be in the best interests of the
Company. As a REIT, the Company is required to distribute at least 95% (90%
for years ending after December 31, 2000) of its taxable ordinary income in
the form of dividends and pay tax on any taxable ordinary income not
distributed. A REIT may choose to retain taxable capital gains, but must pay
income tax on amounts retained. To the extent that the Company has NOLs, it
can offset taxable income by such NOLs thus either reducing its tax liability
or reducing the amount it is required to distribute. The ability to utilize
its NOLs will give the Company the flexibility to determine the timing of its
distributions to minimize the taxability of such distributions. If the
Company were to make a distribution in a year in which it had generated
earnings and profits, such distribution would generally be taxed as ordinary
income (or capital gain if the source of such income was capital in nature
and so designated by the Company). If the Company were to make a distribution
in a year in which it did not have current or accumulated earnings and
profits, such distribution would generally be treated as a return of capital
not subject to taxation. If the Company were to be limited in the utilization
of its NOLs, it could be required to make a distribution in the year in which
taxable income is generated in order to maintain its status as a REIT. Such
distribution would be taxable to the shareholders as ordinary income (or
capital gain). If the Company were to be able to offset such income by its
NOLs and were to make a distribution in a subsequent year in which it did not
have current or accumulated earnings and profits, such distribution would
generally not be taxable to the shareholders.
CURRENT CHARTER PROVISIONS AFFECTING SHARE OWNERSHIP
For the Company to continue to qualify as a REIT, not more than 50% in value
of its outstanding stock may be owned, directly or indirectly, by five or fewer
individuals (as defined in the Code) during the last half of a taxable year (the
"Five or Fewer Rule"). In order to insure compliance with the Five or Fewer
Rule, the current Charter prohibits any Person from having beneficial ownership,
either directly or by virtue of the Code's applicable attribution rules, of more
than 9.9% in value of the Company's outstanding Common Stock (the "Common
Stock Ownership Limit"). If the Common Stock Ownership Limit were to be violated
by a sale or transfer, such sale or transfer would be void AB INITIO unless the
Board exempts such Person from the Common Stock Ownership Limit. The Board may
exempt a Person from the Common Stock Ownership Limit only if (i) such Person is
not an individual for purposes of Section 542(a)(2) of the Code and the Board of
Directors obtains such representations and undertakings from such Person as are
reasonably necessary to ascertain that no such individual's Beneficial Ownership
of such Common Stock will violate the Common Stock Ownership Limit or otherwise
violate Section 4.5.5(c) of the Charter (relating to other ownership
restrictions), (ii) if such Person does not and represents that it will not own,
directly or Constructively, more than a 9.9% interest (as set forth in Section
856(d)(2)(B) of the Code) in a tenant of the Company (or a tenant of any
entity owned or controlled by the Company) and the Board of Directors
obtains such representations and undertakings from such Person as are reasonably
necessary to ascertain this fact, and (iii) if such Person agrees that any
violation or attempted violation of such representations or undertaking (or
other action which would violate the Common Stock Ownership Limit or other
ownership restrictions) will result in such Common Stock being exchanged for
Excess Common Stock in accordance with Section 4.5.7 of the Charter.
DESCRIPTION OF AMENDMENTS TO CHARTER
The proposed amendments to the Charter would prohibit any Person from
Beneficially Owning more than 4.9% of the value of the total outstanding shares
of all classes of stock ("Stock") of the Company (the "Ownership Limit"). If
the Ownership Limit were to be violated by a sale or transfer, such sale or
transfer would be void AB INITIO unless the Board exempts such Person from the
Ownership Limit. The Ownership Limit for any shareholder that owns in excess of
4.9% of the Common Stock as of the effective date of these proposed amendments
(an "Existing Large Shareholder") would be 9.9%, the current Common Stock
Ownership Limit. The
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amendments would also allow the Board to establish a higher Ownership Limit with
respect to any shareholder, including individuals, if such higher Ownership
Limit would not jeopardize the Company's status as a REIT. The proposed
amendments would include all classes of stock of the Company for purposes of
computing the Ownership Limit.
By limiting shareholders to owning no more than 4.9% of the value of the
Company's Stock, no additional shareholders will become Five Percent
Shareholders for purposes of determining whether there has been an Ownership
Shift for purposes of Section 382 of the Code. Based on the changes in share
ownership which have occurred between the commencement of trading of the
Company's shares on June 15, 1998 and the date hereof, such limitation will
prevent the application of the limitations on the utilization of NOLs contained
in Section 382 of the Code. An Ownership Shift may occur between the date hereof
and the effective date of the amendments to the current Charter if additional
shareholders first become Five Percent Shareholders and such shareholdings cause
an Ownership Shift.
EFFECTIVE DATE OF AMENDMENTS
The proposed amendments to the Charter would not become effective unless and
until (i) the proposal receives the affirmative vote of shareholders owning at
least two-thirds (2/3rds) of the Company's outstanding Stock, and (ii) the
Company receives a Private Letter Ruling stating that the amendments would not
affect the Company's status as a REIT. If the Company does not receive such a
Private Letter Ruling, it will not make the filing required under Maryland law
for the amendments to the Charter to become effective.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF
THE AMENDMENTS CONTAINED IN THE ARTICLES OF AMENDMENT AND RESTATEMENT.
PROPOSAL NO. 2 - ELECTION OF DIRECTORS
Pursuant to the By-laws of the Company, the Board of Directors may
determine the number of Directors of the Company which shall not be less than
three. Currently, the Board of Directors has set the number of Directors at
five. Directors are divided into three classes serving staggered three-year
terms of office. The Board of Directors proposes the election of one Director at
this Meeting, to hold office for a three-year term or until a successor is duly
elected and qualified. Other Directors will be elected at the Annual Meetings to
be held in 2001 and 2002, respectively, for three-year terms, and until their
respective successors are duly elected and qualified. It is intended that the
accompanying form of Proxy will be voted for the nominee set forth below. If
some unexpected occurrence should make necessary, in the Board of Directors'
judgment, the substitution of some other person for the nominee, shares will be
voted for such other person as the Board of Directors may select. The Board of
Directors expects the nominee to be able and willing to serve as a Director. The
following sets forth certain information with respect to the nominee and also
with respect to each Director whose term of office will continue after the
Meeting.
NOMINEES FOR ELECTION
<TABLE>
<CAPTION>
Term as Director Principal Occupation, Name of Organization,
Name Expires Age and Offices and Positions With the Company
---- ------- --- ------------------------------------------
<S> <C> <C> <C>
Governor Jim Edgar 2003 54 Distinguished Fellow at the University of Illinois
Institute of Government and Public Affairs, Director of
the Company.
</TABLE>
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GOVERNOR JIM EDGAR. Governor Edgar is currently a Distinguished Fellow at the
University of Illinois Institute of Government and Public Affairs where he is
also a teacher and lecturer. He has been in this position since January 1999.
He was appointed to the Board of Directors of the Company in March 2000. He
was also a Resident Fellow at the John F. Kennedy School of Government at
Harvard University in the 1999 fall semester. Gov. Edgar served as governor
of Illinois from January 14, 1991 through January 11, 1999. Prior to his
election, Gov. Edgar served as Illinois Secretary of State from 1981 to 1991.
Gov. Edgar's retirement from public office marked 30 years of state
government service. Gov. Edgar serves on the Boards of Directors of Kemper
Insurance Companies, Scudder Kemper Funds, John B. Sanfilippo & Sons, Inc.
and the board of directors of the Association of Governing Boards of
Universities and Colleges. He is also a member of the board of directors of
the National Center for Public Policy and Higher Education.
DIRECTORS WHOSE TERM OF OFFICE WILL CONTINUE AFTER THE MEETING
<TABLE>
<CAPTION>
Term as Director Principal Occupation, Name of Organization,
Name Expires Age and Offices and Positions With the Company
---- ------- --- ------------------------------------------
<S> <C> <C> <C>
Michael W. Reschke 2001 45 Chairman of the Board, Chief Executive Officer and President
of The Prime Group, Inc., Director of the Company
Gary J. Skoien 2001 46 Chairman of the Board, President, and Chief Executive Officer
of the Company, Director of the Company
Margaret A. Gilliam 2002 61 President of Gilliam & Co., Director of the Company
E. Thomas Thilman 2002 59 Partner of Thilman & Filippini, Director of the Company
</TABLE>
MICHAEL W. RESCHKE. Mr. Reschke has been the Chairman of the Board of Directors,
Chief Executive Officer and President of The Prime Group, Inc. ("PGI") since its
founding in 1981. Mr. Reschke is also Chairman of the Board of Brookdale Living
Communities, Inc., Prime Retail, Inc., and Prime Group Realty Trust. Mr. Reschke
received a Juris Doctorate degree (SUMMA CUM LAUDE) from the University of
Illinois after having received a B.A. degree (SUMMA CUM LAUDE) in Accounting
from Northern Illinois University. Mr. Reschke is licensed to practice law in
the State of Illinois and is a Certified Public Accountant. Mr. Reschke is a
member of the Chairman's Roundtable and the Executive Committee of the National
Realty Committee, as well as a full member of the Urban Land Institute.
GARY J. SKOIEN. Gary J. Skoien has served as Chairman of the Board, President,
Chief Executive Officer and a Director of the Company since June 1998. Mr.
Skoien also serves, and has served since 1994, as Executive Vice President and
Chief Operating Officer of PGI. Prior to this role, Mr. Skoien served as Senior
Vice President and Chief Operating Officer of the Retail Division of PGI
(currently Prime Retail, Inc.) from 1992 to 1993. In this role, he oversaw
strategic planning, development and management of the rapidly growing division.
He oversaw the development of nearly one million square feet of factory outlet
shopping centers. From 1983 to 1991, Mr. Skoien was the Executive Director of
The Illinois Capital Development Board and from 1980 to 1983, Mr. Skoien was an
Assistant to Illinois Governor James R. Thompson. Mr. Skoien is on the Boards of
Directors of the Chicagoland Chamber of Commerce and the Civic Federation and
the Board of Trustees of Northern Illinois University. Mr. Skoien received an
A.B. (CUM LAUDE) from Colgate University and received his Master of Public
Policy from the University of Michigan.
MARGARET A. GILLIAM. Ms. Gilliam is President of Gilliam & Co., which she
founded in 1997. Gilliam & Co. advises potential investors in both public and
private situations, and individual businesses on strategic initiatives. From
1975 to 1997, Ms. Gilliam oversaw investment research in retail and soft goods
industries where her most recent title was Director - Equity Research for Credit
Suisse First Boston. Ms. Gilliam is a graduate of McGill University and The
Harvard-Radcliffe Program in Business Administration.
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E. THOMAS THILMAN. Since the founding of Thilman & Filippini in 1980, Mr.
Thilman has been a partner. Thilman & Filippini is a Chicago-based insurance
brokerage and consulting agency. Mr. Thilman received his M.B.A. from the
University of Chicago and a bachelors in Business from the University of Notre
Dame. Mr. Thilman is a Certified Public Accountant.
The Board of Directors held six meetings during the year ended December 31,
1999. All directors attended at least 75% of the meetings of the Board and
committee meetings on which they served. The Company has two standing committees
of the Board of Directors, the Audit Committee and the Compensation Committee,
which are described further below.
AUDIT COMMITTEE
The Audit Committee, which consists of Ms. Gilliam, Gov. Edgar and Mr.
Thilman, makes recommendations concerning the engagement of the Company's
independent auditors, reviews with the independent auditors the plans and
results of the audit engagement, approves professional services provided by
the independent public accountants, reviews the independence of the
independent public accountants, considers the range of audit and non-audit
fees, reviews any recommendations made by the Company's auditors regarding
the Company's accounting methods and the adequacy of its system of internal
control and reviews any related party transactions. The Audit Committee held
one meeting during the year ended December 31, 1999.
COMPENSATION COMMITTEE
The Compensation Committee, which consists of Ms. Gilliam, Mr. Reschke, and Mr.
Thilman, determines the compensation paid to executives of the Company, grants
employee stock options and makes other determinations regarding the
administration of employee stock option plans, approves management incentive
(bonus and long-term) plans and determines the standards of performance for
incentive payments. The Compensation Committee held three meetings during the
year ended December 31, 1999.
COMPENSATION OF DIRECTORS
Directors who are not officers of or employed by the Company ("Non-employee
Directors") are paid an annual fee of $15,000 plus a meeting fee of $1,000 for
each meeting of the Board of Directors and $500 for each committee meeting, and
receive reimbursement for their out-of-pocket expenses. Each Non-employee
Director received an option to purchase 10,000 shares of Common Stock under the
Company's 1998 Long-Term Stock Incentive Plan on the date he or she was elected
to the Board of Directors at an exercise price based on the market price of the
Common Stock for a short period subsequent to the grant.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE FOR THE
ELECTION OF GOVERNOR EDGAR AS A DIRECTOR OF THE COMPANY WITH A TERM EXPIRING IN
2003.
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PROPOSAL NO. 3- RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors of the Company has approved the appointment of
Ernst & Young LLP as independent auditors of the Company for the year ending
December 31, 2000. Ernst & Young LLP served in this capacity for the year ended
December 31, 1999. A representative of Ernst & Young LLP will attend the Meeting
and, while not intending to make a statement, will respond to appropriate
questions directed to Ernst & Young LLP.
The appointment of auditors is approved annually by the Board and
subsequently submitted to the stockholders for ratification. The decision of the
Board is based on the recommendation of the Audit Committee. The Audit Committee
also reviews and approves proposed nonaudit services to ensure that they will
not impair the independence of the accountants.
Before making its recommendation to the Board for appointment of Ernst
& Young LLP, the Audit Committee carefully considered that firm's qualifications
as auditors for the Company. This included a review of its performance last
year, as well as its reputation for integrity and competence in the fields of
accounting and auditing. The Audit Committee has expressed its satisfaction with
Ernst & Young LLP in all of these respects.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE FOR
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS OF
THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.
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SECURITY OWNERSHIP OF CERTAIN
OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
The following table sets forth information as of June 29, 2000 regarding the
beneficial ownership of Common Stock by each Director and Named Officers (as
defined herein) of the Company, by all Directors and executive officers of
the Company as a group, and by each person known to the Company to be the
beneficial owner of more than five percent of the outstanding shares of
Common Stock. Unless otherwise indicated in the footnotes, all such interests
are owned directly, and the indicated person has sole voting and investment
power. The number of shares represents the number of shares of Common Stock
the person holds or the number of Common Units held by such person which are
exchangeable for shares of Common Stock. The extent to which a person holds
Common Units as opposed to Common Stock is set forth in the footnotes.
<TABLE>
<CAPTION>
Percentage
Number of Shares/ Ownership of
Name and Address of Common Units Outstanding
Beneficial Owner (1) Beneficially Owned (2) Common Stock (3)
-------------------- ---------------------- ----------------
<S> <C> <C>
Michael W. Reschke (4) 982,724 29.62%
77 West Wacker Drive
Chicago, Illinois 60601
Howard M. Amster (5) 269,855 9.40%
25812 Fairmont Boulevard
Beachwood, Ohio 44122
Maurice A. Halperin (6) 229,074 7.98%
2500 North Military Trail
Suite 225
Boca Raton, Florida 33431
Norman Perlmutter (7) 64,074 2.23%
Jim Edgar - *
Margaret A. Gilliam 6,400 *
E. Thomas Thilman 11,400 *
Gary J. Skoien 116,735 3.99%
David R. Tinkham 50,251 1.74%
Richard A. Berman (8) 3,000 *
John R. Terrell (9) 2,000 *
Andrew F. Pelmoter 19,200 *
Directors and officers of the Company as a 1,275,904 36.96%
group (13 persons) (10)
</TABLE>
9
<PAGE>
NOTES:
* LESS THAN ONE PERCENT
(1) All of the Directors and executive officers of the Company may be contacted
c/o Horizon Group Properties, Inc., 77 West Wacker Drive, Suite 4200,
Chicago, Illinois, 60601.
(2) The beneficial ownership of shares of Common Stock reported herein is based
upon filings with the Securities and Exchange Commission (the "Commission")
pursuant to certain provisions of the Exchange Act and is subject to
confirmation by the Company that such ownership does not violate the
ownership restrictions in the Company's Charter. "Beneficial ownership" is
defined differently in Rule 13d-3 under the Exchange Act and the Code. The
ownership of Common Units reported herein is derived from the transfer
records maintained by the transfer agent for Horizon Group Properties,
L.P.(the "Operating Partnership") and on information provided by certain
limited partners of the Operating Partnership. Information presented
includes Common Stock issuable upon exercise of Stock Options which have
vested or will vest within 60 days of June 29, 2000 as follows: Mr. Reschke
6,400; Mr. Perlmutter 3,300; Ms. Gilliam 6,400; Mr. Thilman 6,400; Mr.
Skoien 57,600; Mr. Tinkham 22,400; and Mr. Pelmoter 19,200.
(3) Information presented assumes exchange or conversion only of Common Units
owned by such beneficial owner for shares of Common Stock. The Common Units
may be exchanged on a one-for-one basis for Common Stock (or, at the
Company's election, cash of an equivalent value) at any time.
(4) Individual directly owns 8,206 shares of Common Stock and 6,400 shares of
Common Stock which Mr. Reschke has the right to acquire upon exercise of
certain options granted by the Company. Under the definition of "beneficial
ownership" applicable to Exchange Act filings, Mr. Reschke may be deemed to
share beneficial ownership of: (1) 527,418 shares of Common Stock and
75,620 Common Units directly owned by Prime Group Limited Partnership, an
Illinois limited partnership ("PGLP"), (2) 277,850 Common Units directly
owned by Prime Financing Limited Partnership, an Illinois limited
partnership ("PFLP"), (3) 42,281 Common Units directly owned by Prime Group
II, L.P., an Illinois limited partnership ("PG-II"), (4) 3,081 Common Units
directly owned by Prime Group III, L.P., an Illinois limited partnership
("PG-III"), (5) 6,818 Common Units directly owned by Prime Group IV, L.P.,
an Illinois limited partnership ("PG-IV"), and (6) 35,050 Common Units
directly owned by Prime Group V, L.P., and Illinois limited partnership
("PG-V") by virtue of his position as managing general partner of PGLP and
his ability to control PFLP, PG-II, PG-III, PG-IV and PG-V.
(5) Information presented is based on a Schedule 13D filed with the Securities
and Exchange Commission on July 20, 1998 by Howard Amster ("Amster") and
certain affiliates. This Schedule 13D indicates that Amster may be deemed
to be the beneficial owner of 269,855 shares of Common Stock by virtue of
his relationships with the following persons, each a holder of Common Stock
of the Company: Amster Trading Company; Amster Trading Company Charitable
Remainder Unitrusts; Gould Trading Company; Howard Amster & Tamra F. Gould
Charitable Unitrust; Howard M. Amster Charitable Remainder Unitrust;
Jeffrey Shafer; Pleasant Lake Apts. Corp.; Ramat Securities Ltd. and Tamra
F. Gould. This Schedule 13D indicates that Amster disclaims beneficial
ownership of the shares of the Common Stock owned by Howard Amster & Tamra
F. Gould Charitable Unitrust; Howard M. Amster Charitable Remainder
Unitrust and Tamra F. Gould.
(6) Information presented is based on a Schedule 13D filed with the Securities
and Exchange Commission on April 30, 1999 by Maurice A. Halperin
("Halperin"). This Schedule 13D indicates that Halperin directly owns
229,074 shares of Common Stock.
(7) Mr. Perlmutter directly owns 20,056 shares of Common Stock and may be
deemed to be the beneficial owner of 40,665 shares of Common Stock directly
owned by Cheryl McArthur, his wife, and 53 shares owned by Perlmutter's
minor sons. There are also 3,300 shares of Common Stocks that Mr.
Perlmutter has the right to acquire upon the exercise of Stock Options
granted by the Company. Mr. Perlmutter disclaims beneficial ownership with
respect to the 40,665 shares of Common Stock owned by his wife and the 53
shares owned by his minor sons. Mr. Perlmutter resigned from the Board of
Directors effective February 29, 2000.
(8) Mr. Berman's employment ended June 13, 2000.
(9) Mr. Terrell's employment ended January 1, 2000.
(10) Information presented includes 69,074 shares of Common Stock directly and
beneficially owned by Messrs. Perlmutter, Berman and Terrell.
10
<PAGE>
EXECUTIVE COMPENSATION
The following table shows the compensation of the Company's five most highly
compensated executive officers, including the Chief Executive Officer, during
the year ended December 31, 1999 (the "Named Officers").
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards
--------------------------------------------- ----------------------
Other Securities
Name and Annual Underlying
Principal Position Year Salary (1) Bonus Compensation (2) Stock Options
------------------ ---- ---------- ----- ----------------- -------------
<S> <C> <C> <C> <C> <C>
Gary J. Skoien 1999 $227,290 $112,500 $5,000 -
Chief Executive Officer 1998 123,300 42,000 - 90,000
David R. Tinkham 1999 145,500 72,500 1,900 -
Chief Financial Officer 1998 76,700 33,000 1,100 35,000
Richard A. Berman (3) 1999 146,500 72,500 2,000 -
General Counsel 1998 79,500 27,500 - 35,000
John R. Terrell (4) 1999 151,500 18,000 - -
Senior Vice President 1998 82,200 22,000 - 25,000
Andrew F. Pelmoter 1999 154,000 58,000 3,400 30,000
Senior Vice President 1998 91,500 27,800 1,600 -
</TABLE>
NOTES:
(1) 1998 salary amounts represent the salary paid to the Named Officers during
the period from June 15, 1998 to December 31, 1998. Annual salaries for the
Named Officers for 1998 were $225,000 for Mr. Skoien, $140,000 for Mr.
Tinkham, $145,000 for Mr. Berman, $150,000 for Mr. Terrell, and $112,815
for Mr. Pelmoter.
(2) Other compensation represents contributions to the Company's 401(K) plan.
(3) Mr. Berman's employment ended June 13, 2000.
(4) Mr. Terrell's employment ended January 1, 2000.
11
<PAGE>
OPTION GRANTS IN FISCAL 1999 AND 1998
The following table sets forth certain information concerning stock option
grants during fiscal 1999 and 1998 for each of the Named Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (1)
-------------------------------------------------------------- ------------------------------
PERCENTAGE OF
NUMBER OF TOTAL OPTIONS
SECURITIES GRANTED TO EXERCISE OR
UNDERLYING EMPLOYEES IN BASE PRICE EXPIRATION
NAME OPTIONS GRANTED FISCAL YEAR ($/SHARE) DATE 5% 10%
---- --------------- ----------- --------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
1999
----
Andrew F. Pelmoter 30,000 100.0% $5.00 6/14/09 94,334 239,061
1998
----
Gary J. Skoien 90,000 28.8% $6.49 6/14/08 367,337 930,905
David R. Tinkham 35,000 11.2% $6.49 6/14/08 142,853 362,019
Richard A. Berman (2) 35,000 11.2% $6.49 6/14/08 142,853 362,019
John R. Terrell (3) 25,000 8.0% $6.49 6/14/08 142,853 362,019
</TABLE>
NOTE:
(1) The amounts shown above for each of the Named Officers as potential
realizable values are based on assumed annualized rates of stock price
appreciation of 5% and 10% over the full ten year term of the options, as
required by applicable regulations of the Securities and Exchange
Commission. Actual gains, if any, on stock option exercises and common
stock holdings will be dependent on the future performance of the Company
and overall stock market conditions.
(2) Mr. Berman's employment ended June 13, 2000.
(3) Mr. Terrell's employment ended January 1, 2000.
EMPLOYMENT CONTRACTS
The Company has entered into employment agreements with Mr. Skoien, Mr.
Tinkham and Mr. Berman dated as of June 15, 1998. The employment agreements
provide that these individuals will receive minimum cash compensation of
$225,000 and $140,000 respectively, per annum plus annual performance bonuses
determined by the Compensation Committee and other employee benefits. Each of
the employment agreements provide for an initial three-year term and
automatically extends for one year terms unless either party gives, prior to
120 days before the end of the respective renewal term, written notice of its
intention to terminate the agreement. The employment agreements contain
non-competition provisions which generally prohibit these executives from
directly or indirectly competing with the business of the Company during the
term of employment and for a two year period after termination "without good
reason" by the employee or for a one year period after termination under
other circumstances. If the employment of these individuals is terminated
after a "change in control" (as such term is defined in the respective
contracts), the individual is entitled to a lump sum payment in an amount
equal to two times the annual salary and last performance bonus for Mr.
Skoien and the annual salary and last performance bonus for Messrs. Tinkham
and Berman. Mr. Berman's employment ended June 13, 2000. Additionally, Mr.
Skoien is permitted to continue certain responsibilities he has with The
Prime Group, Inc. The Company has also entered into an agreement with Mr.
Pelmoter which provides for contingent bonus payments based on the closing of
certain capital transactions and the achievement of certain
12
<PAGE>
occupancy levels at the Company's shopping centers. The agreement also provides
for severance benefits in the event his employment is terminated prior to
December 31, 2000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors, which is required to have
a majority of outside directors who are neither employees nor officers of the
Company, is charged with determining compensation for the Company's executive
officers and to implement and administer the Company's 1998 Long-term Stock
Incentive Plan. Ms. Gilliam, Mr. Reschke, and Mr. Thilman currently serve on the
Compensation Committee. See "Compensation of Directors."
No executive officer of the Company served as a Director or member of (1) the
compensation committee of another entity in which one of the executive officers
of such entity served on the Company's Compensation Committee, (2) the Board of
Directors or another entity in which one of the executive officers of such
entity served on the Company's Compensation Committee, or (3) the compensation
committee of any other entity in which one of the executive officers of such
entity served as a member of the Company's Board of Directors, during the year
ended December 31, 1999.
The Company utilizes Thilman & Filippini as its agent for insurance and risk
management programs. E. Thomas Thilman is a Director of the Company and a
partner in Thilman & Filippini. During the year ended December 31, 1999, the
Company paid premiums totaling approximately $666,000 on insurance policies
placed by Thilman & Filippini.
REPORT OF COMPENSATION COMMITTEE
Compensation of the Chairman, President and Chief Executive Officer and the four
other most highly compensated executive officers of the Company is determined by
the Compensation Committee of the Board of Directors. The Compensation Committee
was formed in June 1998 in connection with the reorganization of the Company in
June, 1998. The current members of the Compensation Committee are Ms. Gilliam,
Mr. Reschke, and Mr. Thilman.
The Company's compensation programs are designed to attract and retain highly
qualified individuals while providing the economic incentive necessary to
achieve the Company's performance goals. The Company intends to maintain
compensation policies, plans and programs which will reward management and
provide additional incentives for the enhancement of cash flows, and
consequently real property and shareholder values. The Compensation Committee
believes that, through their ownership of equity interests in the Company and
the Operating Partnership and the grant of incentive share options in the
Company, as applicable, the financial interests (and net worth) of the Company's
senior executives are aligned with the interests of the shareholders.
While the Compensation Committee will continue to evaluate the compensation
practices of the Company's industry peer group as an important factor in
determining executive compensation, the Company's achievement of its performance
goals and the contribution of senior executives to such achievement will greatly
influence whether the Company's compensation program remains at or exceeds the
median of its peer group. The peer group of companies identified by the
Compensation Committee is further described in the Performance Graph.
The Company's executive compensation programs consist of the following
components:
- Employment agreements with its most senior executives setting base
salary at fixed levels, and containing such other provisions,
sufficient to attract and retain employees capable of
13
<PAGE>
contributing to the Company's performance objectives with
discretionary increases by the Compensation Committee after review at
least annually;
- Incentive bonuses determined by the Board of Directors or the
Compensation Committee upon achievement of such corporate and
individual performance goals and objectives as may be determined by
the Board of Directors or the Compensation Committee, in order to
reward executive officers for attaining performance goals;
- Share options with scheduled vesting periods to align the interests of
the executive with those of the Company's shareholders; and
- Participation in other benefit programs available to employees
generally.
The Company has entered into Employment Agreements with its Chairman, President
and Chief Executive Officer, its Chief Financial Officer and its General
Counsel. The Employment Agreements established the base salaries of such
executives for 1998. The annualized base salary of the Chairman, President and
Chief Executive Officer for the period from June 15, 1998 to December 31, 1998
was $225,000. The annualized base salary of the Chief Financial Officer for the
period from June 15, 1998 to December 31, 1998 was $140,000. The annualized base
salary of the General Counsel for the period from June 15, 1998 to December 31,
1998 was $145,000. See "Executive Compensation - Employment Contracts." As
provided in the Employment Agreements, annual base salary adjustments will be
made by the Compensation Committee based on individual performance reviews as
well as other market factors. The Company has also entered into an agreement
with Mr. Pelmoter which provides for contingent bonus payments based on the
closing of certain capital transactions and the achievement of certain occupancy
levels at the Company's shopping centers. The agreement also provides for
severance benefits in the event his employment is terminated prior to December
31, 2000.
Executive officers are eligible to receive annual incentive bonuses. The amount
of any executive officer's bonus is based upon each individual's contributions
to the Company's achievement of financial and operating goals and, to a lesser
degree, factors such as leadership and contribution to strategy development. The
Compensation Committee will continue to establish overall performance goals for
the Company based primarily on the growth in funds from operations; satisfaction
of expansion, development, operating and occupancy goals; and the relative
performance of the Company in comparison with its industry peer group.
In connection with the reorganization of the Company in June, 1998 the Company
granted share options to the Chairman, President and Chief Executive Officer and
certain other executive officers of the Company. The Company determined the
number of share options to be granted to each executive officer based upon a
comparative analysis of compensation programs for public companies similar to
the Company. The Chairman, President and Chief Executive Officer, the Chief
Financial Officer and the General Counsel were granted options to purchase
90,000, 35,000, and 35,000 common shares, respectively. The Compensation
Committee believes the options granted under the 1998 Long-term Stock Incentive
Plan and the vesting schedules thereof will continue to align the interests of
management with those of the Company's shareholders by emphasizing long-term
share ownership and increases in shareholder value. See "Executive Compensation
- Option Grants in Fiscal 1999 and 1998."
The Internal Revenue Code of 1986, as amended, limits the ability of a
publicly-held corporation such as the Company to deduct compensation for its
Chief Executive Officer and the four highest paid officers other than the Chief
Executive Officer in excess of $1,000,000 per individual, per year.
Performance-based compensation is not counted toward the $1,000,000 limit. It is
the Company's policy to take this rule into account in setting the compensation
of its affected executives. The Company will not be denied any deduction under
Section 162(m) for compensation paid during its taxable year ending December 31,
1999. Based upon proposed Treasury regulations,
14
<PAGE>
bonuses payable to the Company's executives under their current employment
agreements and compensation attributable to options (both statutory and
non-statutory) granted under the 1998 Long-term Stock Incentive Plan may be
considered as compensation subject to the Section 162(m) limitation.
Accordingly, it is possible that in some future year some portion of the
compensation to a Company executive will not be tax deductible under Section
162(m). This will depend upon the market price of the Company's shares on the
date the non-statutory options are exercised and the number of non-statutory
options exercised in any one taxable year.
Margaret A. Gilliam
Michael W. Reschke
E. Thomas Thilman
Members of Compensation
Committee
February 16, 2000
PERFORMANCE GRAPH
The following performance graph compares the Company's performance to the
Russell 2000 and a peer group of companies engaged in the ownership of factory
outlet centers. This group consists of Prime Retail, Inc., Chelsea GCA Realty,
Inc., Konover Property Trust, Inc., and Tanger Factory Outlet Centers, Inc.
Share price performance is for the period from June 16, 1998, the date on which
trading in the common shares commenced, on a when-issued basis, through December
31, 1999. All share price performance assumes an initial investment of $100 at
the beginning of the period and assumes the reinvestment of any dividends.
[EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHICS]
<TABLE>
<CAPTION>
6/16/98 12/31/98 12/31/99
<S> <C> <C> <C>
HGPI $100 $110.71 $ 96.43
Russell 2000 $100 $ 97.26 $116.34
Peer Group $100 $ 84.94 $ 72.06
</TABLE>
15
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and Directors,
and persons who own more than 10% of a registered class of the Company's equity
securities, to file reports of the ownership and changes in the ownership (Forms
3, 4 and 5) with the Commission and the National Association of Securities
Dealers, Inc. Officers, Directors and beneficial owners of more than 10% of the
Company's stock are required by Commission regulation to furnish the Company
with copies of all such forms which they file.
The Company believes that all filing requirements under Section 16(a) of the
Securities Exchange Act of 1934 were complied with in fiscal 1999 with the
exception of Form 4s for Mr. Reschke and Prime Group Limited Partnership
reporting transactions for the month of August 1999, a Form 4 for Mr. Thilman
reporting transactions for the month of September 1999, and a Form 3 for Mr.
Pelmoter, all of which were not timely filed.
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
PRIME RETAIL, INC. GUARANTEE
Prime Retail, Inc., of which Mr. Reschke is Chairman of the Board and Mr.
Perlmutter is a member of the Board (Mr. Reschke is a Director of the Company's
as was Mr. Perlmutter prior to his resignation effective February 29, 2000), has
guaranteed, pursuant to that certain Guaranty dated as of June 15, 1998 (the
"Prime Retail Guarantee"), approximately $10.0 million of obligations under a
Loan Agreement between Nomura Asset Capital Corporation and certain subsidiaries
of the Company (the "Credit Facility"). In connection with the Prime Retail
Guarantee, the Company has agreed to pay Prime a fee of $400,000 per annum until
Prime is released from its guarantee obligation related to the HGP Credit
Facility. The guarantee fee has been prepaid through June 2000.
INSURANCE BROKERAGE WITH THILMAN & FILIPPINI
The Company has an ongoing relationship with respect to insurance brokerage
services with Thilman & Filippini, a general partnership in which Mr. Thilman, a
Director of the Company, is a general partner. Thilman & Filippini provides
insurance brokerage services for the Company in connection with the Company's
insurance programs and Thilman & Filippini receives commissions on the sale of
such policies and related products. During the year ended December 31, 1999 and
the period from June 15, 1998 to December 31, 1998, the Company paid premiums
totaling approximately $666,000 and $457,000, respectively, on insurance
policies placed by Thilman & Filippini.
OFFICE SUB-LEASE
The Company sub-leases office space on a month to month basis for its senior
executives at 77 W. Wacker, Chicago, Illinois from The Prime Group, Inc. The
Prime Group, Inc. is an affiliate of Michael W. Reschke, a Director of the
Company. During the year ended December 31, 1999 and the period from June 15,
1998 to December 31, 1998 the Company incurred rent expense of approximately
$121,000 and $65,000, respectively.
OTHER INDEBTEDNESS AND RELATIONSHIPS
LOAN TO PRIME OUTDOOR, LLC. The Company made $1.5 million a loan to Prime
Outdoor LLC, an affiliate of The Prime Group, Inc. The Prime Group, Inc. is an
affiliate of Michael W. Reschke, a Director of the Company.
16
<PAGE>
The interest rate on the loan was 10% and was secured by a pledge of all of
the unencumbered assets of Prime Outdoor, LLC, Prime's ownership interest in
Prime Outdoor, LLC and 410,783 units in Horizon Group Properties, LP owned by
The Prime Group, Inc. and its affiliates. The loan was approved by a
committee of independent directors of the Company. The loan was repaid on
June 9, 2000.
LOANS SECURED BY THE NORTON SHORES, MICHIGAN OFFICE BUILDING. The Company has
loans totaling $2.7 million as of December 31, 1999 collateralized by a mortgage
on the office building and related equipment which the Company utilizes as a
corporate office in Norton Shores, Michigan. Prime Retail LP, as the successor
to Horizon/Glen LP in the Merger, is jointly and severally liable with the
Company for any and all obligations arising under such loans. This building was
previously owned by an affiliate of Horizon and was contributed to the Company
by Horizon in connection with the Merger. The consent of the lender to the
previous owner of the property is required in connection with the transfer of
the property to the Company. The Company is currently seeking such consent but
as of February 16, 2000, such consent has not been obtained.
REVOLVING CREDIT FACILITY. The Company also had a $4.0 million revolving credit
facility that matured April 30, 1999. In January, 1999, Prime loaned the Company
$1.0 million to make a principal repayment against this credit facility and on
April 31, 1999, loaned the Company an additional $3.0 million to repay this
credit facility in full all at an interest rate of 10.0% (the "Prime Loan")
pursuant to the terms of a Working Capital Agreement between the Company and
Prime (the "Working Capital Agreement"). This loan was repaid on September 1,
1999, in connection with the transfer of the Company's interests in the
Bellport, New York center to Prime.
PHILLIPS VAN HEUSEN, INC. LEASES. Prior to the Merger, Horizon entered into an
agreement (the "PVH Agreement") with Phillips Van Heusen, Inc. ("PVH") which
modified certain provisions of PVH leases for the benefit of Horizon in exchange
for certain payments. Prime is liable for future payments relating to the PVH
Agreement, but the Company was obligated to pay $2,334,000 to Prime for two
payments relating to the PVH Agreement. The amount was paid in connection with
the transfer of the Company's interests in the Bellport Outlet Center and the
settlement of the Working Capital Agreement.
GARY J. SKOIEN'S EMPLOYMENT WITH THE PRIME GROUP, INC. Gary J. Skoien, Chairman,
President and Chief Executive Officer of the Company, is also the Executive Vice
President and Chief Operating Officer of The Prime Group, Inc. Mr. Skoien's
responsibilities with respect to this employment are primarily related to the
Huntley project, a mixed-use development project located in suburban Chicago.
Mr. Reschke, also a Director of the Company, is Chairman and Chief Executive
Officer of The Prime Group, Inc. The Prime Group, Inc. is a large stockholder in
Prime Retail, Inc., which owns, operates and develops factory outlet centers and
may be considered to be in competition with the Company.
WORKING CAPITAL AGREEMENT. In connection with the Merger, the Company entered
into a Working Capital Agreement with Prime (the "Working Capital Agreement").
The Working Capital Agreement provides that Prime will transfer to the Company
sufficient cash to result in net working capital of $545,000, after
consideration of the current assets and current liabilities of the Predecessor
Properties and the two centers which the Company purchased from Prime as of the
date of the Merger. At the date of the Merger Prime transferred $3.0 million to
the Company as a partial payment of amounts due under the Working Capital
Agreement. On September 1, 1999, the Company reached an agreement with Prime to
settle amounts due under the Working Capital Agreement in connection with the
sale of its interests in the joint ventures related to the outlet center in
Bellport, New York (see Note 1). The consideration for the transfer of the
Bellport interests was $7.5 million and approximately 95 acres of land in
Muskegon, Michigan subject to $800,000 of land contract payments. No gain or
loss was recognized on this transfer.
The proceeds from the settlement of the Working Capital Agreement and the sale
of the Bellport interests were used to repay $9.3 million of current and future
obligations owed by the Company to Prime. These obligations included
17
<PAGE>
(i) $2.2 million which the Company had borrowed from Prime to make principal
repayments on the Nomura facility, (ii) $4.0 million which the Company had
borrowed from Prime to repay a credit facility assumed in the Merger, (iii) $2.3
million related to the PVH Agreement, and (iv) $800,000 related to the guarantee
fee associated with Prime's guarantee of certain of the Company's debt
obligations (see Note 9). The Company also received $230,000 in cash.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Proposals of Shareholders intended to be presented at the next Annual Meeting
of Shareholders must be received by the Company not later than
February 28, 2001 in order to be eligible for inclusion in the proxy
statement and form of proxy for that meeting.
18
<PAGE>
APPENDIX A
FORM OF
HORIZON GROUP PROPERTIES, INC.
ARTICLES OF AMENDMENT AND RESTATEMENT
Horizon Group Properties, Inc., a Maryland corporation (the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of the State of Maryland ("SDAT"), that:
FIRST: The Corporation desires to amend and restate its charter as
currently in effect, and upon acceptance for record of these Articles of
Amendment and Restatement by SDAT, the provisions set forth in these Articles of
Amendment and Restatement, will be all of the provisions of the charter of the
Corporation as currently in effect.
SECOND: The charter of the Corporation is hereby amended and restated
in its entirety to read as follows:
ARTICLE I
NAME
The name of the Corporation (the "Corporation") is "Horizon Group
Properties, Inc."
ARTICLE II
PRINCIPAL OFFICE, REGISTERED OFFICE, AND AGENT
The address of the Corporation's principal office is C/O CSC Lawyers
Incorporating Service Company, 11 East Chase Street, Baltimore, Maryland 21202.
The address of the Corporation's resident agent in the State is 11 East Chase
Street, Baltimore, Maryland 21202. The name of its registered agent at that
office is CSC - Lawyers Incorporating Service Company.
<PAGE>
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Maryland General
Corporation Law as now or hereafter in force (the "MGCL").
ARTICLE IV
CAPITALIZATION
4.1 CAPITAL STOCK
Section 4.1.1 AUTHORITY TO ISSUE STOCK. The Board of Directors is hereby
empowered to authorize the issuance from time to time of shares of capital
stock, whether now or hereafter authorized, for such consideration as the Board
of Directors may deem advisable, subject to such limitations as may be set forth
in this charter, or in the by-laws of the Corporation as such by-laws may be
amended from time to time (the "By-laws") or in the MGCL.
Section 4.1.2 SHARES AND PAR VALUE. The total number of shares of all
classes of stock that the Corporation shall have authority to issue is
150,000,000 consisting of (i) 50,000,000 shares of common stock having a par
value of one cent ($.01) per share (the "Common Stock"), amounting in the
aggregate to par value of $500,000, (ii) 50,000,000 shares of preferred stock
having a par value of one cent ($.01) per share (the "Preferred Stock"),
amounting to an aggregate par value of $500,000, which Preferred Stock may be
issued in one or more series with such terms and upon such conditions as the
Board of Directors may authorize from time to time and (iii) 50,000,000 shares
of excess stock having a par value of one cent ($.01) per share (the "Excess
Stock"), amounting in the aggregate to par value of $500,000, of which (a)
25,000,000 shares shall be designated Excess Common Stock (the "Excess Common
Stock"), and (b) 25,000,000 shares shall be designated Excess Preferred Stock
(the "Excess Preferred Stock"). The aggregate par value of all the shares of all
classes of stock that the Corporation shall have authority to issue is
$1,500,000.
Section 4.1.3 DECLARATION OF DIVIDENDS.
(a) The Board of Directors of the Corporation may declare dividends
only to the extent permitted under the MGCL and, to the extent not inconsistent
therewith, these Amended and Restated Articles of Incorporation.
(b) All dividends shall be declared at the sole discretion of the
Board of Directors.
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Section 4.1.4 DETERMINATION OF FUNDS LEGALLY AVAILABLE FOR DISTRIBUTION. In
determining whether a distribution (other than upon voluntary or involuntary
liquidation) by dividend, redemption or other acquisition of shares of Capital
Stock is permitted under the MGCL, no effect shall be given to amounts that
would be needed, if the Corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of holders of
shares of Capital Stock whose preferential rights upon dissolution are superior
to those receiving the distribution.
Section 4.1.5 PREEMPTIVE RIGHTS. No holder of shares of Capital Stock of
the Corporation shall, as such holder, have any preemptive or other right to
purchase or subscribe for any shares of Preferred Stock or Common Stock or any
other class of Capital Stock of the Corporation which the Corporation may issue
or sell.
Section 4.1.6 CONTROL SHARES. Pursuant to Section 3-702(b) of the MGCL, the
terms of Subtitle 7 of Title 3 of such law (the "Control Share Statute") shall
be inapplicable to any acquisition of a Control Share (as determined in Section
3-701(d) of the MGCL) that is not prohibited by the terms of Articles IV or V of
this charter.
4.2 CERTAIN DEFINITIONS
Unless the context otherwise requires, the terms defined in this SECTION
4.2 shall have, for all purposes of this charter, the meanings herein specified
(with terms defined in the singular having comparable meanings when used in the
plural).
ACQUIRE. The term "Acquire" shall mean the acquisition of Beneficial
Ownership of shares of Capital Stock by any means including, without limitation,
the exercise of any rights under any option, warrant, convertible security,
pledge or other security interest or similar right to acquire shares, but shall
not include the acquisition of any such rights unless, as a result, the acquiror
would be considered a Beneficial Owner, as defined below. The term "Acquisition"
shall have the correlative meaning.
BUSINESS DAY. The term "business day" shall mean any day, other than a
Saturday or Sunday, that is neither a legal holiday nor a day on which banking
institutions in New York City are authorized or required by law, regulation or
executive order to close.
BENEFICIAL OWNERSHIP. The term "Beneficial Ownership" shall mean ownership
of Capital Stock by a Person who would be treated as an owner of such shares of
Capital Stock either directly or constructively through the application of
Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code, or the
application of Section 318(a) of the Code, as modified by Section 856(d)(5) of
the Code (except where expressly provided otherwise). The terms "Beneficial
Owner," "Beneficially Owns" and "Beneficially Owned" shall have the correlative
meanings.
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BENEFICIARY. The term "Beneficiary" shall mean a beneficiary of the
Trust as determined pursuant to SECTION 4.6.1.
BOARD. The term "Board" shall mean the Board of Directors of the
Corporation as it is constituted from time to time.
CAPITAL STOCK. The term "Capital Stock" shall mean all classes or series of
stock, including without limitation, Common Stock, Preferred Stock, and Excess
Stock.
CODE. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
COMMON STOCK. The term "Common Stock" shall mean the common shares, par
value $.01 per share, of the Corporation.
STOCK OWNERSHIP LIMIT. The term "Stock Ownership Limit" shall mean 4.9%
of the aggregate value of the outstanding shares of Capital Stock of the
Corporation except with respect to Existing Holders where such term shall
mean 9.9% of the aggregate value of the outstanding shares of Capital Stock
of the Corporation.
COMMON UNITS. "Common Units" shall mean Common Units as that term is
defined in the Partnership Agreement.
CONSTRUCTIVE OWNERSHIP. The term "Constructive Ownership" shall mean
ownership by a Person who would be treated as an owner either directly or
constructively through the application of Section 318(a) of the Code, as
modified by Section 856(d)(5) of the Code. The terms "Constructive Owner,"
"Constructively Owns" and "Constructively Owned" shall have the correlative
meanings.
EFFECTIVE DATE. The term "Effective Date" shall mean the date that these
Articles of Amendment and Restatement first become effective.
EXISTING HOLDER. The term "Existing Holder" shall mean any Person who
Beneficially Owns more than 4.9% of the aggregate value of the outstanding
shares of Common Stock of the Corporation as of the Effective Date.
EXCEPTED HOLDER. The term "Excepted Holder" shall mean any Person for whom
an Excepted Holder Limit is created by the Board pursuant to SECTION 4.5.12.
EXCEPTED HOLDER LIMIT. The term "Excepted Holder Limit" shall mean the
percentage limit established by the Board pursuant to SECTION 4.5.12, PROVIDED
that the affected Excepted Holder agrees to comply with the requirements
established by the Board pursuant to SECTION 4.5.12.
EXCESS STOCK. The term "Excess Stock" shall mean the Excess Common
Stock and the Excess Preferred Stock.
INITIAL DISTRIBUTION. The term "Initial Distribution" means the
distribution of the Common Stock subsequent to the merger of Prime Retail, Inc.,
a Maryland corporation, with Sky Merger Corp., a Maryland corporation.
MARKET PRICE. The term "Market Price" on any date shall mean, with respect
to any class or series of outstanding Capital Stock, the average of the Closing
Price for such Capital Stock for the five consecutive Trading Days ending on
such date. The "Closing Price" on any date shall mean the last sale price for
such Capital Stock, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, for such
Capital Stock in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if such Capital Stock is 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 such Capital Stock
is listed or admitted to trading or, if such Capital Stock is not listed or
admitted to trading on any national securities
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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
Nasdaq National Market or the Nasdaq Stock Market, Inc., or, if such system is
no longer in use, the principal other automated quotations system that may then
be in use or, if such Capital Stock is not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in such Capital Stock selected by the Board.
"Trading Day" shall mean a day on which the principal national securities
exchange on which the applicable Capital Stock is listed or admitted to trading
is open for the transaction of business or, if such Capital Stock is 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.
OPERATING PARTNERSHIP. The term "Operating Partnership" shall mean Horizon
Group Properties, L.P., a Delaware limited partnership subsequent to the Initial
Distribution.
PARTNERSHIP AGREEMENT. The term "Partnership Agreement" shall mean the
Amended and Restated Agreement of Limited Partnership of Horizon Group
Properties, L.P. subsequent to the Initial Distribution, of which, the
Corporation is the sole general partner, dated as of ___________, 1998, as such
agreement may be amended, restated, supplemented or changed from time to time.
PERSON. The term "person" shall mean an individual, corporation,
partnership, estate, trust (including a trust qualified under Sections 401(a) or
501(c)(17) of the Code), a portion of a trust permanently set aside for or to be
used exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 509(a) of the
Code, joint stock company or other entity and also includes a group as that term
is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended; but does not include an underwriter which participates in a public
offering of Capital Stock for a period of 90 days following the purchase by such
underwriter of such Capital Stock.
PREFERRED STOCK. The term "Preferred Stock" shall have the meaning set
forth in Section 4.1.2.
PURPORTED BENEFICIAL HOLDER. The term "Purported Beneficial Holder" shall
mean, with respect to any event other than a purported Transfer which results in
Excess Stock, the person for whom the applicable Purported Record Holder held
the shares of Capital Stock that were, pursuant to SECTION 4.5.7, automatically
exchanged for Excess Stock upon the occurrence of such event. The Purported
Beneficial Holder and the Purported Record Holder may be the same Person.
PURPORTED BENEFICIAL TRANSFEREE. The term "Purported Beneficial
Transferee" shall mean, with respect to any purported Transfer which results
in Excess Stock, the purported beneficial
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transferee for whom the Purported Record Transferee would have acquired
shares of Capital Stock if such Transfer had not violated the provisions of
SECTION 4.5.5. The Purported Beneficial Transferee and the Purported Record
Transferee may be the same Person.
PURPORTED RECORD HOLDER. The term "Purported Record Holder" shall mean,
with respect to any event other than a purported Transfer which results in
Excess Stock, the record holder of the shares of Capital Stock that were,
pursuant to SECTION 4.5.7 of this Article, automatically exchanged for Excess
Stock upon the occurrence of such event. The Purported Record Holder and the
Purported Beneficial Holder may be the same Person.
PURPORTED RECORD TRANSFEREE. The term "Purported Record Transferee" shall
mean, with respect to any purported Transfer which results in Excess Stock, the
Person who would have been the record holder of the Capital Stock if such
Transfer had not violated the provisions of SECTION 4.5.5. The Purported
Beneficial Transferee and the Purported Record Transferee may be the same
Person.
REIT. The term "REIT" shall mean a real estate investment trust within
the meaning of Section 856 of the Code.
REIT TERMINATION EVENT. "REIT Termination Event" shall mean the
earliest to occur of:
(i) the filing of a federal income tax return by the Corporation for
any taxable year on which the Corporation does not elect to be
taxed as a real estate investment trust;
(ii) the approval by the stockholders of the Corporation of a proposal
for the Corporation to cease to qualify as a real estate
investment trust;
(iii) a determination by the Board of the Corporation, based on the
advice of counsel, that the Corporation has ceased to qualify as
a real estate investment trust; or
(iv) a "determination" within the meaning of Section 1313(a) of the
Internal Revenue Code of 1986, as amended, that the Corporation
has ceased to qualify as a real estate investment trust.
RESTRICTION TERMINATION DATE. The term "Restriction Termination Date" shall
mean the first day on which the Corporation determines pursuant to SECTION 5.0.2
of this charter that it is no longer in the best interests of the Corporation to
attempt to, or continue to, qualify as a REIT or that compliance with the
restrictions and limitations on Beneficial Ownership and Transfer of shares of
Capital Stock set forth herein is no longer required in order for the
Corporation to qualify as a REIT.
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SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933,
as amended.
TRANSFER. The term "Transfer" shall mean any sale, transfer, gift,
assignment, devise or other disposition of Capital Stock or the right to vote or
receive dividends on Capital Stock (including (i) the granting of any option or
entering into any agreement for the sale, transfer or other disposition of
Capital Stock or the right to vote or receive dividends on Capital Stock or (ii)
the sale, transfer, assignment or other disposition of any securities (or rights
convertible into or exchangeable for Capital Stock), in each case whether
voluntary or involuntary, whether of record or beneficially (including without
limitation Transfers of interests in other entities which result in changes in
Beneficial Ownership of Capital Stock), and whether by operation of law or
otherwise.
TRUST. The term "Trust" shall mean the trust provided for in SECTION
4.6.1.
TRUSTEE. The term "Trustee" shall mean the Corporation, acting as
trustee for any of the Trusts or any successor trustee appointed by the
Corporation.
UNITS. The term "Units" shall mean units of common partnership
interests in the Operating Partnership.
4.3 PREFERRED STOCK
Section 4.3.1 Subject to the rights of any other class of Capital Stock
having voting rights with respect thereto, Preferred Stock may be issued from
time to time in one or more series, and the Board may, by resolution providing
for the issuance of such Preferred Stock, designate with respect to such shares:
(a) their voting powers; (b) their rights of redemption; (c) their right to
receive dividends (which may be cumulative or noncumulative) including the
dividend rate or rates, the conditions to payment, and the relative preferences
in relation to the dividends payable on any other class or classes or series of
stock; (d) their rights upon the dissolution of, or upon any distribution of the
assets of, the Corporation; (e) their rights to convert into, or exchange for,
shares of any other class or classes of stock of the Corporation, including the
price or prices or the rates of exchange; (f) restrictions on transfer and
ownership to preserve REIT status; and (g) other relative, participating,
optional or special rights, qualifications, limitations or restrictions.
4.4 EXCESS STOCK
Section 4.4.1 Subject to the rights of any other class of Capital Stock
having voting rights with respect thereto, the Excess Stock may be issued from
time to time in one or more series, and the Board may, by resolution providing
for the issuance of such Excess Stock, subject to SECTION 4.6 of this charter,
designate with respect to such shares: (a) their rights of redemption; (b) their
right to receive dividends (which may be cumulative or noncumulative) including
the dividend rate or rates, the conditions to payment, and the relative
preferences in relation to the
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dividends payable on any other class or classes or series of stock; (c) their
rights upon the dissolution of, or upon any distribution of the assets of, the
Corporation; (d) their rights to convert into, or exchange for, shares of any
other class or classes of stock of the Corporation, including the price or
prices or the rates of exchange; (e) designation of Beneficiaries; (f) purchase
right in Excess Stock, and (g) other relative, participating, optional or
special rights, qualifications, limitations or restrictions.
4.5 COMMON STOCK
Section 4.5.1 DIVIDENDS. Subject to the preferential rights of any class or
series within any such class of Capital Stock ranking senior as to dividends to
the Common Stock, and to the provisions of SECTION 4.5 of this charter, the
record holder of shares of Common Stock shall be entitled to receive, out of the
assets of the Corporation which are legally available therefor, such dividends
as from time to time may be declared by the Board. All such holders shall
share ratably, in accordance with the number of shares of Common Stock held
by each such holder, in all dividends paid on the Common Stock.
Section 4.5.2 DISTRIBUTION UPON LIQUIDATION, DISSOLUTION OR WINDING UP. In
the event of any dissolution, liquidation or winding up of the affairs of the
Corporation, after payment or provision for payment of the debts and other
liabilities of the Corporation and subject to the preferential rights of any
class of Capital Stock ranking senior to the Common Stock as to liquidation
preferences and to the provisions of Articles IV and V of this charter, the
holders of shares of Common Stock shall be entitled to receive, ratably with
each other holder of shares of Common Stock and Excess Common Stock which
results from the ownership of Common Stock in excess of the applicable limits
specified in Articles IV and V (the "Excess Common Stock"), a portion of the
assets of the Corporation available for distribution to the holders of its
Common Stock and Excess Common Stock calculated by dividing the number of
shares of Common Stock held by such holder by the total number of shares of
Common Stock and Excess Common Stock then outstanding.
Section 4.5.3 VOTING RIGHTS.
Except as otherwise provided in this charter or required by applicable
law, each holder of shares of Common Stock shall be entitled to notice of, and
the right to vote at, any meeting of the stockholders of Common Stock. Each
holder of shares of Common Stock shall be entitled to one vote for each share of
Common Stock held by such holder. The holders of record of shares of Common
Stock shall be entitled to vote, together with any other class or series of
Capital Stock entitled to vote, then outstanding, on any resolution presented by
the Board of Directors pursuant to SECTION 5.0.2.
Section 4.5.4 EXCLUSION OF OTHER RIGHTS.
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Except as may otherwise be required by law, the shares of Common Stock
shall not have any preferences or relative, participating, optional or other
special rights, other than those specifically set forth in this charter.
Section 4.5.5 STOCK OWNERSHIP LIMITATIONS.
(a) Except as provided in SECTION 4.5.12, during the period commencing
on the Effective Date and prior to the Restriction Termination Date, no Person
shall Acquire or Beneficially Own any shares of Common Stock or Preferred Stock
if, as the result of such acquisition or Beneficial Ownership, such Person shall
Beneficially Own shares of Common Stock and Preferred Stock, or either of them,
in excess of the Stock Ownership Limit applicable to such Person.
(b) Except as provided in SECTION 4.5.12, during the period commencing
on the Effective Date and prior to the Restriction Termination Date, any
Transfer of shares of Common Stock or Preferred Stock that, if effective,
would result in a violation of any of the restrictions in SECTION 4.5.5(a)
shall be void AB INITIO as to the Transfer of that number of shares of Common
Stock or Preferred Stock, as applicable, that would cause the violation of
the applicable restriction in SECTION 4.5.5(a) (rounding up to the nearest
whole share), and the intended transferee shall acquire no rights in such
excess number of shares of Common Stock or Preferred Stock.
(c) Notwithstanding any other provisions contained herein, from the
Effective Date and prior to the Restriction Termination Date, any Transfer of
shares of Common Stock or Preferred Stock or other event that, if effective,
would result in (i) the Corporation being "closely held" within the meaning
of Section 856(h) of the Code, (ii) the outstanding shares of the Capital
Stock of the Corporation being beneficially owned by less than 100 Persons
(determined without reference to any rules of attribution), or (iii) the
Corporation otherwise failing to qualify as a REIT (including, but not
limited to, a Transfer or other event that would result in the Corporation
owning (directly or Constructively) an interest in a tenant that is described
in Section 856(d)(2)(B) of the Code if the income derived by the Corporation
from such tenant would cause the Corporation to fail to satisfy any of the
gross income requirements of Section 856(c) of the Code), shall be void AB
INITIO as to the Transfer of that number of shares of Common Stock or
Preferred Stock (rounding up to the nearest whole share) or other event that
would cause the Corporation to be "closely held" within the meaning of
Section 856(h) of the Code, would result in the outstanding shares of the
Capital Stock of the Corporation being beneficially owned by less than 100
Persons (determined without reference to any rules of attribution), or would
otherwise result in the Corporation failing to qualify as a REIT, and the
intended transferee shall Acquire, or the Beneficial Owner shall retain, as
the case may be, no rights in such shares of Common Stock or Preferred Stock.
(d) It is expressly intended that the restrictions on ownership and
transfer described in this SECTION 4.5.5 shall apply to the exchange rights
provided in the Partnership Agreement. Notwithstanding any of the provisions of
the Partnership Agreement to the contrary, a partner of the Operating
Partnership shall not be entitled to effect an exchange of an interest in
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the Operating Partnership into shares of Common Stock if the Beneficial
Ownership of such shares of Common Stock would be prohibited under the
provisions of SECTION 4.5.5.
Section 4.5.6 REMEDIES FOR BREACH. If the Board or any duly authorized
committee thereof shall at any time determine in good faith that a Transfer or
other event has taken place that results in a violation of SECTION 4.5.5 or that
a Person intends to Acquire or has attempted to Acquire Beneficial Ownership of
any shares of Common Stock or Preferred Stock in violation of SECTION 4.5.5
(whether or not such violation is intended), the Board or a committee
thereof shall take such action as it or they deem advisable, subject to
SECTION 5.0.3 hereof, to refuse to give effect to or to prevent such Transfer
or other event, 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; PROVIDED, HOWEVER, that any Transfers or attempted
Transfers or, in the case of an event other than a Transfer, Beneficial
Ownership in violation of SECTION 4.5.5 shall be void AB INITIO and
automatically result in the exchange described in SECTION 4.5.7, irrespective
of any action (or non-action) by the Board or a committee thereof.
Section 4.5.7 EXCHANGE FOR EXCESS STOCK. If, notwithstanding the other
provisions contained in this SECTION 4.5, at any time after the date of the
Effective Date and prior to the Restriction Termination Date, there is a
purported Transfer or other event such that one or more of the restrictions on
Beneficial Ownership and Transfer of the Common Stock or Preferred Stock
described in SECTION 4.5.5 would be violated, then, except as otherwise provided
in SECTION 4.5.12, the shares of Common Stock or Preferred Stock being
Transferred (or, in the case of an event other than a Transfer, the shares of
Common Stock or Preferred Stock Beneficially Owned, which would cause one or
more of such restrictions to be violated) (rounded up to the nearest whole
share) shall be automatically exchanged for an equal number of shares of
Excess Common Stock or Excess Preferred Stock, as applicable. Such
exchange shall be effective as of the close of business on the business day
prior to the date of such purported Transfer or other event.
Section 4.5.8 NOTICE OF RESTRICTED TRANSFER. Any Person who Acquires or
attempts or intends to Acquire shares of Common Stock or Preferred Stock in
violation of SECTION 4.5.5, or any Person who is a transferee in a Transfer or
is otherwise affected by an event other than a Transfer that results in the
issuance of Excess Stock pursuant to SECTION 4.5.7, shall immediately give
written notice to the Corporation of such Transfer or other 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 Transfer or attempted,
intended or purported Transfer or other event on the Corporation's status as a
REIT.
Section 4.5.9 OWNERS REQUIRED TO PROVIDE INFORMATION. From
the Effective Date and prior to the Restriction Termination Date:
(a) every Beneficial Owner of more than 2.5% (or such lower percentage
as required by the Code or the Treasury Regulations promulgated thereunder) in
value of the outstanding Common Stock or Preferred Stock of the Corporation
shall, within 30 days after January 1 of each year, give written
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notice to the Corporation stating the name and address of such Beneficial Owner,
the number of shares of Common Stock and other shares of the Capital Stock of
the Corporation Beneficially Owned, and a description of the manner in which
such shares are held. Each such Beneficial Owner shall provide to the
Corporation such additional information as the Corporation may request in order
to determine the effect, if any, of such Beneficial Ownership on the
Corporation's status as a REIT and to ensure compliance with the Stock Ownership
Limit; and
(b) each Person who is a Beneficial Owner of Common Stock or Preferred
Stock and each Person (including the stockholder of record) who is holding
Common Stock or Preferred Stock for a Beneficial Owner shall provide to the
Corporation such information that the Corporation may request, in good faith,
in order to determine the Corporation's status as a REIT.
Section 4.5.10 REMEDIES NOT LIMITED. Subject to SECTION 5.0.2, nothing
contained in this SECTION 4.5 shall limit the authority of the Board of
Directors to take such other action as it deems necessary or advisable to
protect the Corporation and the interests of its stockholders in preserving the
Corporation's status as a REIT.
Section 4.5.11 AMBIGUITY. In the case of an ambiguity in the application of
any of the provisions of this SECTION 4.5 or any definition contained in SECTION
4.2, the Board shall have the power to determine the application of the
provisions of this SECTION 4.5 with respect to any situation based on the facts
known to it.
Section 4.5.12 EXCEPTIONS.
(a) The Board, in its sole and absolute discretion, may grant to any Person who
makes a request therefor an exception to the Stock Ownership Limit applicable to
such Person, subject to the following conditions and limitations: (A) the Board
shall have determined that (x) assuming such Person would Beneficially Own the
maximum amount of Common Stock and Preferred Stock permitted as a result of the
exception to be granted and (y) assuming that all other Persons who would be
treated as "individuals" for purposes of Code Section 542(a)(2) (determined
taking into account Section 856(h)(3)(A) of the Code) would Beneficially Own the
maximum amount of Common Stock and Preferred Stock permitted under this SECTION
4.5 (taking into account any exception, waiver, or exemption granted under this
SECTION 4.5.12 to (or with respect to) such Persons), the Corporation would not
be "closely held" within the meaning of Section 856(h) of the Code (assuming
that the ownership of Common Stock and Preferred Stock is determined during the
second half of a taxable year) and would not otherwise fail to qualify as a
REIT; (B) the Board shall have determined that the Corporation would not be
considered to receive or accrue any amounts directly or indirectly from any
person described in Section 856(d)(2)(B) of the Code, unless the Board, in its
sole and absolute discretion, determines that the receipt or accrual of any such
amounts would not otherwise cause the Corporation to fail to satisfy any of the
gross income requirements of Section 856(c) of the Code or otherwise cause the
Corporation to fail to qualify as a REIT; and (C) such Person provides to the
Board such representations and undertakings, if any, as the Board may, in its
sole and absolute discretion, determine to be necessary in order for it to make
the determination that the conditions set forth in clauses (A) and (B) above of
this SECTION 4.5.12(a) have been and will continue to be satisfied (including,
without limitation, an agreement as to a reduced Stock Ownership Limit or
Excepted Holder Limit for such Person with respect to the Beneficial Ownership
of one or more other classes of Common Stock or Preferred Stock not subject to
the exception), and such Person agrees that any violation of such
representations and undertakings or any attempted violation thereof will result
in the application of the remedies set forth in SECTION 4.5 with respect to
Common Stock or Preferred Stock held in excess of the Stock Ownership Limit
applicable to such Person or the Excepted Holder Limit (as may be applicable)
with respect to such Person (determined without regard to the exception granted
such Person under this subparagraph (a)). If a member of the Board requests that
the Board grant an exception pursuant to this subparagraph (a) with respect to
such member or with respect to any other Person if such Board member would be
considered to be the Beneficial Owner of Common Stock or Preferred Stock owned
by such Person, such member of the Board shall not participate in the decision
of the Board as to whether to grant any such exception.
(b) Subject to SECTION 4.5.5(c), the Board, in its sole discretion,
may exempt a Person from the Stock Ownership Limit (A) if such Person is not
an individual for purposes of Section 542(a)(2) of the Code and the Board
obtains such representations and undertakings from such Person as are
reasonably necessary to ascertain that no such individual's Beneficial
Ownership of such Common Stock or Preferred Stock will violate the Stock
Ownership Limit applicable to such Person or otherwise violate SECTION
4.5.5(c), (B) if such Person does not and represents that it will not own,
directly or Constructively, more than a 9.9% interest (as set forth in
Section 856(d)(2)(B) of the Code) in a tenant of the Corporation (or a tenant
of any entity owned or controlled by the Corporation) and the Board obtains
such representations and undertakings from such Person as are reasonably
necessary to ascertain this fact, and (C) if such Person agrees that any
violation of such representations or undertaking (or other action which is
contrary to the restrictions contained in SECTIONS 4.5.5 through 4.5.11 of
this Article IV) or attempted violation will result in such Common Stock or
Preferred Stock being exchanged for Excess Stock in accordance with SECTION
4.5.7.
(c) Prior to granting any exception pursuant to SECTION 4.5.12(b), the
Board shall require a ruling from the Internal Revenue Service, or an opinion of
counsel, in either case in form and substance satisfactory to the Board in it
sole discretion, as it
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may deem necessary or advisable in order to determine or ensure the
Corporation's status as a REIT. Notwithstanding the receipt of any ruling or
opinion, the Board may impose such conditions or restrictions as it deems
appropriate in connection with granting such exception.
Section 4.5.13 LEGEND. Each certificate for Common Stock shall bear the
following legend:
"The shares represented by this certificate are subject to restrictions
on Beneficial Ownership and Transfer for the purpose of the Corporation's
maintenance of its status as a Real Estate Investment Trust under the
Internal Revenue Code of 1986, as amended (the "Code"). Subject to certain
further restrictions and except as expressly provided in the Corporation's
charter, no Person may (i) Beneficially Own shares of the Corporation's
Capital Stock in excess of 4.9% of the aggregate value of the
outstanding shares of Capital Stock (unless (a) such Person is an
Existing Holder in which case such Existing Holder may not Beneficially
Own shares of the Corporation's Capital Stock in excess of 9.9% of the
aggregate value of the outstanding shares of Capital Stock or (b) such
Person is an Excepted Holder, in which case the Excepted Holder Limit
shall be applicable), (ii) Beneficially Own Common Stock or Preferred
Stock that would result in the Corporation being "closely held" under
Section 856(h) of the Code or otherwise cause the Corporation to fail to
qualify as a REIT, or (iii) Transfer shares of Common Stock or Preferred
Stock such that the outstanding shares of Capital Stock of the
Corporation would be beneficially owned by less than 100 Persons
(determined without reference to any rules of attribution). Any Person
who Beneficially Owns or attempts to Beneficially Own shares of Common
Stock or Preferred Stock which causes or will cause a Person to
Beneficially Own shares of Common Stock or Preferred Stock, as
applicable, in excess of the above limitations must immediately notify
the Corporation. Any Transfer of shares of Common Stock or Preferred
Stock in violation of the limitations set forth in the Corporation's
charter shall be void ab initio. If the restrictions on Transfer are
violated, the shares of Common Stock represented hereby will be
automatically exchanged for shares of Excess Common Stock which will be
held in trust by the Corporation. All capitalized terms in this legend
have the meanings defined in the Corporation's Articles of Amendment and
Restatement, as the same may be amended from time to time, a copy of
which, including the restrictions on transfer, will be sent without
charge to each holder of Common Stock who so requests."
4.6 EXCESS STOCK
Section 4.6.1 OWNERSHIP IN TRUST. Upon any purported Transfer or other
event that results in an exchange of Common Stock or Preferred Stock for Excess
Stock pursuant to SECTION 4.5.7, such Excess Stock shall be deemed to have been
Transferred to the Corporation, as Trustee of a Trust for the exclusive benefit
of the Beneficiary or Beneficiaries to whom an interest in such Trust may later
be transferred pursuant to SECTION 4.6.5. Shares of Excess Stock so held in
trust shall be issued and outstanding stock of the Corporation but shall not be
considered issued and outstanding for purposes of any stockholder vote. The
Purported Record Transferee or, in the case of Excess Stock resulting from an
event other than a Transfer, the Purported Record Holder, shall have no rights
in such Excess Stock except the right to designate a transferee of such Excess
Stock upon the terms specified in SECTION 4.6.5. The Purported Beneficial
Transferee or, in the case of Excess Stock resulting from an event other than a
Transfer, the Purported Beneficial Holder, shall have no rights in such Excess
Stock except as provided in SECTION 4.6.5.
Section 4.6.2 DIVIDEND RIGHTS. Excess Common Stock shall not be entitled to
any dividends or periodic distributions. Any dividend or distribution paid prior
to the discovery by the Corporation that shares of Common Stock have been
exchanged for Excess Stock shall be repaid to the Corporation upon demand, and
any dividend or distribution declared but unpaid shall be rescinded as void AB
INITIO with respect to such shares of Common Stock. Excess Preferred Stock shall
be entitled to such dividends and distributions as shall be designated by the
Board with respect to the applicable series of Excess Preferred Stock pursuant
to SECTION 4.4 of this charter at the time such series is created.
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Section 4.6.3 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, the Corporation, as holder of shares of Excess
Stock in trust, shall be entitled to receive, (a) with respect to Excess Common
Stock, subject to the preferential rights of holders of Preferred Stock or
Excess Preferred Stock, ratably with each other holder of Common Stock and
Excess Common Stock, that portion of the assets of the Corporation available for
distribution to the holders of its Common Stock and Excess Common Stock as the
number of shares of the Excess Common Stock held by the Corporation in trust
bears to the total number of shares of Common Stock and Excess Common Stock then
outstanding and (b) with respect to Excess Preferred Stock, that portion of the
assets of the Corporation as shall be designated by the Board with respect to
the applicable series of Excess Preferred Stock pursuant to SECTION 4.4 at the
time such series is created. The Corporation, as holder of the Excess Stock in
trust, or if the Corporation shall have been dissolved, any trustee appointed by
the Corporation prior to its dissolution, shall distribute ratably to the
Beneficiaries of the Trust, when and if determined in accordance with SECTION
4.6.6, any such assets received in respect of the Excess Stock in any
liquidation, dissolution or winding up of, or any distribution of the assets, of
the Corporation.
Section 4.6.4 VOTING RIGHTS. The holders of shares of Excess Stock shall
not be entitled to vote on any matters
Section 4.6.5 RESTRICTIONS ON TRANSFER; DESIGNATION OF BENEFICIARY.
(a) Excess Stock shall not be transferable. A Purported Record
Transferee or, in the case of Excess Stock resulting from an event other than a
Transfer, a Purported Record Holder, may freely designate a Beneficiary of its
interest in the Trust (representing the number of shares of the applicable class
or series of Excess Stock held by the Trust attributable to the purported
Transfer or other event that resulted in the issuance of such Excess Stock), if
(i) the shares of Excess Stock held in the Trust would not be Excess Stock in
the hands of such Beneficiary and (ii) the Purported Beneficial Transferee or,
in the case of Excess Stock resulting from an event other than a Transfer, the
Purported Beneficial Holder, does not receive consideration for the designation
of such Beneficiary that reflects a price per share for such Excess Stock that
exceeds the "Excess Stock Limitation Price". The Excess Stock Limitation Price
is the lesser of (A) in the case of Excess Stock resulting from a Transfer for
value, the price per share that the Purported Beneficial Transferee paid for
the Common Stock or Preferred Stock in the purported Transfer that resulted in
the issuance of the Excess Stock, or, in the case of Excess Stock resulting
from (I) a Transfer other than for value (such as a gift, devise or similar
Transfer) or (II) an event other than a Transfer, a price per share equal to
the Market Price of the Common Stock or Preferred Stock that was exchanged for
such Excess Stock on the date of the purported Transfer or other event that
resulted in the issuance of the Excess Stock or (B) a price per share equal to
the Market Price of the Excess Stock on the date of the designation of the
Beneficiary of the interest in the Trust. Prior to any transfer of any interest
in the Trust, the Purported Record Transferee or Purported Record Holder, as
the case may be, must give advance notice to the Corporation of the intended
transfer and the Corporation must have waived
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in writing its purchase rights under SECTION 4.6.6. Upon any transfer of an
interest in the Trust, the corresponding shares of Excess Stock in the Trust
shall be automatically exchanged for an equal number of shares of Common Stock
or Preferred Stock, as applicable, (and in the case of Preferred Stock, of the
same series as the shares of Preferred Stock that was exchanged into the Excess
Stock) and such shares of Common Stock or Preferred Stock shall be transferred
of record to the Beneficiary of the interest in the Trust designated by the
Purported Record Transferee or Purported Record Holder as described above if
such Common Stock or Preferred Stock would not be Excess Stock in the hands of
such Beneficiary.
(b) Notwithstanding the foregoing, if a Purported Beneficial
Transferee or Purported Beneficial Holder receives consideration for the
designation by the Purported Record Transferee or Purported Record Holder of a
Beneficiary of an interest in the Trust that exceeds the Excess Stock Limitation
Price, such Purported Beneficial Transferee or Purported Beneficial Holder shall
pay, or cause the Beneficiary of the interest in the Trust to pay, to the
Corporation the amount by which such consideration exceeds the Excess Stock
Limitation Price.
Section 4.6.6 PURCHASE RIGHT IN EXCESS STOCK. Notwithstanding SECTION
4.6.5, shares of Excess Stock shall be deemed to have been offered for sale to
the Corporation, or its designee, at a price per share equal to the Excess Stock
Limitation Price (determined by substituting "the date on which the Corporation,
or its designee, accepts the offer to sell" for "the date of the designation of
the Beneficiary of the interest in the Trust" in clause (B) of the definition of
Excess Stock Limitation Price in SECTION 4.6.5(a). 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 Transfer or other event which resulted in the issuance of
such Excess Stock and (ii) if the Corporation does not receive actual notice of
a Transfer or other event pursuant to SECTION 4.5.8, the date the Board of
Directors determines in good faith that such a Transfer or other event resulting
in the issuance of Excess Stock has occurred.
ARTICLE V
GENERAL REIT PROVISIONS
Section 5.0.1 GENERAL LIMITATIONS. Notwithstanding anything else in
this charter, during the period commencing on the Effective Date and prior to
this Restriction Termination Date, (i) no Person shall Acquire any shares of
Capital Stock if, as a result of such Acquisition, the outstanding shares of the
Capital Stock would be owned beneficially and not of record by less than 100
Persons (determined without reference to any rules of attribution), (ii) no
Person shall Acquire or Beneficially Own any shares of Capital Stock if, as a
result of such Acquisition or Beneficial Ownership, the Corporation would be
"closely held" within the meaning of Section 856(h) of the Code and (iii) no
person shall Acquire or Beneficially Own any shares of Capital Stock if, as a
result of such Acquisition or Beneficial Ownership, the Corporation would fail
to qualify as a REIT (including, but not limited to, a Transfer or other event
that would result in the Corporation owning (directly or Constructively) an
interest in a tenant that is described in Section 856(d)(2)(B) of the Code if
the income derived by the Corporation from such tenant would cause the
Corporation to fail to satisfy any of the gross income requirements of Section
856(c) of the Code).
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Section 5.0.2 TERMINATION OF REIT STATUS. The Board shall take no action to
terminate the Corporation's status as a REIT until such time as (i) the Board
adopts a resolution recommending that the Corporation terminate its status as a
REIT, (ii) the Board presents the resolution at an annual or special meeting of
the stockholders and (iii) such resolution is approved by the vote of a majority
of the shares entitled to be cast on the resolution.
Section 5.0.3 EXCHANGE OR MARKET TRANSACTIONS. Nothing in Article IV or
this Article V shall preclude the settlement of any transaction entered into
through the facilities of any national securities exchange or automated
inter-dealer quotation system.
Section 5.0.4 SEVERABILITY. If any provision of Article IV or this Article
V or any application of any such provision is determined to be invalid by any
federal or state court having jurisdiction over the issues, the validity of the
remaining provisions shall not be affected and other applications of such
provision shall be affected only to the extent necessary to comply with the
determination of such court.
Section 5.0.5 WAIVER. The Corporation shall have authority at any time to
waive the requirements that Excess Stock be issued or be deemed outstanding in
accordance with the provisions of Article IV if the Corporation determines,
based on an opinion of nationally recognized tax counsel, that the issuance of
such Excess Stock or the fact that such Excess Stock is deemed to be
outstanding, or any such redemption would jeopardize the status of the
Corporation as a REIT for federal income tax purposes.
ARTICLE VI
BOARD OF DIRECTORS
Section 6.0.1 MANAGEMENT. The management of the business and the conduct of
the affairs of the Corporation shall be vested in its Board of Directors.
Section 6.0.2 NUMBER. The number of directors which will constitute the
entire Board shall be fixed by, or in the manner provided in, the By-laws but
shall in no event be less than three nor more than fifteen. Any increases or
decreases in the size of the board shall be apportioned equally among the
classes of directors to prevent stacking in any one class of directors.
Section 6.0.3 CLASSIFICATION. The directors shall be classified, with
respect to the time for which they severally hold office, into three classes, as
nearly equal in number as possible. As shall be provided in the By-laws of the
Corporation, one class shall originally be elected for a term expiring at the
annual meeting of stockholders to be held in 1999, another class shall
originally be elected for a term expiring at the annual meeting of
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stockholders to be held in 2000, and another class shall originally be elected
for a term expiring at the annual meeting of stockholders to be held in 2001,
with each class to hold office until its successors are elected and qualified.
Except as otherwise provided in this charter, at each annual meeting of the
stockholders of the Corporation, the date of which shall be fixed by or pursuant
to the By-laws of the Corporation, the successors of the class of directors
whose terms expire at that meeting shall be elected to hold office for a term
expiring at the annual meeting of stockholders held in the third year following
the year of their election. No election of directors need be by written ballot.
No decrease in the number of directors constituting the Board shall shorten the
term of any incumbent director.
Section 6.0.4 VACANCIES. Except as otherwise provided in this charter,
newly created directorships resulting from any increase in the number of
directors may be filled by the majority vote of the Board, and any vacancies on
the Board resulting from death, resignation, removal or other cause shall be
filled by the affirmative vote of a majority of the remaining directors then in
office, even if less than a quorum of the Board, or, if applicable, by a sole
remaining director. Any director elected in accordance with the preceding
sentence shall hold office until the next annual meeting of the Corporation, at
which time a successor shall be elected to fill the remaining term of the
position filled by such director.
Section 6.0.5 REMOVAL. Except as otherwise provided in this charter, any
director may be removed from office only for cause and only by the affirmative
vote of two-thirds of the aggregate number of votes then entitled to be cast
generally in the election of directors. For purposes of this SECTION 6.0.5,
"cause" shall mean the willful and continuous failure of a director to
substantially perform the duties to the Corporation of such director (other
than any such failure resulting from temporary incapacity due to physical or
mental illness) or the willful engaging by a director in gross misconduct
materially and demonstrably injurious to the Corporation.
Section 6.0.6 BY-LAWS. Except as otherwise provided in the MGCL, the Board
shall have power to adopt, amend, alter, change and repeal any By-laws of the
Corporation by vote of the majority of the Board of Directors then in office.
Any adoption, amendment, alteration, change or repeal of any By-laws by the
stockholders of the Corporation shall require the affirmative vote of two thirds
of the aggregate number of votes then entitled to be cast generally in the
election of directors. Notwithstanding anything in this SECTION 6.0.6 to the
contrary, no amendment, alteration, change or repeal of any provision of the
By-laws relating to the classification or removal of directors or the amendment
or repeal of the By-laws shall be effected without the vote of two-thirds of the
aggregate number of votes entitled to be cast generally in the election of
Directors.
Section 6.0.7 POWERS. The enumeration and definition of particular
powers of the Board included elsewhere in this charter shall in no way be
limited or restricted by reference to or inference from the terms of any other
clause of this or any other Article of this charter, or construed
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as excluding or limiting, or deemed by inference or otherwise in any manner to
exclude or limit, the powers conferred upon the Board under the MGCL as now or
hereafter in force.
ARTICLE VII
LIABILITY
To the fullest extent permitted by Maryland law, as applicable from time to
time, no person who at any time was or is a director or officer of the
Corporation shall be personally liable to the Corporation or its stockholders
for money damages. No amendment of this charter or repeal of any of its
provisions shall limit or eliminate any of the benefits provided to directors
and officers under this Article VII in respect of any act or omission that
occurred prior to such amendment or repeal.
ARTICLE VIII
INDEMNIFICATION
The Corporation shall indemnify, to the fullest extent permitted by
Maryland law, as applicable from time to time, all persons who at any time were
or are directors or officers of the Corporation for any threatened, pending or
completed action, suit or proceeding (whether civil, criminal, administrative or
investigative) relating to any action alleged to have been taken or omitted in
such capacity as a director or an officer. The Corporation shall pay or
reimburse all reasonable expenses incurred by a present or former director or
officer of the Corporation in connection with any threatened, pending or
completed action, suit or proceeding (whether civil, criminal, administrative or
investigative) in which the present or former director or officer is a party, in
advance of the final disposition of the proceeding, to the fullest extent
permitted by, and in accordance with the applicable requirements of, Maryland
law, as applicable from time to time. The Corporation may indemnify any other
persons permitted but not required to be indemnified by Maryland law, as
applicable from time to time, if and to the extent indemnification is authorized
and determined to be appropriate, in each case in accordance with applicable
law, by the Board of Directors, the majority of the stockholders of the
Corporation entitled to vote thereon or special legal counsel appointed by the
Board. No amendment of this charter or repeal of any of its provisions shall
limit or eliminate any of the benefits provided to directors and officers under
this Article VIII in respect of any act or omission that occurred prior to such
amendment or repeal.
ARTICLE IX
WRITTEN CONSENT OF STOCKHOLDERS
Any corporate action upon which a vote of stockholders is required or
permitted may be taken without a meeting or vote of stockholders with the
unanimous written consent of stockholders entitled to vote thereon.
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ARTICLE X
AMENDMENT
The Corporation reserves the right to amend, alter or repeal any
provision contained in this charter upon (i) adoption by the Board of a
resolution recommending such amendment, alteration, or repeal, (ii) presentation
by the Board to the stockholders of a resolution at an annual or special meeting
of the stockholders and (iii) approval of such resolution by the affirmative
vote of the holders of a majority of the aggregate number of votes entitled to
be cast generally in the election of directors; PROVIDED, HOWEVER, the
affirmative vote of the holders of two-thirds of the aggregate number of votes
then entitled to be cast generally in the election of directors, shall be
required to amend SECTIONS 4.5.5 (including the definitions used therein),
5.0.1, 6.0.3 and 6.0.5 and Articles 4.4 (including the definitions used
therein), 4.6, VII, VIII and X hereof.
ARTICLE XI
EXISTENCE
The Corporation is to have a perpetual existence.
* * * * * *
THIRD: The amendments set forth in these Articles of Amendment and
Restatement do not increase the authorized stock of the Corporation.
FOURTH: The amendment and restatement of the charter of the
Corporation as set forth in these Articles of Amendment and Restatement was
advised by the Board of Directors of the Corporation and approved by the
stockholders of the Corporation.
FIFTH: The current number of directors of the Corporation is five.
The names of the current directors of the Corporation are as follows: Gov.
Jim Edgar, Michael W. Reschke, Gary J. Skoien, Margaret A. Gilliam and E.
Thomas Thilman.
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IN WITNESS WHEREOF, Horizon Group Properties, Inc., has caused these
Articles of Amendment and Restatement be signed in its name and on its behalf by
its President and attested by its Secretary on ___________, 2000.
Horizon Group Properties, Inc.
By:
--------------------------
Gary J. Skoien
President
Attest:
-----------------------
David R. Tinkham
Secretary
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OFFICER'S CERTIFICATION
THE UNDERSIGNED, Gary J. Skoien, President of Horizon Group
Properties, Inc.(the "Corporation") who executed on behalf of the Corporation
the foregoing Articles of Amendment and Restatement of which this certificate is
made a part, hereby acknowledges in the name and on behalf of said Corporation
the foregoing Articles of Amendment and Restatement to be the corporate act of
said Corporation and hereby certifies to the best of his knowledge, information,
and belief the matters and facts set forth therein with respect to the
authorization and approval thereof are true in all material respects under the
penalties of perjury.
---------------------------------
Gary J. Skoien
President
<PAGE>
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P R O X Y
HORIZON GROUP PROPERTIES, INC. Proxy/Voting Instruction Card
Chicago, Illinois
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS ON AUGUST 29, 2000.
The undersigned stockholder of Horizon Group Properties, Inc., a
Maryland corporation, hereby constitutes and appoints Gary J. Skoien and
David R. Tinkham or either of them, proxies for the undersigned, each with
full power of substitution, to attend the Meeting of Stockholders of Horizon
Group Properties, Inc. to be held on August 29, 2000 at 10:00 a.m., local time,
at 77 West Wacker Drive, 42nd Floor, Chicago, Illinois, 60601, and at any
adjournments or postponements thereof, and to vote as specified in this Proxy
all the shares of stock of the Company which the undersigned would be
entitled to vote if personally present. Any appointment of proxy heretofore
made by the undersigned for such meeting is hereby revoked.
Your vote with respect to the proposals may be indicated on the
reverse.
YOUR VOTE IS IMPORTANT! PLEASE SIGN AND DATE ON THE REVERSE AND RETURN
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
This Proxy When Properly Executed Will be Voted In The Manner Directed
Herein. If No Direction Is Made, This Proxy Will Be Voted FOR Proposal 1, FOR
Proposal 2 and FOR Proposal 3.
(PROXY CONTINUED ON REVERSE)
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1, FOR PROPOSAL 2 AND FOR
PROPOSAL 3.
1. Approve Amendments Contained in the Articles of Amendment and
Restatement of the Company;
FOR AGAINST ABSTAIN
2. Elect Governor Jim Edgar as a Director of the Company;
FOR WITHHOLD
3. Ratify the appointment of Ernst & Young, LLP as independent auditors
of the Company for the fiscal year ending December 31, 2000;
FOR AGAINST ABSTAIN
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Date Signature
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Printed Name
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