<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from___________to______________
Commission file number 1-11690
-----------------------------------
DEVELOPERS DIVERSIFIED REALTY CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-1723097
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
34555 Chagrin Boulevard Moreland Hills, Ohio 44022
- --------------------------------------------------------------------------------
(Address of principal executive offices - zip code)
(440) 247-4700
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicated by check X whether the registrant: (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports, and (2) has been subject to such filing
requirements for the past 90 days Yes X No .
---
APPLICABLE ONLY TO CORPORATE ISSUERS:
-------------------------------------
Indicate the number of shares outstanding of each of the issuer's classes of
common shares as of the latest practicable date.
57,293,252 shares outstanding as of November 10, 1998
---------- -----------------
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of September 30, 1998 and December 31,
1997.
Condensed Consolidated Statements of Operations for the Three Month Periods
ended September 30, 1998 and 1997.
Condensed Consolidated Statement of Operations for the Nine Month Periods ended
September 30, 1998 and 1997.
Condensed Consolidated Statements of Cash Flows for the Nine Month Periods ended
September 30, 1998 and 1997.
Notes to Condensed Consolidated Financial Statements.
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1998 1997
-------------- --------------
<S> <C> <C>
Real estate rental property:
Land $ 267,541 $ 183,809
Land under development 36,303 23,668
Construction in progress 132,399 28,130
Buildings 1,400,296 1,071,717
Fixtures and tenant improvement 21,207 18,418
-------------- --------------
1,857,746 1,325,742
Less accumulated depreciation (191,762) (171,737)
-------------- --------------
Real estate, net 1,665,984 1,154,005
Other real estate investments -- 72,149
Cash and cash equivalents 1,691 18
Investments in and advances to joint ventures 231,835 136,267
Minority equity investment 22,315 --
Notes receivable 29,882 4,081
Other assets 34,998 25,398
-------------- --------------
$ 1,986,705 $ 1,391,918
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Unsecured indebtedness:
Fixed rate senior notes $ 592,114 $ 392,254
Revolving credit facilities 114,000 139,700
Subordinated convertible debentures 40,761 46,891
-------------- --------------
746,875 578,845
Mortgage indebtedness 228,303 89,676
-------------- --------------
Total indebtedness 975,178 668,521
Accounts payable and accrued expenses 45,474 28,601
Dividends payable 19,080 --
Other liabilities 9,797 9,100
-------------- --------------
1,049,529 706,222
-------------- --------------
Minority equity interests 8,165 16,293
Operating partnership minority interests 88,887 353
Commitments and contingencies
Shareholders' equity:
Class A - 9.5% cumulative redeemable preferred shares, without par value,
$250 liquidation value; 1,500,000 shares authorized; 421,500 shares
issued and outstanding at September 30, 1998 and December 31, 1997 105,375 105,375
Class B - 9.44% cumulative redeemable preferred shares, without par value,
$250 liquidation value; 1,500,000 shares authorized; 177,500 shares
issued and outstanding at September 30, 1998 and December 31, 1997 44,375 44,375
Class C - 8.375% cumulative redeemable preferred shares, without par value,
$250 liquidation value; 1,500,000 shares authorized; 400,000 shares
issued
and outstanding at September 30, 1998 100,000 --
Class D- 8.68% cumulative redeemable preferred shares, without par value,
$250 liquidation value; 1,500,000 shares authorized; 216,000 shares
issued
and outstanding at September 30, 1998 54,000 --
Common shares, without par value, $.10 stated value; 100,000,000 and
50,000,000 shares authorized; 57,265,334 and 27,687,576 shares issued and
outstanding at September 30, 1998 and December 31, 1997, respectively
(Note 5) 5,726 2,769
Paid-in-capital 605,704 580,509
Accumulated dividends in excess of net income (74,749) (63,517)
-------------- --------------
840,431 669,511
Less: Unearned compensation - restricted stock (307) (461)
-------------- --------------
840,124 669,050
-------------- --------------
$ 1,986,705 $ 1,391,918
============== ==============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Revenues from operations:
Minimum rents $ 47,607 $ 31,871
Percentage and overage rents 324 348
Recoveries from tenants 11,970 8,024
Management fee income 873 669
Other 2,529 1,761
-------- --------
63,303 42,673
-------- --------
Rental operation expenses:
Operating and maintenance 5,770 3,818
Real estate taxes 7,248 5,143
General and administrative 3,244 2,620
Interest expense 17,149 8,982
Depreciation and amortization 12,417 8,303
-------- --------
45,828 28,866
-------- --------
Income before equity in net income of joint ventures and minority equity
investment, gain (loss) on sales of real estate, and allocation to
minority equity interests 17,475 13,807
Equity in net income of joint ventures and
minority equity investment 4,611 3,201
Gain (loss) on sales of real estate (36) --
-------- --------
Income before allocation to minority equity interests 22,050 17,008
Income allocated to minority equity interests (1,338) (261)
-------- --------
Net income $ 20,712 $ 16,747
======== ========
Net income applicable to common shareholders $ 14,702 $ 13,197
======== ========
Per share data:
Earnings per common share - basic $ 0.26 $ 0.25
======== ========
Earnings per common share - diluted $ 0.25 $ 0.24
======== ========
Dividends declared $ 0.3275 $ 0.315
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Revenues from operations:
Minimum rents $ 123,453 $ 89,075
Percentage and overage rents 2,251 1,955
Recoveries from tenants 30,797 22,794
Management fee income 2,437 2,184
Other 6,844 4,984
---------- ----------
165,782 120,992
---------- ----------
Rental operation expenses:
Operating and maintenance 14,034 10,941
Real estate taxes 19,742 14,468
General and administrative 9,247 7,646
Interest expense 41,917 25,460
Depreciation and amortization 31,638 23,509
---------- ----------
116,578 82,024
---------- ----------
Income before equity in net income of joint ventures and minority equity
investment, gain (loss) on sales of real estate, allocation to minority
equity interests and extraordinary item 49,204 38,968
Equity in net income of joint ventures and minority
equity investment 10,323 8,535
Gain (loss) on sales of real estate (36) 3,526
---------- ----------
Income before allocation to minority equity interests
and extraordinary item 59,491 51,029
Income allocated to minority equity interests (1,628) (787)
---------- ----------
Income before extraordinary item 57,863 50,242
Extraordinary item - extinguishment of
debt - deferred finance costs written-off (882) --
---------- ----------
Net income $ 56,981 $ 50,242
========== ==========
Net income applicable to common shareholders $ 43,872 $ 39,592
========== ==========
Per share data:
Earnings per common share - basic:
Income before extraordinary item $ 0.79 $ 0.78
Extraordinary item (0.01) --
---------- ----------
Net income $ 0.78 $ 0.78
========== ==========
Earnings per common share - diluted:
Income before extraordinary item $ 0.76 $ 0.77
Extraordinary item (0.01) --
---------- ----------
Net income $ 0.75 $ 0.77
========== ==========
Dividends declared $ 0.9825 $ 0.945
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30,
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Net cash flow provided by operating activities $ 99,755 $ 69,179
------------ ------------
Cash flow provided by (used for) investing activities:
Real estate developed or acquired (525,125) (235,689)
Investments in and advances to joint ventures and minority
equity investment, net (73,677) (15,312)
Acquisition of minority interest (16,293) --
Issuance of notes receivable (25,801) --
Proceeds from transfer of properties to joint ventures 234,377 --
Proceeds from sales of real estate 5,007 5,452
------------ ------------
Net cash flow used for investing activities (401,512) (245,549)
------------ ------------
Cash flow provided by (used for) financing activities:
Repayment of revolving credit facilities, net (25,700) (72,500)
Proceeds from issuance of Medium Term Notes, net of underwriting commissions
and $459 and $55 of offering expenses paid in 1998 and
1997, respectively 197,910 --
Proceeds from construction loans 20,311 49,670
Principal payments on rental property debt (15,669) (1,686)
Proceeds from issuance of Fixed Rate Senior Notes, net of underwriting
commissions and discounts and $500 of offering expenses paid -- 75,577
Payment of deferred finance costs (469) --
Proceeds from issuance of common shares, net of underwriting commissions
and $26 and $840 of offering expenses paid in 1998 and 1997, respectively 25,234 183,919
Proceeds from issuance of Class C and Class D preferred shares, net of
underwriting commissions and $869 of offering expenses paid in 1998 148,280 --
Proceeds from issuance of common shares in conjunction with exercise of
stock options, the Company's 401(k) plan, restricted stock plan and dividend
reinvestment plan 2,691 1,118
Dividends paid (49,158) (58,865)
------------ ------------
Net cash flow provided by financing activities 303,430 177,233
------------ ------------
Increase in cash and cash equivalents 1,673 863
Cash and cash equivalents, beginning of period 18 13
------------ ------------
Cash and cash equivalents, end of period $ 1,691 $ 876
============ ============
</TABLE>
Supplemental disclosure of non cash investing and financing activities:
In conjunction with the acquisition of certain shopping centers, the Company
assumed mortgage debt and liabilities aggregating $137.0 million and recorded
minority equity interests aggregating approximately $96.7 million during the
nine month period ended September 30, 1998. The Company also had approximately
$6.1 million of debentures converted into common shares of the Company. The
Company also issued approximately 29 million common shares pursuant to the
Company's two-for-one stock split, resulting in the reclassification of
approximately $2.9 million from paid-in-capital to common shares. In addition,
included in accounts payable was approximately $0.2 million relating to
construction in progress and $19.1 million of dividends declared. Also, in
conjunction with the acquisition of a minority equity investment, the Company
transferred land and buildings with a net book value of $7.4 million in exchange
for approximately 1.3 million common shares of American Industrial Properties.
Similarly, in conjunction with the formation of a joint venture, the Company
transferred property to the joint venture with a net book value, after
reduction for cash received, of $27.6 million in exchange for a 50% equity
interest. The foregoing transactions did not provide for or require the use of
cash.
In conjunction with the acquisitions of certain shopping centers, the Company
assumed certain liabilities and recorded a minority equity interest aggregating
approximately $18.1 million during the nine month period ended September 30,
1997. In addition, included in accounts payable was approximately $0.2 million
relating to construction in progress. The foregoing transactions did not require
the use of cash.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND FINANCIAL STATEMENT PRESENTATION
The Company is a self-administered and self-managed real estate
investment trust and is engaged in the business of acquiring, expanding, owning,
developing, managing and operating neighborhood and community shopping centers,
enclosed malls and business centers.
All significant intercompany balances and transactions have been
eliminated in consolidation.
Reclassifications
Certain reclassifications have been made to the 1997 financial
statements to conform to the 1998 presentation.
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries. The
accompanying unaudited condensed consolidated balance sheet as of September 30,
1998, and the related unaudited condensed consolidated statements of operations
and of cash flows for the nine months ended September 30, 1998 and 1997 have
been prepared by the Company in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they do not include
all information and footnotes required by generally accepted accounting
principles for complete financial statements. However, in the opinion of
management, the interim financial statements include all adjustments, consisting
of only normal recurring adjustments, necessary for a fair presentation of the
results of the periods presented. The results of the operations for the nine
months ended September 30, 1998 and 1997 are not necessarily indicative of the
results that may be expected for the full year. These financial statements
should be read in conjunction with the Company's audited financial statements
and notes thereto included in the Developers Diversified Realty Corporation
Annual Report on Form 10-K for the year ended December 31, 1997.
New Accounting Standards
In June 1997, the FASB issued Statement of Financial Accounting
Standard ("SFAS") No. 130 - Reporting Comprehensive Income. SFAS No. 130
establishes standards for the reporting and display of comprehensive income and
its components in a full set of general purpose financial statements.
Comprehensive income is defined as the changes in equity of a business during a
period from
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<PAGE> 8
transactions and other events and circumstances from nonowner sources. The new
standard becomes effective for the Company for the year ending December 31,
1998, and requires that comparative information from earlier years be restated
to conform to the requirements of this standard. Effective March 31, 1998 the
Company implemented SFAS No. 130 - Reporting Comprehensive Income. For the
periods ended September 30, 1998 and 1997 the Company had no items of other
comprehensive income requiring additional disclosure.
In June 1997, the FASB issued SFAS No. 131 - Disclosure about Segments
of an Enterprise and Related Information. SFAS No. 131 establishes standards for
disclosure about operating segments in annual financial statements and selected
information in interim financial reports. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. The statement supersedes SFAS No. 14 - Financial Reporting for
Segments of a Business Enterprise. The new standard becomes effective for the
Company for the year ending December 31, 1998, and requires that comparative
information from earlier years be restated to conform to the requirements of
this standard.
In June 1998, the FASB issued SFAS No. 133 - Accounting for Derivative
Instruments and Hedging Activities. This statement requires fair value
accounting for all derivatives including recognizing all such instruments on the
balance sheet with an offsetting amount recorded in the income statement or as
part of comprehensive income. The new standard becomes effective for the Company
for the year ending December 31, 2000. The Company does not expect this
pronouncement to have a material impact on the Company's financial position or
cash flows.
In May 1998, the Emerging Issues Task Force reached a consensus in
EITF 98-9 "Accounting for Contingent Rent in Interim Financial Periods" that the
lessor should defer recognition of contingent rental income in interim periods
until the specified target that triggers the contingent rental income is
achieved. This method is generally consistent with how the Company has
accounted for contingent rentals historically.
2. OFFERINGS
Equity:
In April 1998, the Company sold 669,639 common shares (pre-split) in an
underwritten offering at $37.7223 per share.
In July 1998, the Company sold 4,000,000 depositary shares of 8.375%
Class C Cumulative Redeemable Preferred Stock at $25 per depositary share. In
August and September 1998, the Company sold 2,160,000 depositary shares of 8.68%
Class D Cumulative Redeemable Preferred Stock at $25 per depositary share.
Debt:
In January 1998, the Company issued $100 million of Unsecured Fixed
Rate Senior Notes pursuant to its Medium Term Note program. These notes have a
term of ten years and a coupon interest rate of 6.625%. In July 1998, the
Company issued $100 million of Unsecured Fixed Rate Senior Notes with a term of
twenty years and a coupon interest rate of 7.5%. The aggregate net proceeds
received from these two offerings of approximately $197.9 million were primarily
used to retire variable rate indebtedness on the Company's revolving credit
facilities.
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<PAGE> 9
3. EQUITY INVESTMENTS IN JOINT VENTURES:
The Company's equity investments in joint ventures at September 30,
1998 were comprised of (i) a 50% joint venture interest in four community center
joint ventures, formed in November 1995, which own and operate ten shopping
center properties, located in nine different states, aggregating approximately
4.0 million square feet; (ii) a 50% joint venture interest, formed in September
1996, with The Ohio State Teachers Retirement Systems (OSTRS) which owns and
operates two shopping centers aggregating approximately 0.5 million square feet;
(iii) a 50% joint venture interest, formed in October 1996, in conjunction with
the development of shopping center in Merriam, Kansas, aggregating approximately
0.4 million square feet; (iv) a 35% joint venture interest in a limited
partnership, formed in January 1997, that owns a 0.3 million square foot
shopping center located in San Antonio, Texas; (v) a 50% joint venture interest
in a limited partnership, that owns a 0.4 million square foot shopping center
located in Martinsville, Virginia, formed in January 1993; (vi) a 50% interest
in seven individual joint ventures which are currently developing seven shopping
centers; (vii) a 50% joint venture interest acquired in March 1998, which owns a
shopping center aggregating 0.3 million square feet, in Columbus, Ohio (viii) a
79.45% joint venture interest acquired in March 1998, which owns a shopping
center aggregating 0.3 million square feet, in Columbus, Ohio (ix) an 80% joint
venture interest acquired in April 1998, which owns a shopping center
aggregating 0.3 million square feet in Columbus, Ohio; (x) a 50% joint venture
interest acquired in April 1998, which owns a shopping center aggregating 0.2
million square feet in Dayton, Ohio; (xi) a 25% joint venture interest in the
Retail Value Fund, formed with Prudential Real Estate Investors in February
1998, which acquired 33 retail sites, formerly occupied by Best Products,
located in 13 different states; (xii) a 50% joint venture interest, formed in
September 1998, which owns and operates six shopping centers, located in four
different states, aggregating approximately 2.0 million square feet and (xiii) a
50% joint venture interest in Sansone Group/DDR LL, a real estate management
company, in St. Louis, MO, formed in July 1998.
Summarized combined financial information of the Company's joint venture
investments is as follows (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
Combined Balance Sheets 1998 1997
------------ ------------
<S> <C> <C>
Land $ 216,833 $ 147,466
Buildings 755,530 482,153
Fixtures and tenant improvements 2,228 1,315
Construction in progress 84,925 19,172
------------ ------------
1,059,516 650,106
Less accumulated depreciation (51,570) (26,113)
------------ ------------
Real estate, net 1,007,946 623,993
Other assets 48,607 25,817
------------ ------------
$ 1,056,553 $ 649,810
============ ============
Mortgage debt $ 649,728 $ 389,160
Amounts payable to DDRC 36,496 32,667
Other liabilities 24,273 9,549
------------ ------------
710,497 431,376
Accumulated equity 346,056 218,434
------------ ------------
$ 1,056,553 $ 649,810
============ ============
</TABLE>
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<PAGE> 10
<TABLE>
<CAPTION>
Three Month Period Nine Month Period
Ended September 30, Ended September 30,
Combined Statements of Operations: 1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues from operations $ 29,287 $ 20,897 $ 74,233 $ 60,848
-------- -------- -------- --------
Rental operation expenses 7,240 4,758 17,770 14,484
Depreciation and amortization expenses 4,081 2,905 10,618 8,571
Interest expense 10,548 7,844 28,190 21,563
-------- -------- -------- --------
21,869 15,507 56,578 44,618
-------- -------- -------- --------
Income before gain on sales of real estate 7,418 5,390 17,655 16,230
Gain on sales of real estate 5,897 1,085 8,710 1,085
-------- -------- -------- --------
Net income $ 13,315 $ 6,475 $ 26,365 $ 17,315
======== ======== ======== ========
</TABLE>
On September 10, 1998 the Company formed a joint venture with the
institutional investment advisory firm DRA Advisors, Inc. ("DRA"), which is
acting on behalf of institutional clients. In conjunction with the formation of
this joint venture, the Company contributed six existing shopping center
properties valued at approximately $238 million and in exchange received cash of
approximately $192 million, funded from debt and equity proceeds received as
described below, which was used to repay variable rate indebtedness on the
Company's revolving credit facilities, and a 50% equity ownership interest in
the joint venture. Simultaneously with the Company's contribution, the joint
venture entered into a seven year, $156 million mortgage with interest at a
coupon rate of 6.64% and DRA contributed cash of approximately $42 million in
exchange for a 50% equity interest. Upon contribution, the Company did not
recognize a gain. The Company also agreed to master lease certain space occupied
by a tenant which has filed for bankruptcy under Chapter 11 with annual base
rent of $2.3 million. In exchange for the agreement to master lease the space,
the Company retained all rights associated with the bankruptcy claim and to the
benefits associated with the releasing of the existing space. The Company does
not believe that its exposure to loss is material under the terms of the
agreement. In accordance with the Joint Venture agreement, the Company will
continue to manage the properties and receive management fees at market rates.
The properties contributed to the joint venture are as follows:
- Arrowhead Crossing - Peoria, Arizona (Phoenix)
- Foothills Towne Center - Ahwatukee, Arizona (Phoenix)
- Eagan Promenade - Eagan, Minnesota (Minneapolis)
- Maple Grove Crossing - Maple Grove, Minnesota (Minneapolis)
- Eastchase Market - Fort Worth, Texas
- Tanasborne Town Center - Hillsboro, Oregon (Portland)
Included in management fee income for the nine month periods ended
September 30, 1998 and 1997, is approximately $2.1 and $2.0 million,
respectively, of management fees earned by the Company for services rendered to
the joint ventures. Similarly, other income for the nine month periods ended
September 30, 1998 and 1997, includes $1.3 million and $0.5 million,
respectively, of development fee income and commissions for services rendered to
the joint ventures.
4. MINORITY EQUITY INVESTMENT:
On August 4, 1998 the Company, in a joint release with American
Industrial Properties REIT [NYSE:IND] ("AIP"), announced the execution of a
definitive agreement providing for the strategic investment in AIP by the
Company. Under the terms of the Share Purchase Agreement dated to be
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<PAGE> 11
effective as of July 30, 1998, the Company purchased 949,147 newly issued common
shares of beneficial interest at $15.50 per share for approximately $14.7
million. Under the terms of a separate agreement, also dated to be effective as
of July 30, 1998, the Company, in exchange for five industrial properties owned
by the Company and valued at approximately $19.5 million, acquired approximately
1.3 million additional newly issued AIP shares of beneficial interest. Combined,
the acquired shares represent 19.9% of AIP's outstanding shares prior to the
Company's purchase. A second purchase by the Company of approximately 5.2
million newly issued shares of AIP for approximately $81.0 million is subject to
shareholder approval at a Special Meeting of AIP Shareholders to be held on
November 20, 1998. The additional shares will be acquired in conjunction with
acquisitions approved by AIP's Board of Trustees. Prior to AIP's November 20,
1998 shareholder meeting, the Company may provide for the financing of
acquisitions approved by AIP's Board of Trustees in the form of demand
promissory notes ("Notes"). These notes will bear interest at the rate of
10.25%. As of September 30, 1998, no notes were outstanding. Concurrent with
entering into the Agreement, AIP increased its Board of Trust Managers by four
positions and appointed the Company's designees Scott A. Wolstein, Albert T.
Adams, Robert H. Gidel and James A. Schoff to the Board. Mr. Wolstein has been
named AIP's Chairman of the Board. Pursuant to the Agreement, AIP may, under
certain circumstances and subject to certain limitations, following the closing
of the second purchase of AIP's common shares, put additional common or
preferred shares of AIP to the Company, at a price not to exceed $15.50 and
$14.00 per share, respectively. The put of these additional shares, would be for
the sole purpose of financing property acquisitions approved by AIP's Board of
Trust Managers.
Summarized financial information of AIP as of September 30, 1998 and for the
period July 30, 1998 through September 30, 1998 is as follows:
<TABLE>
<CAPTION>
September 30, 1998
------------------
<S> <C>
Balance Sheet:
Land $ 81,700
Buildings 322,148
------------
403,848
Less accumulated depreciation (31,052)
------------
Real estate, net 372,796
Other assets 20,334
------------
$ 393,130
============
Mortgage debt $ 207,106
Amounts payable to DDRC --
Other liabilities 18,482
------------
225,588
Accumulated equity 167,542
------------
$ 393,130
============
July 30, 1998 to
September 30, 1998
------------------
Statement of Operations:
Revenues from operations $ 8,720
------------
Rental operation expenses 3,402
Depreciation and amortization expenses 1,649
Interest expense 2,738
------------
7,789
------------
Net income $ 931
============
</TABLE>
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<PAGE> 12
5. ACQUISITIONS AND PRO FORMA FINANCIAL INFORMATION
During the nine month period ended September 30, 1998, the Company
completed the acquisition of, or investment in, 39 shopping centers with an
aggregate of approximately 7.0 million Company owned gross leasable square feet
(GLA) at an initial aggregate investment of approximately $763 million. These
properties are summarized as follows:
<TABLE>
<CAPTION>
Year Effective Date of Company
Location Built Acquisition GLA
-------- ----- ----------- ---
<S> <C> <C> <C>
Country Club Mall - Idaho Falls, Idaho 1976 February 25,1998 148,593
Bel Air Centre - Detroit, Michigan 1989 March 10, 1998 343,502
Perimeter Shopping Center - Dublin, Ohio 1996 March 23, 1998 137,610
OfficeMax - Barboursville, West Virginia 1985 March 23, 1998 70,900
Big Bear - Bellefontaine, Ohio 1995 March 28, 1998 54,780
Roundy's - Hamilton, Ohio 1986 March 23, 1998 30,110
Hoggies Center- Gahanna, Ohio 1995 March 23, 1998 39,285
Roundy's/Rite Aid - Pataskala, Ohio 1980 March 23, 1998 33,270
Shoppes at Turnberry - Pickerington, Ohio 1990 March 23, 1998 59,495
Derby Square Shopping Center - Grove City, Ohio 1992 March 23, 1998 128,050
Lennox Town Center - Columbus, Ohio (1) 1997 March 23, 1998 336,044
Sun Center - Columbus, Ohio (2) 1995 March 23, 1998 317,581
Nassau Park - Princeton, New Jersey 1995 April 1, 1998 202,104
Washington Park Plaza - Dayton, Ohio (1) 1990 April 28, 1998 169,816
Dublin Village Center - Columbus, Ohio (3) 1987 April 28, 1998 327,264
Easton Market - Columbus, Ohio (4) 1998 April 28, 1998 494,226
Family Centers at Las Vegas - Las Vegas, Nevada 1973 July 1, 1998 62,005
Family Centers at Rapid City - Rapid City, South Dakota 1972 July 1, 1998 35,544
Family Centers at Mid Valley - Salt Lake City, Utah 1982 July 1, 1998 696,356
Family Centers at Fort Union - Salt Lake City, Utah 1973 July 1, 1998 662,494
Family Centers at Riverdate - Riverdale, Utah 1995 July 1, 1998 549,733
Family Centers at Orem - Orem, Utah 1991 July 1, 1998 153,460
Family Centers at Ogden - Ogden, Utah 1977 July 1, 1998 162,316
Family Centers at 33rd Street - Salt Lake City, Utah 1978 July 1, 1998 39,032
Family Place at Logan - Logan, Utah 1975 July 1, 1998 19,200
Hermes Building - Salt Lake City, Utah 1985 July 1, 1998 53,749
Tanasbourne Town Center - Portland, Oregon 1998 July 2, 1998 155,892
Northland Square - Cedar Rapids, Iowa 1984 July 16, 1998 187,068
Plaza at Sunset Hill - St. Louis, Missouri 1997 July 16, 1998 421,028
Promenade at Brentwood - St. Louis, Missouri 1998 July 16, 1998 299,479
Olympic Oaks Village - St. Louis, Missouri 1985 July 16, 1998 92,372
Gravois Village - St. Louis, Missouri 1983 July 16, 1998 110,992
Keller Plaza - St. Louis, Missouri 1987 July 16, 1998 52,842
Southtown - St. Louis, Missouri 1992 July 16, 1998 144,808
Home Quarters - St. Louis, Missouri 1992 July 16, 1998 100,911
American Plaza - St. Louis, Missouri 1998 July 16, 1998 29,500
Walgreen's - St. Louis, Missouri 1988 July 16, 1998 17,504
Walgreen's - St. Louis, Missouri 1988 July 16, 1998 15,437
Morris Corners - Springfield, Missouri 1989 July 16, 1998 56,033
---------
7,010,385
=========
</TABLE>
(1) Property acquired through a joint venture in which the Company
owns a 50% interest.
(2) Property acquired through a joint venture in which the Company
owns a 79.45% interest.
(3) Property acquired through a joint venture in which the Company
owns an 80% interest.
(4) A portion of this property is under construction and will be
acquired in phases throughout 1998 and 1999.
-12-
<PAGE> 13
The operating results of the acquired shopping centers are included in
the results of operations of the Company from the effective date of acquisition.
The following unaudited supplemental pro forma operating data is
presented for the nine months ended September 30, 1998 as if each of the
following transactions had occurred on January 1, 1998; (i) the acquisition of
all properties acquired, or interests therein, by the Company in 1998; (ii) the
completion of the sale by the Company of 669,639 common shares (pre-split) in
April 1998; (iii) the completion of the sale by the Company of $200 million of
Medium Term Notes in January and July, 1998; (iv) the purchase by the Company of
the minority interest of a shopping center in Cleveland, Ohio in March 1998; (v)
the completion of the sale by the Company of 4,000,000 Class C Depositary shares
in July 1998; (vi) the completion of the sale by the Company of 2,160,000 Class
D Depositary shares in August and September 1998 and (vii) the transfer of six
properties owned by the Company into a 50% owned joint venture in September
1998.
The following unaudited supplemental pro forma operating data is
presented for the nine months ended September 30, 1997 as if each of the
following transactions had occurred on January 1, 1997: (i) the acquisition of
all properties acquired, or interests therein, by the Company in 1997 and 1998;
(ii) the completion of the sale by the Company of 669,639 common shares
(pre-split) in April 1998; (iii) the completion of the sale by the Company of
$102 million and $200 million of Medium Term Notes in 1997 and 1998,
respectively; (iv) the completion of the sale by the Company of 3,350,000 common
shares (pre-split) in January 1997; (v) the completion of the sale by the
Company of the $75 million 7.125% Pass through Asset Trust Securities in March
1997; (vi) the completion of the sale by the Company of 1,300,000 common shares
(pre-split) in June 1997; (vii) the completion of the sale by the Company of
507,960 common shares (pre-split) in September 1997; (viii) the completion of
the sale by the Company of 316,800 common shares (pre-split) in December 1997;
(ix) the purchase by the Company of the minority interest of a shopping center
in Cleveland, Ohio in March 1998; (x) the completion of the sale by the Company
of 4,000,000 Class C Depositary shares in July 1998; (vi) the completion of the
sale by the Company of 2,160,000 Class D Depositary shares in August and
September 1998 and (vii) the transfer of six properties owned by the Company
into a 50% owned joint venture in September 1998.
-13-
<PAGE> 14
<TABLE>
<CAPTION>
Nine Month Period Ended September 30,
-------------------------------------
(in thousands, except per share)
1998 1997
-------- --------
<S> <C> <C>
Pro forma revenues $167,292 $142,712
======== ========
Pro forma income before extraordinary item $ 60,054 $ 53,155
======== ========
Pro forma net income applicable
to common shareholders $ 41,450 $ 42,505
======== ========
Per share data:
Earnings per common share - basic:
Income before extraordinary item $ 0.74 $ 0.78
Extraordinary item (0.02) --
-------- --------
Net income $ 0.72 $ 0.78
======== ========
Earnings per common share - diluted:
Income before extraordinary item $ 0.71 $ 0.77
Extraordinary item (0.02) --
-------- --------
Net income $ 0.69 $ 0.77
======== ========
</TABLE>
The 1998 and 1997 pro forma information above does not include revenues
and expenses for five of the 39 properties acquired by the Company in 1998 and
the 1997 pro forma information does not include revenues and expenses for four
of the seven properties acquired by the Company in 1997 prior to their
respective acquisition dates because these shopping centers were either under
development or in the lease-up phase and, accordingly, the related operating
information for such centers either does not exist or would not be meaningful.
Pro forma results for two shopping centers acquired in 1998 are not presented
since these centers were sold in 1998. In addition, the 1998 and 1997 pro forma
information does not include the results of shopping center expansions
occurring at five of the shopping centers acquired by the Company.
6. SHAREHOLDERS' EQUITY AND OPERATING PARTNERSHIP UNITS:
The following table summarizes the changes in shareholders' equity
since December 31, 1997 (in thousands):
<TABLE>
<CAPTION>
Preferred Common Accumulated Unearned
Shares ($250 Shares Dividends in Compensation
Stated ($.10 stated Paid-in Excess of Restricted
Value) Value) Capital Net Income Stock Total
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1997 $ 149,750 $ 2,769 580,509 $ (63,517) $ (461) $ 669,050
Net income 56,981 56,981
Dividends declared -
Common Shares (55,657) (55,657)
Dividends declared -
Preferred Shares (12,556) (12,556)
Issuance of Common Shares 67 25,167 25,234
Issuance of Preferred Shares 154,000 (5,720) 148,280
Vesting of restricted stock 154 154
Stated value of shares issued in
connection with a two-for-one
stock split 2,861 (2,861) --
Conversion of Debentures 20 6,081 6,101
Issuance of common shares
related to exercise of stock
options, employee 401(k) plan
and dividend reinvestment plan 9 2,528 2,537
---------- ---------- ---------- ---------- ---------- ----------
Balance September 30, 1998 $ 303,750 $ 5,726 $ 605,704 $ (74,749) $ (307) $ 840,124
========== ========== ========== ========== ========== ==========
</TABLE>
-14-
<PAGE> 15
The Board of Directors of the Company approved a two-for-one stock
split to shareholders of record on July 27, 1998. On August 3, 1998, each such
shareholder received one share of common stock for each share of common stock
held. This stock split was effected in the form of a stock dividend.
Accordingly, $2.9 million was transferred from additional paid in capital to
common stock, representing the stated value of additional shares issued. All
share and per share data included in these condensed consolidated financial
statements reflects this split.
For the period ended September 30, 1998, in conjunction with the
acquisition of 18 shopping centers, the Company formed several limited
partnerships which issued limited partnership units which are exchangeable,
under certain circumstances and at the option of the Company, into 3,966,280 of
shares of the Company's common shares or for cash. In connection with the
Company's purchase of these shopping centers and the issuance of the limited
partership units, the Company provided a guarantee of the value of the limited
partnership units which includes the quarterly operating partnership
distributions. As of July 1, 2000, if required, the guarantee earnout can be
paid in the form of cash or additional limited partnership units. The purchase
was recorded at the present value of the guaranteed amounts.
In 1997, in conjunction with the acquisition of two shopping centers,
the Company formed limited partnerships which issued limited partnership units
which are exchangeable, at the option of the Company, into 17,884 shares of the
Company's common shares or for cash.
7. REVOLVING CREDIT FACILITIES:
During 1998, the Company and a syndicate of financial institutions
agreed to amend and restate the Company's primary revolving credit facility (the
"Unsecured Credit Facility") to increase the facility to $300 million from $150
million. The new agreement also provides for a reduction in pricing and an
extension of the term for an additional year through April 2001. The amended and
restated facility also continues to provide for a competitive bid option for up
to 50% of the facility amount. During the first quarter of 1998, the Company
recognized a non-cash extraordinary charge of approximately $0.9 million ($0.01
per share), relating to the write-off of unamortized deferred finance costs
associated with the former revolving credit facility. The Company's borrowings
under this facility bear interest at variable rates based on the prime rate or
LIBOR plus a specified spread (currently 0.85%), depending on the Company's long
term senior unsecured debt rating from Standard and Poor's and Moody's Investors
Service. The Unsecured Credit Facility is used to finance the acquisition of
properties, to provide working capital and for general corporate purposes. At
September 30, 1998, $114.0 million was outstanding under this facility with a
weighted average interest rate of 6.1%.
In addition, the Company maintains a $20 million unsecured revolving
credit facility with National City Bank. Borrowings under this facility bear
interest at variable rates based on the prime rate or LIBOR plus a specified
spread (currently at 0.85%) depending on the Company's long term senior
unsecured debt rating from Standard and Poor's and Moody's Investors Service. At
September 30, 1998 there was no indebtedness outstanding under this facility.
8. RELATED PARTY TRANSACTIONS
In February 1998, the Company acquired a shopping center located in
Idaho Falls, Idaho from a limited partnership in which the Company's Chairman
Emeritus, The Chairman of the Board, and the Vice-Chairman of the Board owned,
in the aggregate, through a separate partnership, a 1% general partnership
interest. The shopping center aggregates approximately 0.2 million square feet
of Company GLA. The initial purchase price of the property was approximately
$6.5 million. In accordance with
-15-
<PAGE> 16
the purchase agreement, the Company may be required to pay the seller an
additional $0.8 million upon the leasing of vacant space in the center.
In June 1998, the Company acquired, from a partnership owned by the
Company's Chairman Emeritus and an officer of the Company, approximately 18
acres of land, adjacent to a shopping center owned through one of the Company's
joint ventures, at a purchase price of approximately $4.4 million.
In addition, the Company paid to a partnership owned by the Chairman
Emeritus approximately $0.1 million for leasing/sales commissions associated
with leasing or sale of certain shopping center outlots. Also, the Company paid
approximately $0.7 million to a company owned by the brother-in-law of The
Chairman of the Board relating to fees and commissions on the acquisition of
several shopping centers in 1998.
In September 1998, the Company sold two properties which the Company
had initially purchased in July 1998 to a principal of one of the Company's
joint venture partners. These properties aggregated approximately 33,000 square
feet and were sold for approximately $4.4 million.
The Chairman and CEO of the Company received 100,000 stock options of
AIP in conjunction with agreeing to serve as Chairman of AIP's Board of
Trustees. All benefits associated with these options have been or will be
assigned to the Company.
In conjunction with the establishment of DDR's equity investment in
certain entities, the Company's Chairman and CEO owns voting stock in these
entities in order to meet certain REIT qualification requirements.
9. EARNINGS AND DIVIDENDS PER SHARE
Earnings per Share (EPS) have been computed pursuant to the provisions
of Statement of Financial Accounting Standards No. 128 which became effective
for all financial statements issued after December 15, 1997. All periods prior
thereto have been restated to conform with the provisions of this Statement.
Further, all per share amounts and average shares outstanding have been restated
to reflect the stock split described in Note 5.
The following table provides a reconciliation of both income before
extraordinary item and the number of common shares used in the computations of
"basic" EPS, which utilized the weighted average number of common shares
outstanding without regard to dilutive potential common shares, and "diluted"
EPS, which includes all such shares.
-16-
<PAGE> 17
<TABLE>
<CAPTION>
Three Month Period Nine Month Period
Ended September 30, Ended September 30,
------------------- -------------------
(in thousands, except per share amounts)
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income before extraordinary item $ 20,712 $ 16,747 $ 56,981 $ 50,242
Less: Preferred stock dividend (6,010) (3,550) (13,109) (10,650)
------------ ------------ ------------ ------------
Basic - Income before
extraordinary item applicable to
common shareholders 14,702 13,197 43,872 39,592
Effect of dilutive securities:
Joint venture partnerships (141) -- (640) --
------------ ------------ ------------ ------------
Diluted - Income before
extraordinary item applicable to
common shareholders plus
assumed conversions $ 14,561 $ 13,197 $ 43,232 $ 39,592
============ ============ ============ ============
Number of Shares:
Basic - average shares outstanding 57,257 53,113 56,500 50,844
Effect of dilutive securities:
Joint venture partnerships 778 -- 479
Stock options 730 1,027 876 1,026
Restricted stock -- 8 -- 2
------------ ------------ ------------ ------------
Diluted - average shares outstanding 58,765 54,148 57,855 51,872
============ ============ ============ ============
PER SHARE AMOUNT:
Income before extraordinary item
Basic $ 0.26 $ 0.25 $ 0.79 $ 0.78
============ ============ ============ ============
Diluted $ 0.25 $ 0.24 $ 0.76 $ 0.77
============ ============ ============ ============
</TABLE>
10. CONVERTIBLE SUBORDINATED DEBENTURES
During the nine month period ended September 30, 1998, debentures in
the principal amount of $6.1 million were converted into approximately 370,000
common shares (adjusted for the stock split described in Note 6). The related
accrued but unpaid interest was forfeited by the holders. In addition, upon
conversion of the debentures, approximately $29,000 of unamortized debenture
issue costs were charged to additional paid-in-capital.
11. SUBSEQUENT EVENTS
In November 1998, the Company increased the amount of its primary
revolving credit facility to $375 million from $300 million.
-17-
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
accompanying unaudited condensed consolidated financial statements and the notes
thereto.
The Company considers portions of this information to be
forward-looking statements within the meaning of Section 27A of the Securities
Exchange Act of 1933 and Section 21E of The Securities Exchange Act of 1934,
both as amended, with respect to the Company's expectations for future periods.
Although the Company believes that the expectations reflected in such
forward-looking statements are based upon reasonable assumptions, it can give no
assurance that its expectations will be achieved. For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words "believed," "anticipates," "plans," "seeks," "estimates," and similar
expressions are intended to identify forward-looking statements. There are a
number of important factors that could cause the results of the Company to
differ materially from those indicated by such forward-looking statements,
including, among other factors, local conditions such as an oversupply of space
or a reduction in demand for real estate in the area, competition from other
available space, dependence on rental income from real property or the loss of a
major tenant.
RESULTS OF OPERATIONS
Revenues from Operations
Total revenues increased $20.6 million, or 48.3%, to $63.3 million for
the three month period ended September 30, 1998 from $42.7 million for the same
period in 1997. Total revenues increased $44.8 million, or 37.0%, to $165.8
million for the nine month period ended September 30, 1998 from $121.0 million
for the same period in 1997. Base and percentage rents for the three month
period ended September 30, 1998 increased $15.7 million, or 48.7%, to $47.9
million as compared to $32.2 million for the same period in 1997. Base and
percentage rents increased $34.7 million, or 38.0%, to $125.7 million for the
nine month period ended September 30, 1998 from $91.0 million for the same
period in 1997. Approximately $4.6 million of the increase in base and
percentage rental income, for the nine month period ended September 30, 1998 is
the result of new leasing, re-tenanting and expansion of the Core Portfolio
Properties (shopping center properties owned as of January 1, 1997), an increase
of 5.9% over 1997 revenues from Core Portfolio Properties. The 43 shopping
centers acquired by the Company in 1998 and 1997 contributed $29.3 million of
additional base and percentage rental revenue and the four new shopping center
developments contributed $3.0 million. These increases were offset by a decrease
of $0.7 million relating to the sale of one shopping center in December 1997 and
the transfer of five business centers to American Industrial Properties ("AIP")
in July 1998 and $1.5 million relating to the transfer of 6 properties to a
joint venture in September 1998.
At September 30, 1998 the in-place occupancy rate of the Company's
portfolio was at 95.9% as compared to 96.0% at September 30, 1997. The average
annualized base rent per leased square foot, including those properties owned
through joint ventures, was $8.79 at September 30, 1998 as compared to $8.30 at
September 30, 1997. Same store sales, for those tenants required to report such
information, representing approximately 16.6 million square feet, increased 3.5%
to $229 per square foot as compared to $222 per square foot for the prior twelve
month period.
-18-
<PAGE> 19
The increase in recoveries from tenants of $8.0 million is directly
related to the increase in operating and maintenance expenses and real estate
taxes primarily associated with the 1998 and 1997 shopping center acquisitions
and developments. Recoveries were approximately 91.1% of operating expenses and
real estate taxes for the nine month period ended September 30, 1998 as compared
to 89.7% for the same period in 1997. Management fee income and other income
increased by approximately $2.1 million which generally relates to an increase
in interest income and development fees.
Other income was comprised of the following (in thousands):
<TABLE>
<CAPTION>
Three Month Period Nine Month Period
Ended September 30, Ended September 30,
1998 1997 1998 1997
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Interest $ 1,376 $ 488 $ 3,078 $ 1,362
Temporary tenant
rentals (Kiosks) 135 79 360 327
Lease termination fees 233 401 1,130 1,835
Development fees 431 455 1,188 870
Other 354 338 1,088 590
-------- -------- -------- --------
$ 2,529 $ 1,761 $ 6,844 $ 4,984
======== ======== ======== ========
</TABLE>
Expenses from Operations
Rental operating and maintenance expenses for the three month period
ended September 30, 1998 increased $2.0 million, or 51.1% to $5.8 million as
compared to $3.8 million for the same period in 1997. Rental operating and
maintenance expenses increased $3.1 million, or 28.3%, to $14.0 million for the
nine month period ended September 30, 1998 from $10.9 million for the same
period in 1997. An increase of $3.0 million is attributable to the 46 shopping
centers acquired and developed in 1997 and 1998 and $0.2 million in the Core
Portfolio Properties. These increases were offset by a decrease of $0.1 million
relating to the sale and transfer of 12 properties in 1997 and 1998.
Real estate taxes increased $2.1 million, or 40.9%, to $7.2 million for
the three month period ended September 30, 1998 as compared to $5.1 million for
the same period in 1997. Real estate taxes increased $5.2 million, or 36.5%, to
$19.7 million for the nine month period ended September 30, 1998 from $14.5
million for the same period in 1997. An increase of $4.4 million is related to
the 46 shopping centers acquired and developed in 1997 and 1998 and $1.1 million
in the Core Portfolio Properties. These increases were offset by a decrease of
$0.1 million relating to the sale of one shopping center in December 1997 and
the transfer of five business centers to AIP in July 1998 and $0.2 million
relating to the transfer of 6 properties to a joint venture in September 1998.
General and administrative expenses increased $0.6 million, or 23.9%,
to $3.2 million for the three month period ended September 30, 1998 as compared
to $2.6 million in 1997. General and administrative expenses increased $1.6
million, or 20.9%, to $9.2 million for the nine month period ended September 30,
1998 from $7.6 million for the same period in 1997. The increase is attributable
to the growth of the Company primarily related to acquisitions, expansions and
developments. The Company continues to maintain a conservative policy with
regard to the expensing of all internal leasing salaries, legal salaries and
related expenses associated with the leasing and re-leasing of existing space.
In addition, the Company has expensed all internal costs associated with
acquisitions. Total general and administrative expenses were approximately 3.9%
and 4.2% of total revenues, including
-19-
<PAGE> 20
total revenues of joint ventures, for the nine month periods ended September 30,
1998 and 1997, respectively.
Depreciation and amortization expense increased $4.1 million, or 49.6%,
to $12.4 million for the three month period ended September 30, 1998 as compared
to $8.3 million for the same period in 1997. Depreciation and amortization
increased $8.1 million, or 34.6%, to $31.6 million for the nine month period
ended September 30, 1998 from $23.5 million for the same period in 1997. An
increase of $7.5 million is related to the 46 shopping centers acquired and
developed in 1998 and 1997 and $1.0 million relating to Core Portfolio
Properties. These increases were offset by a decrease of $0.2 million relating
to the sale of one shopping center in December 1997 and the transfer of five
business centers to AIP in July 1998 and $0.2 million relating to the transfer
of six properties to a joint venture in September 1998.
Interest expense increased $8.1 million, or 90.9%, to $17.1 million for
the three month period ended September 30, 1998, as compared to $9.0 million for
the same period in 1997. Interest expense increased $16.4 million, or 64.6%, to
$41.9 million for the nine month period ended September 30, 1998 from $25.5
million for the same period in 1997. The overall increase to interest expense
for the three and nine month periods ended September 30, 1998 as compared to the
same periods in 1997 is primarily related to the acquisition of shopping centers
during 1998 and 1997. The weighted average debt outstanding during the nine
month period ended September 30, 1998 and related weighted average interest rate
was $872.3 million and 7.4%, respectively, compared to $475.8 million and 7.9%,
respectively, for the same period in 1997. Interest costs capitalized, in
conjunction with development and expansion projects, were $3.3 million and $6.6
million for the three and nine month periods ended September 30, 1998, as
compared to $1.2 million and $3.0 million, for the same period in 1997.
Equity in net income of joint ventures increased $1.4 million, or
44.1%, to $4.6 million for the three month period ended September 30, 1998 as
compared to $3.2 million for the same period in 1997. Equity in net income of
joint ventures increased $1.8 million, or 21.0%, to $10.3 million for the nine
month period ended September 30, 1998 from $8.5 million for the same period in
1997. This increase is primarily attributable to approximately $2.5 million of
income from the Company's 25% interest in the Prudential Retail Value Fund and
the seven joint venture interests acquired/formed during 1998. This increase was
offset by a decrease in net income from the Community Center Joint Ventures of
approximately $0.7 million, primarily associated with an increase in interest
costs relating to the refinancing of the variable rate bridge financings to long
term fixed rate financing in May 1997.
The minority equity interest expense increased $1.0 million, to $1.3
million for the three month period ended September 30, 1998, as compared to $0.3
million for the same period in 1997. The minority equity interest expense
increased $0.8 million, to $1.6 million for the nine month period ended
September 30, 1998, as compared to $0.8 million for the same period in 1997. The
increase relates to the Company's purchase of 16 shopping centers in 1998 and
as consideration, the related issuance of operating partnership units which are
convertible into 3.9 million common shares of the Company. This increase is
offset by the Company's purchase, in March 1998, of the minority interest in
one shopping center located in Cleveland, Ohio, for approximately $16.3
million. The minority equity interest expense represents the allocation
associated with the priority distribution associated with such interests.
-20-
<PAGE> 21
Loss on sales of real estate aggregated $0.04 million for the nine
month period ended September 30, 1998 due to the sale of certain outlots. Gain
on sales of real estate aggregated $3.5 million for the nine month period ended
September 30, 1997. In March 1997, the Company sold two business centers in
Highland Heights, Ohio aggregating approximately 113,000 square feet for
approximately $5.7 million. The two business centers had been vacant for
approximately 18 months.
The extraordinary item, which aggregated $0.9 million for the nine
month period ended September 30, 1998, relates to the write-off of unamortized
deferred finance costs associated with the amended and restated $300 million
revolving credit agreement. (See Financing Activities).
Net Income
Net income increased $4.0 million, or 23.7%, to $20.7 million for the
three month period ended September 30, 1998, as compared to net income of $16.7
million for the same period in 1997. Net income increased $6.7 million, or
13.4%, to $57.0 million for the nine month period ended September 30, 1998, as
compared to $50.3 million for the same period in 1997. The increase in net
income of $6.7 million is primarily attributable to increases in net operating
revenues (total revenues less operating and maintenance, real estate taxes and
general and administrative expense) aggregating $34.8 million, resulting from
new leasing, retenanting and expansion of Core Portfolio Properties, and the 46
shopping centers acquired and developed in 1997 and 1998, an increase of $1.8
million relating to equity income from joint ventures. The increase in net
operating revenues and equity income from joint ventures expense was offset by
increases in depreciation, interest expense, minority interest expense,
extraordinary item and a reduction of gain on sales of real estate of $8.1
million, $16.5 million, $0.8 million, $0.9 million and $3.6 million,
respectively.
FUNDS FROM OPERATIONS
Management believes that funds from operations ("FFO") provides an
additional indicator of the financial performance of a Real Estate Investment
Trust. FFO is defined generally as net income applicable to common shareholders
excluding gains (losses) on sale of property, nonrecurring and extraordinary
items, adjusted for certain non-cash items, principally real property
depreciation and equity income (loss) from its joint ventures and adding the
Company's proportionate share of FFO of its unconsolidated joint ventures,
determined on a consistent basis. The Company calculates FFO in accordance with
the foregoing definition, which is substantially the same as the definition
currently used by the National Association of Real Estate Investment Trusts
("NAREIT"). Certain other real estate companies may calculate funds from
operations in a different manner. For the three month period ended September 30,
1998, FFO increased $7.8 million, or 35.0%, to $30.1 million as compared to
$22.3 million for the same period in 1997. For the nine month period ended
September 30, 1998, FFO increased $18.9 million, or 30.0%, to $81.9 million as
compared to $63.0 million for the same period in 1997. The increase is
attributable to increases in revenues from Core Portfolio Properties,
-21-
<PAGE> 22
acquisitions and developments. The Company's calculation of FFO is as follows
(in thousands):
<TABLE>
<CAPTION>
Three Month Period Nine Month Period
Ended September 30, Ended September 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net income applicable to
common shareholders (1) $ 14,702 $ 13,197 $ 43,872 $ 39,592
Depreciation of real property 12,274 8,217 31,243 23,249
Equity in net income of joint ventures
and minority equity investment (4,611) (3,201) (10,323) (8,535)
Minority interest expense (OP Units) 1,300 -- 1,411 --
Joint Ventures' FFO and minority
equity investment (2) 6,368 4,083 14,805 12,206
Loss (gain) on sales of real estate 36 -- 36 (3,526)
Extraordinary item -- -- 882 --
-------- -------- -------- --------
$ 30,069 $ 22,296 $ 81,926 $ 62,986
======== ======== ======== ========
</TABLE>
(1) Includes straight line rental revenues of approximately $1.0 million
and $0.5 million for the three month periods ended September 30, 1998
and 1997, respectively and approximately $2.5 million and $1.3 million
for the nine month periods ended September 30, 1998 and 1997,
respectively, primarily related to recent acquisitions and new
developments.
(2) Joint Venture and minority equity investment Funds From Operations are
summarized as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Net income (a) $ 14,246 $ 6,475 $ 27,296 $ 17,315
Gain on sales of real estate (5,897) (1,085) (8,709) (1,085)
Depreciation of real property 5,730 2,905 12,267 8,571
-------- -------- -------- --------
$ 14,079 $ 8,295 $ 30,854 $ 24,801
======== ======== ======== ========
DDRC Ownership interests (b) $ 6,368 $ 4,083 $ 14,805 $ 12,206
======== ======== ======== ========
</TABLE>
(a) Revenues for the three month periods ended September 30, 1998
and 1997 include approximately $0.8 million and $0.7 million,
respectively, resulting from the recognition of straight line
rents of which the Company's proportionate share is $0.4
million and $0.3 million, respectively. Revenue for the nine
month period ended September 30, 1998 and 1997 include
approximately $2.1 million, resulting from the recognition of
straight line rents of which the Company's proportionate share
is $1.0 million.
(b) At September 30, 1998 the Company owned a 50% joint venture
interest relating to 21 operating shopping center properties,
an 80% joint venture interest in two operating shopping center
properties, a 35% joint venture interest in one operating
shopping center property, a 25% interest in the Prudential
Retail Value Fund and a 50% joint venture interest in a real
estate management company located in St. Louis, MO. At
September 30, 1998 the Company also owned a 16.6% equity
interest in AIP. At September 30, 1997 the Company owned a 50%
joint venture interest in 13 operating shopping center
properties and a 35% joint venture interest in one operating
shopping center.
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<PAGE> 23
LIQUIDITY AND CAPITAL RESOURCES
The Company anticipates that cash flow from operating activities will
continue to provide adequate capital for all principal payments, recurring
tenant improvements, as well as dividend payments in accordance with REIT
requirements and that cash on hand, borrowings available under its existing
revolving credit facilities, as well as other debt and equity alternatives,
including the issuance of operating partnership units and joint venture capital,
will provide the necessary capital to achieve continued growth. Cash flow from
operating activities for the nine month period ended September 30, 1998
increased to $99.8 million as compared to $69.2 million for the same period in
1997. The increase is attributable to the 46 shopping center acquisitions and
developments completed in 1998 and 1997, new leasing, expansion and re-tenanting
of the core portfolio properties and the equity offerings completed in 1998 and
1997.
An increase in the 1998 quarterly dividend per common share to $.3275
from $.315 was approved in December 1997 by the Company's Board of Directors.
The Company's common share dividend payout ratio for the first three quarters of
1998 approximated 67.9% of the actual Funds From Operations as compared to 76.5%
for the same period in 1997. It is anticipated that the current dividend level
will result in a more conservative payout ratio as compared to prior years. A
lower payout ratio will enable the Company to retain more capital which will be
utilized for attractive investment opportunities in the development, acquisition
and expansion of portfolio properties.
During the nine month period ended September 30, 1998, the Company and
its joint ventures invested $741.4 million, net, to acquire, develop, expand,
improve and re-tenant its properties. The Company's expansion acquisition and
development activity is summarized below:
Expansions:
During the first nine months of 1998, the Company completed six
expansion projects at an aggregate cost of $9.1 million. The Company is
currently expanding/redeveloping 15 of its shopping centers aggregating
approximately 875,000 square feet of Company owned GLA and will continue to
pursue additional expansion opportunities.
Acquisitions:
During the first nine months of 1998, the Company completed the
acquisition of, or investment in 39 shopping centers. The Company purchased
Belair Centre, located in Detroit, Michigan, aggregating approximately 450,000
square feet for approximately $33.7 million. The Company also acquired Country
Club Mall, located in Idaho Falls, Idaho, aggregating approximately 150,000
square feet for approximately $6.5 million.
In March 1998, in a single transaction with Continental Real Estate
Companies ("Continental") of Columbus, Ohio, the Company completed the
acquisition of 10 shopping centers, two of which were acquired through joint
ventures. The 10 shopping centers total 1.2 million gross square feet of
Company-owned retail space. The aggregate cost of these centers was $91.9
million. The Company's net investment was initially funded through its revolving
credit facilities, cash and liabilities assumed of approximately $31.6 million,
mortgages assumed of approximately $57.5 million (including $29.3 million of
joint venture mortgage debt) and the issuance of Operating Partnership Units
valued at
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<PAGE> 24
approximately $2.8 million. In certain circumstances and at the option of the
Company, these units are convertible into 139,872 shares of the Company's common
stock.
In April 1998, the Company acquired from Continental Real Estate,
interests in three additional shopping centers located in the Columbus, Ohio
area. Combined, these shopping centers will have approximately 1.0 million
square feet of total gross leasable area. The Company's proportionate share of
the investment cost will approximate $93.4 million upon completion of
approximately 78,000 square feet which is currently under construction. As of
September 30, 1998 the portion under construction has an estimated cost of
approximately $11 million and the Company is scheduled to close on this
investment periodically throughout 1998 and 1999.
In April 1998, the Company acquired the remaining ownership interest in
a 584,000 square foot shopping center in Princeton, New Jersey at a total cost
of approximately $36.4 million for consideration in the form of $27.8 million of
debt assumed and $0.8 million of Operating Partnership units and cash. The
Company had invested approximately $7.8 million in the shopping center at the
end of December 1997.
In July 1998, the Company acquired from Hermes Associates of Salt Lake
City, Utah, nine shopping centers, one office building and eight additional
expansion, development or redevelopment projects. The nine shopping centers
total 2.4 million square feet of total gross leasable area. The total
consideration for this portfolio was approximately $309 million comprised of
$30.6 million of debt assumed, the issuance of operating partnership units,
which are exchangeable, in certain circumstances at the option of the Company,
into 3,630,668 shares of the Company's common shares or cash, initially valued
at $73.0 million and $194.2 million of cash and $11.2 million other liabilities
assumed. The Company also acquired 13 shopping centers aggregating
approximately 1.5 million square feet of GLA in the St. Louis area from the
Sansone Company. The Company also acquired a 50% ownership interest in the
Sansone Group's management company and development company. As of September 30,
1998, the Company's net investment in this portfolio aggregated $163 million
comprised of $28 million of debt assumed and $135 million of cash paid. In
addition, the Company also acquired the 156,000 square foot Phase II of a
shopping center in Tanasbourne, Oregon at an aggregate cost of approximately
$22.1 million.
On August 4, 1998 the Company, in a joint release with American
Industrial Properties REIT [NYSE:IND] ("AIP"), announced the execution of a
definitive agreement providing for the strategic investment in AIP by the
Company. Under the terms of the Share Purchase Agreement dated to be effective
as of July 30, 1998, the Company purchased 949,147 newly issued common shares of
beneficial interest at $15.50 per share for approximately $14.7 million. Under
the terms of a separate agreement, also dated to be effective as of July 30,
1998, the Company, in exchange for five industrial properties owned by the
Company and valued at approximately $19.5 million, acquired approximately 1.3
million additional newly issued AIP shares of beneficial interest. Combined, the
Company's acquired shares represented 19.9% of AIP's outstanding shares prior to
the Company's purchases. Additional purchases by the Company of approximately
5.2 million newly issued shares of AIP for $81.0 million are subject to
shareholder approval at a Special Meeting of AIP Shareholders to be held on
November 20, 1998. The additional shares will be acquired in conjunction with
acquisitions approved by AIP's Board of Trustees. Prior to AIP's November 20,
1998 shareholder meeting, the Company may provide for the financing of
acquisitions approved by AIP's Board of Trustees in the form of demand
promissory notes ("Notes"). These notes will bear interest at the rate of
10.25%. As of September 30, 1998, no notes were outstanding. Concurrent with
entering into the Agreement, AIP increased its Board of Trust Managers by four
positions and appointed the Company's designees Scott A. Wolstein, Albert T.
Adams, Robert H. Gidel and James A. Schoff to the Board. Mr. Wolstein has
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<PAGE> 25
been named AIP's Chairman of the Board. Pursuant to the Agreement, AIP may,
under certain circumstances and subject to certain limitations, following the
closing of the second purchase of AIP's common shares, put additional common or
preferred shares of AIP to the Company, at a price not to exceed $15.50 and
$14.00 per share, respectively, not to exceed $200 million. The put of these
additional shares, would be for the sole purpose of financing property
acquisitions approved by AIP's Board of Trust Managers.
Developments:
The Company has commenced construction on five shopping centers. The
first is a 445,000 gross square foot shopping center in Merriam, Kansas which is
being developed through a joint venture formed in October 1996, 50% of which is
owned by the Company. This center will be anchored by Home Depot (not owned by
the Company), Cinemark Theaters, Hen House Supermarket, OfficeMax, Marshalls,
Old Navy and PETsMART as anchor tenants. The Merriam, Kansas shopping center is
scheduled to be substantially completed by year end 1998. The second is a
200,000 square foot second phase of the Company's Erie, Pennsylvania center to
be completed in the Spring of 1999 and is to be anchored by Home Depot (not
owned by the Company), PETsMART and Circuit City. Additionally, the Company has
also commenced the construction of a 240,000 square foot shopping center in
Toledo, Ohio, a 170,000 square foot shopping center in Solon, Ohio and a 230,000
square foot shopping center in Oviedo, Florida (a suburb of Orlando). All three
centers are scheduled for completion during 1999 with several tenants opening as
early as the fourth quarter of 1998.
The Company has entered or intends to enter into joint venture
development agreements for seven additional projects with various developers
throughout the country at a projected cost aggregating approximately $283
million. Several of these projects have commenced development and are currently
scheduled for completion in 1999 and 2000.
In May 1998, the Company formed DDR OliverMcMillian ("DDROM"), with
OliverMcMillian, LLC, based in San Diego, California to develop, acquire,
operate and manage urban entertainment and retail projects throughout the United
States. DDROM's initial investments are comprised of six OliverMcMillian
initiated urban entertainment and retail projects located in Southern California
and Reno, Nevada with a projected cost of approximately $221 million.
Construction is scheduled to commence in 1999.
FINANCING ACTIVITIES
The acquisitions, developments and expansions were financed through
cash provided from operating activities, revolving credit facilities, mortgages
assumed, operating partnership units and debt and equity offerings. Total debt
outstanding at September 30, 1998 was $975.2 million compared to $523.6 million
at September 30, 1997.
In January 1998, the Company issued $100 million of senior unsecured
fixed rate notes through its Medium Term Note program with a maturity of ten
years and an interest rate of 6.625%. The proceeds were used to repay variable
rate borrowings on the Company's revolving credit facilities primarily
associated with 1997 shopping center acquisitions.
During 1998, the Company amended and restated its revolving credit
facility and increased the available borrowings to $300 million from $150
million, reduced the pricing to .85% over LIBOR from 1.10% over LIBOR and
extended the term for an additional year through April 2001. The amended and
restated facility also continues to provide for a competitive bid option for up
to 50% of the facility
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<PAGE> 26
amount. The Company recognized a non cash extraordinary charge of approximately
$0.9 million ($0.01 per share) in the first quarter of 1998 relating to the
write-off of unamortized deferred finance costs associated with the former
revolving credit facility. The Company also increased the amount of its other
unsecured revolving credit facility to $20 million from $10 million.
In April 1998, the Company completed a 669,639 common share offering
(pre-split), through a registered unit investment trust, and received net
proceeds of approximately $25.3 million which were primarily used to repay
revolving credit facility borrowings.
In July 1998, the Company completed the sale of 4,000,000 Class C
Depositary Cumulative Redeemable Preferred Shares. In August and September 1998,
the Company completed the sale of 2,160,000 Class D Depositary Cumulative
Redeemable Preferred Shares. The net proceeds of approximately $148.3 million
were used to repay variable rate borrowings on the Company's unsecured revolving
credit facilities.
In July 1998, the Company issued, pursuant to its Medium Term Note
program, $100 million senior unsecured fixed rate notes with a 20 year maturity
and 7.5% coupon rate. The proceeds were used to repay variable rate borrowings
on the Company's revolving credit facilities.
In July 1998, the Company announced that the Board of Directors
approved a two-for-one stock split to shareholders of record on July 27, 1998.
On August 3, 1998 each shareholder received one share of common stock for each
share of common stock held. The stock split was effected in the form of a stock
dividend.
In September 1998, the Company entered into a 50/50 joint venture with
DRA Advisors. In conjunction with this joint venture, the Company contributed
properties valued at approximately $238 million to the joint venture and DRA
contributed cash of approximately $42 million. In addition, the joint venture
entered into a $156 million, seven year mortgage with a coupon interest rate of
6.64%. Net proceeds aggregating approximately $192 million were distributed to
the Company and used to repay borrowings on the Company's revolving credit
facilities. The Company also agreed to master lease certain space occupied by
tenants that have filed for bankruptcy under Chapter 11 with annual base rent
of $2.3 million. In exchange for the agreement to master lease the space, the
Company retained all rights associated with the bankruptcy claim and to the
benefits associated with the releasing of the existing space. Moreover, the
Company does not believe that its exposure to loss is material under the terms
of the agreement. DDR will continue to manage the centers and receive
management fees for these services at market rates.
At September 30, 1998, the Company's capitalization consisted of $975.2
million of debt (excluding the Company's proportionate share of joint venture
mortgage debt aggregating $368.5 million), $303.8 million of preferred stock and
$1,117.8 million of market equity (market equity is defined as common shares and
OP Units outstanding multiplied by the closing price of the common shares on the
New York Stock Exchange at September 30, 1998 of $18.25) resulting in a debt
total market capitalization ratio of 0.41 to 1. At September 30, 1998, the
Company's total debt consisted of $838.3 million of fixed rate debt and $136.8
million of variable rate debt.
It is management's intention that the Company have access to the
capital resources necessary to expand and develop its business. Accordingly, the
Company may seek to obtain funds through additional equity offerings or debt
financing in a manner consistent with its intention to operate with a
conservative debt capitalization policy and maintain its investment grade
ratings with Moody's Investor Services and Standard and Poor's. As of September
30, 1998, the Company had $55.4 million available under its shelf registration
statement. In addition, as of September 30, 1998, the Company had cash of $1.7
million and $206.0 million available under its $320 million of unsecured
revolving credit facilities. On September 30, 1998, the Company also had 105
operating properties with $107.6
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<PAGE> 27
million, or 70.6%, of the total revenue for the nine month period ended
September 30, 1998 which were unencumbered thereby providing a potential
collateral base for future borrowings.
INFLATION
Substantially all of the Company's long-term leases contain provisions
designed to mitigate the adverse impact of inflation. Such provisions include
clauses enabling the Company to receive percentage rentals based on tenants'
gross sales, which generally increase as prices rise, and/or escalation clauses,
which generally increase rental rates during the terms of the leases. Such
escalation clauses are often related to increases in the consumer price index or
similar inflation indices. In addition, many of the Company's leases are for
terms of less than ten years, which permits the Company to seek increased rents
upon re-rental at market rates. Most of the Company's leases require the tenants
to pay their share of operating expenses, including common area maintenance,
real estate taxes, insurance and utilities, thereby reducing the Company's
exposure to increases in costs and operating expenses resulting from inflation.
At September 30, 1998, approximately 86.0% of the Company's debt (not
including joint venture debt) bore interest at fixed rates with a weighted
average maturity of approximately 7.9 years and a weighted average interest rate
of approximately 7.6%. The remainder of the Company's debt bears interest at
variable rates, with a weighted average maturity of approximately 2.6 years and
a weighted average interest rate of approximately 6.2%. As of September 30,
1998, the Company's joint ventures, not including the minority equity
investment, indebtedness aggregated $602.0 million of fixed rate debt, of which
the Company's proportionate share was $310.3 million, and $47.7 million of
variable rate debt, of which the Company's proportionate share was $23.9
million. The Company intends to utilize variable rate indebtedness available
under its revolving credit facilities to initially fund future acquisitions and
developments. Thus, to the extent that the Company incurs additional variable
rate indebtedness, its exposure to increases in interest rates in an
inflationary period would increase. The Company believes, however, that
increases in interest expense as a result of inflation would not significantly
impact the Company's distributable cash flow.
The Company intends to continuously monitor and actively manage
interest costs on its variable rate debt portfolio and may enter into swap
positions based on market fluctuations. In addition, the Company believes that
it has the ability to obtain funds through additional equity and/or debt
offerings, including the issuance of medium term notes. Accordingly, the cost of
obtaining such protection agreements in relation to the Company's access to
capital markets will continue to be evaluated.
ECONOMIC CONDITIONS
Historically, real estate has been subject to a wide range of cyclical
economic conditions which affect various real estate sectors and geographic
regions with differing intensities and at different times. Adverse changes in
general or local economic conditions, could result in the inability of some
existing tenants of the Company to meet their lease obligations and could
otherwise adversely affect the Company's ability to attract or retain tenants.
The shopping centers are typically anchored by discount department stores
(usually Wal-Mart, Kmart or J.C. Penney), supermarkets, and drug stores which
usually offer day-to-day necessities, rather than high-priced luxury items.
Since these merchants typically perform better in an economic recession than
those who market high priced luxury items, the percentage rents received by the
Company have remained relatively stable. In addition, the Company seeks to
reduce its operating and leasing risks through ownership of a portfolio of
properties with a diverse geographic and tenant base.
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<PAGE> 28
The year 2000 issue ("Year 2000") is the result of computer programs
being written using two digits rather than four to define the applicable year.
Any of the Company's computer programs that have time-sensitive hardware and
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, collect rents, or engage in similar normal business
activities.
The Company believes that it has identified all of its information
technology ("IT") and non-IT systems to assess their Year 2000 readiness.
Critical IT systems include, but are not limited to: accounts receivable and
rent collections, accounts payable and general ledger, human resources and
payroll (both property and corporate levels), cash management, fixed assets,
all IT hardware (such as desktop/laptop computers and data networking
equipment). Critical non-IT systems include telephone systems, fax machines,
copy machines as well as property environmental, health safety and security
systems (such as elevators and alarm systems).
The Company has conducted an assessment of its core internal and
external IT systems. The majority of these systems are currently Year 2000
compliant or are in the process of being modified to be compliant. The Company
is currently in the process of determining its exposure to any non-IT systems
that are not Year 2000 compliant and believes that all such systems will have
been identified and evaluated with respect to their Year 2000 compliance by the
close of the first quarter of 1999. The Company has not yet estimated the total
Year 2000 project cost pending completion of the evaluation of its non-IT
systems but does not believe that such costs will be significant.
In some cases, various third party vendors have been queried on their
Year 2000 readiness. The Company continues to query its significant suppliers
and vendors to determine the extent to which the Company's interface systems
are vulnerable to those third parties' failure to remediate their own Year 2000
issues. To date, the Company is not aware of any significant suppliers or
vendors with a Year 2000 issue that would materially impact the Company's
results of operations, liquidity, or capital resources. However, there can be
no assurances that the systems of other companies, on which the Company's
systems rely, will be timely converted and would not have an adverse effect on
the Company's systems.
The Company believes it has an effective program in place that will
resolve the Year 2000 issue in a timely manner. Aside from catastrophic failure
of banks or governmental agencies, the Company believes that it could continue
its normal business operations if compliance by the Company is delayed. The
Company does not believe that the Year 2000 issue will materially impact its
results of operations, liquidity or capital resources.
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<PAGE> 29
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Other than routine litigation and administrative proceedings arising in
the ordinary course of business, the Company is not presently involved in any
litigation nor, to its knowledge, is any litigation threatened against the
Company or its properties, which is reasonably likely to have a material adverse
effect on the liquidity or results of operations of the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In July 1998, in conjunction with the acquisition of eight shopping
centers and one office building in Utah, one shopping center and one parcel
under development in Nevada, one shopping center in South Dakota and one parcel
intended for development in Idaho the Company formed limited partnerships which
issued limited partnership units (the "Units") which are redeemable for an
amount equal to the value of approximately 3,630,668 of the Company's common
shares. The Units are redeemable beginning July 1, 1998, subject to the
Company's right to purchase such units for cash or for Company common shares on
a one-for-one basis. This transaction was conducted as a private placement in
reliance on the exemption from registration provided by Section 4(2) of the
Securities Act of 1933, as amended.
ITEM 3. DEFAULTS ON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
Shareholders who intend to submit proposals to be included in the
Company's proxy materials may do so in compliance with Rule 14a-8 promulgated
under the Securities Exchange Act of 1934. As stated in the Company's proxy
statement dated April 10, 1998, the last date any such proposal will be received
by the Company for inclusion in the Company's proxy materials relating to the
1999 Annual Meeting is December 12, 1998. For those shareholder proposals which
are not submitted in accordance with Rule 14a-8, the Company's designated
proxies may exercise their discretionary voting authority for any proposal
received after February 24, 1999, without any discussion of the proposal in the
Company's proxy materials.
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<PAGE> 30
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits -
3 (a) Amended and Restated Articles of Incorporation of the Company
27 (a) Financial Data Schedule
b) Date of Report Items Reported
July 1, 1998 Item 2. Acquisition or Disposition of Assets
July 16, 1998 Item 2. Acquisition or Disposition of Assets
August 5, 1998 Item 5. Other Events
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<PAGE> 31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DEVELOPERS DIVERSIFIED REALTY CORPORATION
November 16, 1998 /s/ Scott A. Wolstein
- ----------------------- ----------------------------------------------
(Date) Scott A. Wolstein, President and
Chief Executive Officer
November 16, 1998 /s/ William H. Schafer
- ----------------------- ----------------------------------------------
(Date) William H. Schafer, Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
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<PAGE> 1
EXHIBIT 3
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
DEVELOPERS DIVERSIFIED CORPORATION
The undersigned, desiring to form a corporation for profit
under Sections 1701.01 to 1701.98, inclusive, of the Ohio Revised Code, does
hereby certify:
FIRST: The name of the Corporation shall be Developers Diversified
Realty Corporation.
SECOND: The place in the State of Ohio where the principal office of
the Corporation is located is Moreland Hills, Cuyahoga County.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be formed under Sections 1701.01 to 1701.98,
inclusive of the Ohio Revised Code.
FOURTH: The authorized number of shares of the Corporation is
109,000,000, consisting of 100,000,000 Common Shares, without par value
(hereinafter called "Common Shares"), 1,500,000 Class A Cumulative Preferred
Shares, without par value (hereinafter called "Class A Shares"), 1,500,000 Class
B Cumulative Preferred Shares, without par value (hereinafter called "Class B
Shares"), 1,500,000 Class C Cumulative Preferred Shares, without par value
(hereinafter called "Class C Shares"), 1,500,000 Class D Cumulative Preferred
Shares, without par value (hereinafter called "Class D Shares"), 1,500,000 Class
E Cumulative Preferred Shares, without par value (hereinafter called "Class E
Shares"), and 1,500,000 Noncumulative Preferred Shares, without par value
(hereinafter called "Noncumulative Shares").
DIVISION A
I. The Class A Cumulative Preferred Shares. The Class A Shares shall
have the following express terms:
Section 1. Series. The Class A Shares may be issued from time
to time in one or more series. All Class A Shares shall be of
equal rank and shall be identical, except in respect of the
matters that may be fixed by the Board of Directors as
hereinafter provided, and each share of a series shall be
identical with all other shares of such series, except as to
the dates from which dividends shall accrue and be cumulative.
All Class A Shares shall rank on a parity with the Class B
Shares, the Class C Shares, the Class D Shares, the Class E
Shares and the Noncumulative Shares and shall be identical to
all Class B Shares, Class C Shares, Class D Shares, Class E
Shares and Noncumulative Shares except (1) in respect of the
matters that may be fixed by the Board of Directors as
provided in clauses (a) through (i), inclusive, of this
Section 1 and (2) only dividends on Class A Shares,
<PAGE> 2
Class B Shares, Class C Shares, Class D Shares and Class E
Shares shall be cumulative as set forth herein. Subject to the
provisions of Sections 2 through 5, both inclusive, and Item
VII of this Division, which provisions shall apply to all
Class A Shares, the Board of Directors hereby is authorized to
cause such shares to be issued in one or more series and, with
respect to each such series to determine and fix prior to the
issuance thereof (and thereafter, to the extent provided in
clause (b) of this Section) the following:
(a) The designation of the series, which may be by
distinguishing number, letter or title;
(b) The authorized number of shares of the series,
which number the Board of Directors may (except where
otherwise provided in the creation of the series) increase or
decrease from time to time before or after the issuance
thereof (but not below the number of shares thereof then
outstanding);
(c) The dividend rate or rates of the series,
including the means by which such rates may be established;
(d) The date or dates from which dividends shall
accrue and be cumulative and the dates on which and the period
or periods for which dividends, if declared, shall be payable,
including the means by which such dates and periods may be
established;
(e) The redemption rights and price or prices, if
any, for shares of the series;
(f) The terms and amount of the sinking fund, if any,
for the purchase or redemption of shares of the series;
(g) The amounts payable on shares of the series in
the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation;
(h) Whether the shares of the series shall be
convertible into Common Shares or shares of any other class
and, if so, the conversion rate or rates or price or prices,
any adjustments thereof and all other terms and conditions
upon which such conversion may be made; and
(i) Restrictions (in addition to those set forth in
Subsection 5(d) or 5(e) of this Item I) on the issuance of
shares of the same series or of any other class or series.
The Board of Directors is authorized to adopt from time to time
amendments to the Amended and Restated Articles of Incorporation, as amended,
fixing, with respect to each such series, the matters described in clauses (a)
through (i), inclusive, of this Section and is authorized to take such actions
with respect thereto as may be required by law in order to effect such
amendments.
Page 2
<PAGE> 3
Section 2. Dividends.
(a) The holders of Class A Shares of each series, in
preference to the holders of Common Shares and of any other
class of shares ranking junior to the Class A Shares, shall be
entitled to receive out of any funds legally available
therefor, and when and as declared by the Board of Directors,
dividends in cash at the rate or rates for such series fixed
in accordance with the provisions of Section 1 above and no
more, payable on the dates fixed for such series. Such
dividends shall accrue and be cumulative, in the case of
shares of each particular series, from and after the date or
dates fixed with respect to such series. No dividends shall be
paid upon or declared or set apart for any series of the Class
A Shares for any dividend period unless at the same time (i) a
like proportionate dividend for the dividend periods
terminating on the same or any earlier date, ratably in
proportion to the respective annual dividend rates fixed
therefor, shall have been paid upon or declared or set apart
for all Class A Shares of all series then issued and
outstanding and entitled to receive such dividend and (ii) the
dividends payable for the dividend periods terminating on the
same or any earlier date (but, with respect to Noncumulative
Shares, only with respect to the then current dividend
period), ratably in proportion to the respective dividend
rates fixed therefor, shall have been paid upon or declared or
set apart for all Class B Shares, Class C Shares, Class D
Shares, Class E Shares and Noncumulative Shares then issued
and outstanding and entitled to receive such dividends.
(b) So long as any Class A Shares shall be outstanding no
dividend, except a dividend payable in Common Shares or other
shares ranking junior to the Class A Shares, shall be paid or
declared or any distribution be made, except as aforesaid, in
respect of the Common Shares or any other shares ranking
junior to the Class A Shares, nor shall any Common Shares or
any other shares ranking junior to the Class A Shares be
purchased, retired or otherwise acquired by the Corporation,
except out of the proceeds of the sale of Common Shares or
other shares of the Corporation ranking junior to the Class A
Shares received by the Corporation subsequent to the date of
first issuance of Class A Shares of any series, unless:
(1) All accrued and unpaid dividends on Class A
Shares, Class B Shares, Class C Shares, Class D Shares and
Class E Shares including the full dividends for all current
dividend periods, shall have been declared and paid or a sum
sufficient for payment thereof set apart;
(2) All unpaid dividends on Noncumulative Shares for
the then current dividend period shall have been declared and
paid or a sum sufficient for payment therefor set apart; and
(3) There shall be no arrearages with respect to the
redemption of Class A Shares, Class B Shares, Class C Shares,
Class D Shares, Class E Shares or Noncumulative Shares of any
series from any sinking fund provided for shares of such
series in accordance with the provisions of Section 1 of this
Item I.
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(c) The foregoing restrictions on the payment of dividends or
other distributions on, or on the purchase, redemption
retirement or other acquisition of, Common Shares or any other
shares ranking on a parity with or junior to the Class A
Shares shall be inapplicable to (i) any payments in lieu of
issuance of fractional shares thereof, whether upon any
merger, conversion, stock dividend or otherwise, (ii) the
conversion of Class A Shares, Class B Shares, Class C Shares,
Class D Shares, Class E Shares or Noncumulative Shares into
Common Shares, or (iii) the exercise by the Corporation of its
rights pursuant to Item VIII(d) of this Division A, Section
4(d) of Division B or any similar Section hereafter contained
in these Amended and Restated Articles of Incorporation, as
amended, with respect to any other class or series of capital
stock hereafter created or authorized.
(d) If, for any taxable year, the Corporation elects to
designate as "capital gain dividends" (as defined in Section
857 of the Code), any portion (the "Capital Gains Amount") of
the dividends paid or made available for the year to holders
of all classes of stock (the "Total Dividends"), then, to the
extent permissible under the Code and to the extent it does
not cause any dividends to fail to qualify for the dividends
paid deduction under Section 561 of the Code, the portion of
the Capital Gains Amount that shall be allocable to holders of
the Class A Shares shall be the amount that the total
dividends paid or made available to the holders of the Class A
Shares for the year bears to the Total Dividends.
Section 3. Redemption.
(a) Subject to the express terms of each series, the
Corporation:
(1) May, from time to time at the option of the Board
of Directors, redeem all or any part of any redeemable series
of Class A Shares at the time outstanding at the applicable
redemption price for such series fixed in accordance with the
provisions of Section 1 of this Item I; and
(2) Shall, from time to time, make such redemptions
of each series of Class A Shares as may be required to fulfill
the requirements of any sinking fund provided for shares of
such series at the applicable sinking fund redemption price
fixed in accordance with the provisions of Section 1 of this
Item I; and shall in each case pay all accrued and unpaid
dividends to the redemption date.
(b) (1) Notice of every such redemption shall be mailed,
postage prepaid, to the holders of record of the Class A
Shares to be redeemed at their respective addresses then
appearing on the books of the Corporation, not less than 30
days nor more than 60 days prior to the date fixed for such
redemption, or such other time prior thereto as the Board of
Directors shall fix for any series pursuant to Section 1 of
this Item I prior to the issuance thereof. At any time after
notice as provided above has been deposited in the mail, the
Corporation may deposit the aggregate redemption price of
Class A Shares to be redeemed, together with accrued and
unpaid dividends thereon to the redemption date, with any bank
or trust company in Cleveland, Ohio, or New York, New York,
having capital and
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surplus of not less than $100,000,000, named in such notice
and direct that there be paid to the respective holders of the
Class A Shares so to be redeemed amounts equal to the
redemption price of the Class A Shares so to be redeemed,
together with such accrued and unpaid dividends thereon, on
surrender of the share certificate or certificates held by
such holders; and upon the deposit of such notice in the mail
and the making of such deposit of money with such bank or
trust company, such holders shall cease to be shareholders
with respect to such shares; and from and after the time such
notice shall have been so deposited and such deposit of money
shall have been so made, such holders shall have no rights or
claim against the Corporation with respect to such shares,
except only the right to receive such money from such bank or
trust company without interest or to exercise before the
redemption date any unexpired privileges of conversion. In the
event less than all of the outstanding Class A Shares are to
be redeemed, the Corporation shall select by lot the shares so
to be redeemed in such manner as shall be prescribed by the
Board of Directors.
(2) If the holders of Class A Shares which have been
called for redemption shall not within six years after such
deposit claim the amount deposited for the redemption thereof,
any such bank or trust company shall, upon demand, pay over to
the Corporation such unclaimed amounts and thereupon such bank
or trust company and the Corporation shall be relieved of all
responsibility in respect thereof and to such holders.
(c) Any Class A Shares which are (1) redeemed by the
Corporation pursuant to the provisions of this Section, (2)
purchased and delivered in satisfaction of any sinking fund
requirements provided for shares of such series, (3) converted
in accordance with the express terms thereof, or (4) otherwise
acquired by the Corporation, shall resume the status of
authorized but unissued Class A Shares without serial
designation.
(d) Except in connection with the exercise of the
Corporation's rights pursuant to Section (d) of Item VIII of
this Division A, Section 4(d) of Division B or any similar
Section hereafter contained in these Amended and Restated
Articles of Incorporation, as amended, with respect to any
other class or series of capital stock hereafter created or
authorized, the Corporation may not purchase or redeem (for
sinking fund purposes or otherwise) less than all of the Class
A Shares then outstanding except in accordance with a stock
purchase offer made to all holders of record of Class A
Shares, unless all dividends on all Class A Shares then
outstanding for all previous and current dividend periods
shall have been declared and paid or funds therefor set apart
and all accrued sinking fund obligations applicable thereto
shall have been complied with.
Section 4. Liquidation.
(a) (1) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of Class A Shares of any series shall
be entitled to receive in full out of the assets of the
Corporation,
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including its capital, before any amount shall be paid or
distributed among the holders of the Common Shares or any
other shares ranking junior to the Class A Shares, the amounts
fixed with respect to shares of such series in accordance with
Section 1 of this Item I, plus an amount equal to all
dividends accrued and unpaid thereon to the date of payment of
the amount due pursuant to such liquidation, dissolution or
winding up of the affairs of the Corporation. In the event the
net assets of the Corporation legally available therefor are
insufficient to permit the payment upon all outstanding Class
A Shares, Class B Shares, Class C Shares, Class D Shares,
Class E Shares and Noncumulative Shares of the full
preferential amount to which they are respectively entitled,
then such net assets shall be distributed ratably upon all
outstanding Class A Shares, Class B Shares, Class C Shares,
Class D Shares, Class E Shares and Noncumulative Shares in
proportion to the full preferential amount to which each such
share is entitled.
(2) After payment to the holders of Class A Shares of
the full preferential amounts as aforesaid, the holders of
Class A Shares, as such, shall have no right or claim to any
of the remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation into or
with any other Corporation, the merger of any other
Corporation into it, or the sale, lease or conveyance of all
or substantially all the assets of the Corporation, shall not
be deemed to be a dissolution, liquidation or winding up for
the purposes of this Section.
Section 5. Voting.
(a) The holders of Class A Shares shall have no voting rights,
except as provided in this Section or required by law.
(b) (1) If, and so often as, the Corporation shall be in
default in the payment of dividends on any series of Class A
Shares at the time outstanding, whether or not earned or
declared, for a number of consecutive dividend payment periods
which in the aggregate contain at least 540 days, all holders
of such Class A Shares, voting separately as a class, together
with all Class B Shares, Class C Shares, Class D Shares, Class
E Shares and Noncumulative Shares upon which like voting
rights have been conferred and are exercisable under the
circumstances described in Subsection 5(c), shall be entitled
to elect, as herein provided, a total of two members of the
Board of Directors of the Corporation; provided, however, that
the holders of such Class A Shares shall not exercise such
special class voting rights except at meetings of such
shareholders for the election of directors at which the
holders of not less than 50% of such Class A Shares are
present in person or by proxy; and provided further, that the
special class voting rights provided for in this paragraph
when the same shall have become vested shall remain so vested
until all accrued and unpaid dividends on such Class A Shares
then outstanding shall have been paid or declared and a sum
sufficient for the payment thereof set aside for payment,
whereupon the holders of such Class A Shares shall be divested
of their special class voting rights in respect of
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subsequent elections of directors, subject to the revesting of
such special class voting rights in the event above specified
in this paragraph.
(2) In the event of default entitling holders of
Class A Shares to elect two directors as specified in
paragraph (1) of this Subsection, a special meeting of such
holders for the purpose of electing such directors shall be
called by the Secretary of the Corporation upon written
request of, or may be called by, the holders of record of at
least 10% of the Class A Shares upon which such default in the
payment of dividends exists and notice thereof shall be given
in the same manner as that required for the annual meeting of
shareholders; provided, however, that the Corporation shall
not be required to call such special meeting if the annual
meeting of shareholders shall be called to be held within 90
days after the date of receipt of the foregoing written
request from the holders of Class A Shares. At any meeting at
which such holders of Class A Shares shall be entitled to
elect directors, holders of 50% of such Class A Shares,
present in person or by proxy, shall be sufficient to
constitute a quorum, and the vote of the holders of a majority
of such shares so present at any such meeting at which there
shall be such a quorum shall be sufficient to elect the
members of the Board of Directors which such holders of Class
A Shares are entitled to elect as herein provided.
Notwithstanding any provision of these Amended and Restated
Articles of Incorporation, as amended, or the Code of
Regulations of the Corporation or any action taken by the
holders of any class of shares fixing the number of directors
of the Corporation, the two directors who may be elected by
such holders of Class A Shares pursuant to this Subsection
shall serve in addition to any other directors then in office
or proposed to be elected otherwise than pursuant to this
Subsection. Nothing in this Subsection shall prevent any
change otherwise permitted in the total number of or
classifications of directors of the Corporation or require the
resignation of any director elected otherwise than pursuant to
this Subsection. Notwithstanding any classification of the
other directors of the Corporation, the two directors elected
by such holders of Class A Shares shall be elected annually
for terms expiring at the next succeeding annual meeting of
shareholders.
(3) Upon any divesting of the special class voting
rights of the holders of the Class A Shares in respect of
elections of directors as provided in this Subsection, the
terms of office of all directors then in office elected by
such holders shall terminate immediately thereupon. If the
office of any director elected by such holders voting as a
class becomes vacant by reason of death, resignation, removal
from office or otherwise, the remaining director elected by
such holders voting as a class may elect a successor who shall
hold office for the unexpired term in respect of which such
vacancy occurred.
(c) If at any time when the holders of Class A Shares are
entitled to elect directors pursuant to the foregoing
provisions of this Section the holders of any Class B Shares,
Class C Shares, Class D Shares, Class E Shares or
Noncumulative Shares are entitled to elect directors pursuant
hereto by reason of any default in the payment of dividends
thereon, then the voting rights of the Class A Shares, the
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Class B Shares, the Class C Shares, the Class D Shares, the
Class E Shares and the Noncumulative Shares then entitled to
vote shall be combined (with each class of shares having a
number of votes proportional to the aggregate liquidation
preference of its outstanding shares). In such case, the
holders of Class A Shares and of all such other shares then
entitled so to vote, voting as a class, shall elect such
directors. If the holders of any such other shares have
elected such directors prior to the happening of the default
or event permitting the holders of Class A Shares to elect
directors, or prior to a written request for the holding of a
special meeting being received by the Secretary of the
Corporation as required above, then a new election shall be
held with all such other shares and the Class A Shares voting
together as a single class for such directors, resulting in
the termination of the term of such previously elected
directors upon the election of such new directors.
(d) The affirmative vote of the holders of at least two-thirds
of the Class A Shares at the time outstanding, voting
separately as a class, given in person or by proxy either in
writing or at a meeting called for the purpose, shall be
necessary to effect either of the following:
(1) Any amendment, alteration or repeal, whether by
merger, consolidation or otherwise, of any of the provisions
of the Amended and Restated Articles of Incorporation, as
amended, or of the Code of Regulations of the Corporation
which affects adversely and materially the preferences or
voting or other rights of the holders of Class A Shares which
are set forth in these Amended and Restated Articles of
Incorporation, as amended; provided, however, neither the
amendment of these Amended and Restated Articles of
Incorporation, as amended, so as to authorize, create or
change the authorized or outstanding number of Class A Shares
or of any shares ranking on a parity with or junior to the
Class A Shares nor the amendment of the provisions of the Code
of Regulations so as to change the number or classification of
directors of the Corporation shall be deemed to affect
adversely and materially preferences or voting or other rights
of the holders of Class A Shares; or
(2) The authorization, creation or increase in the
authorized number of any shares, or any security convertible
into shares, in either case ranking prior to such series of
Class A Shares.
(e) In the event, and only to the extent, that (1) Class A
Shares are issued in more than one series and (2) Ohio law
permits the holders of a series of a class of capital stock to
vote separately as a class, the affirmative vote of the
holders of at least two-thirds of each series of Class A
Shares at the time outstanding, voting separately as a class,
given in person or by proxy either in writing or at a meeting
called for the purpose of voting on such matters, shall be
required for any amendment, alteration or repeal, whether by
merger, consolidation or otherwise, of any of the provisions
of these Amended and Restated Articles of Incorporation, as
amended, or of the Code of Regulations of the Corporation
which affects adversely and materially the preferences or
voting or other rights of the holders of
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such series which are set forth in these Amended and Restated
Articles of Incorporation, as amended; provided, however,
neither the amendment of these Amended and Restated Articles
of Incorporation, as amended, so as to authorize, create or
change the authorized or outstanding number of Class A Shares
or of any shares ranking on a parity with or junior to the
Class A Shares nor the Amendment of the provisions of the Code
of Regulations so as to change the number or classification of
directors of the Corporation shall be deemed to affect
adversely and materially the preferences or voting or other
rights of the holders of such series.
Section 6. 9 1/2% Class A Cumulative Redeemable Preferred
Shares. Of the 1,500,000 authorized Class A Shares, 460,000
shares are designated as a series entitled "9 1/2% Class A
Cumulative Redeemable Preferred Shares" (hereinafter called
"9 1/2% Class A Preferred Shares"). The 9 1/2% Class A
Preferred Shares shall have the express terms set forth in
this Item I as being applicable to all Class A Shares as a
class and, in addition, the following express terms applicable
to all 9 1/2% Class A Preferred Shares as a series of Class A
Shares:
(a) The annual dividend rate of the 9 1/2% Class A
Preferred Shares shall be 9 1/2% of the liquidation preference
of $250.00 per share.
(b) Dividends on the 9 1/2% Class A Preferred Shares
shall be payable, if declared, quarterly on or about the 15th
day of March, June, September, and December each year, the
first quarterly dividend being payable, if declared, on
December 15, 1995. The dividends payable for each full
quarterly dividend period on each 9 1/2% Class A Preferred
Shares shall be $5.94.
Dividends for the initial dividend period on the
9 1/2% Class A Preferred Shares, or for any period shorter or
longer than a full dividend period on the 9 1/2% Class A
Preferred Shares, shall be computed on the basis of a 360-day
year consisting of twelve 30-day months. The aggregate
dividend payable quarterly to each holder of 9 1/2% Class A
Preferred Shares shall be rounded to the nearest one
one-hundredth of one cent with $.00005 being rounded upward.
Each dividend shall be payable to the holders of record on
such record date, no less than 10 nor more than 30 days
preceding the payment date thereof, as shall be fixed from
time to time by the Corporation's Board of Directors.
(c) Dividends on 9 1/2% Class A Preferred Shares
shall be cumulative as follows:
(1) With respect to shares included in the
initial issue of 9 1/2% Class A Preferred Shares and
shares issued any time thereafter up to and including
the record date for the payment of the first dividend
on the initial issue of 9 1/2% Class A Preferred
Shares, dividends shall be cumulative from the date
of the initial issue of 9 1/2% Class A Preferred
Shares; and
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(2) With respect to shares issued any time
after the aforesaid record date, dividends shall be
cumulative from the dividend payment date next
preceding the date of issue of such shares, except
that if such shares are issued during the period
commencing the day after the record date for the
payment of a dividend on 9 1/2% Class A Preferred
Shares and ending on the payment date of that
dividend, dividends with respect to such shares shall
be cumulative from that dividend payment date.
(d) Except as required to preserve the Corporation's
status as a real estate investment trust under the Internal
Revenue Code of 1986, as amended, the 9 1/2% Class A Preferred
Shares may not be redeemed prior to November 15, 2000. At any
time or from time to time on and after November 15, 2000 the
Corporation, at its option upon not less than thirty (30) nor
more than sixty (60) days' written notice, may redeem all or
any part of the 9 1/2% Class A Preferred Shares at a
redemption price of $250.00 per share plus, in each case, an
amount equal to all dividends accrued and unpaid thereon to
the redemption date, without interest. The redemption price
(other than the portion thereof consisting of accrued and
unpaid dividends) is payable solely out of the sale proceeds
of other capital shares of the Corporation, which may include
any equity securities (including common shares and preferred
shares), shares, interests, participation or other ownership
interests (however designated) and any rights (other than debt
securities convertible into or exchangeable for equity
securities), or options to purchase any of the foregoing.
(e) The amount payable per 9 1/2% Class A Preferred
Share in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Corporation shall be $250.00, plus an amount equal to all
dividends accrued and unpaid thereon to the date of payment.
(f) All dividend payments made on the 9 1/2% Class A
Preferred Shares, at any time during which the Corporation is
in default in the payment of dividends on such 9 1/2% Class A
Preferred Shares for any dividend period, shall, for the
purposes of Section 5(b)(1) of this Item I, be deemed to be
made in respect of the earliest dividend period with respect
to which the Corporation is in default.
II. The Class B Cumulative Preferred Shares. The Class B Cumulative
Preferred Shares shall have the following express terms:
Section 1. Series. The Class B Shares may be issued from time
to time in one or more series. All Class B Shares shall be of
equal rank and shall be identical, except in respect of the
matters that may be fixed by the Board of Directors as
hereinafter provided, and each share of a series shall be
identical with all other shares of such series, except as to
the dates from which dividends shall accrue and be cumulative.
All Class B Shares shall rank on a parity with the Class A
Shares, the Class C Shares, the Class D Shares, the Class E
Shares and the Noncumulative Shares and shall be identical to
all Class A Shares, Class C Shares, Class D Shares, Class E
Shares and Noncumulative Shares except (1) in respect of the
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matters that may be fixed by the Board of Directors as
provided in clauses (a) through (i), inclusive, of this
Section 1 and (2) only dividends on the Class A Shares, the
Class B Shares, the Class C Shares, the Class D Shares and the
Class E Shares are cumulative as set forth herein. Subject to
the provisions of Sections 2 through 5, both inclusive, and
Item VII of this Division, which provisions shall apply to all
Class B Shares, the Board of Directors hereby is authorized to
cause such shares to be issued in one or more series and with
respect to each such series to determine and fix prior to the
issuance thereof (and thereafter, to the extent provided in
clause (b) of this Section) the following:
(a) The designation of the series, which may be by
distinguishing number, letter or title;
(b) The authorized number of shares of the series,
which number the Board of Directors may (except where
otherwise provided in the creation of the series) increase or
decrease from time to time before or after the issuance
thereof (but not below the number of shares thereof then
outstanding);
(c) The dividend rate or rates of the series,
including the means by which such rates may be established;
(d) The date or dates from which dividends shall
accrue and be cumulative and the dates on which and the period
or periods for which dividends, if declared, shall be payable,
including the means by which such dates and periods may be
established;
(e) The redemption rights and price or prices, if
any, for shares of the series;
(f) The terms and amount of the sinking fund, if any,
for the purchase or redemption of shares of the series;
(g) The amounts payable on shares of the series in
the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation;
(h) Whether the shares of the series shall be
convertible into Common Shares or shares of any other class
and, if so, the conversion rate or rates or price or prices,
any adjustments thereof and all other terms and conditions
upon which such conversion may be made; and
(i) Restrictions (in addition to those set forth in
Subsection 5(d) or 5(e) of this Item II) on the issuance of
shares of the same series or of any other class or series.
The Board of Directors is authorized to adopt from time to time
amendments to the Amended and Restated Articles of Incorporation, as amended,
fixing, with respect to each such series, the matters described in clauses (a)
through (i), both inclusive, of this Section and is
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authorized to take such actions with respect thereto as may be required by law
in order to effect such amendments.
Section 2. Dividends.
(a) The holders of Class B Shares of each series, in
preference to the holders of Common Shares and of any other
class of shares ranking junior to the Class B Shares, shall be
entitled to receive out of any funds legally available
therefor, and when and as declared by the Board of Directors,
dividends in cash at the rate or rates for such series fixed
in accordance with the provisions of Section 1 above and no
more, payable on the dates fixed for such series. Such
dividends shall accrue and be cumulative, in the case of
shares of each particular series, from and after the date or
dates fixed with respect to such series. No dividends shall be
paid upon or declared or set apart for any series of the Class
B Shares for any dividend period unless at the same time (i) a
like proportionate dividend for the dividend periods
terminating on the same or any earlier date, ratably in
proportion to the respective annual dividend rates fixed
therefor, shall have been paid upon or declared or set apart
for all Class B Shares of all series then issued and
outstanding and entitled to receive such dividend and (ii) the
dividends payable for the dividend periods terminating on the
same or any earlier date (but, with respect to the
Noncumulative Shares, only with respect to the then current
dividend period), ratably in proportion to the respective
dividend rates fixed therefor, shall have been paid upon or
declared or set apart for all Class A Shares, Class C Shares,
Class D Shares, Class E Shares and Noncumulative Shares then
issued and outstanding and entitled to receive such dividends.
(b) So long as any Class B Shares shall be outstanding no
dividend, except a dividend payable in Common Shares or other
shares ranking junior to the Class B Shares, shall be paid or
declared or any distribution be made, except as aforesaid, in
respect of the Common Shares or any other shares ranking
junior to the Class B Shares, nor shall any Common Shares or
any other shares ranking junior to the Class B Shares be
purchased, retired or otherwise acquired by the Corporation,
except out of the proceeds of the sale of Common Shares or
other shares of the Corporation ranking junior to the Class B
Shares received by the Corporation subsequent to the date of
first issuance of Class B Shares of any series, unless:
(1) All accrued and unpaid dividends on Class A
Shares, Class B Shares, Class C Shares, Class D Shares and
Class E Shares including the full dividends for all current
dividend periods, shall have been declared and paid or a sum
sufficient for payment thereof set apart;
(2) All unpaid dividends on Noncumulative Shares for
the then current dividend period shall have been declared and
paid or a sum sufficient for payment thereof set apart; and
(3) There shall be no arrearages with respect to the
redemption of Class A Shares, Class B Shares, Class C Shares,
Class D Shares, Class E Shares or
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Noncumulative Shares of any series from any sinking fund
provided for shares of such series in accordance with the
provisions of Section 1 of this Item II.
(c) The foregoing restrictions on the payment of dividends or
other distributions on, or on the purchase, redemption,
retirement or other acquisition of, Common Shares or any other
shares ranking on a parity with or junior to the Class B
Shares shall be inapplicable to (i) any payments in lieu of
issuance of fractional shares thereof, whether upon any
merger, conversion, stock dividend or otherwise, (ii) the
conversion of Class A Shares, Class B Shares, Class C Shares,
Class D Shares, Class E Shares or Noncumulative Shares into
Common Shares or (iii) the exercise by the Corporation of its
rights pursuant to Item VIII(d) of this Division A, Section
4(d) of Division B or any similar Section hereafter contained
in these Amended and Restated Articles of Incorporation, as
amended, with respect to any other class or series of capital
stock hereafter created or authorized.
(d) If, for any taxable year, the Corporation elects to
designate as "capital gain dividends" (as defined in Section
857 of the Code), any portion (the "Capital Gains Amount") of
the dividends paid or made available for the year to holders
of all classes of stock (the "Total Dividends"), then, to the
extent permissible under the Code and to the extent that it
does not cause any dividends to fail to qualify for the
dividends paid deduction under Section 561 of the Code, the
portion of the Capital Gains Amount that shall be allocable to
holders of the Class B Shares shall be the amount that the
total dividends paid or made available to the holders of the
Class B Shares for the year bears to the Total Dividends.
Section 3. Redemption.
(a) Subject to the express terms of each series, the
Corporation:
(1) May, from time to time at the option of the Board
of Directors, redeem all or any part of any redeemable series
of Class B Shares at the time outstanding at the applicable
redemption price for such series fixed in accordance with the
provisions of Section 1 of this Item II; and
(2) Shall, from time to time, make such redemptions
of each series of Class B Shares as may be required to fulfill
the requirements of any sinking fund provided for shares of
such series at the applicable sinking fund redemption price
fixed in accordance with the provisions of Section 1 of this
Item II; and shall in each case pay all accrued and unpaid
dividends to the redemption date.
(b) (1) Notice of every such redemption shall be mailed,
postage prepaid, to the holders of record of the Class B
Shares to be redeemed at their respective addresses then
appearing on the books of the Corporation, not less than 30
days nor more than 60 days prior to the date fixed for such
redemption, or such other time prior thereto as the Board of
Directors shall fix for any series pursuant to Section 1 of
this Item II prior to the issuance thereof. At any time after
notice as provided above has been deposited in the mail, the
Corporation may deposit the
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aggregate redemption price of Class B Shares to be redeemed,
together with accrued and unpaid dividends thereon to the
redemption date, with any bank or trust company in Cleveland,
Ohio, or New York, New York, having capital and surplus of not
less than $100,000,000, named in such notice and direct that
there be paid to the respective holders of the Class B Shares
so to be redeemed amounts equal to the redemption price of the
Class B Shares so to be redeemed, together with such accrued
and unpaid dividends thereon, on surrender of the share
certificate or certificates held by such holders; and upon the
deposit of such notice in the mail and the making of such
deposit of money with such bank or trust company, such holders
shall cease to be shareholders with respect to such shares;
and from and after the time such notice shall have been so
deposited and such deposit of money shall have been so made,
such holders shall have no rights or claim against the
Corporation with respect to such shares, except only the right
to receive such money from such bank or trust company without
interest or to exercise before the redemption date any
unexpired privileges of conversion. In the event less than all
of the outstanding Class B Shares are to be redeemed, the
Corporation shall select by lot the shares so to be redeemed
in such manner as shall be prescribed by the Board of
Directors.
(2) If the holders of Class B Shares which have been
called for redemption shall not within six years after such
deposit claim the amount deposited for the redemption thereof,
any such bank or trust company shall, upon demand, pay over to
the Corporation such unclaimed amounts and thereupon such bank
or trust company and the Corporation shall be relieved of all
responsibility in respect thereof and to such holders.
(c) Any Class B Shares which are (1) redeemed by the
Corporation pursuant to the provisions of this Section, (2)
purchased and delivered in satisfaction of any sinking fund
requirements provided for shares of such series, (3) converted
in accordance with the express terms thereof, or (4) otherwise
acquired by the Corporation, shall resume the status of
authorized but unissued Class B Shares without serial
designation.
(d) Except in connection with the exercise of the
Corporation's rights pursuant to Section (d) of Item VIII of
this Division A, Section 4(d) of Division B or any similar
Section hereafter contained in these Amended and Restated
Articles of Incorporation, as amended, with respect to any
other class or series of capital stock hereafter created or
authorized, the Corporation may not purchase or redeem (for
sinking fund purposes or otherwise) less than all of the Class
B Shares then outstanding except in accordance with a stock
purchase offer made to all holders of record of Class B
Shares, unless all dividends on all Class B Shares then
outstanding for all previous and current dividend periods
shall have been declared and paid or funds therefor set apart
and all accrued sinking fund obligations applicable thereto
shall have been complied with.
Section 4. Liquidation.
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(a) (1) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of Class B Shares of any series shall
be entitled to receive in full out of the assets of the
Corporation, including its capital, before any amount shall be
paid or distributed among the holders of the Common Shares or
any other shares ranking junior to the Class B Shares, the
amounts fixed with respect to shares of such series in
accordance with Section 1 of this Item II, plus an amount
equal to all dividends accrued and unpaid thereon to the date
of payment of the amount due pursuant to such liquidation,
dissolution or winding up of the affairs of the Corporation.
In the event the net assets of the Corporation legally
available therefor are insufficient to permit the payment upon
all outstanding Class A Shares, Class B Shares, Class C
Shares, Class D Shares, Class E Shares and Noncumulative
Shares of the full preferential amount to which they are
respectively entitled, then such net assets shall be
distributed ratably upon all outstanding Class A Shares, Class
B Shares, Class C Shares, Class D Shares, Class E Shares and
Noncumulative Shares in proportion to the full preferential
amount to which each such share is entitled.
(2) After payment to the holders of Class B Shares of
the full preferential amounts as aforesaid, the holders of
Class B Shares, as such, shall have no right or claim to any
of the remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation into or
with any other Corporation, the merger of any other
corporation into it, or the sale, lease or conveyance of all
or substantially all the assets of the Corporation, shall not
be deemed to be a dissolution, liquidation or winding up for
the purposes of this Section.
Section 5. Voting.
(a) The holders of Class B Shares shall have no voting rights,
except as provided in this Section or required by law.
(b) (1) If, and so often as, the Corporation shall be in
default in the payment of dividends on any series of Class B
Shares at the time outstanding, whether or not earned or
declared, for a number of consecutive dividend payment periods
which in the aggregate contain at least 540 days, all holders
of Class B Shares, voting separately as a class, together with
all Class A Shares, Class C Shares, Class D Shares, Class E
Shares and Noncumulative Shares upon which like voting rights
have been conferred and are exercisable under the
circumstances described in Subsection 5(c), shall be entitled
to elect, as herein provided, a total of two members of the
Board of Directors of the Corporation; provided, however, that
the holders of such Class B Shares shall not exercise such
special class voting rights except at meetings of such
shareholders for the election of directors at which the
holders of not less than 50% of such Class B Shares are
present in person or by proxy; and provided further, that the
special class voting rights provided for in this paragraph
when the same shall have become vested shall remain so vested
until all accrued and unpaid dividends on such Class B Shares
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then outstanding shall have been paid or declared and a sum
sufficient therefor set aside for payment, whereupon the
holders of such Class B Shares shall be divested of their
special class voting rights in respect of subsequent elections
of directors, subject to the revesting of such special class
voting rights in the event above specified in this paragraph.
(2) In the event of default entitling holders of
Class B Shares to elect two directors as specified in
paragraph (1) of this Subsection, a special meeting of such
holders for the purpose of electing such directors shall be
called by the Secretary of the Corporation upon written
request of, or may be called by, the holders of record of at
least 10% of the Class B Shares upon which such default in the
payment of dividends exists and notice thereof shall be given
in the same manner as that required for the annual meeting of
shareholders; provided, however, that the Corporation shall
not be required to call such special meeting if the annual
meeting of shareholders shall be called to be held within 90
days after the date of receipt of the foregoing written
request from the holders of Class B Shares. At any meeting at
which such holders of Class B Shares shall be entitled to
elect directors, holders of 50% of such Class B Shares,
present in person or by proxy, shall be sufficient to
constitute a quorum, and the vote of the holders of a majority
of such shares so present at any such meeting at which there
shall be such a quorum shall be sufficient to elect the
members of the Board of Directors which such holders of Class
B Shares are entitled to elect as herein provided.
Notwithstanding any provision of these Amended and Restated
Articles of Incorporation, as amended, or the Code of
Regulations of the Corporation or any action taken by the
holders of any class of shares fixing the number of directors
of the Corporation, the two directors who may be elected by
such holders of Class B Shares pursuant to this Subsection
shall serve in addition to any other directors then in office
or proposed to be elected otherwise than pursuant to this
Subsection. Nothing in this Subsection shall prevent any
change otherwise permitted in the total number of or
classifications of directors of the Corporation nor require
the resignation of any director elected otherwise than
pursuant to this Subsection. Notwithstanding any
classification of the other directors of the Corporation, the
two directors elected by such holders of Class B Shares shall
be elected annually for terms expiring at the next succeeding
annual meeting of shareholders.
(3) Upon any divesting of the special class voting
rights of the holders of the Class B Shares in respect of
elections of directors as provided in this Subsection, the
terms of office of all directors then in office elected by
such holders shall terminate immediately thereupon. If the
office of any director elected by such holders voting as a
class becomes vacant by reason of death, resignation, removal
from office or otherwise, the remaining director elected by
such holders voting as a class may elect a successor who shall
hold office for the unexpired term in respect of which such
vacancy occurred.
(c) If at any time when the holders of Class B Shares are
entitled to elect directors pursuant to the foregoing
provisions of this Section the holders of any
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Class A Shares, Class C Shares, Class D Shares, Class E Shares
or Noncumulative Shares are entitled to elect directors
pursuant hereto by reason of any default in the payment of
dividends thereon, then the voting rights of the Class A
Shares, the Class B Shares, the Class C Shares, the Class D
Shares, the Class E Shares and the Noncumulative Shares then
entitled to vote shall be combined (with class of shares
having a number of votes proportional to the aggregate
liquidation preference of its outstanding shares). In such
case, the holders of Class B Shares and of all such other
shares then entitled so to vote, voting as a class, shall
elect such directors. If the holders of any such other shares
have elected such directors prior to the happening of the
default or event permitting the holders of Class B Shares to
elect directors, or prior to a written request for the holding
of a special meeting being received by the Secretary of the
Corporation as required above, then a new election shall be
held with all such other shares and the Class B Shares voting
together as a single class for such directors, resulting in
the termination of the term of such previously elected
directors upon the election of such new directors.
(d) The affirmative vote of the holders of at least two-thirds
of the Class B Shares at the time outstanding, voting
separately as a class, given in person or by proxy either in
writing or at a meeting called for the purpose, shall be
necessary to effect either of the following:
(1) Any amendment, alteration or repeal, whether by
merger, consolidation or otherwise, of any of the provisions
of the Amended and Restated Articles of Incorporation, as
amended, or of the Code of Regulations of the Corporation
which affects adversely and materially the preferences or
voting or other rights of the holders of Class B Shares which
are set forth in these Amended and Restated Articles of
Incorporation, as amended; provided, however, neither the
amendment of these Amended and Restated Articles of
Incorporation, as amended, so as to authorize, create or
change the authorized or outstanding number of Class B Shares
or of any shares ranking on a parity with or junior to the
Class B Shares nor the amendment of the provisions of the Code
of Regulations so as to change the number or classification of
directors of the Corporation shall be deemed to affect
adversely and materially preferences or voting or other rights
of the holders of Class B Shares; or
(2) The authorization, creation or increase in the
authorized number of any shares, or any security convertible
into shares, in either case ranking prior to such Class B
Shares.
(e) In the event, and only to the extent, that (1) Class B
Shares are issued in more than one series and (2) Ohio law
permits the holders of a series of a class of capital stock to
vote separately as a class, the affirmative vote of the
holders of at least two-thirds of each series of Class B
Shares at the time outstanding, voting separately as a class,
given in person or by proxy either in writing or at a meeting
called for the purpose of voting on such matters, shall be
required for any amendment, alteration or repeal, whether by
merger, consolidation or otherwise,
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of any of the provisions of these Amended and Restated
Articles of Incorporation, as amended, or of the Code of
Regulations of the Corporation which affects adversely and
materially the preferences or voting or other rights of the
holders of such series which are set forth in these Amended
and Restated Articles of Incorporation, as amended; provided,
however, neither the amendment of these Amended and Restated
Articles of Incorporation, as amended, so as to authorize,
create or change the authorized or outstanding number of Class
B Shares or of any shares remaining on a parity with or junior
to the Class B Shares nor the amendment of the provisions of
the Code of Regulations so as to change the number of
classification of directors of the Corporation shall be deemed
to affect adversely and materially preferences or voting or
other rights of the holders of such series.
Section 6. 9.44% Class B Cumulative Redeemable Preferred
Shares. Of the 1,500,000 authorized Class B Shares, 177,500
shares are designated as a series entitled "9.44% Class B
Cumulative Redeemable Preferred Shares" (hereinafter called
"9.44% Class B Preferred Shares"). The 9.44% Class B Preferred
Shares shall have the express terms set forth in this Item II
as being applicable to all Class B Shares as a class and, in
addition, the following express terms applicable to all 9.44%
Class B Preferred Shares as a series of Class B Shares:
(a) The annual dividend rate of the 9.44% Class B
Preferred Shares shall be 9.44% of the liquidation preference
of $250.00 per share.
(b) Dividends on the 9.44% Class B Preferred Shares
shall be payable, if declared, quarterly on or about the 15th
day of March, June, September, and December each year, the
first quarterly dividend being payable, if declared, on March
15, 1996. The dividends payable for each full quarterly
dividend period on each 9.44% Class B Preferred Shares shall
be $5.90.
Dividends for the initial dividend period on the
9.44% Class B Preferred Shares, or for any period shorter or
longer than a full dividend period on the 9.44% Class B
Preferred Shares, shall be computed on the basis of a 360-day
year consisting of twelve 30-day months. The aggregate
dividend payable quarterly to each holder of 9.44% Class B
Preferred Shares shall be rounded to the nearest one
one-hundredth of one cent with $.00005 being rounded upward.
Each dividend shall be payable to the holders of record on
such record date, no less than 10 nor more than 30 days
preceding the payment date thereof, as shall be fixed from
time to time by the Corporation's Board of Directors.
(c) Dividends on 9.44% Class B Preferred Shares shall
be cumulative as follows:
(1) With respect to shares included in the initial
issue of 9.44% Class B Preferred Shares and shares
issued any time thereafter up to and including the
record date for the payment of the first dividend on
the initial issue of 9.44% Class B Preferred Shares,
dividends shall be
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cumulative from the date of the initial issue of
9.44% Class B Preferred Shares; and
(2) With respect to shares issued any time after the
aforesaid record date, dividends shall be cumulative
from the dividend payment date next preceding the
date of issue of such shares, except that if such
shares are issued during the period commencing the
day after the record date for the payment of a
dividend on 9.44% Class B Preferred Shares and ending
on the payment date of that dividend, dividends with
respect to such shares shall be cumulative from that
dividend payment date.
(d) Except as required to preserve the Corporation's
status as a real estate investment trust under the Internal
Revenue Code of 1986, as amended, the 9.44% Class B Preferred
Shares may not be redeemed prior to December 26, 2000. At any
time or from time to time on and after December 26, 2000 the
Corporation, at its option upon not less than thirty (30) nor
more than sixty (60) days' written notice, may redeem all or
any part of the 9.44% Class B Preferred Shares at a redemption
price of $250.00 per share plus, in each case, an amount equal
to all dividends accrued and unpaid thereon to the redemption
date, without interest. The redemption price (other than the
portion thereof consisting of accrued and unpaid dividends) is
payable solely out of the sale proceeds of other capital
shares of the Corporation, which may include any equity
securities (including common shares and preferred shares),
shares, interests, participation or other ownership interests
(however designated) and any rights (other than debt
securities convertible into or exchangeable for equity
securities), or options to purchase any of the foregoing.
(e) The amount payable per 9.44% Class B Preferred
Share in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Corporation shall be $250.00, plus an amount equal to all
dividends accrued and unpaid thereon to the date of payment.
(f) All dividend payments made on the 9.44% Class B
Preferred Shares, at any time during which the Corporation is
in default in the payment of dividends on such 9.44% Class B
Preferred Shares for any dividend period, shall, for the
purposes of Section 5(b)(1) of this Item II, be deemed to be
made in respect of the earliest dividend period with respect
to which the Corporation is in default.
III. The Class C Cumulative Preferred Shares. The Class C Shares shall
have the following express terms:
Section 1. Series. The Class C Shares may be issued from time
to time in one or more series. All Class C Shares shall be of
equal rank and shall be identical, except in respect of the
matters that may be fixed by the Board of Directors as
hereinafter provided, and each share of a series shall be
identical with all other shares of such series, except as to
the dates from which dividends shall accrue and
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be cumulative. All Class C Shares shall rank on a parity with
the Class A Shares, the Class B Shares, the Class D Shares,
the Class E Shares and the Noncumulative Shares and shall be
identical to all Class A Shares, Class B Shares, Class D
Shares, Class E Shares and Noncumulative Shares except (1) in
respect of the matters that may be fixed by the Board of
Directors as provided in clauses (a) through (i), inclusive,
of this Section 1 and (2) only dividends on Class A Shares,
Class B Shares, Class C Shares, Class D Shares and Class E
Shares shall be cumulative as set forth herein. Subject to the
provisions of Sections 2 through 5, both inclusive, and Item
VII of this Division, which provisions shall apply to all
Class C Shares, the Board of Directors hereby is authorized to
cause such shares to be issued in one or more series and, with
respect to each such series to determine and fix prior to the
issuance thereof (and thereafter, to the extent provided in
clause (b) of this Section) the following:
(a) The designation of the series, which may be by
distinguishing number, letter or title;
(b) The authorized number of shares of the series,
which number the Board of Directors may (except where
otherwise provided in the creation of the series) increase or
decrease from time to time before or after the issuance
thereof (but not below the number of shares thereof then
outstanding);
(c) The dividend rate or rates of the series,
including the means by which such rates may be established;
(d) The date or dates from which dividends shall
accrue and be cumulative and the dates on which and the period
or periods for which dividends, if declared, shall be payable,
including the means by which such dates and periods may be
established;
(e) The redemption rights and price or prices, if
any, for shares of the series;
(f) The terms and amount of the sinking fund, if any,
for the purchase or redemption of shares of the series;
(g) The amounts payable on shares of the series in
the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation;
(h) Whether the shares of the series shall be
convertible into Common Shares or shares of any other class
and, if so, the conversion rate or rates or price or prices,
any adjustments thereof and all other terms and conditions
upon which such conversion may be made; and
(i) Restrictions (in addition to those set forth in
Subsection 5(d) or 5(e) of this Item III) on the issuance of
shares of the same series or of any other class or series.
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The Board of Directors is authorized to adopt from time to time
amendments to the Amended and Restated Articles of Incorporation, as amended,
fixing, with respect to each such series, the matters described in clauses (a)
through (i), inclusive, of this Section and is authorized to take such actions
with respect thereto as may be required by law in order to effect such
amendments.
Section 2. Dividends.
(a) The holders of Class C Shares of each series, in
preference to the holders of Common Shares and of any other
class of shares ranking junior to the Class C Shares, shall be
entitled to receive out of any funds legally available
therefor, and when and as declared by the Board of Directors,
dividends in cash at the rate or rates for such series fixed
in accordance with the provisions of Section 1 above and no
more, payable on the dates fixed for such series. Such
dividends shall accrue and be cumulative, in the case of
shares of each particular series, from and after the date or
dates fixed with respect to such series. No dividends shall be
paid upon or declared or set apart for any series of the Class
C Shares for any dividend period unless at the same time (i) a
like proportionate dividend for the dividend periods
terminating on the same or any earlier date, ratably in
proportion to the respective annual dividend rates fixed
therefor, shall have been paid upon or declared or set apart
for all Class C Shares of all series then issued and
outstanding and entitled to receive such dividend and (ii) the
dividends payable for the dividend periods terminating on the
same or any earlier date (but, with respect to Noncumulative
Shares, only with respect to the then current dividend
period), ratably in proportion to the respective dividend
rates fixed therefor, shall have been paid upon or declared or
set apart for all Class A Shares, Class B Shares, Class D
Shares, Class E Shares and Noncumulative Shares then issued
and outstanding and entitled to receive such dividends.
(b) So long as any Class C Shares shall be outstanding no
dividend, except a dividend payable in Common Shares or other
shares ranking junior to the Class C Shares, shall be paid or
declared or any distribution be made, except as aforesaid, in
respect of the Common Shares or any other shares ranking
junior to the Class C Shares, nor shall any Common Shares or
any other shares ranking junior to the Class C Shares be
purchased, retired or otherwise acquired by the Corporation,
except out of the proceeds of the sale of Common Shares or
other shares of the Corporation ranking junior to the Class C
Shares received by the Corporation subsequent to the date of
first issuance of Class C Shares of any series, unless:
(1) All accrued and unpaid dividends on Class A
Shares, Class B Shares, Class C Shares, Class D Shares and
Class E Shares including the full dividends for all current
dividend periods, shall have been declared and paid or a sum
sufficient for payment thereof set apart;
(2) All unpaid dividends on Noncumulative Shares for
the then current dividend period shall have been declared and
paid or a sum sufficient for payment therefor set apart; and
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(3) There shall be no arrearages with respect to the
redemption of Class A Shares, Class B Shares, Class C Shares,
Class D Shares, Class E Shares or Noncumulative Shares of any
series from any sinking fund provided for shares of such
series in accordance with the provisions of Section 1 of this
Item III.
(c) The foregoing restrictions on the payment of dividends or
other distributions on, or on the purchase, redemption
retirement or other acquisition of, Common Shares or any other
shares ranking on a parity with or junior to the Class C
Shares shall be inapplicable to (i) any payments in lieu of
issuance of fractional shares thereof, whether upon any
merger, conversion, stock dividend or otherwise, (ii) the
conversion of Class A Shares, Class B Shares, Class C Shares,
Class D Shares, Class E Shares or Noncumulative Shares into
Common Shares, or (iii) the exercise by the Corporation of its
rights pursuant to Item VIII(d) of this Division A, Section
4(d) of Division B or any similar Section hereafter contained
in these Amended and Restated Articles of Incorporation, as
amended, with respect to any other class or series of capital
stock hereafter created or authorized.
(d) If, for any taxable year, the Corporation elects to
designate as "capital gain dividends" (as defined in Section
857 of the Code), any portion (the "Capital Gains Amount") of
the dividends paid or made available for the year to holders
of all classes of stock (the "Total Dividends"), then, to the
extent permissible under the Code and to the extent it does
not cause any dividends to fail to qualify for the dividends
paid deduction under Section 561 of the Code, the portion of
the Capital Gains Amount that shall be allocable to holders of
the Class C Shares shall be the amount that the total
dividends paid or made available to the holders of the Class C
Shares for the year bears to the Total Dividends.
Section 3. Redemption.
(a) Subject to the express terms of each series, the
Corporation:
(1) May, from time to time at the option of the Board
of Directors, redeem all or any part of any redeemable series
of Class C Shares at the time outstanding at the applicable
redemption price for such series fixed in accordance with the
provisions of Section 1 of this Item III; and
(2) Shall, from time to time, make such redemptions
of each series of Class C Shares as may be required to fulfill
the requirements of any sinking fund provided for shares of
such series at the applicable sinking fund redemption price
fixed in accordance with the provisions of Section 1 of this
Item III; and shall in each case pay all accrued and unpaid
dividends to the redemption date.
(b) (1) Notice of every such redemption shall be mailed,
postage prepaid, to the holders of record of the Class C
Shares to be redeemed at their respective addresses then
appearing on the books of the Corporation, not less than 30
days nor more than 60 days prior to the date fixed for such
redemption, or such other time prior thereto as the Board of
Directors shall fix for any series pursuant to
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Section 1 of this Item III prior to the issuance thereof. At
any time after notice as provided above has been deposited in
the mail, the Corporation may deposit the aggregate redemption
price of Class C Shares to be redeemed, together with accrued
and unpaid dividends thereon to the redemption date, with any
bank or trust company in Cleveland, Ohio, or New York, New
York, having capital and surplus of not less than
$100,000,000, named in such notice and direct that there be
paid to the respective holders of the Class C Shares so to be
redeemed amounts equal to the redemption price of the Class C
Shares so to be redeemed, together with such accrued and
unpaid dividends thereon, on surrender of the share
certificate or certificates held by such holders; and upon the
deposit of such notice in the mail and the making of such
deposit of money with such bank or trust company, such holders
shall cease to be shareholders with respect to such shares;
and from and after the time such notice shall have been so
deposited and such deposit of money shall have been so made,
such holders shall have no rights or claim against the
Corporation with respect to such shares, except only the right
to receive such money from such bank or trust company without
interest or to exercise before the redemption date any
unexpired privileges of conversion. In the event less than all
of the outstanding Class C Shares are to be redeemed, the
Corporation shall select by lot the shares so to be redeemed
in such manner as shall be prescribed by the Board of
Directors.
(2) If the holders of Class C Shares which have been
called for redemption shall not within six years after such
deposit claim the amount deposited for the redemption thereof,
any such bank or trust company shall, upon demand, pay over to
the Corporation such unclaimed amounts and thereupon such bank
or trust company and the Corporation shall be relieved of all
responsibility in respect thereof and to such holders.
(c) Any Class C Shares which are (1) redeemed by the
Corporation pursuant to the provisions of this Section, (2)
purchased and delivered in satisfaction of any sinking fund
requirements provided for shares of such series, (3) converted
in accordance with the express terms thereof, or (4) otherwise
acquired by the Corporation, shall resume the status of
authorized but unissued Class C Shares without serial
designation.
(d) Except in connection with the exercise of the
Corporation's rights pursuant to Section (d) of Item VIII of
this Division A, Section 4(d) of Division B or any similar
Section hereafter contained in these Amended and Restated
Articles of Incorporation, as amended, with respect to any
other class or series of capital stock hereafter created or
authorized, the Corporation may not purchase or redeem (for
sinking fund purposes or otherwise) less than all of the Class
C Shares then outstanding except in accordance with a stock
purchase offer made to all holders of record of Class C
Shares, unless all dividends on all Class C Shares then
outstanding for all previous and current dividend periods
shall have been declared and paid or funds therefor set apart
and all accrued sinking fund obligations applicable thereto
shall have been complied with.
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Section 4. Liquidation.
(a) (1) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of Class C Shares of any series shall
be entitled to receive in full out of the assets of the
Corporation, including its capital, before any amount shall be
paid or distributed among the holders of the Common Shares or
any other shares ranking junior to the Class C Shares, the
amounts fixed with respect to shares of such series in
accordance with Section 1 of this Item III, plus an amount
equal to all dividends accrued and unpaid thereon to the date
of payment of the amount due pursuant to such liquidation,
dissolution or winding up of the affairs of the Corporation.
In the event the net assets of the Corporation legally
available therefor are insufficient to permit the payment upon
all outstanding Class A Shares, Class B Shares, Class C
Shares, Class D Shares, Class E Shares and Noncumulative
Shares of the full preferential amount to which they are
respectively entitled, then such net assets shall be
distributed ratably upon all outstanding Class A Shares, Class
B Shares, Class C Shares, Class D Shares, Class E Shares and
Noncumulative Shares in proportion to the full preferential
amount to which each such share is entitled.
(2) After payment to the holders of Class C Shares of
the full preferential amounts as aforesaid, the holders of
Class C Shares, as such, shall have no right or claim to any
of the remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation into or
with any other Corporation, the merger of any other
Corporation into it, or the sale, lease or conveyance of all
or substantially all the assets of the Corporation, shall not
be deemed to be a dissolution, liquidation or winding up for
the purposes of this Section.
Section 5. Voting.
(a) The holders of Class C Shares shall have no voting rights,
except as provided in this Section or required by law.
(b) (1) If, and so often as, the Corporation shall be in
default in the payment of dividends on any series of Class C
Shares at the time outstanding, whether or not earned or
declared, for a number of consecutive dividend payment periods
which in the aggregate contain at least 540 days, all holders
of such Class C Shares, voting separately as a class, together
with all Class A Shares, Class B Shares, Class D Shares, Class
E Shares and Noncumulative Shares upon which like voting
rights have been conferred and are exercisable under the
circumstances described in Subsection 5(c), shall be entitled
to elect, as herein provided, a total of two members of the
Board of Directors of the Corporation; provided, however, that
the holders of such Class C Shares shall not exercise such
special class voting rights except at meetings of such
shareholders for the election of directors at which the
holders of not less than 50% of such Class C Shares are
present in person or by proxy; and provided further, that the
special class voting rights
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provided for in this paragraph when the same shall have become
vested shall remain so vested until all accrued and unpaid
dividends on such Class C Shares then outstanding shall have
been paid or declared and a sum sufficient for the payment
thereof set aside for payment, whereupon the holders of such
Class C Shares shall be divested of their special class voting
rights in respect of subsequent elections of directors,
subject to the revesting of such special class voting rights
in the event above specified in this paragraph. All dividend
payments made on the Class C Shares, at any time during which
the Corporation is in default in the payment of dividends on
such Class C Shares for any dividend period, shall be deemed
to be made in respect of the earliest dividend period with
respect to which the Corporation is in default.
(2) In the event of default entitling holders of
Class C Shares to elect two directors as specified in
paragraph (1) of this Subsection, a special meeting of such
holders for the purpose of electing such directors shall be
called by the Secretary of the Corporation upon written
request of, or may be called by, the holders of record of at
least 10% of the Class C Shares upon which such default in the
payment of dividends exists and notice thereof shall be given
in the same manner as that required for the annual meeting of
shareholders; provided, however, that the Corporation shall
not be required to call such special meeting if the annual
meeting of shareholders shall be called to be held within 90
days after the date of receipt of the foregoing written
request from the holders of Class C Shares. At any meeting at
which such holders of Class C Shares shall be entitled to
elect directors, holders of 50% of such Class C Shares,
present in person or by proxy, shall be sufficient to
constitute a quorum, and the vote of the holders of a majority
of such shares so present at any such meeting at which there
shall be such a quorum shall be sufficient to elect the
members of the Board of Directors which such holders of Class
C Shares are entitled to elect as herein provided.
Notwithstanding any provision of these Amended and Restated
Articles of Incorporation, as amended, or the Code of
Regulations of the Corporation or any action taken by the
holders of any class of shares fixing the number of directors
of the Corporation, the two directors who may be elected by
such holders of Class C Shares pursuant to this Subsection
shall serve in addition to any other directors then in office
or proposed to be elected otherwise than pursuant to this
Subsection. Nothing in this Subsection shall prevent any
change otherwise permitted in the total number of or
classifications of directors of the Corporation or require the
resignation of any director elected otherwise than pursuant to
this Subsection. Notwithstanding any classification of the
other directors of the Corporation, the two directors elected
by such holders of Class C Shares shall be elected annually
for terms expiring at the next succeeding annual meeting of
shareholders.
(3) Upon any divesting of the special class voting
rights of the holders of the Class C Shares in respect of
elections of directors as provided in this Subsection, the
terms of office of all directors then in office elected by
such holders shall terminate immediately thereupon. If the
office of any director elected by such holders voting as a
class becomes vacant by reason of death,
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resignation, removal from office or otherwise, the remaining
director elected by such holders voting as a class may elect a
successor who shall hold office for the unexpired term in
respect of which such vacancy occurred.
(c) If at any time when the holders of Class C Shares are
entitled to elect directors pursuant to the foregoing
provisions of this Section the holders of any Class A Shares,
Class B Shares, Class D Shares, Class E Shares or
Noncumulative Shares are entitled to elect directors pursuant
hereto by reason of any default in the payment of dividends
thereon, then the voting rights of the Class A Shares, the
Class B Shares, the Class C Shares, the Class D Shares, the
Class E Shares and the Noncumulative Shares then entitled to
vote shall be combined (with each class of shares having a
number of votes proportional to the aggregate liquidation
preference of its outstanding shares). In such case, the
holders of Class C Shares and of all such other shares then
entitled so to vote, voting as a class, shall elect such
directors. If the holders of any such other shares have
elected such directors prior to the happening of the default
or event permitting the holders of Class C Shares to elect
directors, or prior to a written request for the holding of a
special meeting being received by the Secretary of the
Corporation as required above, then a new election shall be
held with all such other shares and the Class C Shares voting
together as a single class for such directors, resulting in
the termination of the term of such previously elected
directors upon the election of such new directors.
(d) The affirmative vote of the holders of at least two-thirds
of the Class C Shares at the time outstanding, voting
separately as a class, given in person or by proxy either in
writing or at a meeting called for the purpose, shall be
necessary to effect either of the following:
(1) Any amendment, alteration or repeal, whether by
merger, consolidation or otherwise, of any of the provisions
of the Amended and Restated Articles of Incorporation, as
amended, or of the Code of Regulations of the Corporation
which affects adversely and materially the preferences or
voting or other rights of the holders of Class C Shares which
are set forth in these Amended and Restated Articles of
Incorporation, as amended; provided, however, neither the
amendment of these Amended and Restated Articles of
Incorporation, as amended, so as to authorize, create or
change the authorized or outstanding number of Class C Shares
or of any shares ranking on a parity with or junior to the
Class C Shares nor the amendment of the provisions of the Code
of Regulations so as to change the number or classification of
directors of the Corporation shall be deemed to affect
adversely and materially preferences or voting or other rights
of the holders of Class C Shares; or
(2) The authorization, creation or increase in the
authorized number of any shares, or any security convertible
into shares, in either case ranking prior to such series of
Class C Shares.
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(e) In the event, and only to the extent, that (1) Class C
Shares are issued in more than one series and (2) Ohio law
permits the holders of a series of a class of capital stock to
vote separately as a class, the affirmative vote of the
holders of at least two-thirds of each series of Class C
Shares at the time outstanding, voting separately as a class,
given in person or by proxy either in writing or at a meeting
called for the purpose of voting on such matters, shall be
required for any amendment, alteration or repeal, whether by
merger, consolidation or otherwise, of any of the provisions
of these Amended and Restated Articles of Incorporation, as
amended, or of the Code of Regulations of the Corporation
which affects adversely and materially the preferences or
voting or other rights of the holders of such series which are
set forth in these Amended and Restated Articles of
Incorporation, as amended; provided, however, neither the
amendment of these Amended and Restated Articles of
Incorporation, as amended, so as to authorize, create or
change the authorized or outstanding number of Class C Shares
or of any shares ranking on a parity with or junior to the
Class C Shares nor the Amendment of the provisions of the Code
of Regulations so as to change the number or classification of
directors of the Corporation shall be deemed to affect
adversely and materially the preferences or voting or other
rights of the holders of such series.
Section 6. 8 3/8% Class C Cumulative Redeemable Preferred
Shares. Of the 1,500,000 authorized Class C Shares, 400,000 shares are
designated as a series entitled "8 3/8% Class C Cumulative Redeemable Preferred
Shares" (hereinafter called "8 3/8% Class C Preferred Shares"). The 8 3/8% Class
C Preferred Shares shall have the express terms set forth in this Division as
being applicable to all Class C Shares as a class and, in addition, the
following express terms applicable to all 8 3/8% Class C Preferred Shares as a
series of Class C Shares:
(a) The annual dividend rate of the 8 3/8% Class C Preferred Shares
shall be 8 3/8% of the liquidation preference of $250.00 per share.
(b) Dividends on the 8 3/8% Class C Preferred Shares shall be payable,
if declared, quarterly on or about the fifteenth day of March, June,
September, and December each year, the first quarterly dividend being
payable, if declared, on September 15, 1998. The dividends payable for
each full quarterly dividend period on each 8 3/8% Class C Preferred
Shares shall be $5.234375.
Dividends for the initial dividend period on the 8 3/8% Class
C Preferred Shares, or for any period shorter or longer than a
full dividend period on the 8 3/8% Class C Preferred Shares,
shall be computed on the basis of a 360-day year consisting of
twelve 30-day months. The aggregate dividend payable quarterly
to each holder of 8 3/8% Class C Preferred Shares shall be
rounded to the nearest one one-hundredth of one cent with
$.00005 being rounded upward. Each dividend shall be payable
to the holders of record on such record date, no less than 10
nor more than 30 days preceding the payment date thereof, as
shall be fixed from time to time by the Corporation's Board of
Directors.
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(c) Dividends on 8 3/8% Class C Preferred Shares shall be cumulative as
follows:
(1) With respect to shares included in the initial issue of
8 3/8% Class C Preferred Shares and shares issued any time
thereafter up to and including the record date for the payment
of the first dividend on the initial issue of 8 3/8% Class C
Preferred Shares, dividends shall be cumulative from the date
of the initial issue of 8 3/8% Class C Preferred Shares; and
(2) With respect to shares issued any time after the aforesaid
record date, dividends shall be cumulative from the dividend
payment date next preceding the date of issue of such shares,
except that if such shares are issued during the period
commencing the day after the record date for the payment of a
dividend on 8 3/8% Class C Preferred Shares and ending on the
payment date of that dividend, dividends with respect to such
shares shall be cumulative from that dividend payment date.
(d) Except as required to preserve the Corporation's status as a real
estate investment trust under the Internal Revenue Code of 1986, as
amended, the 8 3/8% Class C Preferred Shares may not be redeemed prior
to July 7, 2003. At any time or from time to time on and after July 7,
2003 the Corporation, at its option upon not less than thirty (30) nor
more than sixty (60) days' written notice, may redeem all or any part
of the 8 3/8% Class C Preferred Shares at a redemption price of $250.00
per share plus, in each case, an amount equal to all dividends accrued
and unpaid thereon to the redemption date, without interest. The
redemption price (other than the portion thereof consisting of accrued
and unpaid dividends) is payable solely out of the sale proceeds of
other capital shares of the Corporation, which may include any equity
securities (including common shares and preferred shares), shares,
interests, participation or other ownership interests (however
designated) and any rights (other than debt securities convertible into
or exchangeable for equity securities), or options to purchase any of
the foregoing.
(e) The amount payable per 8 3/8% Class C Preferred Share in the event
of any voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the Corporation shall be $250.00, plus an amount
equal to all dividends accrued and unpaid thereon to the date of
payment.
(f) All dividend payments made on the 8 3/8% Class C Preferred Shares,
at any time during which the Corporation is in default in the payment
of dividends on such 8 3/8% Class C Preferred Shares for any dividend
period, shall, for the purposes of Section 5(b)(1) of this Division
A-III, be deemed to be made in respect of the earliest dividend period
with respect to which the Corporation is in default.
IV. The Class D Cumulative Preferred Shares. The Class D Shares shall
have the following express terms:
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Section 1. Series. The Class D Shares may be issued from time
to time in one or more series. All Class D Shares shall be of
equal rank and shall be identical, except in respect of the
matters that may be fixed by the Board of Directors as
hereinafter provided, and each share of a series shall be
identical with all other shares of such series, except as to
the dates from which dividends shall accrue and be cumulative.
All Class D Shares shall rank on a parity with the Class A
Shares, the Class B Shares, the Class C Shares, the Class E
Shares and the Noncumulative Shares and shall be identical to
all Class A Shares, Class B Shares, Class C Shares, Class E
Shares and Noncumulative Shares except (1) in respect of the
matters that may be fixed by the Board of Directors as
provided in clauses (a) through (i), inclusive, of this
Section 1 and (2) only dividends on Class A Shares, Class B
Shares, Class C Shares, Class D Shares and Class E Shares
shall be cumulative as set forth herein. Subject to the
provisions of Sections 2 through 5, both inclusive, and Item
VII of this Division, which provisions shall apply to all
Class D Shares, the Board of Directors hereby is authorized to
cause such shares to be issued in one or more series and, with
respect to each such series to determine and fix prior to the
issuance thereof (and thereafter, to the extent provided in
clause (b) of this Section) the following:
(a) The designation of the series, which may be by
distinguishing number, letter or title;
(b) The authorized number of shares of the series,
which number the Board of Directors may (except where
otherwise provided in the creation of the series) increase or
decrease from time to time before or after the issuance
thereof (but not below the number of shares thereof then
outstanding);
(c) The dividend rate or rates of the series,
including the means by which such rates may be established;
(d) The date or dates from which dividends shall
accrue and be cumulative and the dates on which and the period
or periods for which dividends, if declared, shall be payable,
including the means by which such dates and periods may be
established;
(e) The redemption rights and price or prices, if
any, for shares of the series;
(f) The terms and amount of the sinking fund, if any,
for the purchase or redemption of shares of the series;
(g) The amounts payable on shares of the series in
the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation;
(h) Whether the shares of the series shall be
convertible into Common Shares or shares of any other class
and, if so, the conversion rate or rates or price
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or prices, any adjustments thereof and all other terms and
conditions upon which such conversion may be made; and
(i) Restrictions (in addition to those set forth in
Subsection 5(d) or 5(e) of this Item IV) on the issuance of
shares of the same series or of any other class or series.
The Board of Directors is authorized to adopt from time to time
amendments to the Amended and Restated Articles of Incorporation, as amended,
fixing, with respect to each such series, the matters described in clauses (a)
through (i), inclusive, of this Section and is authorized to take such actions
with respect thereto as may be required by law in order to effect such
amendments.
Section 2. Dividends.
(a) The holders of Class D Shares of each series, in
preference to the holders of Common Shares and of any other
class of shares ranking junior to the Class D Shares, shall be
entitled to receive out of any funds legally available
therefor, and when and as declared by the Board of Directors,
dividends in cash at the rate or rates for such series fixed
in accordance with the provisions of Section 1 above and no
more, payable on the dates fixed for such series. Such
dividends shall accrue and be cumulative, in the case of
shares of each particular series, from and after the date or
dates fixed with respect to such series. No dividends shall be
paid upon or declared or set apart for any series of the Class
D Shares for any dividend period unless at the same time (i) a
like proportionate dividend for the dividend periods
terminating on the same or any earlier date, ratably in
proportion to the respective annual dividend rates fixed
therefor, shall have been paid upon or declared or set apart
for all Class D Shares of all series then issued and
outstanding and entitled to receive such dividend and (ii) the
dividends payable for the dividend periods terminating on the
same or any earlier date (but, with respect to Noncumulative
Shares, only with respect to the then current dividend
period), ratably in proportion to the respective dividend
rates fixed therefor, shall have been paid upon or declared or
set apart for all Class A Shares, Class B Shares, Class C
Shares, Class E Shares and Noncumulative Shares then issued
and outstanding and entitled to receive such dividends.
(b) So long as any Class D Shares shall be outstanding no
dividend, except a dividend payable in Common Shares or other
shares ranking junior to the Class D Shares, shall be paid or
declared or any distribution be made, except as aforesaid, in
respect of the Common Shares or any other shares ranking
junior to the Class D Shares, nor shall any Common Shares or
any other shares ranking junior to the Class D Shares be
purchased, retired or otherwise acquired by the Corporation,
except out of the proceeds of the sale of Common Shares or
other shares of the Corporation ranking junior to the Class D
Shares received by the Corporation subsequent to the date of
first issuance of Class D Shares of any series, unless:
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(1) All accrued and unpaid dividends on Class A
Shares, Class B Shares, Class C Shares, Class D Shares and
Class E Shares, including the full dividends for all current
dividend periods, shall have been declared and paid or a sum
sufficient for payment thereof set apart;
(2) All unpaid dividends on Noncumulative Shares for
the then current dividend period shall have been declared and
paid or a sum sufficient for payment therefor set apart; and
(3) There shall be no arrearages with respect to the
redemption of Class A Shares, Class B Shares, Class C Shares,
Class D Shares, Class E Shares or Noncumulative Shares of any
series from any sinking fund provided for shares of such
series in accordance with the provisions of Section 1 of this
Item IV.
(c) The foregoing restrictions on the payment of dividends or
other distributions on, or on the purchase, redemption
retirement or other acquisition of, Common Shares or any other
shares ranking on a parity with or junior to the Class D
Shares shall be inapplicable to (i) any payments in lieu of
issuance of fractional shares thereof, whether upon any
merger, conversion, stock dividend or otherwise, (ii) the
conversion of Class A Shares, Class B Shares, Class C Shares,
Class D Shares, Class E Shares or Noncumulative Shares into
Common Shares, or (iii) the exercise by the Corporation of its
rights pursuant to Item VIII(d) of this Division A, Section
4(d) of Division B or any similar Section hereafter contained
in these Amended and Restated Articles of Incorporation, as
amended, with respect to any other class or series of capital
stock hereafter created or authorized.
(d) If, for any taxable year, the Corporation elects to
designate as "capital gain dividends" (as defined in Section
857 of the Code), any portion (the "Capital Gains Amount") of
the dividends paid or made available for the year to holders
of all classes of stock (the "Total Dividends"), then, to the
extent permissible under the Code and to the extent it does
not cause any dividends to fail to qualify for the dividends
paid deduction under Section 561 of the Code, the portion of
the Capital Gains Amount that shall be allocable to holders of
the Class D Shares shall be the amount that the total
dividends paid or made available to the holders of the Class D
Shares for the year bears to the Total Dividends.
Section 3. Redemption.
(a) Subject to the express terms of each series, the
Corporation:
(1) May, from time to time at the option of the Board
of Directors, redeem all or any part of any redeemable series
of Class D Shares at the time outstanding at the applicable
redemption price for such series fixed in accordance with the
provisions of Section 1 of this Item IV; and
(2) Shall, from time to time, make such redemptions
of each series of Class D Shares as may be required to fulfill
the requirements of any sinking fund provided for shares of
such series at the applicable sinking fund redemption price
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fixed in accordance with the provisions of Section 1 of this
Item IV; and shall in each case pay all accrued and unpaid
dividends to the redemption date.
(b) (1) Notice of every such redemption shall be mailed,
postage prepaid, to the holders of record of the Class D
Shares to be redeemed at their respective addresses then
appearing on the books of the Corporation, not less than 30
days nor more than 60 days prior to the date fixed for such
redemption, or such other time prior thereto as the Board of
Directors shall fix for any series pursuant to Section 1 of
this Item IV prior to the issuance thereof. At any time after
notice as provided above has been deposited in the mail, the
Corporation may deposit the aggregate redemption price of
Class D Shares to be redeemed, together with accrued and
unpaid dividends thereon to the redemption date, with any bank
or trust company in Cleveland, Ohio, or New York, New York,
having capital and surplus of not less than $100,000,000,
named in such notice and direct that there be paid to the
respective holders of the Class D Shares so to be redeemed
amounts equal to the redemption price of the Class D Shares so
to be redeemed, together with such accrued and unpaid
dividends thereon, on surrender of the share certificate or
certificates held by such holders; and upon the deposit of
such notice in the mail and the making of such deposit of
money with such bank or trust company, such holders shall
cease to be shareholders with respect to such shares; and from
and after the time such notice shall have been so deposited
and such deposit of money shall have been so made, such
holders shall have no rights or claim against the Corporation
with respect to such shares, except only the right to receive
such money from such bank or trust company without interest or
to exercise before the redemption date any unexpired
privileges of conversion. In the event less than all of the
outstanding Class D Shares are to be redeemed, the Corporation
shall select by lot the shares so to be redeemed in such
manner as shall be prescribed by the Board of Directors.
(2) If the holders of Class D Shares which have been
called for redemption shall not within six years after such
deposit claim the amount deposited for the redemption thereof,
any such bank or trust company shall, upon demand, pay over to
the Corporation such unclaimed amounts and thereupon such bank
or trust company and the Corporation shall be relieved of all
responsibility in respect thereof and to such holders.
(c) Any Class D Shares which are (1) redeemed by the
Corporation pursuant to the provisions of this Section, (2)
purchased and delivered in satisfaction of any sinking fund
requirements provided for shares of such series, (3) converted
in accordance with the express terms thereof, or (4) otherwise
acquired by the Corporation, shall resume the status of
authorized but unissued Class D Shares without serial
designation.
(d) Except in connection with the exercise of the
Corporation's rights pursuant to Section (d) of Item VIII of
this Division A, Section 4(d) of Division B or any similar
Section hereafter contained in these Amended and Restated
Articles of Incorporation, as amended, with respect to any
other class or series of capital
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stock hereafter created or authorized, the Corporation may not
purchase or redeem (for sinking fund purposes or otherwise)
less than all of the Class D Shares then outstanding except in
accordance with a stock purchase offer made to all holders of
record of Class D Shares, unless all dividends on all Class D
Shares then outstanding for all previous and current dividend
periods shall have been declared and paid or funds therefor
set apart and all accrued sinking fund obligations applicable
thereto shall have been complied with.
Section 4. Liquidation.
(a) (1) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of Class D Shares of any series shall
be entitled to receive in full out of the assets of the
Corporation, including its capital, before any amount shall be
paid or distributed among the holders of the Common Shares or
any other shares ranking junior to the Class D Shares, the
amounts fixed with respect to shares of such series in
accordance with Section 1 of this Item IV, plus an amount
equal to all dividends accrued and unpaid thereon to the date
of payment of the amount due pursuant to such liquidation,
dissolution or winding up of the affairs of the Corporation.
In the event the net assets of the Corporation legally
available therefor are insufficient to permit the payment upon
all outstanding Class A Shares, Class B Shares, Class C
Shares, Class D Shares, Class E Shares and Noncumulative
Shares of the full preferential amount to which they are
respectively entitled, then such net assets shall be
distributed ratably upon all outstanding Class A Shares, Class
B Shares, Class C Shares, Class D Shares, Class E Shares and
Noncumulative Shares in proportion to the full preferential
amount to which each such share is entitled.
(2) After payment to the holders of Class D Shares of
the full preferential amounts as aforesaid, the holders of
Class D Shares, as such, shall have no right or claim to any
of the remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation into or
with any other Corporation, the merger of any other
Corporation into it, or the sale, lease or conveyance of all
or substantially all the assets of the Corporation, shall not
be deemed to be a dissolution, liquidation or winding up for
the purposes of this Section.
Section 5. Voting.
(a) The holders of Class D Shares shall have no voting rights,
except as provided in this Section or required by law.
(b) (1) If, and so often as, the Corporation shall be in
default in the payment of dividends on any series of Class D
Shares at the time outstanding, whether or not earned or
declared, for a number of consecutive dividend payment periods
which in the aggregate contain at least 540 days, all holders
of such Class D Shares, voting separately as a class, together
with all Class A Shares, Class B Shares,
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Class C Shares, Class E Shares and Noncumulative Shares upon
which like voting rights have been conferred and are
exercisable under the circumstances described in Subsection
5(c), shall be entitled to elect, as herein provided, a total
of two members of the Board of Directors of the Corporation;
provided, however, that the holders of such Class D Shares
shall not exercise such special class voting rights except at
meetings of such shareholders for the election of directors at
which the holders of not less than 50% of such Class D Shares
are present in person or by proxy; and provided further, that
the special class voting rights provided for in this paragraph
when the same shall have become vested shall remain so vested
until all accrued and unpaid dividends on such Class D Shares
then outstanding shall have been paid or declared and a sum
sufficient for the payment thereof set aside for payment,
whereupon the holders of such Class D Shares shall be divested
of their special class voting rights in respect of subsequent
elections of directors, subject to the revesting of such
special class voting rights in the event above specified in
this paragraph. All dividend payments made on the Class D
Shares, at any time during which the Corporation is in default
in the payment of dividends on such Class D Shares for any
dividend period, shall be deemed to be made in respect of the
earliest dividend period with respect to which the Corporation
is in default.
(2) In the event of default entitling holders of
Class D Shares to elect two directors as specified in
paragraph (1) of this Subsection, a special meeting of such
holders for the purpose of electing such directors shall be
called by the Secretary of the Corporation upon written
request of, or may be called by, the holders of record of at
least 10% of the Class D Shares upon which such default in the
payment of dividends exists and notice thereof shall be given
in the same manner as that required for the annual meeting of
shareholders; provided, however, that the Corporation shall
not be required to call such special meeting if the annual
meeting of shareholders shall be called to be held within 90
days after the date of receipt of the foregoing written
request from the holders of Class D Shares. At any meeting at
which such holders of Class D Shares shall be entitled to
elect directors, holders of 50% of such Class D Shares,
present in person or by proxy, shall be sufficient to
constitute a quorum, and the vote of the holders of a majority
of such shares so present at any such meeting at which there
shall be such a quorum shall be sufficient to elect the
members of the Board of Directors which such holders of Class
D Shares are entitled to elect as herein provided.
Notwithstanding any provision of these Amended and Restated
Articles of Incorporation, as amended, or the Code of
Regulations of the Corporation or any action taken by the
holders of any class of shares fixing the number of directors
of the Corporation, the two directors who may be elected by
such holders of Class D Shares pursuant to this Subsection
shall serve in addition to any other directors then in office
or proposed to be elected otherwise than pursuant to this
Subsection. Nothing in this Subsection shall prevent any
change otherwise permitted in the total number of or
classifications of directors of the Corporation or require the
resignation of any director elected otherwise than pursuant to
this Subsection. Notwithstanding any classification of the
other directors of the Corporation, the two directors elected
by such holders of Class D Shares shall be
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elected annually for terms expiring at the next succeeding
annual meeting of shareholders.
(3) Upon any divesting of the special class voting
rights of the holders of the Class D Shares in respect of
elections of directors as provided in this Subsection, the
terms of office of all directors then in office elected by
such holders shall terminate immediately thereupon. If the
office of any director elected by such holders voting as a
class becomes vacant by reason of death, resignation, removal
from office or otherwise, the remaining director elected by
such holders voting as a class may elect a successor who shall
hold office for the unexpired term in respect of which such
vacancy occurred.
(c) If at any time when the holders of Class D Shares are
entitled to elect directors pursuant to the foregoing
provisions of this Section the holders of any Class A Shares,
Class B Shares, Class C Shares, Class E Shares or
Noncumulative Shares are entitled to elect directors pursuant
hereto by reason of any default in the payment of dividends
thereon, then the voting rights of the Class A Shares, the
Class B Shares, the Class C Shares, the Class D Shares, the
Class E Shares and the Noncumulative Shares then entitled to
vote shall be combined (with each class of shares having a
number of votes proportional to the aggregate liquidation
preference of its outstanding shares). In such case, the
holders of Class D Shares and of all such other shares then
entitled so to vote, voting as a class, shall elect such
directors. If the holders of any such other shares have
elected such directors prior to the happening of the default
or event permitting the holders of Class D Shares to elect
directors, or prior to a written request for the holding of a
special meeting being received by the Secretary of the
Corporation as required above, then a new election shall be
held with all such other shares and the Class D Shares voting
together as a single class for such directors, resulting in
the termination of the term of such previously elected
directors upon the election of such new directors.
(d) The affirmative vote of the holders of at least two-thirds
of the Class D Shares at the time outstanding, voting
separately as a class, given in person or by proxy either in
writing or at a meeting called for the purpose, shall be
necessary to effect either of the following:
(1) Any amendment, alteration or repeal, whether by
merger, consolidation or otherwise, of any of the provisions
of the Amended and Restated Articles of Incorporation, as
amended, or of the Code of Regulations of the Corporation
which affects adversely and materially the preferences or
voting or other rights of the holders of Class D Shares which
are set forth in these Amended and Restated Articles of
Incorporation, as amended; provided, however, neither the
amendment of these Amended and Restated Articles of
Incorporation, as amended, so as to authorize, create or
change the authorized or outstanding number of Class D Shares
or of any shares ranking on a parity with or junior to the
Class D Shares nor the amendment of the provisions of the Code
of Regulations so as to change the number or classification of
directors of the
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Corporation shall be deemed to affect adversely and materially
preferences or voting or other rights of the holders of Class
D Shares; or
(2) The authorization, creation or increase in the
authorized number of any shares, or any security convertible
into shares, in either case ranking prior to such series of
Class D Shares.
(e) In the event, and only to the extent, that (1) Class D
Shares are issued in more than one series and (2) Ohio law
permits the holders of a series of a class of capital stock to
vote separately as a class, the affirmative vote of the
holders of at least two-thirds of each series of Class D
Shares at the time outstanding, voting separately as a class,
given in person or by proxy either in writing or at a meeting
called for the purpose of voting on such matters, shall be
required for any amendment, alteration or repeal, whether by
merger, consolidation or otherwise, of any of the provisions
of these Amended and Restated Articles of Incorporation, as
amended, or of the Code of Regulations of the Corporation
which affects adversely and materially the preferences or
voting or other rights of the holders of such series which are
set forth in these Amended and Restated Articles of
Incorporation, as amended; provided, however, neither the
amendment of these Amended and Restated Articles of
Incorporation, as amended, so as to authorize, create or
change the authorized or outstanding number of Class D Shares
or of any shares ranking on a parity with or junior to the
Class D Shares nor the Amendment of the provisions of the Code
of Regulations so as to change the number or classification of
directors of the Corporation shall be deemed to affect
adversely and materially the preferences or voting or other
rights of the holders of such series.
Section 6. 8.68% Class D Cumulative Redeemable Preferred
Shares. Of the 1,500,000 authorized Class D Shares, 230,000 shares are
designated as a series entitled "8.68% Class D Cumulative Redeemable Preferred
Shares" (hereinafter called "8.68% Class D Preferred Shares"). The 8.68% Class D
Preferred Shares shall have the express terms set forth in this Division as
being applicable to all Class D Shares as a class and, in addition, the
following express terms applicable to all 8.68% Class D Preferred Shares as a
series of Class D Shares:
(a) The annual dividend rate of the 8.68 % Class D Preferred Shares
shall be 8.68 % of the liquidation preference of $250.00 per share.
(b) Dividends on the 8.68 % Class D Preferred Shares shall be payable,
if declared, quarterly on or about the fifteenth day of March, June,
September, and December each year, the first quarterly dividend being
payable, if declared, on December 15, 1998 The dividends payable for
each full quarterly dividend period on each 8.68 % Class D Preferred
Shares shall be $5.425.
Dividends for the initial dividend period on the 8.68 % Class D Preferred
Shares, or for any period shorter or longer than a full dividend period on the
8.68 % Class D Preferred Shares, shall be computed on the basis of a 360-day
year consisting of twelve 30-day months. The aggregate
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dividend payable quarterly to each holder of 8.68 % Class D Preferred Shares
shall be rounded to the nearest one one-hundredth of one cent with $.00005 being
rounded upward. Each dividend shall be payable to the holders of record on such
record date, no less than 10 nor more than 30 days preceding the payment date
thereof, as shall be fixed from time to time by the Corporation's Board of
Directors.
(c) Dividends on 8.68 % Class D Preferred Shares shall be cumulative as
follows:
(1) With respect to shares included in the initial issue of
8.68 % Class D Preferred Shares and shares issued any time
thereafter up to and including the record date for the payment
of the first dividend on the initial issue of 8.68 % Class D
Preferred Shares, dividends shall be cumulative from the date
of the initial issue of 8.68 % Class D Preferred Shares; and
(2) With respect to shares issued any time after the aforesaid
record date, dividends shall be cumulative from the dividend
payment date next preceding the date of issue of such shares,
except that if such shares are issued during the period
commencing the day after the record date for the payment of a
dividend on 8.68 % Class D Preferred Shares and ending on the
payment date of that dividend, dividends with respect to such
shares shall be cumulative from that dividend payment date.
(d) Except as required to preserve the Corporation's status as a real
estate investment trust under the Internal Revenue Code of 1986, as
amended, the 8.68 % Class D Preferred Shares may not be redeemed prior
to August 20, 2003. At any time or from time to time on and after
August 20, 2003 the Corporation, at its option upon not less than
thirty (30) nor more than sixty (60) days' written notice, may redeem
all or any part of the 8.68 % Class D Preferred Shares at a redemption
price of $250.00 per share plus, in each case, an amount equal to all
dividends accrued and unpaid thereon to the redemption date, without
interest. The redemption price (other than the portion thereof
consisting of accrued and unpaid dividends) is payable solely out of
the sale proceeds of other capital shares of the Corporation, which may
include any equity securities (including common shares and preferred
shares), shares, interests, participation or other ownership interests
(however designated) and any rights (other than debt securities
convertible into or exchangeable for equity securities), or options to
purchase any of the foregoing.
(e) The amount payable per 8.68 % Class D Preferred Share in the event
of any voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the Corporation shall be $250.00, plus an amount
equal to all dividends accrued and unpaid thereon to the date of
payment.
(f) All dividend payments made on the 8.68 % Class D Preferred Shares,
at any time during which the Corporation is in default in the payment
of dividends on such 8.68 % Class D Preferred Shares for any dividend
period, shall, for the purposes of Section 5(b)(1) of this Division
A-IV, be deemed to be made in respect of the earliest dividend period
with respect to which the Corporation is in default.
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V. The Class E Cumulative Preferred Shares. The Class E Shares shall
have the following express terms:
Section 1. Series. The Class E Shares may be issued from time
to time in one or more series. All Class E Shares shall be of
equal rank and shall be identical, except in respect of the
matters that may be fixed by the Board of Directors as
hereinafter provided, and each share of a series shall be
identical with all other shares of such series, except as to
the dates from which dividends shall accrue and be cumulative.
All Class E Shares shall rank on a parity with the Class A
Shares, the Class B Shares, the Class C Shares, the Class D
Shares and the Noncumulative Shares and shall be identical to
all Class A Shares, Class B Shares, Class C Shares, Class D
Shares and Noncumulative Shares except (1) in respect of the
matters that may be fixed by the Board of Directors as
provided in clauses (a) through (i), inclusive, of this
Section 1 and (2) only dividends on Class A Shares, Class B
Shares, Class C Shares, Class D Shares and Class E Shares
shall be cumulative as set forth herein. Subject to the
provisions of Sections 2 through 5, both inclusive, and Item
VII of this Division, which provisions shall apply to all
Class E Shares, the Board of Directors hereby is authorized to
cause such shares to be issued in one or more series and, with
respect to each such series to determine and fix prior to the
issuance thereof (and thereafter, to the extent provided in
clause (b) of this Section) the following:
(a) The designation of the series, which may be by
distinguishing number, letter or title;
(b) The authorized number of shares of the series,
which number the Board of Directors may (except where
otherwise provided in the creation of the series) increase or
decrease from time to time before or after the issuance
thereof (but not below the number of shares thereof then
outstanding);
(c) The dividend rate or rates of the series,
including the means by which such rates may be established;
(d) The date or dates from which dividends shall
accrue and be cumulative and the dates on which and the period
or periods for which dividends, if declared, shall be payable,
including the means by which such dates and periods may be
established;
(e) The redemption rights and price or prices, if
any, for shares of the series;
(f) The terms and amount of the sinking fund, if any,
for the purchase or redemption of shares of the series;
(g) The amounts payable on shares of the series in
the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation;
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(h) Whether the shares of the series shall be
convertible into Common Shares or shares of any other class
and, if so, the conversion rate or rates or price or prices,
any adjustments thereof and all other terms and conditions
upon which such conversion may be made; and
(i) Restrictions (in addition to those set forth in
Subsection 5(d) or 5(e) of this Item V) on the issuance of
shares of the same series or of any other class or series.
The Board of Directors is authorized to adopt from time to time
amendments to the Amended and Restated Articles of Incorporation, as amended,
fixing, with respect to each such series, the matters described in clauses (a)
through (i), inclusive, of this Section and is authorized to take such actions
with respect thereto as may be required by law in order to effect such
amendments.
Section 2. Dividends.
(a) The holders of Class E Shares of each series, in
preference to the holders of Common Shares and of any other
class of shares ranking junior to the Class E Shares, shall be
entitled to receive out of any funds legally available
therefor, and when and as declared by the Board of Directors,
dividends in cash at the rate or rates for such series fixed
in accordance with the provisions of Section 1 above and no
more, payable on the dates fixed for such series. Such
dividends shall accrue and be cumulative, in the case of
shares of each particular series, from and after the date or
dates fixed with respect to such series. No dividends shall be
paid upon or declared or set apart for any series of the Class
E Shares for any dividend period unless at the same time (i) a
like proportionate dividend for the dividend periods
terminating on the same or any earlier date, ratably in
proportion to the respective annual dividend rates fixed
therefor, shall have been paid upon or declared or set apart
for all Class E Shares of all series then issued and
outstanding and entitled to receive such dividend and (ii) the
dividends payable for the dividend periods terminating on the
same or any earlier date (but, with respect to Noncumulative
Shares, only with respect to the then current dividend
period), ratably in proportion to the respective dividend
rates fixed therefor, shall have been paid upon or declared or
set apart for all Class A Shares, Class B Shares, Class C
Shares, Class D Shares and Noncumulative Shares then issued
and outstanding and entitled to receive such dividends.
(b) So long as any Class E Shares shall be outstanding no
dividend, except a dividend payable in Common Shares or other
shares ranking junior to the Class E Shares, shall be paid or
declared or any distribution be made, except as aforesaid, in
respect of the Common Shares or any other shares ranking
junior to the Class E Shares, nor shall any Common Shares or
any other shares ranking junior to the Class E Shares be
purchased, retired or otherwise acquired by the Corporation,
except out of the proceeds of the sale of Common Shares or
other shares of the Corporation ranking junior to the Class E
Shares received by the Corporation subsequent to the date of
first issuance of Class E Shares of any series, unless:
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(1) All accrued and unpaid dividends on Class A
Shares, Class B Shares, Class C Shares, Class D Shares and
Class E Shares, including the full dividends for all current
dividend periods, shall have been declared and paid or a sum
sufficient for payment thereof set apart;
(2) All unpaid dividends on Noncumulative Shares for
the then current dividend period shall have been declared and
paid or a sum sufficient for payment therefor set apart; and
(3) There shall be no arrearages with respect to the
redemption of Class A Shares, Class B Shares, Class C Shares,
Class D Shares, Class E Shares or Noncumulative Shares of any
series from any sinking fund provided for shares of such
series in accordance with the provisions of Section 1 of this
Item V.
(c) The foregoing restrictions on the payment of dividends or
other distributions on, or on the purchase, redemption
retirement or other acquisition of, Common Shares or any other
shares ranking on a parity with or junior to the Class E
Shares shall be inapplicable to (i) any payments in lieu of
issuance of fractional shares thereof, whether upon any
merger, conversion, stock dividend or otherwise, (ii) the
conversion of Class A Shares, Class B Shares, Class C Shares,
Class D Shares, Class E Shares or Noncumulative Shares into
Common Shares, or (iii) the exercise by the Corporation of its
rights pursuant to Item VIII(d) of this Division A, Section
4(d) of Division B or any similar Section hereafter contained
in these Amended and Restated Articles of Incorporation, as
amended, with respect to any other class or series of capital
stock hereafter created or authorized.
(d) If, for any taxable year, the Corporation elects to
designate as "capital gain dividends" (as defined in Section
857 of the Code), any portion (the "Capital Gains Amount") of
the dividends paid or made available for the year to holders
of all classes of stock (the "Total Dividends"), then, to the
extent permissible under the Code and to the extent it does
not cause any dividends to fail to qualify for the dividends
paid deduction under Section 561 of the Code, the portion of
the Capital Gains Amount that shall be allocable to holders of
the Class E Shares shall be the amount that the total
dividends paid or made available to the holders of the Class E
Shares for the year bears to the Total Dividends.
Section 3. Redemption.
(a) Subject to the express terms of each series, the
Corporation:
(1) May, from time to time at the option of the Board
of Directors, redeem all or any part of any redeemable series
of Class E Shares at the time outstanding at the applicable
redemption price for such series fixed in accordance with the
provisions of Section 1 of this Item V; and
(2) Shall, from time to time, make such redemptions
of each series of Class E Shares as may be required to fulfill
the requirements of any sinking fund provided for shares of
such series at the applicable sinking fund redemption price
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fixed in accordance with the provisions of Section 1 of this
Item V; and shall in each case pay all accrued and unpaid
dividends to the redemption date.
(b) (1) Notice of every such redemption shall be mailed,
postage prepaid, to the holders of record of the Class E
Shares to be redeemed at their respective addresses then
appearing on the books of the Corporation, not less than 30
days nor more than 60 days prior to the date fixed for such
redemption, or such other time prior thereto as the Board of
Directors shall fix for any series pursuant to Section 1 of
this Item V prior to the issuance thereof. At any time after
notice as provided above has been deposited in the mail, the
Corporation may deposit the aggregate redemption price of
Class E Shares to be redeemed, together with accrued and
unpaid dividends thereon to the redemption date, with any bank
or trust company in Cleveland, Ohio, or New York, New York,
having capital and surplus of not less than $100,000,000,
named in such notice and direct that there be paid to the
respective holders of the Class E Shares so to be redeemed
amounts equal to the redemption price of the Class E Shares so
to be redeemed, together with such accrued and unpaid
dividends thereon, on surrender of the share certificate or
certificates held by such holders; and upon the deposit of
such notice in the mail and the making of such deposit of
money with such bank or trust company, such holders shall
cease to be shareholders with respect to such shares; and from
and after the time such notice shall have been so deposited
and such deposit of money shall have been so made, such
holders shall have no rights or claim against the Corporation
with respect to such shares, except only the right to receive
such money from such bank or trust company without interest or
to exercise before the redemption date any unexpired
privileges of conversion. In the event less than all of the
outstanding Class E Shares are to be redeemed, the Corporation
shall select by lot the shares so to be redeemed in such
manner as shall be prescribed by the Board of Directors.
(2) If the holders of Class E Shares which have been
called for redemption shall not within six years after such
deposit claim the amount deposited for the redemption thereof,
any such bank or trust company shall, upon demand, pay over to
the Corporation such unclaimed amounts and thereupon such bank
or trust company and the Corporation shall be relieved of all
responsibility in respect thereof and to such holders.
(c) Any Class E Shares which are (1) redeemed by the
Corporation pursuant to the provisions of this Section, (2)
purchased and delivered in satisfaction of any sinking fund
requirements provided for shares of such series, (3) converted
in accordance with the express terms thereof, or (4) otherwise
acquired by the Corporation, shall resume the status of
authorized but unissued Class E Shares without serial
designation.
(d) Except in connection with the exercise of the
Corporation's rights pursuant to Section (d) of Item VIII of
this Division A, Section 4(d) of Division B or any similar
Section hereafter contained in these Amended and Restated
Articles of Incorporation, as amended, with respect to any
other class or series of capital
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stock hereafter created or authorized, the Corporation may not
purchase or redeem (for sinking fund purposes or otherwise)
less than all of the Class E Shares then outstanding except in
accordance with a stock purchase offer made to all holders of
record of Class E Shares, unless all dividends on all Class E
Shares then outstanding for all previous and current dividend
periods shall have been declared and paid or funds therefor
set apart and all accrued sinking fund obligations applicable
thereto shall have been complied with.
Section 4. Liquidation.
(a) (1) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of Class E Shares of any series shall
be entitled to receive in full out of the assets of the
Corporation, including its capital, before any amount shall be
paid or distributed among the holders of the Common Shares or
any other shares ranking junior to the Class E Shares, the
amounts fixed with respect to shares of such series in
accordance with Section 1 of this Item V, plus an amount equal
to all dividends accrued and unpaid thereon to the date of
payment of the amount due pursuant to such liquidation,
dissolution or winding up of the affairs of the Corporation.
In the event the net assets of the Corporation legally
available therefor are insufficient to permit the payment upon
all outstanding Class A Shares, Class B Shares, Class C
Shares, Class D Shares, Class E Shares and Noncumulative
Shares of the full preferential amount to which they are
respectively entitled, then such net assets shall be
distributed ratably upon all outstanding Class A Shares, Class
B Shares, Class C Shares, Class D Shares, Class E Shares and
Noncumulative Shares in proportion to the full preferential
amount to which each such share is entitled.
(2) After payment to the holders of Class E Shares of
the full preferential amounts as aforesaid, the holders of
Class E Shares, as such, shall have no right or claim to any
of the remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation into or
with any other Corporation, the merger of any other
Corporation into it, or the sale, lease or conveyance of all
or substantially all the assets of the Corporation, shall not
be deemed to be a dissolution, liquidation or winding up for
the purposes of this Section.
Section 5. Voting.
(a) The holders of Class E Shares shall have no voting rights,
except as provided in this Section or required by law.
(b) (1) If, and so often as, the Corporation shall be in
default in the payment of dividends on any series of Class E
Shares at the time outstanding, whether or not earned or
declared, for a number of consecutive dividend payment periods
which in the aggregate contain at least 540 days, all holders
of such Class E Shares, voting separately as a class, together
with all Class A Shares, Class B Shares,
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Class C Shares, Class D Shares and Noncumulative Shares upon
which like voting rights have been conferred and are
exercisable under the circumstances described in Subsection
5(c), shall be entitled to elect, as herein provided, a total
of two members of the Board of Directors of the Corporation;
provided, however, that the holders of such Class E Shares
shall not exercise such special class voting rights except at
meetings of such shareholders for the election of directors at
which the holders of not less than 50% of such Class E Shares
are present in person or by proxy; and provided further, that
the special class voting rights provided for in this paragraph
when the same shall have become vested shall remain so vested
until all accrued and unpaid dividends on such Class E Shares
then outstanding shall have been paid or declared and a sum
sufficient for the payment thereof set aside for payment,
whereupon the holders of such Class E Shares shall be divested
of their special class voting rights in respect of subsequent
elections of directors, subject to the revesting of such
special class voting rights in the event above specified in
this paragraph. All dividend payments made on the Class E
Shares, at any time during which the Corporation is in default
in the payment of dividends on such Class E Shares for any
dividend period, shall be deemed to be made in respect of the
earliest dividend period with respect to which the Corporation
is in default.
(2) In the event of default entitling holders of
Class E Shares to elect two directors as specified in
paragraph (1) of this Subsection, a special meeting of such
holders for the purpose of electing such directors shall be
called by the Secretary of the Corporation upon written
request of, or may be called by, the holders of record of at
least 10% of the Class E Shares upon which such default in the
payment of dividends exists and notice thereof shall be given
in the same manner as that required for the annual meeting of
shareholders; provided, however, that the Corporation shall
not be required to call such special meeting if the annual
meeting of shareholders shall be called to be held within 90
days after the date of receipt of the foregoing written
request from the holders of Class E Shares. At any meeting at
which such holders of Class E Shares shall be entitled to
elect directors, holders of 50% of such Class E Shares,
present in person or by proxy, shall be sufficient to
constitute a quorum, and the vote of the holders of a majority
of such shares so present at any such meeting at which there
shall be such a quorum shall be sufficient to elect the
members of the Board of Directors which such holders of Class
E Shares are entitled to elect as herein provided.
Notwithstanding any provision of these Amended and Restated
Articles of Incorporation, as amended, or the Code of
Regulations of the Corporation or any action taken by the
holders of any class of shares fixing the number of directors
of the Corporation, the two directors who may be elected by
such holders of Class E Shares pursuant to this Subsection
shall serve in addition to any other directors then in office
or proposed to be elected otherwise than pursuant to this
Subsection. Nothing in this Subsection shall prevent any
change otherwise permitted in the total number of or
classifications of directors of the Corporation or require the
resignation of any director elected otherwise than pursuant to
this Subsection. Notwithstanding any classification of the
other directors of the Corporation, the two directors elected
by such holders of Class E Shares shall be
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elected annually for terms expiring at the next succeeding
annual meeting of shareholders.
(3) Upon any divesting of the special class voting
rights of the holders of the Class E Shares in respect of
elections of directors as provided in this Subsection, the
terms of office of all directors then in office elected by
such holders shall terminate immediately thereupon. If the
office of any director elected by such holders voting as a
class becomes vacant by reason of death, resignation, removal
from office or otherwise, the remaining director elected by
such holders voting as a class may elect a successor who shall
hold office for the unexpired term in respect of which such
vacancy occurred.
(c) If at any time when the holders of Class E Shares are
entitled to elect directors pursuant to the foregoing
provisions of this Section the holders of any Class A Shares,
Class B Shares, Class C Shares, Class D Shares or
Noncumulative Shares are entitled to elect directors pursuant
hereto by reason of any default in the payment of dividends
thereon, then the voting rights of the Class A Shares, the
Class B Shares, the Class C Shares, the Class D Shares, the
Class E Shares and the Noncumulative Shares then entitled to
vote shall be combined (with each class of shares having a
number of votes proportional to the aggregate liquidation
preference of its outstanding shares). In such case, the
holders of Class E Shares and of all such other shares then
entitled so to vote, voting as a class, shall elect such
directors. If the holders of any such other shares have
elected such directors prior to the happening of the default
or event permitting the holders of Class E Shares to elect
directors, or prior to a written request for the holding of a
special meeting being received by the Secretary of the
Corporation as required above, then a new election shall be
held with all such other shares and the Class E Shares voting
together as a single class for such directors, resulting in
the termination of the term of such previously elected
directors upon the election of such new directors.
(d) The affirmative vote of the holders of at least two-thirds
of the Class E Shares at the time outstanding, voting
separately as a class, given in person or by proxy either in
writing or at a meeting called for the purpose, shall be
necessary to effect either of the following:
(1) Any amendment, alteration or repeal, whether by
merger, consolidation or otherwise, of any of the provisions
of the Amended and Restated Articles of Incorporation, as
amended, or of the Code of Regulations of the Corporation
which affects adversely and materially the preferences or
voting or other rights of the holders of Class E Shares which
are set forth in these Amended and Restated Articles of
Incorporation, as amended; provided, however, neither the
amendment of these Amended and Restated Articles of
Incorporation, as amended, so as to authorize, create or
change the authorized or outstanding number of Class E Shares
or of any shares ranking on a parity with or junior to the
Class E Shares nor the amendment of the provisions of the Code
of Regulations so as to change the number or classification of
directors of the
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Corporation shall be deemed to affect adversely and materially
preferences or voting or other rights of the holders of Class
E Shares; or
(2) The authorization, creation or increase in the
authorized number of any shares, or any security convertible
into shares, in either case ranking prior to such series of
Class E Shares.
(e) In the event, and only to the extent, that (1) Class E
Shares are issued in more than one series and (2) Ohio law
permits the holders of a series of a class of capital stock to
vote separately as a class, the affirmative vote of the
holders of at least two-thirds of each series of Class E
Shares at the time outstanding, voting separately as a class,
given in person or by proxy either in writing or at a meeting
called for the purpose of voting on such matters, shall be
required for any amendment, alteration or repeal, whether by
merger, consolidation or otherwise, of any of the provisions
of these Amended and Restated Articles of Incorporation, as
amended, or of the Code of Regulations of the Corporation
which affects adversely and materially the preferences or
voting or other rights of the holders of such series which are
set forth in these Amended and Restated Articles of
Incorporation, as amended; provided, however, neither the
amendment of these Amended and Restated Articles of
Incorporation, as amended, so as to authorize, create or
change the authorized or outstanding number of Class E Shares
or of any shares ranking on a parity with or junior to the
Class E Shares nor the Amendment of the provisions of the Code
of Regulations so as to change the number or classification of
directors of the Corporation shall be deemed to affect
adversely and materially the preferences or voting or other
rights of the holders of such series.
VI. The Noncumulative Preferred Shares. The Noncumulative Preferred
Shares shall have the following express terms:
Section 1. Series. The Noncumulative Shares may be issued from
time to time in one or more series. All Noncumulative Shares
shall be of equal rank and shall be identical, except in
respect of the matters that may be fixed by the Board of
Directors as hereinafter provided, and each share of a series
shall be identical with all other shares of such series,
except as to the dates on which and the periods for which
dividends may be payable. All Noncumulative Shares shall rank
on a parity with the Class A Shares, the Class B Shares, the
Class C Shares, the Class D Shares and the Class E Shares, and
shall be identical to all Class A Shares, Class B Shares,
Class C Shares, Class D Shares and Class E Shares, except (1)
in respect of the matters that may be fixed by the Board of
Directors as provided in clauses (a) through (i), inclusive,
of this Section 1 and (2) only dividends on the Noncumulative
Shares are noncumulative as set forth herein. Subject to the
provisions of Sections 2 through 5, inclusive, and Item VII of
this Division, which provisions shall apply to all
Noncumulative Shares, the Board of Directors hereby is
authorized to cause such shares to be issued in one or more
series, and with respect to each such series, to determine and
fix prior to the issuance thereof (and thereafter, to the
extent provided in clause (b) of this Section) the following:
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(a) The designation of the series, which may be by
distinguishing number, letter or title;
(b) The authorized number of shares of the series,
which number the Board of Directors may (except where
otherwise provided in the creation of the series) increase or
decrease from time to time before or after the issuance
thereof (but not below the number of shares thereof then
outstanding);
(c) The dividend rate or rates of the series,
including the means by which such rates may be established;
(d) The dates on which and the period or periods for
which dividends, if declared, shall be payable, including the
means by which such dates and periods may be established;
(e) The redemption rights and price or prices, if
any, for shares of the series;
(f) The terms and amount of the sinking fund, if any,
for the purchase or redemption of shares of the series;
(g) The amounts payable on shares of the series in
the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation;
(h) Whether the shares of the series shall be
convertible into Common Shares or shares of any other class
and, if so, the conversion rate or rates or price or prices,
any adjustments thereof and all other terms and conditions
upon which such conversion may be made; and
(i) Restrictions (in addition to those set forth in
Subsection 5(d) or 5(e) of this Item VI) on the issuance of
shares of the same series or of any other class or series.
The Board of Directors is authorized to adopt from time to time
amendments to the Amended and Restated Articles of Incorporation, as amended,
fixing, with respect to each such series, the matters described in clauses (a)
through (i), both inclusive, of this Section and is authorized to take such
actions with respect thereto as may be required by law in order to effect such
amendments.
Section 2. Dividends.
(a) The holders of Noncumulative Shares of each series, in
preference to the holders of Common Shares and of any other
class of shares ranking junior to the Noncumulative Shares,
shall be entitled to receive out of any funds legally
available therefor, if, when and as declared by the Board of
Directors, dividends in cash at the rate or rates for such
series fixed in accordance with the provisions of Section 1
above and no more, payable on the dates fixed for such series.
Such
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dividends shall accrue, in the case of shares of each
particular series, from and after the date or dates fixed with
respect to such series; provided, however, that if the Board
of Directors fails to declare a dividend payable on a dividend
payment date on any Noncumulative Shares, the holders of the
Noncumulative Shares shall have no right to receive a dividend
in respect of the dividend period ending on such dividend
payment date, and the Corporation shall have no obligation to
pay the dividend accrued for such period, whether or not
dividends on such Noncumulative Shares are declared payable on
any future dividend payment date. No dividends shall be paid
upon or declared or set apart for any series of the
Noncumulative Shares for any dividend period unless at the
same time (i) a like proportionate dividend for the then
current dividend period, ratably in proportion to the
respective annual dividend rates fixed therefor, shall have
been paid upon or declared or set apart for all Noncumulative
Shares of all series then issued and outstanding and entitled
to receive such dividend and (ii) the dividends payable for
the dividend periods terminating on the same or any earlier
date, ratably in proportion to the respective dividend rates
fixed therefor, shall have been paid upon or declared or set
apart for all Class A Shares, Class B Shares, Class C Shares,
Class D Shares and Class E Shares then issued and outstanding
and entitled to receive such dividends.
(b) So long as any Noncumulative Shares shall be outstanding
no dividend, except a dividend payable in Common Shares or
other shares ranking junior to the Noncumulative Shares, shall
be paid or declared or any distribution be made, except as
aforesaid, in respect of the Common Shares or any other shares
ranking junior to the Noncumulative Shares, nor shall any
Common Shares or any other shares ranking junior to the
Noncumulative Shares be purchased, retired or otherwise
acquired by the Corporation, except out of the proceeds of the
sale of Common Shares or other shares of the Corporation
ranking junior to the Noncumulative Shares received by the
Corporation subsequent to the date of first issuance of
Noncumulative Shares of any series, unless:
(1) All accrued and unpaid dividends on Class A
Shares, Class B Shares, Class C Shares, Class D Shares and
Class E Shares including the full dividends for all current
dividend periods, shall have been declared and paid or a sum
sufficient for payment thereof set apart;
(2) All unpaid dividends on Noncumulative Shares for
the then current dividend period shall have been declared and
paid or a sum sufficient for payment therefor set apart; and
(3) There shall be no arrearages with respect to the
redemption of Class A Shares, Class B Shares, Class C Shares,
Class D Shares, Class E Shares or Noncumulative Shares of any
series from any sinking fund provided for shares of such
series in accordance with the provisions of Section 1 of this
Item VI.
(c) The foregoing restrictions on the payment of dividends or
other distributions on, or on the purchase, redemption
retirement or other acquisition of, Common
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Shares or any other shares ranking on a parity with or junior
to the Noncumulative Shares shall be inapplicable to (i) any
payments in lieu of issuance of fractional shares thereof,
whether upon any merger, conversion, stock dividend or
otherwise, (ii) the conversion of Class A Shares, Class B
Shares, Class C Shares, Class D Shares, Class E Shares or
Noncumulative Shares into Common Shares or (iii) the exercise
by the Corporation of its rights pursuant to Item VIII(d) of
this Division A, Section 4(d) of Division B or any similar
Section hereafter contained in these Amended and Restated
Articles of Incorporation with respect to any other class or
series of capital stock hereafter created or authorized.
(d) If, for any taxable year, the Corporation elects to
designate as "capital gain dividends" (as defined in Section
857 of the Code), any portion (the "Capital Gains Amount") of
the dividends paid or made available for the year to holders
of all classes of stock (the "Total Dividends"), then, to the
extent permissible under the Code and to the extent it does
not cause any dividends to fail to qualify for the dividends
paid deduction under Section 561 of the Code, the portion of
the Capital Gains Amount that shall be allocable to holders of
the Noncumulative Shares shall be the amount that the total
dividends paid or made available to the holders of the
Noncumulative Shares for the year bears to the Total
Dividends.
Section 3. Redemption.
(a) Subject to the express terms of each series, the
Corporation:
(1) May, from time to time at the option of the Board
of Directors, redeem all or any part of any redeemable series
of Noncumulative Shares at the time outstanding at the
applicable redemption price for such series fixed in
accordance with the provisions of Section 1 of this Item VI;
and
(2) Shall, from time to time, make such redemptions
of each series of Noncumulative Shares as may be required to
fulfill the requirements of any sinking fund provided for
shares of such series at the applicable sinking fund
redemption price fixed in accordance with the provisions of
Section 1 of this Item VI; and shall, in each case, pay all
unpaid dividends for the then current dividend period to the
redemption date.
(b) (1) Notice of every such redemption shall be mailed,
postage prepaid, to the holders of record of the Noncumulative
Shares to be redeemed at their respective addresses then
appearing on the books of the Corporation, not less than 30
days nor more than 60 days prior to the date fixed for such
redemption, or such other time prior thereto as the Board of
Directors shall fix for any series pursuant to Section 1 of
this Item VI prior to the issuance thereof. At any time after
notice as provided above has been deposited in the mail, the
Corporation may deposit the aggregate redemption price of
Noncumulative Shares to be redeemed, together with accrued and
unpaid dividends thereon for the then current dividend period
to the redemption date, with any bank or trust company in
Cleveland, Ohio, or New York, New York, having capital and
surplus of not less than $100,000,000, named
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in such notice and direct that there be paid to the respective
holders of the Noncumulative Shares so to be redeemed amounts
equal to the redemption price of the Noncumulative Shares so
to be redeemed together with such accrued and unpaid dividends
thereon for the then current dividend period, on surrender of
the share certificate or certificates held by such holders;
and upon the deposit of such notice in the mail and the making
of such deposit of money with such bank or trust company, such
holders shall cease to be shareholders with respect to such
shares; and from and after the time such notice shall have
been so deposited and such deposit of money shall have been so
made, such holders shall have no rights or claim against the
Corporation with respect to such shares, except only the right
to receive such money from such bank or trust company without
interest or to exercise before the redemption date any
unexpired privileges of conversion. In the event less than all
of the outstanding Noncumulative Shares are to be redeemed,
the Corporation shall select by lot the shares so to be
redeemed in such manner as shall be prescribed by the Board of
Directors.
(2) If the holders of Noncumulative Shares which have
been called for redemption shall not within six years after
such deposit claim the amount deposited for the redemption
thereof, any such bank or trust company shall, upon demand,
pay over to the Corporation such unclaimed amounts and
thereupon such bank or trust company and the Corporation shall
be relieved of all responsibility in respect thereof and to
such holders.
(c) Any Noncumulative Shares which are (1) redeemed by the
Corporation pursuant to the provisions of this Section, (2)
purchased and delivered in satisfaction of any sinking fund
requirements provided for shares of such series, (3) converted
in accordance with the express terms thereof, or (4) otherwise
acquired by the Corporation, shall resume the status of
authorized but unissued Noncumulative Shares without serial
designation.
(d) Except in connection with the exercise of the
Corporation's rights pursuant to Section (d) of Item VIII of
this Division A, Section 4(d) of Division B or any similar
Section hereafter contained in these Amended and Restated
Articles of Incorporation, as amended, with respect to any
other class or series of capital stock hereafter created or
authorized, the Corporation may not purchase or redeem (for
sinking fund purposes or otherwise) of less than all of the
Noncumulative Shares then outstanding except in accordance
with a stock purchase offer made to all holders of record of
Noncumulative Shares, unless all dividends on all
Noncumulative Shares then outstanding for the then current
dividend period shall have been declared and paid or funds
therefor set apart and all accrued sinking fund obligations
applicable thereto shall have been complied with.
Section 4. Liquidation.
(a) (1) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of Noncumulative Shares of any series
shall be entitled to receive in full out of the assets of the
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Corporation, including its capital, before any amount shall be
paid or distributed among the holders of the Common Shares or
any other shares ranking junior to the Noncumulative Shares,
the amounts fixed with respect to shares of such series in
accordance with Section 1 of this Item VI, plus an amount
equal to all dividends accrued and unpaid thereon for the then
current dividend period to the date of payment of the amount
due pursuant to such liquidation, dissolution or winding up of
the affairs of the Corporation. In the event the net assets of
the Corporation legally available therefor are insufficient to
permit the payment upon all outstanding Class A Shares, Class
B Shares, Class C Shares, Class D Shares, Class E Shares and
Noncumulative Shares of the full preferential amount to which
they are respectively entitled, then such net assets shall be
distributed ratably upon all outstanding Noncumulative Shares
in proportion to the full preferential amount to which each
such share is entitled.
(2) After payment to the holders of Noncumulative
Shares of the full preferential amounts as aforesaid, the
holders of Noncumulative Shares, as such, shall have no right
or claim to any of the remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation into or
with any other Corporation, the merger of any other
Corporation into it, or the sale, lease or conveyance of all
or substantially all the assets of the Corporation, shall not
be deemed to be a dissolution, liquidation or winding up for
the purposes of this Section.
Section 5. Voting.
(a) The holders of Noncumulative Shares shall have no voting
rights, except as provided in this Section or required by law.
(b)(1) If, and so often as, the Corporation shall not have
fully paid, or shall not have declared and set aside a sum
sufficient for the payment of, dividends on any series of
Noncumulative Shares at the time outstanding, for a number of
consecutive dividend payment periods which in the aggregate
contain at least 540 days, the holders of such Noncumulative
Shares, voting separately as a class, together with all Class
A Shares, Class B Shares, Class C Shares, Class D Shares and
Class E Shares upon which like voting rights have been
conferred and are exercisable, shall be entitled to elect, as
herein provided, two members of the Board of Directors of the
Corporation; provided, however, that the holders of such
Noncumulative Shares shall not exercise such special class
voting rights except at meetings of such shareholders for the
election of directors at which the holders of not less than
50% of such Noncumulative Shares are present in person or by
proxy; and provided further, that the special class voting
rights provided for in this paragraph when the same shall have
become vested shall remain so vested until the Corporation
shall have fully paid, or shall have set aside a sum
sufficient for the payment of, dividends on such Noncumulative
Shares then outstanding for a number of consecutive dividend
payment periods which in the aggregate contain at least 360
days, whereupon the holders of such Noncumulative Shares shall
be
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divested of their special class voting rights in respect of
subsequent elections of directors, subject to the revesting of
such special class voting rights in the event above specified
in this paragraph.
(2) In the event of default entitling holders of
Noncumulative Shares to elect two directors as specified in
paragraph (1) of this Subsection, a special meeting of such
holders for the purpose of electing such directors shall be
called by the Secretary of the Corporation upon written
request of, or may be called by, the holders of record of at
least 10% of the Noncumulative Shares upon which such default
in the payment of dividends exists and notice thereof shall be
given in the same manner as that required for the annual
meeting of shareholders; provided, however, that the
Corporation shall not be required to call such special meeting
if the annual meeting of shareholders shall be called to be
held within 90 days after the date of receipt of the foregoing
written request from the holders of Noncumulative Shares. At
any meeting at which such holders of Noncumulative Shares
shall be entitled to elect directors, holders of 50% of such
Noncumulative Shares, present in person or by proxy, shall be
sufficient to constitute a quorum, and the vote of the holders
of a majority of such shares so present at any such meeting at
which there shall be such a quorum shall be sufficient to
elect the members of the Board of Directors which such holders
of Noncumulative Shares are entitled to elect as herein
provided. Notwithstanding any provision of these Amended and
Restated Articles of Incorporation, as amended, or the Code of
Regulations of the Corporation or any action taken by the
holders of any class of shares fixing the number of directors
of the Corporation, the two directors who may be elected by
such holders of Noncumulative Shares pursuant to this
Subsection shall serve in addition to any other directors then
in office or proposed to be elected otherwise than pursuant to
this Subsection. Nothing in this Subsection shall prevent any
change otherwise permitted in the total number of or
classifications of directors of the Corporation nor require
the resignation of any director elected otherwise than
pursuant to this Subsection. Notwithstanding any
classification of the other directors of the Corporation, the
two directors elected by such holders of Noncumulative Shares
shall be elected annually for terms expiring at the next
succeeding annual meeting of shareholders.
(3) Upon any divesting of the special class voting
rights of the holders of the Noncumulative Shares in respect
of elections of directors as provided in this Subsection, the
terms of office of all directors then in office elected by
such holders shall terminate immediately thereupon. If the
office of any director elected by such holders voting as a
class becomes vacant by reason of death, resignation, removal
from office or otherwise, the remaining director elected by
such holders voting as a class may elect a successor who shall
hold office for the unexpired term in respect of which such
vacancy occurred.
(c) If at any time when the holders of Noncumulative Shares
are entitled to elect directors pursuant to the foregoing
provisions of this Section the holders of any Class A Shares,
Class B Shares, Class C Shares, Class D Shares and Class E
Shares, are entitled to elect directors pursuant hereto by
reason of any default in
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the payment of dividends thereon, then the voting rights of
the Class A Shares, the Class B Shares, the Class C Shares,
the Class D Shares, the Class E Shares and Noncumulative
Shares then entitled to vote shall be combined (with class of
shares having a number of votes proportional to the aggregate
liquidation preference of its outstanding shares). In such
case, the holders of Noncumulative Shares and of all such
other shares then entitled so to vote, voting as a class,
shall elect such directors. If the holders of any such other
shares have elected such directors prior to the happening of
the default or event permitting the holders of Noncumulative
Shares to elect directors, or prior to a written request for
the holding of a special meeting being received by the
Secretary of the Corporation as required above, then a new
election shall be held with all such other shares and the
Noncumulative Shares voting together as a single class for
such directors, resulting in the termination of the term of
such previously elected directors upon the election of such
new directors.
(d) The affirmative vote of the holders of at least two-thirds
of the Noncumulative Shares at the time outstanding, voting
separately as a class, given in person or by proxy either in
writing or at a meeting called for the purpose, shall be
necessary to effect either of the following:
(1) Any amendment, alteration or repeal, whether by
merger, consolidation or otherwise, of any of the provisions
of the Amended and Restated Articles of Incorporation, as
amended, or of the Code of Regulations of the Corporation
which affects adversely and materially the preferences or
voting or other rights of the holders of Noncumulative Shares
which are set forth in these Amended and Restated Articles of
Incorporation, as amended; provided, however, neither the
amendment of these Amended and Restated Articles of
Incorporation, as amended, so as to authorize, create or
change the authorized or outstanding number of Noncumulative
Shares or of any shares ranking on a parity with or junior to
the Noncumulative Shares nor the amendment of the provisions
of the Code of Regulations so as to change the number or
classification of directors of the Corporation shall be deemed
to affect adversely and materially preferences or voting or
other rights of the holders of Noncumulative Shares; or
(2) The authorization, creation or increase in the
authorized number of any shares, or any security convertible
into shares, in either case ranking prior to such
Noncumulative Shares.
(e) In the event, and only to the extent, that (1)
Noncumulative Shares are issued in more than one series and
(2) Ohio law permits the holders of a series of a class of
capital stock to vote separately as a class, the affirmative
vote of the holders of at least two-thirds of each series of
the Noncumulative Shares at the time outstanding, voting
separately as a class, given in person or by proxy either in
writing or at a meeting called for the purpose of voting on
such matters, shall be required for any amendment, alteration
or repeal, whether by merger, consolidation or otherwise, of
any of the provisions of these Amended and Restated Articles
of Incorporation, as amended, or of the Code of Regulations of
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the Corporation which affects adversely and materially the
preferences or voting or other rights of the holders of such
series which are set forth in these Amended and Restated
Articles of Incorporation, as amended; provided, however,
neither the amendment of these Amended and Restated Articles
of Incorporation, as amended, so as to authorize, create or
change the authorized or outstanding number of Noncumulative
Shares or of any shares remaining on a parity with or junior
to the Noncumulative Shares nor the amendment of the
provisions of the Code of Regulations so as to change the
number or classification of directors of the Corporation shall
be deemed to affect adversely and materially preferences or
voting or other rights of the holder of such series.
VII. Definitions. For the purposes of this Division:
(a) Whenever reference is made to shares "ranking prior to"
Class A Shares, Class B Shares, Class C Shares, Class D
Shares, Class E Shares or Noncumulative Shares, such reference
shall mean and include all shares of the Corporation in
respect of which the rights of the holders thereof as to the
payment of dividends or as to distributions in the event of a
voluntary or involuntary liquidation, dissolution or winding
up of the affairs of the Corporation are given preference over
the rights of the holders of Class A Shares, Class B Shares,
Class C Shares, Class D Shares, Class E Shares or
Noncumulative Shares, as the case may be;
(b) Whenever reference is made to shares "on a parity with"
Class A Shares, Class B Shares, Class C Shares, Class D
Shares, Class E Shares or Noncumulative Shares, such reference
shall mean and include all shares of the Corporation in
respect of which the rights of the holders thereof as to the
payment of dividends or as to distributions in the event of a
voluntary or involuntary liquidation, dissolution or winding
up of the affairs of the Corporation rank equally (except as
to the amounts fixed therefor) with the rights of the holders
of Class A Shares, Class B Shares, Class C Shares, Class D
Shares, Class E Shares or Noncumulative Shares, as the case
may be; and
(c) Whenever reference is made to shares "ranking junior to"
Class A Shares, Class B Shares, Class C Shares, Class D
Shares, Class E Shares or Noncumulative Shares, such reference
shall mean and include all shares of the Corporation other
than those defined under Subsections (a) and (b) of this
Section as shares "ranking prior to" or "on a parity with"
Class A Shares, Class B Shares, Class C Shares, Class D
Shares, Class E Shares or Noncumulative Shares, as the case
may be.
VIII. Restrictions on Transfer to Preserve Tax Benefit; Shares Subject
to Redemption.
(a) Definitions. For the purposes of this Item VIII of this
Division A of this Article FOURTH, the following terms shall
have the following meanings:
"Beneficial Ownership" shall mean ownership of Preferred
Shares by a Person who would be treated as an owner of such
Preferred Shares either directly or constructively through the
application of Section 544 of the Code, as modified by
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Section 856(h) of the Code. The terms "Beneficial Owner,"
"Beneficially Owns" and "Beneficially Owned" shall have the
correlative meanings.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Constructive Ownership" shall mean ownership of Preferred
Shares by a Person who would be treated as an owner of such
Preferred Shares either directly or constructively through the
application of Section 318 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.
"Excess Preferred Shares" shall mean any Preferred Shares (i)
acquired or proposed to be acquired by any Person pursuant to
a Transfer to the extent that, if effective, such Transfer
would result in the transferee either Beneficially Owning
Preferred Shares or Constructively Owning Preferred Shares in
excess of the Ownership Limit, or (ii) which are the subject
of a Transfer that, if effective, which would result in the
Corporation being "closely held" within the meaning of Section
856(h) of the Code.
"Market Price" shall mean, with respect to any series of any
class of Preferred Shares, the last reported sales price of
such series reported on the New York Stock Exchange on the
trading day immediately preceding the relevant date or, if
shares of such series are not then traded on the New York
Stock Exchange, the last reported sales price of shares of
such series on the trading day immediately preceding the
relevant date as reported on any exchange or quotation system
over which the shares of such series may be traded, or if
shares of such series are not then traded over any exchange or
quotation system, then the market price of shares of such
series on the relevant date as determined in good faith by the
Board of Directors of the Corporation.
"Ownership Limit" shall mean, with respect to each series of
each class of Preferred Shares, 9.8% of the outstanding shares
of such series.
"Person" shall mean an individual, corporation, partnership,
estate, trust (including a trust qualified under Section
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, an
association, a private foundation within the meaning of
Section 509(a) of the Code, a joint stock company, other
entity or a group as that term is used for purposes of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended;
provided, however, that a "person" does not mean an
underwriter which participates in a public offering of
Preferred Shares, for a period of 35 days following the
purchase by such underwriter of such Preferred Shares.
"Preferred Shares" shall mean, collectively, Class A Shares,
Class B Shares, Class C Shares, Class D Shares, Class E Shares
and Noncumulative Shares.
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"REIT" shall mean a Real Estate Investment Trust under Section
856 of the Code.
"Transfer" shall mean any sale, transfer, gift, assignment,
devise or other disposition of Preferred Shares (including,
without limitation, (i) the granting of any option or entering
into any agreement for the sale, transfer or other disposition
of Preferred Shares or (ii) the sale, transfer, assignment or
other disposition of any securities or rights convertible into
or exchangeable for Preferred Shares), whether voluntary or
involuntary, whether of record or beneficially and whether by
operation of law or otherwise.
(b) Restrictions on Transfers.
(i) Except as provided in Section (i) of this Item
VIII of this Division A of this Article FOURTH, no Person
shall Beneficially Own or Constructively Own shares of any
series of any class of Preferred Shares in excess of the
Ownership Limit applicable to such series.
(ii) Except as provided in Section (i) of this Item
VIII of this Division A of this Article FOURTH, any Transfer
that, if effective, would result in any Person Beneficially
Owning shares of any series of any class of Preferred Shares
in excess of the Ownership Limit applicable to such series
shall be void ab initio as to the Transfer of such Preferred
Shares which would be otherwise Beneficially Owned by such
Person in excess of such Ownership Limit, and the intended
transferee shall acquire no rights in such Preferred Shares.
(iii) Except as provided in Section (i) of this Item
VIII of this Division A of this Article FOURTH, any Transfer
that, if effective, would result in any Person Constructively
Owning shares of any series of any class of Preferred Shares
in excess of the Ownership Limit applicable to such series
shall be void ab initio as to the Transfer of such Preferred
Shares which would be otherwise Constructively Owned by such
Person in excess of such amount, and the intended transferee
shall acquire no rights in such Preferred Shares.
(iv) Notwithstanding any other provisions contained
in this Item VIII, any Transfer (whether or not such Transfer
is the result of a transaction entered into through the
facilities of the New York Stock Exchange) or other event
that, if effective, would result in the Corporation being
"closely held" within the meaning of Section 856(h) of the
Code, or would otherwise result in the Corporation 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
requirement of Section 856(c) of the Code) shall be void ab
initio as to the Transfer of the Preferred Shares or other
event which would cause the Corporation to be "closely held"
within the meaning of Section 856(h) of the Code or would
otherwise result in the Corporation failing
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to qualify as a REIT; and the intended transferee or owner or
Constructive or Beneficial Owner shall acquire or retain no
rights in such Preferred Shares.
(v) For purposes of construing the foregoing
provisions, any attempt to transfer Preferred Shares in
violation of the Ownership Limit applicable to the series of
the class of such Preferred Shares (as such Ownership Limit
may be modified by the Board of Directors pursuant to Section
(h) of Item VIII) shall be construed as causing such Preferred
Shares to be transferred by operation of law to the
Corporation as trustee of a trust for the exclusive benefit of
the person or persons to whom such Preferred Shares can
ultimately be transferred without violating the Ownership
Limit and any Excess Preferred Shares while held in such trust
shall not have any voting rights, shall not be considered for
purposes of any shareholder vote or for determining a quorum
for such a vote, and shall not be entitled to any dividends or
other distributions.
(c) Remedies for Breach. If the Board of Directors or its
designees shall at any time determine in good faith that a
Transfer has taken place in violation of Section (b) of Item
VIII of this Division A of this Article FOURTH or that a
Person intends to acquire or has attempted to acquire
beneficial ownership (determined without reference to any
rules of attribution), Beneficial Ownership or Constructive
Ownership of any Preferred Shares of the Corporation in
violation of Section (b) of Item VIII of this Division A of
this Article FOURTH, or that any such Transfer, intended or
attempted acquisition or acquisition would jeopardize the
status of the Corporation as a REIT under the Code, the Board
of Directors or its designees shall take such actions as it
deems advisable to refuse to give effect or to prevent such
Transfer, 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 and, in
addition, exercising its rights under Section (d) of Item VIII
of this Division A of Article FOURTH.
(d) Purchase Right in Excess Preferred Shares. Beginning on
the date of the occurrence of a Transfer which, if
consummated, in the good faith judgment of the Board of
Directors of the Corporation, could result in Excess Preferred
Shares the Excess Preferred Shares, subject to such transfer
shall be deemed to have been offered for sale to the
Corporation, or its designee, at a price per share equal to
the lesser of (i) the price per share in the transaction that
created such Excess Preferred Shares (or, in the case of a
devise or gift, the Market Price at the time of such devise or
gift) and (ii) the Market Price on the date the Corporation,
or its designee, accepts such offer. The Corporation shall
have the right to accept such offer for a period of 90 days
after the later of (i) the date of such Transfer and (ii) if
the Corporation does not receive a notice of such Transfer
pursuant to Section (e) of Item VIII of this Division A of
this Article FOURTH, the date the Board of Directors
determines in good faith that such Transfer has occurred.
Prompt payment of the purchase price shall be made in such
reasonable manner as may be determined by the Corporation.
From and after the date fixed for purchase by the Corporation,
and so long as payment of the purchase price for the Excess
Preferred Shares to be so purchased shall have been made or
duly provided for,
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the holder of any Excess Preferred Shares so called for
purchase shall cease to be entitled to dividends,
distributions, voting rights and other benefits with respect
to such Excess Preferred Shares, excepting only the right to
payment of the purchase price fixed as aforesaid. Any dividend
or distribution paid to a proposed transferee of Excess
Preferred Shares prior to the discovery by the Corporation
that the Excess Preferred Shares have been transferred in
violation of Section (b) of Item VIII of this Division A of
this Article FOURTH shall be repaid to the Corporation upon
demand. If the foregoing provisions are determined to be void
or invalid by virtue of any legal decision, statute, rule or
regulation, then the intended transferee of such Excess
Preferred Shares shall be deemed, at the option of the
Corporation, to have acted as agent on behalf of the
Corporation in acquiring such Excess Preferred Shares and to
hold such Excess Preferred Shares on behalf of the
Corporation.
(e) Notice of Restricted Transfer. Any Person who acquires or
attempts to acquire Preferred Shares or other securities in
violation of subparagraph (b) of this Item VIII, or any Person
who owns or will own Excess Preferred Shares as a result of an
event under subparagraph (b) of this Item VIII, shall
immediately give written notice to the Corporation of such
event and shall provide to the Corporation such other
information as the Corporation may request in order to
determine the effect, if any, of such Transfer or attempted
Transfer or other event on the Corporation's status as a REIT.
(f) Owners Required to Provide Information. From and after the
date of the Initial Public Offering:
(i) every Beneficial Owner of more than 5.0% (or such
other percentage, between 0.5% and 5.0%, as provided in the
regulations promulgated pursuant to the Code) of the
outstanding Preferred Shares of the Corporation shall, within
30 days after January 1 of each year, give written notice to
the Corporation stating the name and address of such
Beneficial Owner, the number of shares Beneficially Owned, and
description of how 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.
(ii) each Person who is a Beneficial Owner or
Constructive Owner of Preferred Shares and each Person
(including the shareholder of record) who is holding Preferred
Shares for a Beneficial Owner or Constructive 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.
(g) Remedies Not Limited. Nothing contained in this Division A
of this Article FOURTH 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 shareholders by preservation of the Corporation's status
as a REIT.
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(h) Ambiguity. In the case of an ambiguity in the application
of any of the provisions of Item VIII of this Division A of
this Article FOURTH, including any definition contained in
Section (a) of Item VIII, the Board of Directors shall have
the power to determine the application of the provisions of
this Item VIII with respect to any situation based on the
facts known to it.
(i) Exceptions.
(i) Subject to Section (b)(iv) of this Item VIII of
this Division A, the Board of Directors may exempt a Person
from the Ownership Limit applicable to a series of a class of
Preferred Shares if such Person is not an individual (other
than pension plans described in Section 856(h)(3)) for
purposes of Section 542(a)(2) of the Code if the Board of
Directors obtains such representations and undertakings from
such Person as are reasonably necessary to ascertain that no
individual's Beneficial Ownership of such Preferred Shares
will violate the Ownership Limit, and agrees that any
violation or attempted violation will result in such Preferred
Shares in excess of the Ownership Limit being subject to
repurchase by the Corporation as set forth in Section (d) of
Item VIII of this Division A of this Article FOURTH.
(ii) The Board of Directors may exempt a Person from
the limitation on such Person Constructively Owning Preferred
Shares in excess of the Ownership Limit applicable to a series
of a class of such Preferred Shares if such Person does not
own and represents that it will not own, directly or
constructively (by virtue of the application of Section 318 of
the Code, as modified by Section 856(d)(5) of the Code), more
than a 9.8% interest (as set forth in Section 856(d)(2)(B)) in
a tenant of any real property owned or leased by the
Corporation, if the Board of Directors obtains such
representations and undertakings from such Person as are
reasonably necessary to ascertain this fact and agrees that
any violation or attempted violation will result in such
Preferred Shares in excess of the Ownership Limit being deemed
to be Excess Preferred Shares and subject to repurchase by the
Corporation as set forth in Section (d) of Item VIII of this
Division A of this Article FOURTH.
IX. Legend. Each certificate for Preferred Shares shall bear the
following legend:
"The Preferred Shares represented by this certificate are subject to
restrictions on transfer for the purpose of the corporation's maintenance of its
status as a Real Estate Investment Trust under the Internal Revenue Code of
1986, as amended. Subject to certain provisions of the Corporation's Articles of
Incorporation, no Person may Beneficially Own or Constructively Own shares of
any series of any class of Preferred Shares in excess of 9.8% of the outstanding
Preferred Shares of such series. Any Person who attempts to Beneficially Own or
Constructively Own shares of any series of any class of Preferred Shares in
excess of the above limitations must immediately notify the Corporation. All
capitalized terms in this legend have the meanings defined in the Corporation's
Articles of Incorporation, a copy of which, including the restrictions on
transfer, will be sent without charge to each shareholder who so requests. If
the restrictions on transfer are violated, certain of the Preferred Shares
represented hereby may be subject to
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repurchase by the Corporation on the terms and conditions set forth in the
Corporation's Articles of Incorporation.
DIVISION B
Subject to the terms of the Class A Cumulative Preferred Shares, the
Class B Cumulative Preferred Shares, the Class C Cumulative Preferred Shares,
the Class D Cumulative Preferred Shares, the Class E Cumulative Preferred Shares
and the Noncumulative Preferred Shares, the Common Shares shall have the
following express terms:
Section 1. Dividend Rights. The holders of Common Shares shall be
entitled to receive, when, as and if declared by the Board of Directors of the
Corporation, out of the assets of the Corporation which are by law available
therefor, dividends or distributions payable in cash, in property or in
securities of the Corporation.
Section 2. Rights Upon Liquidation. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of, or any distribution of
the assets of, the Corporation, each holder of Common Shares shall be entitled
to receive, ratably with each other holder of Common Shares, that portion of the
assets of the Corporation available for distribution to its shareholders as the
number of Common Shares held by such holder bears to the total number of Common
Shares then outstanding.
Section 3. Voting Rights. The holders of Common Shares shall be
entitled to vote on all matters (for which holders of Common Shares shall be
entitled to vote thereon) at all meetings of the shareholders of the
Corporation, and shall be entitled to one vote for each Common Share entitled to
vote at such meeting.
Section 4. Restrictions on Transfer to Preserve Tax Benefit; Common
Shares Subject to Redemption.
(a) Definitions. For the purposes of this Section 4 of this
Division B of this Article FOURTH, the following terms shall
have the following meanings:
"Beneficial Ownership" shall mean ownership of Common Shares
by a Person who would be treated as an owner of such Common
Shares either directly or constructively through the
application of Section 544 of the Code, as modified by Section
856(h)(1)(B) of the Code. The terms "Beneficial Owner,"
"Beneficially Owns" and "Beneficially Owned" shall have the
correlative meanings.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Constructive Ownership" shall mean ownership of Common Shares
by a Person who would be treated as an owner of such Common
Shares either directly or Constructively through the
application of Section 318 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.
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"Excess Shares" shall mean any Common Shares (i) acquired or
proposed to be acquired by any Person (other than an Existing
Holder) pursuant to a Transfer to the extent that, if
effective, such Transfer would result in the transferee either
(A) Beneficially Owning Common Shares in excess of the
Ownership Limit or (B) Constructively Owning Common Shares in
excess of the Related Party Limit, (ii) acquired or proposed
to be acquired by an Existing Holder pursuant to a Transfer to
the extent that, if effective, such Transfer would result in
such Existing Holder Beneficially Owning Common Shares in
excess of the Existing Holder Limit for such Existing Holder,
or (iii) which are the subject of a Transfer that, if
effective, which would result in (A) the Common Shares being
owned by fewer than 100 Persons (determined without reference
to any rules of attribution), or (B) the Corporation being
"closely held" within the meaning of Section 856(h) of the
Code.
"Existing Holder" shall mean (i) Bert L. Wolstein, (ii) Scott
A. Wolstein, (iii) James A. Schoff, and (iv) any Person to
whom an Existing Holder Transfers Beneficial Ownership of
Common Shares causing such transferee to Beneficially Own
Common Shares in excess of the Ownership Limit.
"Existing Holder Limit" (i) for any Existing Holder who is an
Existing Holder by virtue of clause (i), (ii) or (iii) of the
definition thereof, shall mean, initially, the percentage of
the outstanding Common Shares Beneficially Owned by such
Existing Holder upon the consummation of the Initial Public
Offering, and after any adjustment pursuant to Section (4)(i)
of this Division B of this Article FOURTH, shall mean such
percentage of the outstanding Common Shares as so adjusted;
and (ii) for any Existing Holder who becomes an Existing
Holder by virtue of clause (iv) of the definition thereof,
shall mean, initially, the percentage of the outstanding
Common Shares Beneficially Owned by such Existing Holder at
the time that such Existing Holder becomes an Existing Holder,
and after any adjustment pursuant to Section 4(i) of this
Division B of this Article FOURTH, shall mean such percentage
of the outstanding Common Shares as so adjusted. From and
after the date of the Initial Public Offering, the secretary
of the Corporation shall maintain and, upon request, make
available to each Existing Holder, a schedule which sets forth
the then current Existing Holder Limits for each Existing
Holder.
"Initial Public Offering" means the sale of Common Shares
pursuant to the Corporation's first effective registration
statement for such Common Shares filed under the Securities
Act of 1933, as amended.
"Market Price" shall mean the last reported sales price of
Common Shares reported on the New York Stock Exchange on the
trading day immediately preceding the relevant date or, if the
Common Shares are not then traded on the New York Stock
Exchange, the last reported sales price of the Common Shares
on the trading day immediately preceding the relevant date as
reported on any exchange or quotation system over which the
Common Shares may be traded, or if the Common Shares are not
then traded over any exchange or quotation system,
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then the market price of the Common Shares on the relevant
date as determined in good faith by the Board of Directors of
the Corporation.
"Ownership Limit" shall mean 5.0% of the outstanding Common
Shares of the Corporation.
"Person" shall mean an individual, corporation, partnership,
estate, trust (including a trust qualified under Section
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, an
association, a private foundation within the meaning of
Section 509(a) of the Code, a joint stock company, other
entity or a group as that term is used for purposes of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended;
provided, however, that a "Person" does not mean an
underwriter which participates in a public offering of the
Common Shares, for a period of 35 days following the purchase
by such underwriter of the Common Shares.
"REIT" shall mean a Real Estate Investment Trust under Section
856 of the Code.
"Related Party Limit" shall mean 9.8% of the outstanding
Common Shares of the Corporation.
"Transfer" shall mean any sale, transfer, gift, assignment,
devise or other disposition of Common Shares (including,
without limitation, (i) the granting of any option or entering
into any agreement for the sale, transfer or other disposition
of Common Shares or (ii) the sale, transfer, assignment or
other disposition of any securities or rights convertible into
or exchangeable for Common Shares), whether voluntary or
involuntary, whether of record or beneficially and whether by
operation of law or otherwise.
(b) Restrictions on Transfers.
(i) Except as provided in Section 4(i) of this
Division B of this Article FOURTH, from and after the date of
the Initial Public Offering, no Person (other than an Existing
Holder) shall Beneficially Own Common Shares in excess of the
Ownership Limit and no Existing Holder shall Beneficially Own
Common Shares in excess of the Existing Holder Limit for such
Existing Holder.
(ii) Except as provided in Section 4(i) of this
Division B of this Article FOURTH, from and after the date of
the Initial Public Offering, any Transfer that, if effective,
would result in any Person (other than an Existing Holder)
Beneficially Owning Common Shares in excess of the Ownership
Limit shall be void ab initio as to the Transfer of such
Common Shares which would be otherwise Beneficially Owned by
such Person in excess of the Ownership Limit, and the intended
transferee shall acquire no rights in such Common Shares.
(iii) Except as provided in Section 4(i) of this
Division B of this Article FOURTH, from and after the date of
the Initial Public Offering, any Transfer that,
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if effective, would result in any Existing Holder Beneficially
Owning Common Shares in excess of the applicable Existing
Holder Limit shall be void ab initio as to the Transfer of
such Common Shares which would be otherwise Beneficially Owned
by such Existing Holder in excess of the applicable Existing
Holder Limit, and such Existing Holder shall acquire no rights
in such Common Shares.
(iv) Except as provided in Section 4(i) of this
Division B of this Article FOURTH, from and after the date of
the Initial Public Offering, any Transfer that, if effective,
would result in any Person Constructively Owning Common Shares
in excess of the Related Party Limit shall be void ab initio
as to the Transfer of such Common Shares which would be
otherwise Constructively Owned by such Person in excess of
such amount, and the intended transferee shall acquire no
rights in such Common Shares.
(v) Except as provided in Section 4(i) of this
Division B of this Article FOURTH, from and after the date of
the Initial Public Offering, any Transfer that, if effective,
would result in the Common Shares being beneficially owned by
less than 100 Persons (determined without reference to any
rules of attribution) shall be void ab initio as to the
Transfer of such Common Shares which would be otherwise
beneficially owned by the transferee, and the intended
transferee shall acquire no rights in such Common Shares.
(vi) From and after the date of the Initial Public
Offering, any Transfer that, if effective, would result in the
Corporation being "closely held" within the meaning of Section
856(h) of the Code shall be void ab initio as to the Transfer
of the Common Shares which would cause the Corporation to be
"closely held" within the meaning of Section 856(h) of the
Code, and the intended transferee shall acquire no rights in
such Common Shares.
(c) Remedies for Breach. If the Board of Directors or its
designees shall at any time determine in good faith that a
Transfer has taken place in violation of Section 4(b) of this
Division B of this Article FOURTH or that a Person intends to
acquire or has attempted to acquire beneficial ownership
(determined without reference to any rules of attribution),
Beneficial Ownership or Constructive Ownership of any Common
Shares of the Corporation in violation of Section 4(b) of this
Division B of this Article FOURTH, or that any such Transfer,
intended or attempted acquisition or acquisition would
jeopardize the status of the Corporation as a REIT under the
Code, the Board of Directors or its designees shall take such
actions as it deems advisable to refuse to give effect or to
prevent such Transfer, 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
and, in addition, exercising its rights under Section 4(d) of
this Division B of this Article FOURTH.
(d) Purchase Right in Excess Shares. Beginning on the date of
the occurrence of a Transfer which, if consummated, in the
good faith judgment of the Board of Directors of the
Corporation, could result in Excess Shares, such Excess Shares
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shall be deemed to have been offered for sale to the
Corporation, or its designee, at a price per share equal to
the lesser of (i) the price per share in the transaction that
created such Excess Shares (or, in the case of a devise or
gift, the Market Price at the time of such devise or gift) and
(ii) the Market Price on the date the Corporation, or its
designee, accepts such offer. The Corporation shall have the
right to accept such offer for a period of ninety days after
the later of (i) the date of such Transfer and (ii) if the
Corporation does not receive a notice of such Transfer
pursuant to Section 4(e) of this Division B of this Article
FOURTH, the date the Board of Directors determines in good
faith that such Transfer has occurred. Prompt payment of the
purchase price shall be made in such reasonable manner as may
be determined by the Corporation. From and after the date
fixed for purchase by the Corporation, and so long as payment
of the purchase price for the Excess Shares to be so purchased
shall have been made or duly provided for, the holder of any
Excess Shares so called for purchase shall cease to be
entitled to dividends, distributions, voting rights and other
benefits with respect to such Excess Shares, excepting only
the right to payment of the purchase price fixed as aforesaid.
Any dividend or distribution paid to a proposed transferee of
Excess Shares prior to the discovery by the Corporation that
the Excess Shares have been transferred in violation of
Section 4(b) of this Division B of this Article FOURTH shall
be repaid to the Corporation upon demand. If the foregoing
provisions are determined to be void or invalid by virtue of
any legal decision, statute, rule or regulation, then the
intended transferee of such Excess Shares shall be deemed, at
the option of the Corporation, to have acted as agent on
behalf of the Corporation in acquiring such Excess Shares and
to hold such Excess Shares on behalf of the Corporation.
(e) Notice of Restricted Transfer. Any Person who acquires or
intends to acquire shares in violation of Section 4(b) of this
Division B of this Article FOURTH or any Person who is a
transferee of Excess Shares shall immediately give written
notice to the Corporation of such event and shall provide to
the Corporation such other information as the Corporation may
request in order to determine the effect, if any, of such
Transfer or intended Transfer on the Corporation's status as a
REIT.
(f) Owners Required to Provide Information. From and after the
date of the Initial Public Offering:
(i) every Beneficial Owner of more than 5.0% (or such
other percentage, between 0.5% and 5.0%, as provided in the
regulations promulgated pursuant to the Code) of the
outstanding Common Shares of the Corporation shall, within 30
days after January 1 of each year, give written notice to the
Corporation stating the name and address of such Beneficial
Owner, the number of shares Beneficially Owned, and
description of how 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.
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(ii) each Person who is a Beneficial Owner or
Constructive Owner of Common Shares and each Person (including
the shareholder of record) who is holding Common Shares for a
Beneficial Owner or Constructive 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.
(g) Remedies Not Limited. Nothing contained in this Division B
of this Article FOURTH 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 shareholders by preservation of the Corporation's status
as a REIT.
(h) Ambiguity. In the case of an ambiguity in the application
of any of the provisions of Section 4 of this Division B of
this Article FOURTH, including any definition contained in
Section 4(a), the Board of Directors shall have the power to
determine the application of the provisions of this Section 4
with respect to any situation based on the facts known to it.
(i) Modification of Existing Holder Limits. Subject to the
provisions of Section 4(k) of this Division B, the Existing
Holder Limits may be modified as follows:
(i) Subject to the limitations provided in Section
4(k), any Existing Holder may Transfer Common Shares to a
Person who is already an Existing Holder up to the number of
Common Shares Beneficially Owned by such transferor Existing
Holder in excess of the Ownership Limit. Any such Transfer
will decrease the Existing Holder Limit for such transferor
Existing Holder and increase the Existing Holder Limit for
such transferee Existing Holder by the percentage of the
outstanding Common Shares so Transferred. The transferor
Existing Holder shall give the Board of Directors of the
Corporation prior written notice of any such Transfer.
(ii) Any grant of a stock option pursuant to a stock
option plan approved by the shareholders of the Corporation
shall increase the Existing Holder Limit for the affected
Existing Holder to the maximum extent possible under Section
4(k) to permit the Beneficial Ownership of the Common Shares
issuable upon the exercise of such stock option.
(iii) The Board of Directors may reduce the Existing
Holder Limit for any Existing Holder, with the written consent
of such Existing Holder, after any Transfer permitted in this
Section 4 by such Existing Holder to a Person other than an
Existing Holder or after the lapse (without exercise) of a
stock option described in Section 4(i)(ii).
(iv) Any Common Shares issued to an Existing Holder
pursuant to a dividend reinvestment plan adopted by the
Corporation shall increase the Existing Holder Limit for the
Existing Holder to the maximum extent possible under Section
4(k) to permit the Beneficial Ownership of such Common Shares.
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(j) Modification of Ownership Limit. Subject to the
limitations provided in Section 4(k) of this Division B, the
Board of Directors may from time to time increase the
Ownership Limit.
(k) Limitations on Modifications. Notwithstanding any other
provision of this Division B of this Article FOURTH:
(i) Neither the Ownership Limit nor any Existing
Holder Limit may be increased (nor may any additional Existing
Holder Limit be created) if, after giving effect to such
increase (or creation), five Beneficial Owners of Common
Shares (including all of the then Existing Holders) could
Beneficially Own, in the aggregate, more than 49.6% of the
outstanding Common Shares.
(ii) Prior to the modification of any Existing Holder
Limit or Ownership Limit pursuant to Section 4(i) or Section
4(j) of this Division B of this Article FOURTH, the Board of
Directors of the Corporation may require such opinions of
counsel, affidavits, undertakings or agreements as it may deem
necessary or advisable in order to determine or ensure the
Corporation's status as a REIT.
(iii) No Existing Holder Limit shall be reduced to a
percentage which is less than the Ownership Limit.
(iv) The Ownership Limit may not be increased to a
percentage which is greater than 9.8%.
(v) The Related Party Limit may not be increased to a
percentage which is greater than 9.8%.
(l) Exceptions.
(i) The Board of Directors, with a ruling from the
Internal Revenue Service or an opinion of counsel, may exempt
a Person from the Ownership Limits or the Existing Holder
Limits, as the case may be, if 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 individual's Beneficial Ownership of such
Common Shares will violate the Ownership Limit or the
applicable Existing Holder Limit, as the case may be, and
agrees that any violation or attempted violation will result
in such Common Shares in excess of 5.0% of the outstanding
Common Shares being deemed to be Excess Shares and subject to
repurchase by the Corporation as set forth in Section 4(d) of
this Division B of this Article FOURTH.
(ii) The Board of Directors, with a ruling from the
Internal Revenue Service or an opinion of counsel, may exempt
a Person from the limitation on such Person Constructively
Owning Common Shares in excess of the Related Party Limit if
such Person does not own and represents that it will not own,
directly or constructively (by virtue of the application of
Section 318 of the Code,
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as modified by Section 856(d)(5) of the Code), more than a
9.9% interest (as set forth in Section 856(d)(2)(B) in a
tenant of any real property owned or leased by the
Corporation, and the Corporation obtains such representations
and undertakings from such Person as are reasonably necessary
to ascertain this fact and agrees that any violation or
attempted violation will result in such Common Shares in
excess of 9.8% being deemed to be Excess Shares and subject to
repurchase by the Corporation as set forth in Section 4(d) of
this Division B of this Article FOURTH.
Section 5. Legend. Each certificate for Common Shares shall bear the
following legend:
"The Common Shares represented by this certificate are subject to
restrictions on transfer for the purpose of the Corporation's maintenance of its
status as a Real Estate Investment Trust under the Internal Revenue Code of
1986, as amended. Subject to certain provisions of the Corporation's Articles of
Incorporation, no Person may Beneficially Own Common Shares in excess of 5.0% of
the outstanding Common Shares of the Corporation (unless such Person is an
Existing Holder) and no Person (other than an Existing Holder who Constructively
Owns in excess of 9.8% of the Common Shares immediately following the
consummation of the Initial Public Offering) may Constructively Own Common
Shares in excess of 9.8% of the outstanding Common Shares of the Corporation.
Any Person who attempts to Beneficially Own or Constructively Own Common Shares
in excess of the above limitations must immediately notify the Corporation. All
capitalized items in this legend have the meanings defined in the Corporation's
Articles of Incorporation, a copy of which, including the restrictions on
transfer, will be sent without charge to each shareholder who so requests. If
the restrictions on transfer are violated, certain of the Common Shares
represented may be subject to repurchase by the Corporation on the terms and
conditions set forth in the Corporation's Articles of Incorporation."
Section 6. Securities Exchange Transactions. Notwithstanding any
provision contained herein to the contrary, nothing in these Amended and
Restated Articles of Incorporation shall preclude the settlement of any
transaction entered into through the facilities of the New York Stock Exchange.
FIFTH: At all times following the consummation of the Initial Public
offering (as defined in Article FOURTH), at least a majority of the members of
the Board of Directors shall, except during the period of a vacancy or vacancies
therein, be Independent Directors. An "Independent Director" shall mean a person
who is not (i) employed by the Corporation or (ii) an "affiliate" (as defined in
Rule 405 under the Securities Act of 1933, as amended) of (A) any entity which
is part of the Developers Diversified Group, including, without limitation,
Developers Diversified Limited Partnership, an Ohio limited partnership,
Developers Diversified, Ltd., an Ohio limited partnership, W & M Properties, an
Ohio general partnership, W & Z Properties, Ltd., an Ohio limited partnership,
and DE Properties Corporation, an Ohio corporation, or (B) any partnership which
is an affiliate (as declined above) of any entity listed in clause (A) of this
Article FIFTH.
SIXTH: No holder of shares of the corporation of any class shall be
entitled as such, as a matter of right, to subscribe for or purchase shares of
any class, now or hereafter authorized, or to subscribe for or purchase
securities convertible into or exchangeable for shares of the corporation or to
which shall be attached or appertain any warrants or rights entitling the holder
thereof to subscribe for or purchase
Page 66
<PAGE> 67
shares, except such rights of subscription or purchase, if any, for such
considerations and upon such terms and conditions as its Board of Directors from
time to time may determine.
SEVENTH: Notwithstanding any provision of Sections 1701.01 to 1701.98,
inclusive, of the Ohio Revised Code, or any successor statutes now or hereafter
in force, requiring for the authorization or taking of any action the vote or
consent of the holders of shares entitling them to exercise two-thirds or any
other proportion of the voting power of the corporation or of any class or
classes of shares thereof, such action, unless otherwise expressly required by
law or these Articles of Incorporation, may be authorized or taken by the vote
or consent of the holders of shares entitling them to exercise a majority of the
voting power of the corporation or of such class or classes of shares thereof.
EIGHTH: To the extent permitted by law, the corporation, by action of
its Board of Directors, may purchase or otherwise acquire shares of any class
issued by it at such times, for such consideration and upon such terms and
conditions as its Board of Directors may determine.
NINTH: The provisions of Chapter 1701.831 of the Ohio Revised Code
shall not apply to the Corporation.
TENTH: The provisions of Chapter 1707.043 of the Ohio Revised Code
shall not apply to the Corporation.
ELEVENTH: If any provision (or portion thereof) of these Articles of
Incorporation shall be found to be invalid, prohibited, or unenforceable for any
reason, the remaining provisions (or portions thereof) of these Articles of
Incorporation shall be deemed to remain in full force and effect, and shall be
construed as if such invalid prohibited, or unenforceable provision had been
stricken herefrom or otherwise rendered inapplicable, it being the intent of the
Corporation and its shareholders that each such remaining provision (or portion
thereof) of these Articles of Incorporation remain, to the fullest extent
permitted by law, applicable and enforceable as to all shareholders,
notwithstanding any such finding.
TWELFTH: No shareholder of the Corporation may cumulate his voting
power in the election of directors.
THIRTEENTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in these Articles of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
shareholders herein are granted subject to this reservations.
FOURTEENTH: These Amended and Restated Articles of Incorporation shall
take the place of and supersede the Corporation's existing Articles of
Incorporation.
Page 67
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