<PAGE> 1
Draft dated: 8/7/98
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported)
July 23, 1998
GENERAL GROWTH PROPERTIES, INC.
-------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-11656 42-1283895
-------- ------- ----------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
110 N. Wacker Drive, Chicago, Illinois 60606
--------------------------------------------
(Address of principal executive offices, Zip Code)
(312) 960-5000
--------------
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report.)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
U.S. PRIME PROPERTY INC.
On July 23, 1998, GGP Ivanhoe III, Inc. ("Ivanhoe III"), an affiliate
of GGP Limited Partnership, a Delaware limited partnership (the
"Operating Partnership"), acquired U.S. Prime Property Inc. ("USPPI"),
a private real estate investment trust ("REIT") controlled by
institutional investors, effective as of June 30, 1998, through a
merger (the "Merger") of a wholly-owned subsidiary of Ivanhoe III (the
"Transitory Subsidiary") with and into USPPI. The general partner of
the Operating Partnership is General Growth Properties, Inc., a
Delaware Corporation (the "Company") which holds approximately a 65.9%
interest in the Operating Partnership (assuming conversion of all
Operating Partnership preferred units into Operating Partnership common
units). The Merger was effected pursuant to the terms of a Merger
Agreement, dated May 14, 1998 (the "Merger Agreement"), among USPPI,
the Operating Partnership and the Transitory Subsidiary. The Operating
Partnership subsequently assigned its rights and obligations under the
Merger Agreement and its interest in the Transitory Subsidiary to
Ivanhoe III. Effective upon the consummation of the Merger, the name
of USPPI was changed to GGP Ivanhoe II, Inc. The common stock of
Ivanhoe III, which will elect to be taxed as a REIT, is owned 51% by
the Operating Partnership and 49% by an affiliate of Ivanhoe, Inc. of
Montreal, Quebec, Canada ("Ivanhoe"). The Ivanhoe affiliate is also a
49% joint venture partner in GGP Ivanhoe, Inc., another joint venture
with the Operating Partnership formed in 1997, which owns two shopping
centers. It is currently contemplated that the assets indirectly
acquired through the Merger will continue to be used in the shopping
mall business.
Except as described below, there is no material relationship between
USPPI or its former controlling stockholders, on the one hand, and the
Company, its affiliates, officers or directors or any associates
thereof, on the other hand.
The aggregate consideration paid pursuant to the Merger Agreement was
$625 million less certain adjustments (including a credit of
approximately $64 million for outstanding mortgage indebtedness on the
Meadows Mall and accrued interest thereon as well as credits for tenant
allowances, construction costs, commissions, due diligence items and
certain miscellaneous expenses). The consideration payable under the
Merger Agreement was determined as a result of arm's length
negotiations between the Operating Partnership and USPPI. During the
negotiations, the Operating Partnership considered, among other
factors, historical and expected cash flow from USPPI's real estate
holdings, the nature of the tenancies and terms of leases in place,
occupancy rates, opportunities for alternative and new tenancies,
current operating costs and taxes on the properties and anticipated
changes therein under the new ownership, the outlots and expansion
areas available, the terms of the existing mortgages and prospects for
financing and refinancing of the centers, the physical condition and
locations of the properties, the anticipated effect on the financial
results of the Operating
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<PAGE> 3
Partnership and Ivanhoe (collectively, the "Investors") (including, but
not limited to, the Company's funds from operations) and capitalization
rates at which the Operating Partnership believes other comparable
shopping centers have recently sold. No separate independent
appraisals were obtained by the Operating Partnership in connection
with the Merger.
The acquisition was financed with a $392 million loan from Lehman
Brothers Holdings Inc., d/b/a Lehman Capital, a division of Lehman
Brothers Holdings Inc., bearing interest at a fluctuating rate equal to
the per annum rate of LIBOR plus 90 basis points (adjusted monthly),
and capital contributions by the Investors, in proportion to their
common stock ownership in Ivanhoe III. The loan will mature on July 1,
1999. The Operating Partnership and Ivanhoe made initial capital
contributions, aggregating $179 million, to Ivanhoe III. Such
contributions include approximately $10 million which is intended to be
used to fund working capital and costs relating to the acquisition and
financing. The Operating Partnership's capital contribution was
financed through its line of credit with Union Bank of Switzerland,
with the $18.75 million deposit made by the Operating Partnership
concurrently with the execution of the Merger Agreement being credited
against the Operating Partnership's capital contribution.
In connection with the transactions described above, the Operating
Partnership and Ivanhoe entered into a Stockholders Agreement (the
"Stockholders Agreement") relating to Ivanhoe III. The Stockholders
Agreement provides that the Operating Partnership has the right to
elect three members of the Board of Directors of Ivanhoe III and
Ivanhoe has the right to elect two members of the Board of Directors.
Pursuant to the terms of the Stockholders Agreement, the Board of
Directors of Ivanhoe III generally acts by majority vote, except that
certain major decisions, such as the decision to sell or finance a
property and the approval of operating budgets, require the approval of
at least one director designated by each Investor. Affiliates of the
Operating Partnership will provide property management, leasing,
development and certain other services to Ivanhoe III.
Additionally, the Stockholders Agreement contains provisions relating
to the transfer of Ivanhoe III stock. Each Investor generally may
transfer shares of Ivanhoe III to a third party (other than certain
persons engaged in competitive businesses), subject to a right of first
refusal in favor of the other. However, no Ivanhoe III stock may be
transferred if the transfer would jeopardize Ivanhoe III's status as a
REIT or cause Ivanhoe III not to be a domestically controlled REIT
under applicable tax law.
The Stockholders Agreement also provides for buy-sell rights which may
be exercised by the Investors. Specifically, each Investor has the
right, which generally is exercisable on or after the fifth anniversary
of the closing date, to initiate a buy-sell procedure by delivering a
notice to the other which specifies a per share price for the Ivanhoe
III stock. Upon receipt of the notice, the other Investor may elect to
sell its shares to the initiating Investor or buy the shares of
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<PAGE> 4
the initiating Investor for the per share price specified in the
buy-sell notice. However, upon receipt of a buy-sell notice from
Ivanhoe, the Operating Partnership has a one-time right to cause the
stock of Ivanhoe III or the properties directly and indirectly owned by
Ivanhoe III to be offered to third parties during the fifteen month
period following the Operating Partnership's exercise of such right for
a purchase price per share which generally is no less than that
specified in the buy-sell notice.
Finally, Ivanhoe has certain rights to require the Operating
Partnership to purchase all or a portion of its Ivanhoe III stock.
Ivanhoe has the right, which is exercisable within thirty days
following each of the fifth and the seventh anniversaries of the
closing date, to require that the Operating Partnership purchase all of
its Ivanhoe III stock for a purchase price determined by reference to
the value of the Ivanhoe III assets. Ivanhoe also has the right to
require that the Operating Partnership purchase its Ivanhoe III stock
to the extent necessary to maintain the status of Ivanhoe III as a
domestically controlled REIT under applicable tax law.
The purchase prices payable by the Operating Partnership and Ivanhoe in
connection with such sales and purchases of Ivanhoe III stock generally
are payable in cash. However, in the event that the Operating
Partnership is to purchase Ivanhoe's shares of Ivanhoe III, the Company
may elect to purchase such shares (in lieu of the Operating
Partnership) for cash, shares of Company common stock (based on then
current trading prices) or a combination thereof at the election of the
Company.
USPPI directly or indirectly owns 100% of the following properties
which will be managed by an affiliate of the Operating Partnership:
<TABLE>
<CAPTION>
TOTAL
GROSS LEASABLE
AREA ("GLA")
YEAR OPENED/ MALL AND
REMODELED OR FREESTANDING ANCHOR
NAME OF CENTER/LOCATION EXPANDED GLA (SQ.FT.) ANCHORS VACANCIES
- ----------------------- -------- ----------- ---------------------------------------------- ---------
<S> <C> <C> <C> <C>
Park City Center 1970/1988, 1,382,837/ Boscov's, the Bon Ton, Sears, JCPenney, Kohl's None
Lancaster, PA 1997 481,192
Landmark Mall NA/1989, 965,137/ Hecht's, JCPenney, Sears None
Alexandria, VA 1990 324,496
Oglethorpe Mall 1969/ 950,140/ Belks, Rich's, JCPenney, Sears, Steinmart None
Savannah, GA (5 times) 402,169
Meadows Mall 1978/1995 946,444/ Dillard's, JCPenney, Macy's, Sears None
Las Vegas, NV 309,591
Mayfair Mall 1958/1986 841,610/ Marshall Fields, The Boston Store None
Wauwatosa, WI 342,300
Mayfair Offices 1958-1982/ 420,278/ N/A None
Wauwatosa, WI 1989 N/A
Northgate Mall 1972/1991 805,408/ JCPenney, Proffitt's, Sears None
Chattanooga, TN 1998 233,474
</TABLE>
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<PAGE> 5
The USPPI portfolio contains approximately 5.9 million square feet of
retail GLA. The mall store and freestanding store portions of the
portfolio are currently approximately 88% leased.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a), (b) The requisite financial information for the USPPI portfolio is
hereby incorporated herein by reference from the Company's Current
Report on Form 8-K/A (File No. 1-11656) dated June 2, 1998.
(c) Exhibits
See Exhibit Index attached hereto and incorporated herein.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
GENERAL GROWTH PROPERTIES, INC.
Date: August 7, 1998 By: /s/ Bernard Freibaum
------------------------------
Bernard Freibaum
Executive Vice President and
Chief Financial Officer
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<PAGE> 6
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
Number Name Number
- ------ --------------------------------------------------------- ------
<S> <C> <C>
2.1 Merger Agreement, dated May 14, 1998, among GGP Limited
Partnership, GGP Acquisition L.L.C. and U.S. Prime
Property Inc.*
4.1 Certificate of Designations, Preferences and Rights of
7.25% Preferred Income Equity Redeemable Stock, Series A.
</TABLE>
(*) Previously filed by the Company as Exhibit #2.3 to its Current Report on
Form 8-K dated May 26, 1998.
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<PAGE> 1
EXHIBIT 4.1
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
7.25% PREFERRED INCOME EQUITY REDEEMABLE STOCK, SERIES A
OF
GENERAL GROWTH PROPERTIES, INC.
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
General Growth Properties, Inc., a Delaware corporation (the
"Company"), hereby certifies that pursuant to the authority contained in
Article IV of its Second Amended and Restated Certificate of Incorporation, as
amended (the "Certificate of Incorporation"), and in accordance with Section
151 of the General Corporation Law of the State of Delaware (the "DGCL"), its
Board of Directors (the "Board"), on June 4, 1998, adopted the following
resolution creating a series of its preferred stock, par value $100 per share,
liquidation preference $1,000 per share, designated as the 7.25% Preferred
Income Equity Redeemable Stock, Series A:
WHEREAS, the Board of Directors of the Company is authorized, within
the limitations and restrictions stated in its Certificate of Incorporation, to
provide for the issuance of preferred stock in series and to establish the
number of shares to be included in such series and to fix the designation,
powers, preferences and rights of the shares of such series and the
qualifications, limitations and restrictions thereof; and
WHEREAS, it is the desire of the Board of Directors, pursuant to its
authority as aforesaid, to authorize and fix the terms of the preferred stock
to be designated the "7.25% Preferred Income Equity Redeemable Stock, Series A"
and the number of shares constituting such preferred stock;
<PAGE> 2
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized the
7.25% Preferred Income Equity Redeemable Stock, Series A on the terms and with
the provisions herein set forth:
I. Certain Definitions
As used herein, the following terms shall have the following meanings
(with terms defined in the singular having comparable meanings when used in the
plural and vice versa), unless the context otherwise requires:
"Act" shall mean the Securities Act of 1933, as amended.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which state or federally chartered banking institutions in New York, New
York are not required to be open.
"Capital Stock" shall mean Common Stock or Preferred Stock. The term
"Capital Stock" shall not include convertible debt securities.
"Common Stock" shall mean the common stock, par value $.10 per share,
of the Company.
"Company" shall mean General Growth Properties, Inc., a Delaware
corporation.
"Conversion Agent" shall mean Norwest Bank Minnesota, N.A., the
principal corporate trust office of which currently is located at 161 North
Concord Exchange, South St. Paul, Minnesota 55075, or such other agent or
agents of the Company as may be designated by the Board or its designee as the
conversion agent for the Series A Preferred Stock.
"Current Market Price" of publicly traded Common Stock or any other
class of shares of Capital Stock or other security of the Company or any other
issuer for any day shall mean the last reported sales price, regular way, on
such day, or, if no sale takes place on such day, the average of the reported
closing bid and asked prices on such day, regular way, in either case as
reported on the NYSE or, if such security is not listed or admitted for trading
on the NYSE, on the principal national securities exchange on which such
security is listed or admitted for trading, or, if such security is not listed
or admitted for trading on any national securities exchange, on the NASDAQ
National Market, or, if such security is not listed or admitted for trading on
any national securities exchange or quoted on the NASDAQ National Market, the
average of the closing bid and asked prices on such day in the over-the-counter
market as reported by NASDAQ or, if bid and asked prices for such security on
such day shall not have been reported through NASDAQ, the average of the bid
and asked prices on
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<PAGE> 3
such day as furnished by any NYSE member firm regularly making a market in such
security selected for such purpose by the Chief Executive Officer of the
Company or the Board of Directors.
"Dividend Period" shall mean quarterly dividend periods commencing on
(and including) the fifteenth day of each January, April, July and October of
each year and ending on (and including) the day preceding the first day of the
next succeeding Dividend Period (other than the initial Dividend Period, which
shall commence on the Issue Date and end on and include October 14, 1998).
"Fair Market Value" shall mean the average of the daily Current Market
Prices per share of Common Stock during the five consecutive Trading Days
selected by the Company commencing not more than 20 Trading Days before, and
ending not later than, the earlier of the day in question and the day before
the "ex" date with respect to the issuance or distribution requiring such
computation. The term "'ex' date," when used with respect to any issuance or
distribution, means the first day on which the Common Stock trades regular way,
without the right to receive such issuance or distribution, on the exchange or
in the market, as the case may be, used to determine that day's Current Market
Price.
"Mandatory Redemption" shall mean the redemption by the Company for
cash of all of the outstanding shares of Series A Preferred Stock on July 15,
2008 at a price of $1,000 per share of Series A Preferred Stock, plus
accumulated and unpaid dividends to such Mandatory Redemption Date.
"Mandatory Redemption Date" shall mean July 15, 2008.
"NYSE" shall mean the New York Stock Exchange.
"Ownership Limitations" shall mean the restrictions on transferability
and ownership described in Article IV of the Certificate of Incorporation,
specifically, that ownership of more than 7.5% of the value of the outstanding
shares of Capital Stock of the Company, including the Series A Preferred Stock,
is restricted.
"Redemption Date" shall mean any date fixed for redemption of the
shares of Series A Preferred Stock by the Company, including the Mandatory
Redemption Date (as the context requires).
"Series A Preferred Stock" shall mean the 7.25% Preferred Income
Equity Redeemable Stock, Series A of the Company.
"Trading Day" shall mean any day on which the securities in question
are traded on the NYSE or, if such securities are not listed or admitted for
trading on the NYSE, on the
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<PAGE> 4
principal national securities exchange on which such securities are listed or
admitted or, if such securities are not listed or admitted for trading on any
national securities exchange, on the NASDAQ National Market or, if such
securities are not listed or admitted for trading on any national securities
exchange or quoted on the NASDAQ National Market, in the applicable securities
market in which the securities are traded.
"Transfer Agent" shall mean Norwest Bank Minnesota, N.A., the
principal corporate trust office of which currently is located at 161 North
Concord Exchange, South St. Paul, Minnesota 55075, or such other agent or
agents of the Company as may be designated by the Board or its designee as the
transfer agent for the Series A Preferred Stock.
II. Designation and Number of Shares
A series of preferred stock, designated the "7.25% Preferred Income
Equity Redeemable Stock, Series A" (the "Series A Preferred Stock"), is hereby
established. The par value of the Series A Preferred Stock is $100 per share,
which is not a change in the par value of the Preferred Shares as set forth in
the Certificate of Incorporation. The liquidation preference of the Series A
Preferred Stock is $1,000. The authorized number of shares of Series A
Preferred Stock shall be 345,000.
III. Rank
The Series A Preferred Stock, with respect to payment of dividends and
amounts upon voluntary or involuntary liquidation, dissolution or winding-up of
the Company, shall be deemed to rank:
(a) senior to all classes or series of Common Stock and to all
Capital Stock of the Company the terms of which provide that such Capital Stock
shall rank junior to such Series A Preferred Stock;
(b) on a parity with each series of Preferred Stock issued by the
Company which does not provide by its express terms that it ranks junior in
right of payment to the Series A Preferred Stock with respect to payment of
dividends or amounts upon liquidation, winding-up or otherwise; and
(c) junior to any class or series of Capital Stock issued by the
Company that ranks senior to the Series A Preferred Stock in accordance with
Section VII(d).
IV. Dividends.
(a) The holders of shares of the Series A Preferred Stock shall be
entitled to receive, when, as and if declared by the Board, out of assets
legally available for the payment
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<PAGE> 5
of dividends, quarterly cumulative cash dividends in an amount per share of
Series A Preferred Stock equal to the greater of (i) 7.25% of the $1,000
liquidation preference thereof per annum (or $18.125 per quarter) and (ii) the
quarterly cash dividends paid or payable (determined on each of the quarterly
Dividend Payment Dates referred to below) on that number of shares of Common
Stock equal to the number of shares of Common Stock (or portion thereof), into
which a share of Series A Preferred Stock is convertible. Such dividends shall
be cumulative beginning on June 10, 1998, whether or not in any Dividend Period
or Periods there shall be funds of the Company legally available for the
payment of such dividends, and shall be payable in arrears quarterly when, as
and if declared by the Board, on the fifteenth day of each January, April, July
and October or, if not a Business Day, the next succeeding Business Day,
beginning October 15, 1998 (each, a "Dividend Payment Date"). Each such
dividend shall be payable in arrears to holders of record of shares of the
Series A Preferred Stock, as such holders appear in the stock records of the
Company at the close of business on the applicable record date, which shall be
the first day of the calendar month in which the applicable Dividend Payment
Date falls or such other date designated by the Board for the payment of
dividends that is not more than 30 nor less than 10 days prior to such Dividend
Payment Date (each, a "Dividend Record Date"). Accrued and unpaid dividends
for any past Dividend Periods may be declared and paid at any time, without
reference to any Dividend Payment Date, to holders of record on such date, not
exceeding 45 days preceding the payment date thereof, as may be fixed by the
Board.
(b) The amount of dividends payable per share of Series A
Preferred Stock for each full Dividend Period shall be computed by taking the
greater of (a) 7.25% of the $1,000 liquidation preference thereof divided by
four (or $18.125) and (ii) the quarterly cash dividends paid or payable
(determined as of the applicable Dividend Payment Date) on that number of
shares of Common Stock equal to the number of shares of Common Stock (or
portion thereof), into which a share of Series A Preferred Stock is
convertible. The amount of dividends payable for the initial Dividend Period,
or any other period shorter or longer than a full Dividend Period, on the
Series A Preferred Stock, shall be prorated and computed on the basis of twelve
30-day months and a 360-day year. Holders of shares of Series A Preferred
Stock shall not be entitled to any dividends, whether payable in cash, property
or stock, in excess of cumulative dividends, as herein provided, on the Series
A Preferred Stock. Any dividend payment made on the Series A Preferred Stock
shall first be credited against the earliest accumulated but unpaid dividend
due with respect to such shares which remains payable. No interest, or sum of
money in lieu of interest, shall be payable in respect of any dividend payment
or payments on the Series A Preferred Stock that may be in arrears.
(c) No dividend on the Series A Preferred Stock shall be declared
by the Board or paid or set apart for payment by the Company at such time as
the terms and provisions of any agreement of the Company, including any
agreement relating to its indebtedness, prohibits such declaration, payment or
setting apart for payment or provides that such declaration, payment or setting
apart for payment would constitute a breach thereof, or a default thereunder,
or if such declaration or payment shall be restricted or prohibited by law.
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<PAGE> 6
Notwithstanding the foregoing, dividends on the Series A Preferred
Stock shall accumulate whether or not any of the foregoing restrictions exist,
whether or not there are funds legally available for the payment thereof and
whether or not such distributions are authorized. Accumulated but unpaid
dividends on the Series A Preferred Stock shall not bear interest and holders
of the shares of Series A Preferred Stock shall not be entitled to any
dividends in excess of full cumulative dividends as described in IV(b) above.
(d) Except as provided in subsection IV(e) herein, so long as any
shares of Series A Preferred Stock are outstanding, no dividends (other than in
Common Stock or other Capital Stock of the Company ranking junior to the Series
A Preferred Stock as to payment of dividends and amounts upon liquidation,
dissolution or winding-up of the Company) shall be declared or paid or set
apart for payment upon the Common Stock or any other class or series of Capital
Stock of the Company ranking, as to payment of dividends or amounts
distributable upon liquidation, dissolution or winding-up of the Company, on a
parity with or junior to the Series A Preferred Stock, for any period unless
full cumulative dividends have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set apart for such
payment on the Series A Preferred Stock for all Dividend Periods and the then
current Dividend Period, nor shall any Common Stock or other Capital Stock of
the Company ranking junior to or on a parity with the Series A Preferred Stock
as to payment of dividends or amounts upon liquidation, dissolution or
winding-up of the Company, be redeemed, purchased or otherwise acquired for any
consideration (or any monies be paid to or made available for a sinking fund
for the redemption of any such Capital Stock) by the Company (except by
conversion into or exchange for other Capital Stock of the Company ranking
junior to the Series A Preferred Stock as to payment of dividends and amounts
upon liquidation, dissolution or winding-up of the Company or by redemptions
for the purpose of maintaining the Company's qualification as a real estate
investment trust ("REIT") for U.S. federal income tax purposes).
(e) When dividends are not paid in full (or a sum sufficient for
such full payment is not set apart for such payment) upon the Series A
Preferred Stock and any other Capital Stock ranking on a parity as to payment
of dividends with the Series A Preferred Stock, all dividends declared upon the
Series A Preferred Stock and any other Capital Stock ranking on a parity as to
payment of dividends with the Series A Preferred Stock shall be declared pro
rata so that the amount of dividends declared per share of Series A Preferred
Stock and such other Capital Stock shall in all cases bear to each other the
same ratio that accumulated dividends per share on the Series A Preferred Stock
and such other Capital Stock (which shall not include any accumulation in
respect of unpaid dividends for prior dividend periods if such Capital Stock
does not have a cumulative dividend) bear to each other.
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<PAGE> 7
V. Liquidation Preference.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Company, before any payment or distribution of
the assets of the Company (whether capital or surplus) shall be made to or set
apart for the holders of Common Stock or any other Capital Stock ranking junior
to the Series A Preferred Stock as to the distribution of assets upon the
liquidation, dissolution or winding-up of the Company, the holders of shares of
the Series A Preferred Stock shall be entitled to receive out of the assets of
the Company available for distribution to stockholders remaining after payment
or provisions for payment of all debts and other liabilities of the Company a
liquidation preference of $1,000 per share, plus an amount equal to all
dividends (whether or not earned or declared) accrued and unpaid thereon to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. If, upon any such voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the assets of the
Company, or proceeds thereof, distributable among the holders of the shares of
Series A Preferred Stock, are insufficient to pay in full the preferential
amount aforesaid on the shares of Series A Preferred Stock and liquidating
payments on any other shares of any class or series of Capital Stock ranking,
as to payment of dividends and amounts upon the liquidation, dissolution or
winding-up of the Company, on a parity with the Series A Preferred Stock, then
such assets, or the proceeds thereof, shall be distributed among the holders of
shares of Series A Preferred Stock and any such other parity stock ratably in
accordance with the respective amounts that would be payable on such shares of
Series A Preferred Stock and such other stock if all amounts payable thereon
were paid in full. For the purposes of this Section V, none of (i) a
consolidation or merger of the Company with or into another entity, (ii) a
merger of another entity with or into the Company, (iii) a statutory share
exchange by the Company or (iv) a sale, lease or conveyance of all or
substantially all of the Company's assets, properties or business shall be
deemed to be a liquidation, dissolution or winding-up of the Company.
(b) Written notice of such liquidation, dissolution or winding-up
of the Company, stating the payment date or dates when, and the place or places
where, the amounts distributable in such circumstances shall be payable, shall
be given by first class mail, postage pre-paid, not less than 30 nor more than
60 days prior to the payment date stated therein, to each record holder of the
Series A Preferred Stock at the respective addresses of such holders as the
same shall appear on the stock transfer records of the Company.
(c) After payment of the full amount of liquidating distributions
to which they are entitled, the holders of Series A Preferred Stock shall have
no right or claim to any of the remaining assets of the Company.
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<PAGE> 8
VI. Redemption.
(a) The shares of Series A Preferred Stock are not redeemable
prior to July 15, 2003. To ensure that the Company remains a qualified REIT
for U.S. federal income tax purposes, however, the Series A Preferred Stock
shall be subject to the provisions of Article IV of the Certificate of
Incorporation pursuant to which Series A Preferred Stock owned by a shareholder
(i) in excess of the Ownership Limit or the Existing Holder Limit or (ii) that
would cause the Company to become "closely held" within the meaning of Section
856(h) of the Internal Revenue Code of 1986, as amended (the "Code") shall
automatically by transferred to a Trust (as defined in Article IV of the
Certificate of Incorporation) and the Company shall have the right to purchase
such shares, as provided in Article IV of the Certificate of Incorporation.
(b) Cash Redemption Right. On and after July 15, 2003, the
Company, at its option, upon giving notice as provided below, may redeem the
Series A Preferred Stock, in whole or from time to time in part, at the
following redemption prices per share of Series A Preferred Stock if redeemed
during the twelve-month period beginning July 15 of the year indicated below,
plus, in each case, all dividends accumulated and unpaid on such Series A
Preferred Stock to the date of such redemption (the "Cash Redemption Right"):
<TABLE>
<CAPTION>
Redemption Price Per Share of
Year Series A Preferred Stock
---- ----------------------------------
<S> <C>
2003 . . . . . . . . . . . . . . . . . $1,032.22
2004 . . . . . . . . . . . . . . . . . $1,024.16
2005 . . . . . . . . . . . . . . . . . $1,016.11
2006 . . . . . . . . . . . . . . . . . $1,008.05
2007 and thereafter . . . . . . . . . $1,000.00
</TABLE>
(c) Stock Redemption Right. In addition to the Cash Redemption
Right set forth in (b) above, on and after July 15, 2003, the Series A
Preferred Stock shall be redeemable by the Company, in whole or from time to
time in part, at the option of the Company, for such number of shares of Common
Stock as equals the liquidation preference of the Series A Preferred Stock to
be redeemed divided by the Conversion Price (defined in subsection VIII(a)
herein) as of the opening of business on the date set for such redemption
(equivalent initially to a conversion rate of 25.188917 shares of Common Stock
per share of Series A Preferred Stock (the "Stock Redemption Right")). The
Company may exercise the Stock Redemption Right, at its option, only if for 20
Trading Days within any period of 30 consecutive Trading Days, including the
last Trading Day of such period, the Current Market Price of the Common Stock
on each of such Trading Days exceeds $45.65 per share, subject
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to adjustment under the circumstances described in Section VIII herein, with
respect to the Conversion Price. To exercise the Stock Redemption Right, the
Company shall issue a press release announcing the redemption prior to the
opening of business on the second Trading Day after the conditions described in
the preceding sentences have, from time to time, been met (the "Press
Release"). The Company shall not issue a Press Release prior to May 15, 2003.
The Press Release shall announce the redemption and set forth the number of
shares of Series A Preferred Stock that the Company intends to redeem. The
redemption date (which may not be before July 15, 2003) shall be selected by
the Company, shall be specified in the notice of redemption and shall be not
less than 30 days or more than 60 days after the date on which the Company
issues the Press Release.
(d) Limitations on Redemption.
(i) The Company may exercise the Cash Redemption Right
provided that the redemption price (other than the portion thereof consisting
of accumulated and unpaid dividends) is payable solely out of the sale proceeds
of other shares of Capital Stock of the Company, and from no other source. For
purposes of the preceding sentence, "Capital Stock" means any Capital Stock or
other securities of the Company which, by their terms, are subject to mandatory
conversion into, or exchange for, or which require the purchase of, Capital
Stock.
(ii) If fewer than all of the outstanding shares of Series
A Preferred Stock are to be redeemed pursuant to the Cash Redemption Right or
the Stock Redemption Right, the shares to be redeemed shall be determined pro
rata or by lot or in such other manner as prescribed by the Board. If such
redemption is to be by lot and, as a result of such redemption, (i) any holder
of Series A Preferred Stock would become a holder of a number of shares of
Series A Preferred Stock in excess of the Ownership Limit or the Existing
Holder Limit or (ii) the Company would become "closely held" within the meaning
of Section 856(h) of the Code because such holder's Series A Preferred Stock
were not redeemed, or were only redeemed in part, then, except as otherwise
provided in the Certificate of Incorporation, the Company will redeem the
requisite number of shares of Series A Preferred Stock of such holder such that
the holder of such shares (i) will not hold in excess of the Ownership Limit or
the Existing Holder Limit subsequent to such redemption or (ii) will not cause
the Company to become "closely held" within the meaning of Section 856(h) of
the Code.
(iii) Notwithstanding anything to the contrary contained
herein, unless full cumulative dividends on all outstanding shares of Series A
Preferred Stock shall have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment for
all past Dividend Periods and the current Dividend Period, no shares of Series
A Preferred Stock shall be redeemed unless all outstanding shares of Series A
Preferred Stock are simultaneously redeemed; provided, however, that the
foregoing
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<PAGE> 10
shall not prevent the purchase or acquisition of Series A Preferred Stock
pursuant to a purchase or exchange offer made on the same terms to holders of
all outstanding shares of Series A Preferred Stock. In addition, unless full
cumulative dividends on all outstanding shares of Series A Preferred Stock
shall have been or contemporaneously are declared and paid or declared and a
sum sufficient for payment thereof set apart for payment for all past Dividend
Periods and the current Dividend Period, the Company shall not purchase or
otherwise acquire directly or indirectly any Series A Preferred Stock, or any
shares of any class or series of Capital Stock of the Company ranking, as to
payment of dividends or amounts distributable upon liquidation, dissolution or
winding-up of the Company, junior to or on a parity with the Series A Preferred
Stock (except by conversion into or exchange for Common Stock or other Capital
Stock of the Company ranking junior to or on a parity with the Series A
Preferred Stock as to payment of dividends or amounts upon liquidation,
dissolution or winding-up of the Company or by redemptions for the purposes of
maintaining the Company's qualification as a REIT).
(iv) The foregoing provisions of subsections
VI(d)(i)-(iii) shall not prevent the purchase by the Company of Series A
Preferred Stock pursuant to Article IV of the Certificate of Incorporation or
otherwise in order to ensure that the Company remains qualified as a REIT for
U.S. federal income tax purposes.
(v) Immediately prior to any redemption of Series A
Preferred Stock, the Company shall pay, in cash, any accumulated and unpaid
dividends through the Redemption Date, unless a Redemption Date falls after a
Dividend Record Date and on or prior to the corresponding Dividend Payment
Date, in which case each holder of shares of Series A Preferred Stock at the
close of business on such Dividend Record Date shall be entitled to the
dividend payable on such shares on the corresponding Dividend Payment Date
notwithstanding the redemption of such shares on or prior to such Dividend
Payment Date. Except as provided above, the Company will make no payment, or
allowance for unpaid dividends, whether or not in arrears, on Series A
Preferred Stock for which a notice of redemption has been given.
(e) Mandatory Redemption. The Company shall redeem for cash all
outstanding shares of Series A Preferred Stock on the Mandatory Redemption Date
at a price of $1,000 per share of Series A Preferred Stock, plus accumulated
and unpaid dividends to the redemption date.
(f) Procedures for Redemption.
(i) Notice of redemption pursuant to the Cash Redemption
Right shall be mailed, not less than 20 nor more than 60 days prior to the
Redemption Date, to each holder of record of shares of Series A Preferred Stock
to be redeemed, notifying such holder of the Company's election to redeem such
shares. Notice of redemption pursuant to the Stock
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<PAGE> 11
Redemption Right shall be given not more than four Business Days after the date
on which the Company issues the Press Release to each holder of shares of the
Series A Preferred Stock to be redeemed. Such notice shall be provided by
first class mail, postage prepaid, at such holder's address as the same
appears on the stock records of the Company, or by publication in The Wall
Street Journal or The New York Times, or, if neither such newspaper is then
being published, any other daily newspaper of national circulation. If the
Company elects to provide such notice by publication, it shall also promptly
mail notice of such redemption to holders of the shares of Series A Preferred
Stock to be redeemed. Notice of any Mandatory Redemption shall be mailed, not
less than 20 nor more than 60 days prior to the Mandatory Redemption Date, to
each holder of record of shares of Series A Preferred Stock to be redeemed. No
failure to give such notice or any defect thereto or in the mailing thereof, to
any particular holder, shall affect the sufficiency of notice or the validity
of the proceedings for the redemption of any shares of Series A Preferred Stock
with respect to any other holder.
(ii) In addition to any information required by law or by
the applicable rules of any exchange upon which the Series A Preferred Stock
may be listed or admitted to trading, such notice shall state, as appropriate:
(i) the Redemption Date, (ii) with respect to the Cash Redemption Right or the
Mandatory Redemption, the cash redemption price per share of Series A Preferred
Stock and, with respect to the Stock Redemption Right, the number of shares of
Common Stock to be issued with respect to each share of Series A Preferred
Stock, (iii) the number of shares of Series A Preferred Stock to be redeemed
from such holder (and, if fewer than all the shares of Series A Preferred Stock
are to be redeemed from such holder, the number of shares to be redeemed from
such holder), (iv) the place or places where certificates for shares of such
Series A Preferred Stock are to be surrendered for payment of the redemption
price in cash, with respect to the Cash Redemption Right or the Mandatory
Redemption, and in certificates representing shares of Common Stock with
respect to the Stock Redemption Right, (v) that dividends on the shares to be
redeemed will cease to accumulate on such Redemption Date, and (vi) the date
upon which the holder's conversion rights, if any, as to such shares of Series
A Preferred Stock shall terminate.
(iii) On or after the Redemption Date, each holder of
shares of Series A Preferred Stock to be redeemed shall present and surrender
the certificates representing his Series A Preferred Stock to the Company at
the place designated in the notice of redemption and thereupon the redemption
price (in cash and/or shares of Common Stock, as applicable) of such shares
shall be paid to or on the order of the person whose name appears on such
certificate representing shares of Series A Preferred Stock as the owner
thereof and each surrendered certificate shall be canceled. If fewer than all
the shares represented by any such certificate representing shares of Series A
Preferred Stock are to be redeemed, a new certificate shall be issued
representing the unredeemed shares.
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<PAGE> 12
(iv) From and after the Redemption Date (unless the
Company fails to make available a number of shares of Common Stock or amount in
cash necessary to effect such redemption), all dividends on the Series A
Preferred Stock designated for redemption in such notice shall cease to
accumulate and all rights of the holders thereof, except the right to receive
the redemption price thereof (including all accumulated and unpaid dividends up
to the Redemption Date), shall cease and terminate and such shares shall not
thereafter be transferred (except with the consent of the Company) on the
Company's books, all rights of the holders of shares of the Series A Preferred
Stock shall cease (except the right to receive the shares of Common Stock
and/or cash payable upon such redemption) and such shares shall not be deemed
to be outstanding for any purpose whatsoever.
The Company's obligation to provide shares of Common Stock
and/or cash in accordance with this Section VI shall be deemed fulfilled if, on
or before the Redemption Date, the Company elects to deposit the shares of
Common Stock and/or cash necessary for redemption of the shares of Series A
Preferred Stock so called with a bank or trust company that has, or is an
affiliate of a bank or trust company that has, a capital and surplus of at
least $50,000,000, in trust, with irrevocable instructions that such shares of
Common Stock and/or cash be applied to the redemption of the shares of Series A
Preferred Stock so called for redemption. At the close of business on the
Redemption Date relating to the Company's Stock Redemption Right, each holder
of shares of Series A Preferred Stock to be redeemed (unless the Company
defaults in the delivery of the shares of Common Stock and/or cash payable on
such Redemption Date) shall be deemed to be the record holder of the number of
shares of Common Stock into which such shares of Series A Preferred Stock is to
be redeemed, regardless of whether such holder has surrendered the certificates
representing the Series A Preferred Stock. No interest shall accrue for the
benefit of the holders of Series A Preferred Stock to be redeemed on any cash
so set aside by the Company. Any such cash unclaimed at the end of two years
from the Redemption Date shall revert to the general funds of the Company. If
the Company elects to deposit the cash and/or shares of Common Stock necessary
for redemption with a bank or trust company, in accordance with this subsection
(f)(iv), the redemption notice to holders of the shares of Series A Preferred
Stock to be redeemed shall (i) state the date of such deposit, (ii) specify the
office of such bank or trust company as the place of redemption and (iii)
require such holders to surrender the certificates representing such shares at
such place on or about the date fixed in such redemption notice (which may not
be later than the Redemption Date or Mandatory Redemption Date) against payment
of the redemption price (including all accumulated and unpaid dividends to the
Redemption Date or Mandatory Redemption Date) or delivery of the shares of
Common Stock (as applicable).
(g) Status of Redeemed Shares of Series A Preferred Stock. Any
shares of Series A Preferred Stock that shall at any time have been redeemed
shall, after such redemption, have the status of authorized but unissued
Preferred Stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board.
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<PAGE> 13
(h) No Fractional Shares. No fractional shares or scrip
representing fractions of shares of Common Stock shall be issued upon
redemption of the Series A Preferred Stock pursuant to the Company's Stock
Redemption Right. Instead of any fractional interest in a share of Common
Stock that would otherwise be deliverable upon the redemption of a share of
Series A Preferred Stock, the Company shall pay to the holder of such share of
Series A Preferred Stock an amount in cash in respect of such interest
(computed to the nearest cent) based upon the Current Market Price of the
Common Stock on the Trading Day immediately preceding the Redemption Date. If
more than one share of Series A Preferred Stock shall be surrendered for
redemption at one time by the same holder, the number of full shares of Common
Stock issuable upon redemption thereof shall be computed on the aggregate
number of shares of Series A Preferred Stock so surrendered.
(i) Common Stock Issuable Upon Redemption. The Company covenants
that any Common Stock issued upon redemption of shares of the Series A
Preferred Stock shall be validly issued, fully paid and nonassessable.
VII. Voting.
(a) Holders of shares of the Series A Preferred Stock shall not
have any voting rights, except as provided by applicable law and as described
below in this Section VII.
(b) If and whenever six quarterly dividends on the Series A
Preferred Stock, whether or not earned or declared, shall be in arrears (which
shall, with respect to any such quarterly dividend, mean that any such dividend
has not been paid in full) (a "Preferred Dividend Default"), the number of
directors then constituting the Board shall be increased by two and the holders
of shares of such Series A Preferred Stock (voting separately as a single class
(regardless of series) with all other Capital Stock of the Company upon which
like voting rights have been conferred and are exercisable ("Parity Preferred
Stock")) shall be entitled to elect two additional directors (the "Preferred
Stock Directors") to serve on the Board at any annual meeting of stockholders
or special meeting held in place thereof, or at a special meeting of the
holders of the Series A Preferred Stock and the Parity Preferred Stock called
as hereinafter provided. Whenever all arrears in dividends on the Series A
Preferred Stock and the Parity Preferred Stock then outstanding shall have been
paid and dividends thereon for the current Dividend Period shall have been paid
or declared and set apart for payment, then the right of the holders of the
Series A Preferred Stock and the Parity Preferred Stock to elect such
additional two directors shall cease (but subject always to the same provisions
for the vesting of such voting rights in the case of any similar future
arrearages in six quarterly dividends), and the terms of office of all persons
elected as directors by the holder of the Series A Preferred Stock and the
Parity Preferred Stock shall forthwith terminate and the number of the Board
shall be reduced accordingly. At any time after such voting power shall have
been so vested in the holders of shares of Series A Preferred Stock and Parity
Preferred Stock, the secretary of the Corporation may, and upon
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<PAGE> 14
the written request of any holder of Series A Preferred Stock (addressed to the
secretary at the principal office of the Corporation) shall, call a special
meeting of the holders of the Series A Preferred Stock and of the Parity
Preferred Stock for the election of the two directors to be elected by them as
herein provided, such call to be made by notice similar to that provided in the
By-Laws of the Corporation for a special meeting of the stockholders or as
required by law. If any such special meeting required to be called as above
provided shall not be called by the secretary within 20 days after receipt of
any such request, then any holder of shares of Series A Preferred Stock may
call such meeting, upon the notice above provided, and for that purpose shall
have access to the stock books of the Corporation. The directors elected at
any such special meeting shall hold office until the next annual meeting of the
stockholders or special meeting held in lieu thereof if such office shall not
have previously terminated as above provided.
(c) So long as a Preferred Dividend Default shall continue, any
vacancy in the office of a Preferred Stock Director may be filled by written
consent of the Preferred Stock Director remaining in office, or if there is no
such remaining director, by vote of holders of a majority of the outstanding
shares of Series A Preferred Stock and any other such series of Parity
Preferred Stock voting as a single class. Any Preferred Stock Director may be
removed only for cause and only by the vote of the holders of record of
seventy-five percent (75%) of the outstanding shares of Series A Preferred
Stock voting separately as a class with all other series of Parity Preferred
Stock upon which like voting rights have been conferred and are exercisable).
The Preferred Stock Directors shall each be entitled to one vote per director
on any matter
(d) So long as any shares of Series A Preferred Stock remain
outstanding, the Company shall not, without the affirmative vote or consent of
the holders of at least two-thirds of the shares of Series A Preferred Stock
outstanding at the time, given in person or by proxy, either in writing or at a
meeting (such series voting separately as a class), (i) authorize or create, or
increase the authorized or issued amount of, any class or series of shares of
Capital Stock ranking prior to the Series A Preferred Stock with respect to the
payment of dividends or the distribution of assets upon voluntary or
involuntary liquidation, dissolution or winding-up of the Company or reclassify
any authorized shares of Capital Stock of the Company into such Capital Stock,
or create, authorize or issue any obligation or security convertible or
exchangeable into or evidencing the right to purchase any such Capital Stock;
or (ii) amend, alter or repeal the provisions of the Certificate of
Incorporation or this Certificate of Designations, whether by merger or
consolidation or otherwise (an "Event"), so as to materially and adversely
affect any right, preference, privilege or voting power of the Series A
Preferred Stock or the holders thereof; provided, however, with respect to the
occurrence of any of the Events set forth in (ii) above, so long as shares of
Series A Preferred Stock remain outstanding with the terms thereof materially
unchanged, taking into account that, upon the occurrence of an Event, the
Company may not be the surviving entity, the occurrence of any such Event shall
not be deemed to materially and adversely affect such
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<PAGE> 15
rights, preferences, privileges or voting power of holders of the Series A
Preferred Stock; and provided further that (x) any increase in the amount of
the authorized Preferred Stock or the creation or issuance of any other series
of Preferred Shares or (y) any increase in the amount of authorized Series A
Preferred Stock or any other series of Preferred Shares, in each case ranking
on a parity with or junior to the Series A Preferred Stock with respect to
payment of dividends and the distribution of assets upon voluntary or
involuntary liquidation, dissolution or winding-up of the Company, shall not be
deemed to materially and adversely affect such rights, preferences, privilege
or voting powers.
(e) The foregoing voting provisions shall not apply if, at or
prior to the time when the act with respect to which such vote would otherwise
be required shall be effected, all outstanding Series A Preferred Stock shall
have been converted, redeemed or called for redemption upon proper notice and
sufficient funds or shares of Common Stock, as applicable, shall have been
deposited in trust to effect such redemption.
(f) For purposes of the foregoing provisions of this Section VII,
each share of Series A Preferred Stock shall have one (1) vote per share,
except that when any other series of preferred stock shall have the right to
vote with the Series A Preferred Stock as a single class on any matter, then
the Series A Preferred Stock and such other series shall have with respect to
such matters one (1) vote per $25.00 of stated liquidation preference. Except
as otherwise required by applicable law or as set forth herein, the shares of
Series A Preferred Stock shall not have any relative, participating, optional
or other special voting rights and powers and the consent of the holders
thereof shall not be required for the taking of any corporate action.
VIII. Conversion.
Holders of shares of Series A Preferred Stock shall have the right to
convert all or a portion of such shares into shares of Common Stock, as
follows:
(a) Subject to the restrictions on transfer and ownership
referenced in Article IV of the Certificate of Incorporation, a holder of
shares of Series A Preferred Stock shall have the right, at such holder's
option, at any time, to convert any number of shares of Series A Preferred
Stock, in whole or in part, into fully paid and nonassessable shares of Common
Stock at an initial conversion price of $39.70 per share of Common Stock
(equivalent to an initial conversion rate of 25.188917 shares of Common Stock
for each share of Series A Preferred Stock), subject to adjustment as described
in Section VIII(d) herein (the "Conversion Price"); provided, however, that the
right to convert shares of Series A Preferred Stock called for redemption
pursuant to Section VI shall terminate at the close of business on the second
Business Day prior to the Redemption Date fixed for such redemption, unless the
Company shall default in making payment of the redemption price in shares of
Common Stock and/or cash in accordance with Section VI. If part of a share of
Series A Preferred
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<PAGE> 16
Stock is converted, then the Company will convert such share into the requested
shares of Common Stock (subject to Paragraph (c) of this Section VIII) and
issue a fractional share of Series A Preferred Stock evidencing the remaining
interest of such holder.
(b) To exercise the conversion right, the holder of each share of
Series A Preferred Stock to be converted shall surrender the certificate
representing such share, duly endorsed or assigned to the Company or in blank,
at the principal office of the Conversion Agent accompanied by written notice
to the Company that the holder thereof elects to convert such share of Series A
Preferred Stock or a specified portion thereof. Unless the shares issuable on
conversion are to be issued in the same name as the name in which such share of
Series A Preferred Stock is registered, each share surrendered for conversion
shall be accompanied by instruments of transfer, in form satisfactory to the
Company, duly executed by the holder or such holder's duly authorized attorney
and an amount sufficient to pay any transfer or similar tax (or evidence
reasonably satisfactory to the Company demonstrating that such taxes have been
paid).
Holders of shares of Series A Preferred Stock at the close of business
on a Dividend Record Date shall be entitled to receive the dividend payable on
such shares on the corresponding Dividend Payment Date notwithstanding the
conversion of such shares following such Dividend Record Date and prior to such
Dividend Payment Date. However, certificates representing shares of Series A
Preferred Stock surrendered for conversion during the period between the close
of business on any Dividend Record Date and ending with the opening of business
on the corresponding Dividend Payment Date (except shares of Series A Preferred
Stock converted after the issuance of a notice of redemption with respect to a
Redemption Date during such period or coinciding with such Dividend Payment
Date, which shares will be entitled to such dividend) shall be accompanied by
payment of an amount equal to the dividend payable on such shares on such
Dividend Payment Date. A holder of shares of Series A Preferred Stock on a
Dividend Record Date who (or whose transferee) tenders any such shares for
conversion into shares of Common Stock on such Dividend Payment Date shall
receive the dividend payable by the Company on such shares of Series A
Preferred Stock on such date, and the converting holder need not include
payment of the amount of such dividend upon surrender of certificates
representing such shares of Series A Preferred Stock for conversion. Except as
provided above, the Company shall make no payment or allowance for unpaid
dividends, whether or not in arrears, on converted shares or for dividends on
the shares of Common Stock that are issued upon such conversion.
Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which the certificates for shares
of Series A Preferred Stock shall have been surrendered and such notice (and if
applicable, payment of an amount equal to the dividend payable on such shares)
received by the Company as aforesaid, and the person or persons in whose name
or names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders
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<PAGE> 17
of record of the shares represented thereby at such time on such date, and such
conversion shall be at the Conversion Price in effect at such time and on such
date unless the stock transfer books of the Company shall be closed on that
date, in which event such person or persons shall be deemed to have become such
holder or holders of record at the close of business on the next succeeding day
on which such stock transfer books are open, but such conversion shall be at
the Conversion Price in effect on the date on which such shares have been
surrendered and such notice received by the Company.
As promptly as practicable after the surrender of certificates for
shares of Series A Preferred Stock as aforesaid, the Company shall issue and
shall deliver at such office to such holder, or on the holder's written order,
a certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of such shares in accordance with the provisions
of this Section VIII, and any fractional interest with respect to a share of
Common Stock arising upon such conversion shall be settled as provided in
subsection (c) of this Section VIII.
(c) No fractional shares or scrip representing fractions of shares
of Common Stock shall be issued upon conversion of the shares of Series A
Preferred Stock. Instead of any fractional interest in a share of Common Stock
that would otherwise be deliverable upon the conversion of a share of Series A
Preferred Stock, the Company shall pay to the holder of such share an amount in
cash in respect of such fractional interest based upon the Current Market Price
of Common Stock on the Trading Day immediately preceding the date of
conversion. If more than one share of Series A Preferred Stock shall be
surrendered for conversion at one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be computed on
the basis of the aggregate number of shares of Series A Preferred Stock so
surrendered.
(d) Conversion Price Adjustments.
The Conversion Price shall be adjusted from time to time as follows:
(i) If the Company shall, after the date on which the
Series A Preferred Stock is first issued and sold (the "Issue Date"), (A) pay
or make a dividend to holders of its Capital Stock in shares of Common Stock,
(B) subdivide its outstanding shares of Common Stock into a greater number of
shares, (C) combine its outstanding shares of Common Stock into a smaller
number of shares or (D) issue any shares of Capital Stock by reclassification
of its Common Stock, the Conversion Price in effect at the opening of business
on the day next following the date fixed for the determination of stockholders
entitled to receive such dividend or at the opening of business on the day next
following the day on which such subdivision, combination or reclassification
becomes effective, as the case may be, shall be adjusted so that the holder of
any share of Series A Preferred Stock thereafter surrendered for conversion
shall be entitled to receive the number of shares of Common Stock that such
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<PAGE> 18
holder would have owned or have been entitled to receive after the happening of
any of the events described above had such share of Series A Preferred Stock
been converted immediately prior to the record date in the case of a dividend
or the effective date in the case of a subdivision, combination or
reclassification. An adjustment made pursuant to this subsection (i) shall
become effective immediately after the opening of business on the day next
following the record date (except as provided in subsection (h) below) in the
case of a dividend and shall become effective immediately after the opening of
business on the day next following the effective date in the case of a
subdivision, combination or reclassification.
(ii) If the Company shall issue after the Issue Date
rights, options or warrants to all holders of shares of Common Stock entitling
them to subscribe for or purchase shares of Common Stock (or securities
convertible into or exchangeable for shares of Common Stock) at a price per
share less than the Fair Market Value per share of Common Stock on the record
date for the determination of stockholders entitled to receive such rights,
options or warrants, then the Conversion Price in effect at the opening of
business on the day next following such record date shall be adjusted to equal
the price determined by multiplying (I) the Conversion Price in effect
immediately prior to the opening of business on the day next following the date
fixed for such determination by (II) a fraction, the numerator of which shall
be the sum of (A) the number of shares of Common Stock outstanding at the close
of business on the date fixed for such determination and (B) the number of
shares that the aggregate proceeds to the Company from the exercise of such
rights, options or warrants for shares of Common Stock would purchase at such
Fair Market Value, and the denominator of which shall be the sum of (A) the
number of shares of Common Stock outstanding at the close of business on the
date fixed for such determination and (B) the number of additional shares of
Common Stock offered for subscription or purchase pursuant to such rights,
options or warrants. Such adjustment shall become effective immediately after
the opening of business on the day next following such record date (except as
provided in subsection (h) below). In determining whether any rights, options
or warrants entitle the holders of shares of Common Stock to subscribe for or
purchase shares of Common Stock at less than the Fair Market Value, there shall
be taken into account any consideration received by the Company upon issuance
and upon exercise of such rights, options or warrants, the value of such
consideration, if other than cash, to be determined by the Company's Chief
Executive Officer or the Board.
(iii) If the Company shall distribute to all holders of
shares of its Common Stock any other Capital Stock or evidences of its
indebtedness or assets (including securities but excluding those rights,
options and warrants issued to all holders of shares of Common Stock entitling
them to subscribe for or purchase shares of Common Stock, which rights, options
and warrants are referred to in and treated under subsection (ii) above, and
excluding dividends and distributions paid exclusively in cash out of equity,
including revaluation equity, applicable to Common Stock) (any of the foregoing
being hereinafter in this subsection (iii) called the "Securities"), then in
each case the Conversion Price shall be
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<PAGE> 19
adjusted so that it shall equal the price determined by multiplying (I) the
Conversion Price in effect immediately prior to the close of business on the
date fixed for the determination of stockholders entitled to receive such
dividend by (II) a fraction, the numerator of which shall be the Fair Market
Value per share of Common Stock on the record date mentioned below less the
then fair market value (as determined by the Chief Executive Officer or the
Board, whose determination shall be conclusive) of the portion of the Capital
Stock or assets or evidences of indebtedness so distributed applicable to one
share of Common Stock, and the denominator of which shall be the Fair Market
Value per share of Common Stock on the record date mentioned below. Such
adjustment shall become effective immediately at the opening of business on the
business day next following (except as provided in subsection (h) below) the
record date for the determination of stockholders entitled to receive such
dividend. For the purposes of this subsection (iii), a dividend in the form of
a Security, which is distributed not only to the holders of the shares of
Common Stock on the date fixed for the determination of stockholders entitled
to such dividend of such Security, but also is distributed with each share of
Common Stock delivered to a person converting a share of Series A Preferred
Stock after such determination date, shall not require an adjustment of the
Conversion Price pursuant to this subsection (iii); provided that on the date,
if any, on which a person converting a share of Series A Preferred Stock would
no longer be entitled to receive such Security with a share of Common Stock
(other than as a result of the termination of all such Securities), a dividend
of such Securities shall be deemed to have occurred, and the Conversion Price
shall be adjusted as provided in this subsection (iii) (and such day shall be
deemed to be "the date fixed for the determination of the stockholders entitled
to receive such dividend" and "the record date" within the meaning of the two
preceding sentences).
(iv) If (I) the Company shall make cash dividends to all
holders of shares of its Common Stock (excluding any cash portion of dividends
referred to in subsection (iii) above) which, when combined with (A) all such
cash dividends made within the preceding 12 months in respect of which no
adjustment has been made, plus (B) the amount by which any cash and the fair
market value, as of the relevant expiration date, of other consideration
payable in respect of any tender offers by the Company for Common Stock, which
tender offers expired within the preceding 12 months in respect of which no
adjustment has been made exceeds the Current Market Price of the Common Stock
acquired in such tender offers, exceeds 15% of the Company's market
capitalization (being the product of the then Current Market Price of the
Common Stock times the number of shares of Common Stock then outstanding) on
the record date for such dividend (the amount by which such cash dividends,
when combined with (A) plus (B) above, exceeds such 15% of such market
capitalization being referred to herein as the "Excess Cash Amount"), or (II) a
tender offer made by the Company or any subsidiary for all or any portion of
the Common Stock shall expire and such tender offer shall require payment to
stockholders of aggregate consideration having a fair market value which, when
combined with (C) the aggregate of the amount by which the cash plus the fair
market value, as of the expiration of such tender offer, of other consideration
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payable in respect of any other tender offer by the Company or any subsidiary
for all or any portion of the Common Stock expiring within 12 months preceding
the expiration of such tender offer and in respect of which no adjustment
pursuant to this subsection (d)(iv) has been made exceeds the Current Market
Price of the shares of Common Stock acquired in such tender offer, plus (D) the
aggregate amount of any dividends to all holders of shares of Common Stock made
exclusively in cash within the 12 months preceding the expiration of such
tender offer and in respect of which no adjustment pursuant to clause (I) above
has been made, exceeds 15% of the product of the Current Market Price per share
of the Common Stock as of the last time tenders could have been made pursuant
to such tender offer times the number of shares of Common Stock outstanding
(including tendered shares) (the amount by which such aggregate consideration,
when combined with (C) plus (D) above, exceeds such 15% of such product being
referred to herein as the "Excess Tender Amount"), then in each case the
Conversion Price shall be adjusted so that it shall equal the price determined
by multiplying (Y) the Conversion Price in effect immediately prior to the
close of business on the date fixed for the determination of stockholders
entitled to receive such dividend by (Z) a fraction, the numerator of which
shall be the Fair Market Value per share of Common Stock on the record date
mentioned below less the Excess Cash Amount, if any, and the Excess Tender
Amount, if any, and the denominator of which shall be the Fair Market Value per
share of Common Stock on the record date mentioned below. Such adjustment
shall become effective immediately at the opening of business on the business
day next following (except as provided in subsection (h) below) the record date
for the determination of stockholders entitled to receive such dividend, or the
expiration date of such tender offer, as the case may be.
(v) No adjustment in the Conversion Price shall be
required unless such adjustment would require a cumulative increase or decrease
of at least 1% in such price; provided, however, that any adjustments that by
reason of this subsection (v) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment until made; and
provided, further, that any adjustment shall be required and made in accordance
with the provisions of this Section VIII (other than this subsection (v)) not
later than such time as may be required in order to preserve the tax-free
nature of a dividend to the holders of shares of Common Stock. Notwithstanding
any other provisions of this Section VIII, the Company shall not be required to
make any adjustment to the Conversion Price for the issuance of any shares of
Common Stock pursuant to any plan providing for the reinvestment of dividends
or interest payable on securities of the Company and the investment of
additional optional amounts in Common Stock under such plan. All calculations
under this Section VIII shall be made to the nearest cent (with $.005 being
rounded upward) or to the nearest one-thousandth of a share (with .0005 of a
share being rounded upward), as the case may be. Anything in this subsection
(d) to the contrary notwithstanding, the Company shall be entitled, to the
extent permitted by law, to make such reductions in the Conversion Price, in
addition to those required by this subsection (d), as it in its discretion
shall determine to be advisable in order that any stock dividends, subdivision
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<PAGE> 21
of shares, reclassification or combination of shares, distribution of rights,
options or warrants to purchase shares or securities, or a dividend consisting
of other assets (other than cash dividends) hereafter made by the Company to
its stockholders shall not be taxable.
(e) If the Company shall be a party to any transaction (including,
without limitation, a merger, consolidation, statutory share exchange, self
tender offer for all or substantially all of the shares of Common Stock, sale
of all or substantially all of the Company's assets or recapitalization of the
Common Stock and excluding any transaction as to which subsection (d)(i) of
this Section VIII applies) (each of the foregoing being referred to herein as a
"Transaction"), in each case as a result of which shares of Common Stock shall
be converted into the right to receive shares, stock, securities or other
property (including cash or any combination thereof), each share of Series A
Preferred Stock which is not converted into the right to receive shares, stock,
securities or other property in connection with such Transaction shall
thereafter be convertible into the kind and amount of shares, stock, securities
and other property (including cash or any combination thereof) receivable upon
the consummation of such Transaction by a holder of that number of shares of
Common Stock into which one share of Series A Preferred Stock was convertible
immediately prior to such Transaction, assuming such holder of shares of Common
Stock (i) is not a Person with which the Company consolidated or into which the
Company merged or which merged into the Company or to which such sale or
transfer was made, as the case may be (a "Constituent Person"), or an affiliate
of a Constituent Person and (ii) failed to exercise his rights of the election,
if any, as to the kind or amount of shares, stock, securities and other
property (including cash) receivable upon such Transaction (each a
"Non-Electing Share") (provided that if the kind and amount of shares, stock,
securities and other property (including cash) receivable upon such Transaction
is not the same for each Non-Electing Share, the kind and amount receivable by
each Non-Electing Share shall be deemed to be the kind and amount receivable
per share by a plurality of the Non-Electing Shares). The Company shall not be
a party to any Transaction unless the terms of such Transaction are consistent
with the provisions of this subsection (e), and it shall not consent or agree
to the occurrence of any Transaction until the Company has entered into an
agreement with the successor or purchasing entity, as the case may be, for the
benefit of the holders of the shares of Series A Preferred Stock that will
contain provisions enabling the holders of shares of the Series A Preferred
Stock that remain outstanding after such Transaction to convert into the
consideration received by holders of shares of Common Stock at the Conversion
Price in effect immediately prior to such Transaction. The provisions of this
subsection (e) shall similarly apply to successive Transactions.
(f) If:
(i) the Company shall declare a dividend on the Common
Stock (other than a cash dividend excluded from the operation of subsection (d)
above) or there shall be a reclassification, subdivision or combination of
shares of Common Stock; or
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<PAGE> 22
(ii) the Company shall authorize the granting to the
holders of the shares of Common Stock of rights, options or warrants to
subscribe for or purchase any shares of any class or any other rights, options
or warrants; or
(iii) the Company shall authorize the payment of any Excess
Cash Amount or Excess Tender Amount; or
(iv) there shall be any reclassifications of the shares of
Common Stock (other than an event to which subsection (f)(i) of this Section
VIII applies) or any consolidation or merger to which the Company is a party
and for which approval of any stockholders of the Company is required, or a
statutory share exchange involving the conversion or exchange of shares of
Common Stock into securities or other property, or a self tender offer by the
Company for all or substantially all of the shares of its outstanding Common
Stock, or the sale or transfer of all or substantially all of the assets of the
Company as an entirety and for which approval of any stockholder of the Company
is required; or
(v) there shall occur the voluntary or involuntary
liquidation, dissolution or winding-up of the Company,
then the Company shall cause to be filed with the Transfer Agent and shall
cause to be mailed to the holders of the shares of Series A Preferred Stock at
their addresses as shown on the stock records of the Company, as promptly as
possible, but at least 15 days prior to the applicable date hereinafter
specified, a notice stating (A) the date on which a record is to be taken for
the purpose of such dividend or distribution of rights, options or warrants,
or, if a record is not to be taken, the date as of which the holders of shares
of Common Stock of record to be entitled to such dividend or distribution of
rights, options or warrants are to be determined or (B) the date on which such
reclassification, subdivision, combination, consolidation, merger, sale,
transfer, liquidation, dissolution or winding-up is expected to become
effective, and the date as of which it is expected that holders of shares of
Common Stock of record shall be entitled to exchange their shares of Common
Stock for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding-up. Failure to give or receive such notice or any
defect therein shall not affect the legality or validity of the proceedings
described in this Section VIII.
(g) Whenever the Conversion Price is adjusted as herein provided,
the Company shall promptly file with the Transfer Agent an officer's
certificate setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment, which
certificate shall be conclusive evidence of the correctness of such adjustment
absent manifest error. Promptly after delivery of such certificate, the
Company shall prepare a notice of such adjustment of the Conversion Price
setting forth the adjusted Conversion Price and the effective date such
adjustment becomes effective and shall
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<PAGE> 23
mail such notice of such adjustment of the Conversion Price to the holder of
each share of Series A Preferred Stock at such holder's last address as shown
on the stock records of the Company.
(h) In any case in which subsection (d) of this Section VIII
provides that an adjustment shall become effective on the date next following
the record date for an event, the Company may defer until the occurrence of
such event (A) issuing to the holder of any share of Series A Preferred Stock
converted after such record date and before the occurrence of such event the
additional shares of Common Stock issuable upon such conversion by reason of
the adjustment required by such event over and above the shares of Common Stock
issuable upon such conversion before giving effect to such adjustment and (B)
paying to such holder any amount of cash in lieu of any fraction pursuant to
subsection (c) of this Section VIII.
(i) For purposes of this Section VIII, the number of shares of
Common Stock at any time outstanding shall not include any shares of Common
Stock then owned or held by or for the account of the Company. The Company
shall not pay a dividend or make any distribution on shares of Common Stock
held in the treasury of the Company.
(j) There shall be no adjustment of the Conversion Price in case
of the issuance of any shares of Capital Stock of the Company in a
reorganization, acquisition or other similar transaction except as specifically
set forth in this Section VIII. If any action or transaction would require
adjustment of the Conversion Price pursuant to more than one subsection of this
Section VIII, only one adjustment shall be made, and such adjustment shall be
the amount of adjustment that has the highest absolute value.
(k) If the Company shall take any action affecting the shares of
Common Stock, other than action described in this Section VIII, that in the
opinion of the Board would materially adversely affect the conversion rights of
the holders of the shares of Series A Preferred Stock, the Conversion Price for
the shares of Series A Preferred Stock may be adjusted, to the extent permitted
by law, in such manner, if any, and at such time, as the Board, in its sole
discretion, may determine to be equitable in the circumstances.
(l) The Company covenants that it will at all times reserve and
keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued Common Stock or its issued shares of Common Stock held
in its treasury, or both, for the purpose of effecting conversion of the Series
A Preferred Stock, the full number of shares of Common Stock deliverable upon
the conversion of all outstanding shares of Series A Preferred Stock not
theretofore converted. For purposes of this subsection (l), the number of
shares of Common Stock that shall be deliverable upon the conversion of all
outstanding shares of Series A Preferred Stock shall be computed as if at the
time of computation all such outstanding shares were held by a single holder.
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<PAGE> 24
The Company covenants that any shares of Common Stock issued upon
conversion of the Series A Preferred Stock shall be validly issued, fully paid
and nonassessable. Before taking any action that would cause an adjustment
reducing the Conversion Price below the then par value of the Common Stock
deliverable upon conversion of the shares of Series A Preferred Stock, the
Company will take any corporate action that, in the opinion of its counsel, may
be necessary in order that the Company may validly and legally issue fully paid
and nonassessable Common Shares at such adjusted Conversion Price.
Prior to the delivery of any securities that the Company shall be
obligated to deliver upon conversion of the shares of Series A Preferred Stock,
the Company shall endeavor to comply with all federal and state laws and
regulations thereunder requiring the registration of such securities with, or
any approval of or consent to the delivery thereof by any governmental
authority.
(m) The Company will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of shares
of Common Stock or other securities or property on conversion or redemption of
the Series A Preferred Stock pursuant hereto; provided, however, that the
Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issue or delivery of shares of Common Stock or
other securities or property in a name other than that of the holder of the
shares of Series A Preferred Stock to be converted, and no such issue or
delivery shall be made unless and until the person requesting such issue or
delivery has paid to the Company the amount of any such tax or established, to
the reasonable satisfaction of the Company, that such tax has been paid.
IX. Ownership Limitations.
The shares of Series A Preferred Stock are subject to the restrictions
on transferability and ownership provisions described in Article IV of the
Certificate of Incorporation. The ownership limit as described in Article IV
of the Certificate of Incorporation (the "Ownership Limit") shall mean that
ownership of more than 7.5% of the value of the outstanding shares of Capital
Stock of the Company, including the Series A Preferred Stock, is restricted in
order to preserve the Company's status as a REIT for U.S. federal income tax
purposes. Subject to certain limitations described in Article IV of the
Certificate of Incorporation, the Board may modify the Ownership Limit, though
the Ownership Limit may not be increased by the Board to more than 9.8%. In
addition, Article IV of the Certificate of Incorporation limits the ownership
of "Existing Holders" (the "Existing Holder Limit") and also limits transfers
that would cause the Company to become "closely held" within the meaning of
Section 856(h) of the Code.
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IN WITNESS WHEREOF, the Company has caused this Certificate of
Designations to be executed in its name and on its behalf and attested to by
its duly authorized officers on this 8th day of June, 1998.
GENERAL GROWTH PROPERTIES, INC.
By: /s/ Bernard Freibaum
---------------------------
Name: Bernard Freibaum
Title: Executive Vice President and
Chief Financial Officer
ATTEST:
By: /s/ Ronald Gern
-----------------------------
Name: Ronald Gern
Title: Assistant Secretary
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