As filed with the Securities and Exchange Commission on December 24, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GLIMCHER REALTY TRUST
(Exact name of registrant as specified in its declaration of trust)
Maryland 31-1390518
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
20 South Third Street
Columbus, Ohio 43215
(614) 621-9000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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Herbert Glimcher
Glimcher Realty Trust
20 South Third Street
Columbus, Ohio 43215
(614) 621-9000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York 10104
Attention: Alan S. Pearce, Esq.
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Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement as
determined by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
Title of Proposed
Each Class Proposed Maximum
of Secur- Amount Maximum Aggregate Amount of
ities to be to be Offering Price Offering Registration
Registered (1) Registered (2) Per Unit (2)(3) Price (2)(3) Fee
- -------------- -------------- --------------- ------------- ------------
Preferred
Shares of
Beneficial
Interest,
$.01 par
value per
share (4)
Common
Shares of
Beneficial
Interest,
$.01 par (9) (9) (9)
value per
share (5)
Warrants (6)
Rights (7)
Total (8) $360,365,000 $360,365,000 $360,365,000 $106,060(10)(11)
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
PURSUANT TO RULE 429 UNDER THE SECURITIES OF 1933, AS AMENDED, THE
PROSPECTUS WHICH CONSTITUTES PART OF THIS REGISTRATION STATEMENT ALSO RELATES
TO AND INCLUDES AN AGGREGATE INITIAL PUBLIC OFFERING PRICE OF $10,365,000
OF OFFERED SECURITIES REGISTERED ON FORM S-3, REGISTRATION NO. 33-91084
(Footnotes on next page)
<PAGE>
_____________________________
(Footnotes for previous page)
(1) This Registration Statement also covers Preferred Shares, Common Shares,
Warrants or Rights which may be issued by the Registrant under delayed
delivery contracts pursuant to which the counterparty may be required to
purchase such securities.
(2) In U.S. dollars or the equivalent thereof denominated in one or more
foreign currencies or units of two or more foreign currencies or
composite currencies (such as European Currency Units).
(3) Estimated solely for purposes of calculating the registration fee. No
separate consideration will be received for Preferred Shares or Common
Shares that are issued upon conversion of Preferred Shares. Includes
all consideration to be received upon exercise of the Warrants or Rights
registered hereunder, as the case may be.
(4) Subject to note (8) below, there is being registered hereunder an
indeterminate number of Preferred Shares as may be sold, from time to
time, by the Registrant. There is also being registered hereunder an
indeterminate number of Preferred Shares as shall be issuable upon
exercise of Warrants registered hereby.
(5) Subject to note (8) below, there is being registered hereunder an
indeterminate number of Common Shares as may be sold, from time to time,
by the Registrant. There is also being registered hereunder an
indeterminate number of Common Shares as shall be issuable upon
conversion or redemption of Preferred Shares registered hereby or upon
exercise of Warrants or Rights registered hereby.
(6) Subject to note (8) below, there are being registered hereunder an
indeterminate amount and number of Warrants, representing rights to
purchase Preferred Shares or Common Shares registered hereby.
(7) Subject to note (8) below, there is being registered hereunder an
indeterminate number of Rights representing rights to purchase Common
Shares registered hereby.
(8) In no event will the aggregate initial offering price of all securities
issued from time to time pursuant to this Registration Statement exceed
$360,365,000. Any securities registered hereunder may be sold
separately or as units with other securities registered hereunder.
(9) Omitted pursuant to General Instruction II.D of Form S-3 under the
Securities Act of 1933, as amended.
(10) Calculated pursuant to Rule 457(o) of the rules and regulations under
the Securities Act of 1933, as amended.
(11) Does not include the registration fee of $3,140.90 pertaining to the
aggregate initial public offering price of $10,365,000 of Offered
Securities previously registered on Form S-3, Registration No. 33-91084
and carried over to this Registration Statement.
<PAGE>
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
- -----------------------------------------------------------------------------
PROSPECTUS
- ----------
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 24, 1997
GLIMCHER REALTY TRUST
$360,365,000
Preferred Shares, Common Shares,
Warrants and Rights
Glimcher Realty Trust (the "Company") may from time to time offer in one
or more series its (i) preferred shares of beneficial interest, par value
$.01 per share ("Preferred Shares"), (ii) common shares of beneficial
interest, par value $.01 per share ("Common Shares"), (iii) warrants to
purchase Preferred Shares or Common Shares (collectively, "Warrants"), or
(iv) rights to purchase Common Shares ("Rights"), with an aggregate initial
public offering price of up to $360,365,000 on terms to be determined at the
time of offering. Preferred Shares, Common Shares, Warrants and Rights
(collectively, the "Offered Securities") may be offered, separately or
together, in separate series in amounts, at prices and on terms to be set
forth in a supplement to this Prospectus (a "Prospectus Supplement").
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable: (i) in the case of Preferred
Shares, the number, specific title and stated value, any distribution,
liquidation, redemption, conversion, voting and other terms and conditions,
and the initial public offering price; (ii) in the case of Common Shares, any
initial public offering price; (iii) in the case of Warrants, the number and
terms thereof, the designation and the number of securities issuable upon
their exercise, the exercise price, the terms of the offering and sale
thereof and, where applicable, the duration and detachability thereof; and
(iv) in the case of Rights, the duration, exercise price and transferability
thereof. In addition, such specific terms may include limitations on direct
or beneficial ownership and restrictions on transfer of certain types of
Offered Securities, in each case as may be appropriate to preserve the status
of the Company as a real estate investment trust for federal income tax
purposes.
The applicable Prospectus Supplement will also contain information,
where applicable, about certain United States federal income tax
considerations relating to, and any listing on a securities exchange of, the
Offered Securities covered by such Prospectus Supplement.
The Offered Securities may be offered directly, through agents
designated from time to time by the Company, or to or through underwriters or
dealers. If any agents or underwriters are involved in the sale of any of
the Offered Securities, their names, and any applicable purchase price, fee,
commission or discount arrangement between or among them, will be set forth,
or will be calculable from the information set forth, in the applicable
Prospectus Supplement. See "Plan of Distribution." No Offered Securities
may be sold without delivery of the applicable Prospectus Supplement
describing the method and terms of the offering of such series of Offered
Securities.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is _______, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). The reports,
proxy statements and other information filed by the Company with the
Commission in accordance with the Exchange Act can be inspected and copied at
the Commission's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following regional offices of the
Commission: Seven World Trade Center, 13th Floor, New York, New York 10048
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, the Company's Common Shares and 9 1/4% Series B
Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $.01
per share ("Series B Preferred Shares"), are listed on the New York Stock
Exchange (the "NYSE") and similar information concerning the Company can be
inspected and copied at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration statement (the
"Registration Statement") (of which this Prospectus is a part) under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Offered Securities. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain portions of
which have been omitted as permitted by the rules and regulations of the
Commission. Statements contained in this Prospectus as to the contents of
any contract or other document are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement or to previous filings made
by the Company with the Commission, each such statement being qualified in
all respects by such reference and the exhibits and schedules thereto. For
further information regarding the Company and the Offered Securities,
reference is hereby made to the Registration Statement, the previous filings
made by the Company with the Commission and the exhibits and schedules
thereto, which may be obtained from the Commission (i) at its principal
office in Washington, D.C., upon payment of the fees prescribed by the
Commission or (ii) by consulting the Commission's Web site at the address of
http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company under the
Exchange Act with the Commission and are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
2. The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997.
3. The Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997.
4. The Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997.
5. The Company's Form 8-K dated February 5, 1997, filed February
5, 1997.
6. The Company's Form 8-K dated June 17, 1997, filed June 23,
1997.
7. The Company's Form 8-K dated November 4, 1997, filed November
4, 1997.
8. The Company's Form 8-K dated November 14, 1997, filed November
15, 1997.
9. The description of the Common Shares contained in the
Company's Registration Statement on Form 8-A, filed October
21, 1993, and the information thereby incorporated by
reference contained in the Company's Registration Statement on
Form S-11 (No. 33-69740), as amended by Amendments No. 1, 2,
3, 4 and 5, filed September 30, 1993, November 5, 1993,
November 22, 1993, November 30, 1993, January 10, 1994 and
January 19, 1994, respectively, under the heading "Description
of Shares of Beneficial Interest."
10. The description of the Series B Preferred Shares (defined
below) contained in the Company's Registration Statement on
Form 8-A, dated November 13, 1997, filed November 14, 1997.
11. All other reports filed by the Company pursuant to Section
13(a) or 15(d) of the Exchange Act since December 31, 1996.
All reports and other documents filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the
date of this Prospectus and prior to the termination of the offering of the
Offered Securities shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing such documents.
Any statement contained herein or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein (or in the applicable Prospectus Supplement) or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person to whom this Prospectus is delivered, upon
written or oral request. Requests should be directed to Glimcher Realty
Trust, Attention: Chief Financial Officer, 20 South Third Street, Columbus,
Ohio 43215 (Telephone Number: (614) 621-9000).
THE COMPANY
Glimcher Realty Trust is a fully integrated, self-administered and
self-managed Maryland real estate investment trust ("REIT"), which owns,
leases, manages and develops a portfolio of retail properties consisting of
regional and super regional malls (including, most recently, value-oriented
super regional malls) ("Mall Properties") and community shopping centers
(including single tenant retail properties) ("Community Centers"). As of
September 30, 1997, the Company owned interests in and operated 115
properties, consisting of 11 Mall Properties and 104 Community Centers
(including 17 single tenant retail properties (collectively, the
"Properties") located in 24 states. As of September 30, 1997, the Properties
contained an aggregate of approximately 20.8 million square feet of gross
leasable area ("GLA") and were approximately 93% leased.
The Company is focused on achieving growth in multiple retail formats
which appeal to a wide range of consumers and to national and regional
tenants in selected markets throughout the United States. Through the
application of technology and the introduction of entertainment concepts, the
Company has developed new designs and formats for retail properties in order
to forge strong ties with a broad group of retailers and to appeal to a broad
cross section of consumers. The Company is committed to developing and
acquiring retail properties throughout the United States that individually,
or in combination with other properties owned by the Company, are capable of
becoming the dominant retail properties in their markets.
Herbert Glimcher, the Company's Chairman and Chief Executive Officer,
and David J. Glimcher, the Company's President and Chief Operating Officer,
have been involved in the acquisition, leasing, management and development of
retail properties for approximately 37 and 23 years, respectively. The
Company has assembled a management team that together possesses the skill and
sophistication necessary to execute its strategy. New senior management
appointments include experienced professionals in development, finance, human
resources, leasing, legal and marketing. The Company believes that its team
approach to property management and its ability to develop high quality and
innovative retail properties on a cost effective basis combined with its
established relationships with national and regional tenants and its
extensive experience in understanding the needs of local tenants provide the
Company with strategic advantages over other retail property operators and
developers in the Company's market areas.
All of the Company's interests in the Properties are held by, and its
operations are conducted through, Glimcher Properties Limited Partnership, a
Delaware limited partnership (the "Operating Partnership"), or by entities in
which the Operating Partnership has a direct or indirect interest
("Subsidiary Partnerships"). As of the date hereof, the Company owns
approximately 90.1% of the Operating Partnership's outstanding common units
of partnership interest and all of the outstanding Series A-1 Preferred
Units, Series B Preferred Units and Series C Preferred Units in the Operating
Partnership, and is, through its wholly owned subsidiary, Glimcher Properties
Corporation, the sole general partner of the Operating Partnership.
The Company's executive offices are located at 20 South Third Street,
Columbus, Ohio 43215, and its telephone number is (614) 621-9000.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to
combined fixed charges and preferred share dividends of the Company for the
periods indicated:
Nine Months Ended Year Ended December 31,
September 30, 1997 1996 1995 1994 1993 1992
------------------ ---- ---- ---- ---- ----
1.47 1.81 1.98 1.70 0.97 0.90
For purposes of computing the ratio of earnings to fixed charges and
preferred share dividends, earnings have been calculated by adding fixed
charges (excluding capitalized interest) to income (loss) before
extraordinary items. Fixed charges consist of interest costs, whether
expensed or capitalized, the interest component of rental income, if any,
amortization of deferred financing costs (including amounts capitalized) and
dividends payable on outstanding preferred shares. The Company's earnings
were inadequate to cover fixed charges by $755,000 and $2,120,000 for the
years ended December 31, 1993 and December 31, 1992, respectively, all of
which were prior to the Company's initial public offering in January 1994
(the "Initial Offering").
USE OF PROCEEDS
The Company is required by the terms of the partnership agreement for
the Operating Partnership to invest the net proceeds of any sale of Offered
Securities in the Operating Partnership in exchange for a similar economic
interest in the Operating Partnership. Unless otherwise described in the
applicable Prospectus Supplement, the intended use of the net proceeds from
the sale of the Offered Securities by the Operating Partnership is for
general purposes, which may include the acquisition of properties as suitable
opportunities arise, the expansion and improvement of certain properties
owned or to be owned, the financing of future new development and the
repayment of certain indebtedness outstanding at such time, and for working
capital purposes.
DESCRIPTION OF PREFERRED SHARES
The Company's Amended and Restated Declaration of Trust, as amended (the
"Declaration of Trust"), authorizes the Company to issue up to 100,000,000
shares of beneficial interest of the Company, consisting of Common Shares and
such other types or classes of shares of beneficial interest as the Board of
Trustees may create and authorize from time to time and designate as
representing a beneficial interest in the Company. The Company is authorized
to issue Preferred Shares in one or more series, with such terms,
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms
or conditions of redemption, in each case, if any, as are permitted by
Maryland law and as the Board of Trustees of the Company may determine by
resolution. As of December 21, 1997, the Company had issued and outstanding
23,669,710 Common Shares, 34,000 Series A-1 Preferred Shares of Beneficial
Interest, par value $.01 per share ("Series A-1 Preferred Shares"), 5,118,000
Series B Preferred Shares and 56,000 Series C Preferred Shares of Beneficial
Interest, par value $.01 per share (the "Series C Preferred Shares").
Pursuant to a Purchase Agreement (the "Purchase Agreement"), dated
November 27, 1996, as amended, among the Company and an affiliate (the
"Nomura Affiliate") of Nomura Asset Capital Corporation ("Nomura") the
Company issued Series A Preferred Shares of Beneficial Interest in order to
finance The Great Mall of the Great Plains; the Series A Preferred Shares
were subsequently exchanged for Series A-1 Preferred Shares. The Series A-1
Preferred Shares together with any other series of preferred shares issued
pursuant to the Purchase Agreement are referred to herein as the "Nomura
Preferred Shares."
Pursuant to the Purchase Agreement, the Nomura Affiliate agreed to
purchase one or more series of Nomura Preferred Shares, in addition to the
Series A-1 Preferred Shares, prior to November 26, 2006, from time to time
upon request by the Company, for an aggregate purchase price of $101 million,
the proceeds of which are to be used in connection with the acquisition,
construction and development of two value-oriented super regional malls
located in Elizabeth, New Jersey (the "Jersey Gardens") and Carson,
California (the "LA Metro Mall"). It is anticipated that each series of
Nomura Preferred Shares issued pursuant to the Purchase Agreement will have
terms substantially similar to those of the Series A-1 Preferred Shares,
except that the mandatory redemption provisions of any other series of
Preferred Shares issued pursuant to the Purchase Agreement will relate to
either the Jersey Gardens or the LA Metro Mall, as the case may be. See
"Description of Preferred Shares - Description of Series A-1 Preferred Shares
- - Redemption." Nomura Preferred Shares do not include any other preferred
shares issued to Nomura or any other person on any terms, whether or not
substantially similar to the terms of the Series A-1 Preferred Shares, for
any reason, whether or not such Preferred Shares are issued in connection
with the properties contemplated under the Purchase Agreement.
On December 5, 1997, the Series C Preferred Shares were issued pursuant
to another Purchase Agreement, dated December 4, 1997, among the Company and
a Nomura Affiliate, to obtain equity funding for the purchase by Elizabeth
MetroMall LLC of real estate on which the Jersey Gardens will be constructed
and developed. It is contemplated that, subject to satisfactory completion
of its due diligence and satisfaction of certain other conditions, a Nomura
Affiliate will purchase a series of Nomura Preferred Shares and that the
proceeds of such sale will be used to redeem the Series C Preferred Shares.
Description of Series A-1 Preferred Shares
Set forth below is a summary of the material terms of the Series A-1
Preferred Shares.
Distributions
The holders of the Series A-1 Preferred Shares shall be entitled to
receive, after and subject to the payment in full to holders of the Series B
Preferred Shares and of any other series of preferred shares senior to the
Series A-1 Preferred Shares with respect to distributions, cumulative
distributions, payable quarterly on April 1, July 1, October 1 and January 1,
at the annual rate per share equal to the product of $1,000, which amount is
subject to adjustment (the "Liquidation Preference"), and at the Company's
option either (a) a variable rate at 90-day LIBOR plus 285 basis points
(8.57% at September 30, 1997) or (b) a four-year fixed rate equal to the
yield to maturity of the five-year U.S. Treasury Security with a remaining
maturity of four years plus 285 basis points (8.79% at September 25, 1997)
(the "Distribution Rate"). Currently, the Distribution Rate on the
outstanding Series A-1 Preferred Shares is as set forth in clause (a) above,
however, the Company may select the Distribution Rate set forth in clause (b)
at any time prior to the earliest to occur of (i) the final issuance of
Series A-1 Preferred Shares and (ii) November 27, 1997. In the event the
Company selects the Distribution Rate set forth in clause (b), upon the
expiration of the four years, the Distribution Rate will return to the
variable rate set forth in clause (a).
In addition, the margin over LIBOR or applicable U.S. Treasury Security
used to determine the distribution rate of the Series A-1 Preferred Shares
will be increased under the following circumstances. If there are Nomura
Preferred Shares outstanding having an aggregate liquidation preference of
less than or equal to $100 million, the margin over LIBOR or applicable U.S.
Treasury Security used to determine the distribution rate on the Series A-1
Preferred Shares will be increased from 285 basis points to the following
based upon the then percentage that Equity is of Total Market Capitalization
(each as defined below): (i) greater or equal to 42% but less than 47%, 310
basis points; (ii) greater or equal to 37% but less than 42%, 405 basis
points; (iii) greater or equal to 32% but less than 37%, 485 basis points;
and (iv) less than 32%, 605 basis points. If there are Nomura Preferred
Shares outstanding having an aggregate liquidation preference of greater than
$100 million but less than or equal to $200 million, the margin over LIBOR or
applicable U.S. Treasury Security used to determine the distribution rate on
the Series A-1 Preferred Shares will be increased from 285 basis points to
the following based upon the then percentage that Equity is of Total Market
Capitalization: (i) greater or equal to 42% but less than 47%, 335 basis
points, (ii) greater or equal to 37% but less than 42%, 455 basis points;
(iii) greater or equal to 32% but less than 37%, 545 basis points; and (iv)
less than 32%, 655 basis points. If there are Nomura Preferred Shares
outstanding having an aggregate liquidation preference of greater than $200
million, the margin over LIBOR or applicable U.S. Treasury Security used to
determine the distribution rate on the Series A-1 Preferred Shares will be
increased from 285 basis points to the following based upon the then
percentage that Equity is of Total Market Capitalization: (i) greater or
equal to 42% but less than 47%, 360 basis points; (ii) greater or equal to
37% but less than 42%, 485 basis points; (iii) greater or equal to 32% but
less than 37%, 585 basis points; and (iv) less than 32%, 685 basis points.
"Equity" means the value (based upon the average closing price of such shares
on the NYSE for the 90 trading days immediately preceding the date of
determination) of all equity securities of the Company which are junior to
the Series A-1 Preferred Shares upon liquidation of the Company (including
Common Shares and units of partnership interest of the Operating
Partnership). "Total Market Capitalization" means the sum of the outstanding
amount of all indebtedness, the aggregate amount of the liquidation
preference of all Preferred Shares and the aggregate market value of the
Common Shares and units of partnership interest of the Operating Partnership
(based upon the average closing price of such shares on the NYSE for the 90
trading days immediately preceding the date of determination) of the Company
and its consolidated entities.
Defaults
If the Company (a) fails to maintain certain debt to asset ratios as
described below, (b) refinances its approximately $181.0 million loan with
Nomura without Nomura's prior consent, or (c) permits distributions to be in
arrears for two or more quarters (each a "Default"), an additional
distribution of $40 per share per annum shall accrue on each Series A-1
Preferred Share. As of the date of this Prospectus, no Defaults have
occurred.
It is a Default if the Company's ratio of Consolidated Debt to
Consolidated Total Assets (the "Debt Ratio") is more than 0.60 to 1.00 and if
its ratio of Adjusted Consolidated Debt to Adjusted Consolidated Total Assets
(the "Adjusted Debt Ratio") is more than 0.70 to 1.00. As of September 30,
1997, the Company's Debt Ratio and Adjusted Debt Ratio was 0.53 to 1.00 and
0.57 to 1.00, respectively.
"Consolidated Debt" means the total consolidated indebtedness of the
Company and its consolidated entities, determined in accordance with GAAP.
"Consolidated Total Assets" means the sum of the cash and cash equivalents,
the cost of all recently developed or acquired real property and the
aggregate value of all other real property owned by the Company and its
consolidated entities determined by applying a 9.50% capitalization rate to
the adjusted net income of the Company and its consolidated entities.
"Adjusted Consolidated Debt" means Consolidated Debt of the Company and its
consolidated entities plus the Company and its consolidated entities' pro
rata share of the Consolidated Debt of each unconsolidated entity (not to
exceed the amount of the Company and its consolidated entities' pro rata
share of the consolidated assets of such unconsolidated entity). "Adjusted
Consolidated Total Assets" means Consolidated Total Assets of the Company and
its consolidated entities plus the Company and its consolidated entities' pro
rata share of the consolidated assets of each unconsolidated entity using the
method of computation set forth in the definition of Consolidated Total
Assets.
Conversion
Each Series A-1 Preferred Share is convertible at the option of the
holder at any time during the period (a) beginning on the earliest of (i) the
date of a Default and (ii) November 27, 2001, and (b) ending on the business
day prior to the date fixed for redemption or the payment of any amounts
distributable on liquidation to the holders of the Series A-1 Preferred
Shares. Upon conversion, the holder of each Series A-1 Preferred Share shall
receive such number of Common Shares equal to the quotient of (x) the
Liquidation Preference divided by (y) the product of (i) the average market
price for the Common Shares for the 30 trading days prior to conversion times
(ii) the Applicable Conversion Percentage. Provided that no Default has
occurred and is continuing, the "Applicable Conversion Percentage" shall be
(a) 90%, if conversion occurs prior to November 27, 2002, (b) 85%, if
conversion occurs between November 27, 2002 and November 26, 2003, (c) 80%,
if conversion occurs between November 27, 2003 and November 26, 2004, and (d)
70%, if conversion occurs after November 27, 2005. Holders of the Series A-1
Preferred Shares are entitled to certain customary anti-dilution protections
in the event the Company issues any of its Common Shares for a consideration
less than the market price in effect on the date of such issuance.
Notwithstanding the foregoing, no holder of Series A-1 Preferred Shares shall
have the right to convert such Series A-1 Preferred Shares into Common Shares
if the Common Shares issued as a result of such conversion of Series A-1
Preferred Shares and any conversion of other Nomura Preferred Shares, would
(i) have voting power equal to or in excess of 20% of the voting power of the
Common Shares outstanding on November 27, 1996 or (ii) equal or exceed 20% of
the number of Common Shares outstanding on November 27, 1996.
Voting
In the event that (i) distributions on any Series A-1 Preferred Shares
shall be in arrears for two or more quarters or (ii) a Default shall have
occurred and be continuing, the holders of a majority of the Series A-1
Preferred Shares shall have the exclusive right, voting separately as a class
together with the holders of other Nomura Preferred Shares, to elect two
additional trustees for one-year terms. The term of office of each trustee
elected by the holders of Nomura Preferred Shares shall terminate when all
accumulated distributions on the Nomura Preferred Shares have been paid in
full or set aside for payment in full and no Default shall exist.
Other than as set forth above and as required by law, holders of Series
A-1 Preferred Shares have no other voting rights except that the Company may
not (i) amend or repeal any provision of the Declaration or Bylaws which
would have a dilutive effect on the Series A-1 Preferred Shares, increase the
number of members of the Board of Trustees, or otherwise materially adversely
affect the economic rights of the Series A-1 Preferred Shares, (ii) issue any
preferred shares senior to the Series A-1 Preferred Shares unless all Series
A-1 Preferred Shares are redeemed with the proceeds thereof, (iii) authorize
the sale of substantially all of its assets or any merger with and into
another entity, and (iv) enter into a transaction with certain of its
employees and shareholders on terms less favorable to the Company than those
that could have been obtained in a comparable arm's length transaction with a
third party without, in each such case, first obtaining the affirmative vote
of the holders of a majority of the then outstanding Series A-1 Preferred
Shares. In addition, the Company may not take any action which would
adversely affect the Series A-1 Preferred Shares without the affirmative vote
of the holders of at least two-thirds of the then outstanding number of
shares of such adversely affected Series A-1 Preferred Shares.
Redemption
In the event that cash proceeds are received from any capital
transaction with respect to the Company's Mall Property located in Olathe,
Kansas known as The Great Mall of the Great Plains ("The Great Mall of the
Great Plains"), including a sale or refinancing of The Great Mall of the
Great Plains, whether or not such proceeds are made available to the Company,
the Company shall be obligated to redeem, at a price equal to the Liquidation
Preference plus an amount equal to any distributions accrued but unpaid
thereon (the "Redemption Price"), such maximum number of whole Series A-1
Preferred Shares as may be redeemed at the Redemption Price with such
proceeds. The Company is required to make the foregoing redemption even if
it is in arrears in payment of distributions on the Series B Preferred
Shares. Furthermore, so long as all distributions on the Series B Preferred
Shares have been or contemporaneously are authorized and paid or authorized
and a sum sufficient for the payment thereof set apart for payment for all
past distribution periods and the then current distribution period, the
Company may also redeem, at its option, at any time prior to conversion, such
whole number of Nomura Preferred Shares having an aggregate Redemption Price
up to an amount equal to the value (as determined below) of the equity
securities issued by the Company and the units of partnership interest issued
by the Operating Partnership (other than those units of partnership interest
issued in connection with the issuance by the Company of common equity
securities) junior to the Series B Preferred Shares as to distribution rights
and rights upon liquidation, dissolution or winding up ("Junior Equity") from
and after the date of the issuance of the Series B Preferred Shares on
November 17, 1997. The value of such Junior Equity will be equal to the
product of (A) the total number of shares or units of Junior Equity issued
and (B) in each case, as applicable, (i) with respect to issuances of Junior
Equity for cash, the amount of the purchase price therefore, (ii) with
respect to issuances of Junior Equity for property or other consideration,
the closing price per Common Share on the NYSE on the date immediately
preceding issuance of such Junior Equity, or (iii) with respect to issuances
of Junior Equity which are not traded on a national exchange or not
convertible into equity securities or units of partnership interest which are
traded on a national exchange, as determined by an investment banking firm.
Liquidation
The holders of Series A-1 Preferred Shares shall, in the event of any
liquidation, dissolution or winding up of the Company, be entitled to receive
after and subject to the payment in full to holders of the Series B Preferred
Shares and of any other series of preferred shares senior to the Series A-1
Preferred Shares with respect to liquidation, but before any payment shall be
made to the holders of the Company's Common Shares, an amount equal to the
Liquidation Preference plus any accrued distributions thereon.
Restrictions on Ownership and Transfer
Ownership of shares of beneficial interest of the Company, including the
Series A-1 Preferred Shares, by any person is limited, with certain
exceptions, to 8.0% of the lesser of the number or value of the Company's
total outstanding shares of beneficial interest. For information regarding
additional restrictions on ownership and transfer of the Series A-1 Preferred
Shares, see "Description of Common Shares - Restrictions on Ownership and
Transfer."
Description of Series B Preferred Shares
Set forth below is a summary of the material terms of the Series B Preferred
Shares.
Rank
The Series B Preferred Shares will, with respect to distribution rights
and rights upon liquidation, dissolution or winding up of the Company, rank
(a) senior to (i) all classes or series of Common Shares, (ii) the Nomura
Preferred Shares, (iii) the Series C Preferred Shares and (iv) all equity
securities ranking junior to such Series B Preferred Shares; (b) on a parity
with all equity securities issued by the Company the terms of which
specifically provide that such equity securities rank on a parity with the
Series B Preferred Shares (the "Parity Preferred Shares"); and (c) junior to
all equity securities issued by the Company the terms of which specifically
provide that such equity securities rank senior to the Series B Preferred
Shares. The term "equity securities" does not include convertible debt
securities for this purpose. Notwithstanding that the Series B Preferred
Shares rank senior to the Nomura Preferred Shares as to rights to receive
distributions and amounts payable upon liquidation, dissolution or winding up
of the Company, the Company is obligated (whether or not distributions on the
Series B Preferred Shares for all past Distribution Periods and the then
current Distribution Period have been paid) (i) to mandatorily redeem Series
A-1 Preferred Shares in accordance with its terms, and (ii) to mandatorily
redeem any other Nomura Preferred Shares issued from time to time in
accordance with their terms set forth in the articles supplementary
classifying such series of Nomura Preferred Shares. Furthermore, so long as
full cumulative distributions on the Series B Preferred Shares have been or
contemporaneously are authorized and paid or authorized and a sum sufficient
for the payment thereof set apart for payment, the Company may redeem, at its
option, from time to time, Nomura Preferred Shares having an aggregate
Redemption Price of up to an amount equal to the value (as determined below)
of Junior Equity issued from and after the date of the issuance of the Series
B Preferred Shares on November 17, 1997. The value of such Junior Equity
will be equal to the product of (A) the total number of shares or units of
Junior Equity issued and (B) in each case, as applicable, (i) with respect to
issuances of Junior Equity for cash, the amount of the purchase price
therefor, (ii) with respect to issuances of Junior Equity for property or
other consideration, the closing price per Common Share on the NYSE on the
date immediately preceding issuance of such Junior Equity, or (iii) with
respect to issuances of Junior Equity which are not traded on a national
exchange or not convertible into equity securities or units of partnership
interest which are traded on a national exchange, as determined by an
investment banking firm.
Distributions
Holders of Series B Preferred Shares shall be entitled to receive, when,
as and if authorized and declared by the Board of Trustees, out of assets of
the Company legally available for payment, cash distributions payable
quarterly at the rate of 9.25% per annum of the $25.00 liquidation preference
(equivalent to $2.3125 per annum per share). Such distributions shall be
cumulative from the date of original issue and shall be payable quarterly on
the 15th of each January, April, June and October of each year or, if not a
business day, the next succeeding business day (each a "Distribution Payment
Date"). The first distribution, which will be paid on January 15, 1998, will
be for less than a full quarter. Such distribution and any distribution
payable on the Series B Preferred Shares for any partial distribution period
will be computed on the basis of a 360-day year consisting of twelve 30-day
months. Distributions will be payable to holders of record as they appear on
the stock transfer books of the Company at the close of business on the
applicable record date, which shall be fixed by the Board of Trustees of the
Company and which shall be not more than 60 nor less than 10 days prior to
such Distribution Payment Date (each a "Distribution Record Date"). After
full distributions on the Series B Preferred Shares have been paid or
declared and funds set aside for payment for all past distribution periods
and for the then current quarter, the holders of Series B Preferred Shares
will not be entitled to any further distributions with respect to that
quarter.
When distributions are not paid in full upon the Series B Preferred
Shares and any other series of Parity Preferred Shares, all distributions
declared upon the Series B Preferred Shares and any other Parity Preferred
Shares shall be declared pro rata so that the amount of distributions
declared per share on such Series B Preferred Shares and such other Parity
Preferred Shares shall in all cases bear to each other the same ratio that
the accrued distributions per share on the Series B Preferred Shares and such
other Parity Preferred Shares bear to each other. Except as set forth in the
preceding sentence, unless full distributions on the Series B Preferred
Shares have been or contemporaneously are authorized and paid or authorized
and a sum sufficient for the payment thereof set apart for payment for all
past distribution periods and the then current distribution period, no
distributions (other than in Common Shares or other shares of equity
securities of the Company ranking junior to the Series B Preferred Shares as
to distributions and upon liquidation) shall be authorized or paid or set
aside for payment on the Common Shares or on any other shares of equity
securities of the Company ranking junior to or on a parity with the Series B
Preferred Shares as to distributions or upon liquidation. Unless full
distributions on the Series B Preferred Shares have been or contemporaneously
are authorized and paid or authorized and a sum sufficient for the payment
thereof set apart for payment for all past distribution periods and the then
current distribution period, no Common Shares or any other shares of equity
securities of the Company ranking junior to or on a parity with the Series B
Preferred Shares as to distributions or upon liquidation (including less than
all of Series B Preferred Shares) shall be redeemed, purchased or otherwise
acquired for any consideration (or any moneys be paid or made available for a
sinking fund for the redemption of any such shares) by the Company or any
subsidiary of the Company except by conversion into or exchange for shares of
equity securities of the Company ranking junior to the Series B Preferred
Shares as to distributions and upon liquidation. See "Description of
Preferred Shares-Description of Series B Preferred Shares-Redemption" for
similar restrictions on the redemption, purchase or other acquisition of the
Series B Preferred Shares. Notwithstanding that the Series B Preferred
Shares rank senior to the Nomura Preferred Shares as to rights to receive
distributions and amounts payable upon liquidation, dissolution or winding up
of the Company, the Company is obligated (whether or not distributions on the
Series B Preferred Shares for all past Distribution Periods and the then
current Distribution Period have been paid) (i) to mandatorily redeem Series
A-1 Preferred Shares in accordance with its terms, and (ii) to mandatorily
redeem any other Nomura Preferred Shares issued from time to time in
accordance with their terms set forth in the articles supplementary
classifying such series of Nomura Preferred Shares. See "Description of
Preferred Shares-Description of Series A-1 Preferred Shares-Redemption."
No distributions on the Series B Preferred Shares shall be authorized by
the Board of Trustees of the Company 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
authorization, payment or setting apart for payment or provides that such
authorization, payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or if such authorization or payment shall be
restricted or prohibited by law. The Company's $190 million secured credit
facility (the "Credit Facility") presently limits the distributions payable
by the Company on its Common Shares and outstanding preferred shares of
beneficial interest to 100% of Funds from Operations (as defined below) for
the Company on a consolidated and cumulative basis over the prior four
quarters. For the purposes of the Credit Facility, "Funds from Operations"
means net income less gains from property sales, plus losses from property
sales and debt restructurings, amortization and depreciation, noncash expense
and minority interest expense, less the sum of scheduled principal payments,
excluding balloon payments, and capital expenditures. For the purposes of
the preceding sentence, capital expenditures are assumed to be $0.15 per
square foot of GLA on the properties operated and maintained by the Company,
excluding ground leases, in excess of five years old. Cash flow from
properties that secure loans that are in default and as to which the
indebtedness has been accelerated are excluded from the calculation of Funds
from Operations.
Notwithstanding the foregoing, distributions on the Series B Preferred
Shares will accrue whether or not the Company has earnings, whether or not
there are funds legally available for the payment of such distributions,
whether or not any agreement of the Company prohibits payment of such
distributions, and whether or not such distributions are authorized. Accrued
but unpaid distributions on the Series B Preferred Shares will not bear
interest and holders of Series B Preferred Shares shall not be entitled to
any distribution, whether payable in cash, property or shares of beneficial
interest, in excess of full cumulative distributions on the Series B
Preferred Shares as provided above.
Any distribution payment made on the Series B Preferred Shares shall
first be credited against the earliest accrued but unpaid distribution due
with respect to such shares which remains payable.
If, for any taxable year, the Company elects to designate as "capital
gain dividends" (as defined in Section 857 of the Internal Revenue Code of
1986, as amended (the "Code")) any portion (the "Capital Gains Amount") of
the dividends (within the meaning of the Code) paid or made available for the
year to holders of all classes of shares of beneficial interest in the
Company (the "Total Distributions"), then the portion of the Capital Gains
Amount that will be allocable to the holders of the Series B Preferred Shares
will be the Capital Gains Amount multiplied by a fraction, the numerator of
which will be the total dividends (within the meaning of the Code) paid or
made available to the holders of the Series B Preferred Shares for the year
and the denominator of which shall be the Total Distributions.
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the Company, then, before any distribution or payment shall
be made to the holders of any Common Shares or any other class or series of
shares of beneficial interest of the Company ranking junior to the Series B
Preferred Shares in the distribution of assets upon any liquidation,
dissolution or winding up of the Company, the holders of Series B Preferred
Shares shall be entitled to receive, after payment or provision for payment
of the Company's debts and other liabilities, out of assets of the Company
legally available for distribution to shareholders, a liquidation preference
of $25.00 per share, plus an amount equal to any accrued and unpaid
distributions to the date of such liquidation, dissolution or winding up
(whether or not declared). After payment of the full amount of the
liquidating distributions to which they are entitled, the holders of Series B
Preferred Shares will have no right or claim to any of the remaining assets
of the Company. Notwithstanding the foregoing, under certain circumstances,
in the event that The Great Plains MetroMall LLC receives cash proceeds from
any capital transaction with respect to The Great Mall of the Great Plains,
pursuant to the terms of the agreements governing The Great Mall of the Great
Plains, the Company may be required to purchase the Series A-1 Preferred
Shares whether or not the Company is in liquidation.
In the event that, upon any such voluntary or involuntary liquidation,
dissolution or winding up, the legally available assets of the Company are
insufficient to pay the amount of the liquidating distributions on all
outstanding Series B Preferred Shares and the corresponding amounts payable
on all shares of other classes or series of equity security of the Company
ranking on a parity with the Series B Preferred Shares in the distribution of
assets upon liquidation, dissolution or winding up, then the holders of the
Series B Preferred Shares and all other such classes or series of equity
security shall share ratably in any such distribution of assets in proportion
to the full liquidating distributions to which they would otherwise be
respectively entitled. If liquidating distributions shall have been made in
full to all holders of Series B Preferred Shares, the remaining assets of the
Company shall be distributed among the holders of any other classes or series
of equity security ranking junior to the Series B Preferred Shares upon
liquidation, dissolution or winding up, according to their respective rights
and preferences and in each case according to their respective number of
shares.
For purposes of this section, a distribution of assets in any
dissolution, winding up or liquidation will not include (i) any consolidation
or merger of the Company with or into any other entity, (ii) any dissolution,
liquidation, winding up, or reorganization of the Company immediately
followed by incorporation of another entity to which such assets are
distributed or (iii) a sale or other disposition of all or substantially all
of the Company's assets to another entity; provided that, in each case,
effective provision is made in the charter of the resulting and surviving
entity or otherwise for the recognition, preservation and protection of the
rights of the holders of Series B Preferred Shares.
Redemption
Except in certain circumstances relating to the Company's maintenance of
its ability to qualify as a REIT under the Code as described under
"Description of Common Shares-Restrictions on Ownership and Transfer," the
Series B Preferred Shares are not redeemable prior to November 15, 2002. On
any date as fixed by the Board of Trustees of the Company on or after
November 15, 2002, the Company, upon not less than 30 nor more than 60 days'
written notice, may redeem the Series B Preferred Shares, in whole or in
part, at any time or from time to time, for cash at a redemption price of
$25.00 per share, plus all accrued and unpaid distributions thereon, if any
(whether or not declared), to the date fixed for redemption (except as
provided below), without interest, to the extent the Company will have funds
legally available therefore. The redemption price of the Series B Preferred
Shares (other than any portion thereof consisting of accrued and unpaid
dividends) is payable solely out of the sale proceeds of other capital shares
of the Company and not from any other source. For purposes of the preceding
sentence, "capital shares" means any common shares of beneficial interest,
preferred shares, depositary 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 of or in the Company or the Operating
Partnership. Holders of Series B Preferred Shares to be redeemed shall
surrender such Series B Preferred Shares at the place designated in such
notice and shall be entitled to the redemption price and any accrued and
unpaid distributions payable upon such redemption following such surrender.
If notice of redemption of any Series B Preferred Shares has been given and
if the funds necessary for such redemption have been set aside by the Company
in trust for the benefit of the holders of any Series B Preferred Shares so
called for redemption, then from and after the redemption date distributions
will cease to accrue on such Series B Preferred Shares, such Series B
Preferred Shares shall no longer be deemed outstanding and all rights of the
holders of such shares will terminate, except the right to receive the
redemption price plus any accrued and unpaid distributions payable upon such
redemption. If fewer than all of the outstanding Series B Preferred Shares
are to be redeemed, the number of shares to be redeemed will be determined by
the Board of Trustees of the Company and such shares shall be redeemed pro
rata from the holders of record thereof in proportion to the number of such
shares held by such holders (with adjustments to avoid redemption of
fractional shares) or by any other equitable method determined by the
Company.
Notwithstanding the foregoing, unless full cumulative distributions on
all Series B Preferred Shares shall have been or contemporaneously are
authorized and paid or authorized and a sum sufficient for the payment
thereof set apart for payment for all past distribution periods, no Series B
Preferred Shares shall be redeemed unless all outstanding Series B Preferred
Shares are simultaneously redeemed and the Company shall not purchase or
otherwise acquire directly or indirectly any Series B Preferred Shares
(except by exchange for shares of beneficial interest of the Company ranking
junior to the Series B Preferred Shares as to distributions and upon
liquidation); provided, however, that the foregoing shall not prevent the
purchase by the Company of Excess Shares (as defined below) in order to
ensure that the Company remains qualified as a REIT for federal income tax
purposes, or the purchase or acquisition of Series B Preferred Shares
pursuant to a purchase or exchange offer made on the same terms to holders of
all outstanding Series B Preferred Shares.
Notice of redemption will be given by publication in a newspaper of
general circulation in The City of New York, such publication to be made once
a week for two successive weeks commencing not less than 30 nor more than 60
days' prior to the redemption date. A similar notice will be mailed by the
Company, postage prepaid, not less than 30 nor more than 60 days prior to the
redemption date, addressed to the respective holders of record of Series B
Preferred Shares to be redeemed at their respective addresses as shown on the
stock transfer books of the Company. No failure to give such notice or any
defect thereto or in the mailing thereof shall affect the validity of the
proceedings for the redemption of any Series B Preferred Shares except as to
the holder to whom notice was defective or not given. Each notice shall
state: (i) the redemption date; (ii) the redemption price; (iii) the number
of Series B Preferred Shares to be redeemed; (iv) the place or places where
the Series B Preferred Shares are to be surrendered for payment of the
redemption price; and (v) that distributions on the Series B Preferred Shares
to be redeemed will cease to accrue on such redemption date. If fewer than
all the Series B Preferred Shares held by any holder are to be redeemed, the
notice mailed to such holder shall also specify the number of Series B
Preferred Shares to be redeemed from such holder.
In order to facilitate the redemption of the Series B Preferred Shares,
the Board of Trustees may fix a record date for the determination of Series B
Preferred Shares to be redeemed, such record date to be not less than 30 or
more than 60 days prior to the date fixed for such redemption. Except as
provided above, the Company will make no payment or allowance for unpaid
distributions, whether or not in arrears, on Series B Preferred Shares for
which a notice of redemption has been given.
The Series B Preferred Shares have no stated maturity and will not be
subject to any sinking fund or mandatory redemption provisions (except as
provided under "-Restrictions on Ownership and Transfer").
Subject to applicable law and the limitation on purchases when
distributions on the Series B Preferred Shares are in arrears, the Company
may, at any time and from time to time, purchase any Series B Preferred
Shares in the open market, by tender or by private agreement.
Voting Rights
Holders of the Series B Preferred Shares will not have any voting
rights, except as set forth below or as otherwise expressly required by
applicable law.
Whenever distributions on any Series B Preferred Shares shall be in
arrears for six or more quarterly periods (whether or not consecutive), the
holders of such Series B Preferred Shares (voting separately as a class with
all other series of Preferred Shares upon which like voting rights have been
conferred and are exercisable) will be entitled to vote for the election of
two additional trustees of the Company at a special meeting called by the
holders of record of at least 20% of the outstanding Series B Preferred
Shares or the holders of shares of any series of Preferred Shares so in
arrears (unless such request is received less than 90 days before the date
fixed for the next annual or special meeting of the shareholders) or at the
next annual meeting of shareholders and at each subsequent meeting until all
distributions accumulated on such Series B Preferred Shares for the past
distribution periods and the then current distribution period shall have been
fully paid or authorized and declared and a sum sufficient for the payment
thereof set aside for payment in full. In such case, the entire Board of
Trustees will be increased by two trustees.
The affirmative vote or consent of the holders of at least two-thirds of
the outstanding Series B Preferred Shares and of any series of Parity
Preferred Shares, voting as a single class, will be required to authorize
another class of equity securities senior to the Series B Preferred Shares
with respect to the payment of distributions or the distribution of assets on
liquidation. The affirmative vote or consent of the holders of at least two-
thirds of the outstanding Series B Preferred Shares will be required to
amend, alter or repeal any provision of, or add any provision to, the
Declaration of Trust, including the Articles Supplementary relating to the
Series B Preferred Shares (the "Articles Supplementary"), if such action
would materially and adversely alter or change the rights, preferences or
privileges of the Series B Preferred Shares. No such vote or consent is
required in connection with (i) any increase in the total number of
authorized Common Shares; (ii) the authorization or increase of any class or
series of shares of beneficial interest ranking, as to distribution rights
and liquidation preference, on a parity with or junior to the Series B
Preferred Shares; (iii) any merger or consolidation in which the Company is
the surviving entity if, immediately after the merger or consolidation, there
are outstanding no shares of beneficial interest and no securities
convertible into shares of beneficial interest ranking as to distribution
rights or liquidation preference senior to the Series B Preferred Shares
other than the securities of the Company outstanding prior to such merger or
consolidation; (iv) any merger or consolidation in which the Company is not
the surviving entity if, as result of the merger or consolidation, the
holders of Series B Preferred Shares receive shares of stock or beneficial
interest or other equity securities with preferences, rights and privileges
substantially identical with the preferences, rights and privileges of the
Series B Preferred Shares and there are outstanding no shares of stock or
beneficial interest or other equity securities of the surviving entity
ranking as to distribution rights or liquidation preference senior to the
Series B Preferred Shares other than the securities of the Company
outstanding prior to such merger or consolidation; or (v) if, at or prior to
the time when the issuance of any such shares ranking senior to the Series B
Preferred Shares is to be made or any such change is to take effect, as the
case may be, proper notice has been given and sufficient funds have been
irrevocably deposited in trust for the redemption of all the then outstanding
Series B Preferred Shares.
Conversion
The Series B Preferred Shares are not convertible into or exchangeable
for any other property or securities of the Company.
Restrictions on Ownership and Transfer
Ownership of Series B Preferred Shares by any person is limited, with
certain exceptions, to (i) 8.0% of the lesser of the number or value of the
Company's total outstanding shares of beneficial interest and (ii) 9.9% of
the lesser of the number or value of the total outstanding Series B Preferred
Shares. For information regarding additional restrictions on ownership and
transfer of the Series B Preferred Shares, see "Description of Common Shares-
Restrictions on Ownership and Transfer."
In addition to the restrictions on ownership and transfer set forth in
the Declaration of Trust, the Articles Supplementary provide, subject to
certain exceptions, that no holder (other than any person approved by the
Board of Trustees, at their option and in their discretion, provided such
approval will not result in the termination of the status of the Company as a
REIT) may own, or be deemed to own by virtue of the attribution provisions of
the Code, more than 9.9% (the "Series B Ownership Limit") of the lesser of
the number or value (in either case as determined in good faith by the Board
of Trustees) of the total outstanding Series B Preferred Shares.
The Board of Trustees may waive the Series B Ownership Limit if
evidence, satisfactory to the Board of Trustees and the Company's tax counsel
is presented, that such ownership will not then or in the future jeopardize
the Company's status as a REIT. As a condition of such waiver, the intended
transferee must give written notice to the Company of the proposed transfer
and must furnish such opinions of counsel, affidavits, undertakings,
agreements and information as may be required by the Board of Trustees no
later than the 15th day prior to any transfer which, if consummated, would
result in the intended transferee owning Shares in excess of the Series B
Ownership Limit.
Any transfer of Shares that would (i) create a direct or indirect
ownership of Shares in excess of the Series B Ownership Limit, (ii) result in
the Series B Preferred Shares being owned by fewer than 100 persons for
purposes of the REIT provisions of the Code, or (iii) result in the Company
being "closely held" within the meaning of Section 856(h) of the Code, shall
be null and void, and the intended transferee will acquire no, rights to the
Shares. The Articles Supplementary provide that the Company, by notice to
the holder thereof, may purchase any or all Series B Preferred Shares (the
"Series B Excess Preferred Shares") that are proposed to be transferred
pursuant to a transfer which, if consummated, would result in the intended
transferee owning Series B Preferred Shares in excess of the Series B
Ownership Limit or would otherwise jeopardize the REIT status of the Company.
From and after the date fixed for purchase by the Board of Trustees, the
holder of such shares to be purchased by the Company shall cease to be
entitled to distributions, voting rights and other benefits with respect to
such Shares except the right to payment of the purchase price for the shares.
The purchase price for any Series B Excess Preferred Shares shall be equal to
the fair market value of such Series B Preferred Shares. Any distribution
paid to a proposed transferee on Series B Excess Preferred Shares prior to
the discovery by the Company that such shares have been transferred in
violation of the provisions of the Articles Supplementary shall be repaid to
the Company upon demand. If the foregoing transfer restrictions are
determined to be void or invalid by virtue of any legal decision, statute,
rule or regulation, then the intended transferee of any Series B Excess
Preferred Shares may be deemed, at the option of the Company, to have acted
as an agent on behalf of the Company in acquiring such Series B Excess
Preferred Shares and to hold such Series B Excess Preferred Shares on behalf
of the Company.
All persons who own, directly or indirectly by virtue of the attribution
provisions of the Code, more than 5% in number or value of the outstanding
Series B Preferred Shares must give a written notice to the Company
containing the information specified in the Articles Supplementary by
January 30 of each year. In addition, each direct or indirect holder of
Series B Preferred Shares shall upon demand be required to disclose to the
Company in writing such information with respect to the direct or indirect
ownership of Series B Preferred Shares as the Board of Trustees deem
necessary to comply with the provisions of the Code applicable to a REIT, to
comply with the requirements of any taxing authority or governmental agency
or to determine any such compliance.
Transfer Agent
The registrar, transfer agent and distribution disbursing agent for the
Series B Preferred Shares will be The Harris Trust and Savings Bank.
Description of Series C Preferred Shares
Set forth below is a summary of the material terms of the Series C Preferred
Shares.
Distributions
The holders of the Series C Preferred Shares shall be entitled to
receive, after and subject to the payment in full to holders of the Series B
Preferred Shares and of any other series of preferred shares senior to the
Series C Preferred Shares with respect to distributions, cumulative
distributions, payable quarterly on April 1, July 1, October 1 and January 1,
at the annual rate per share equal to the product of $1,000, which amount is
subject to adjustment (the "Series C Liquidation Preference"), and a variable
rate at 3-month LIBOR plus, at all times prior to June 4, 1998, 285 basis
points which rate was 5.91% at December 15, 1997, and at all times on or
after June 4, 1998, 500 basis points.
In addition, the margin over LIBOR used to determine the distribution
rate of the Series C Preferred Shares will be increased under the following
circumstances. If there are Series C Preferred Shares together with Nomura
Preferred Shares (together, "Pari Passu Shares") outstanding having an
aggregate liquidation preference of less than or equal to $100 million, the
margin over LIBOR used to determine the distribution rate on the Series C
Preferred Shares will be increased from 285 basis points to the following
based upon the then percentage that Equity is of Total Market Capitalization:
(i) greater or equal to 42% but less than 47%, 310 basis points prior to June
4, 1998, and 525 basis points on and after June 4, 1998; (ii) greater or
equal to 37% but less than 42%, 405 basis points prior to June 4, 1998, and
620 basis points on and after June 4, 1998; (iii) greater or equal to 32% but
less than 37%, 485 basis points prior to June 4, 1998, and 700 basis points
on and after June 4, 1998; and (iv) less than 32%, 605 basis points prior to
June 4, 1998, and 820 basis points on and after June 4, 1998. If there are
Pari Passu Shares outstanding having an aggregate liquidation preference of
greater than $100 million but less than or equal to $200 million, the margin
over LIBOR used to determine the distribution rate on the Series C Preferred
Shares will be increased from 285 basis points to the following based upon
the then percentage that Equity is of Total Market Capitalization: (i)
greater or equal to 42% but less than 47%, 335 basis points prior to June 4,
1998, and 550 basis points on and after June 4, 1998; (ii) greater or equal
to 37% but less than 42%, 455 basis points prior to June 4, 1998, and 670
basis points on and after June 4, 1998; (iii) greater or equal to 32% but
less than 37%, 545 basis points prior to June 4, 1998, and 760 basis points
on and after June 4, 1998; and (iv) less than 32%, 655 basis points prior to
June 4, 1998, and 870 basis points on and after June 4, 1998. If there are
Pari Passu Shares outstanding having an aggregate liquidation preference of
greater than $200 million, the margin over LIBOR used to determine the
distribution rate on the Series C Preferred Shares will be increased from 285
basis points to the following based upon the then percentage that Equity is
of Total Market Capitalization: (i) greater or equal to 42% but less than
47%, 360 basis points prior to June 4, 1998, and 575 basis points on and
after June 4, 1998; (ii) greater or equal to 37% but less than 42%, 485 basis
points prior to June 4, 1998, and 700 basis points on and after June 4, 1998;
(iii) greater or equal to 32% but less than 37%, 585 basis points prior to
June 4, 1998, and 800 basis points on and after June 4, 1998; and (iv) less
than 32%, 685 basis points prior to June 4, 1998, and 900 basis points on and
after June 4, 1998.
In addition, holders of Series C Preferred Shares outstanding on June 4,
1998 are entitled to receive if, as and when authorized out of net profits, a
dividend, payable on June 4, 1998, of $25.35 per Series C Preferred Share.
Series C Defaults
If the Company (a) fails to maintain certain debt to asset ratios as
described below, (b) refinances its approximately $181.0 million loan with
Nomura without Nomura's prior consent, (c) permits distributions to be in
arrears for two or more quarters or (d) fails to comply with its obligations
to cause Elizabeth MetroMall LLC to sell its assets promptly if Series C
Preferred Shares remain outstanding at December 4, 1998 and to use net
proceeds derived from this or any other sale of Elizabeth MetroMall LLC's
property to redeem Series C Preferred Shares (each a "Series C Default"), an
additional distribution of $40 per share per annum shall accrue on each
Series C Preferred Share. As of the date of this Prospectus, no Series C
Defaults have occurred.
It is a Series C Default if the Company's ratio of Consolidated Debt to
Consolidated Total Assets (the "Series C Debt Ratio") is more than 0.60 to
1.00 and if its ratio of Adjusted Consolidated Debt to Adjusted Consolidated
Total Assets (the "Series C Adjusted Debt Ratio") is more than 0.70 to 1.00.
As of September 30, 1997, the Series C Debt Ratio and Series C Adjusted Debt
Ratio were 0.52 to 1.00 and 0.57 to 1.00, respectively.
For the purposes of the Series C Debt Ratio, "Consolidated Total Assets"
means the sum of the cash and cash equivalents, the cost (unrecovered cost in
the case of investments) of all recently developed or acquired real property
and the aggregate value of all other real property and certain investments in
unconsolidated ventures owned by the Company and its consolidated entities
determined by applying a 9.50% capitalization rate to the adjusted net income
of the Company and its consolidated entities. For the purposes of the Series
C Debt Ratio, "Adjusted Consolidated Total Assets" means Consolidated Total
Assets of the Company and its consolidated entities plus the Company and its
consolidated entities' pro rata share of the consolidated assets of each
unconsolidated entity using the method of computation set forth in the
definition of Consolidated Total Assets above.
Conversion
Each Series C Preferred Share is convertible at the option of the holder
at any time during the period (a) beginning on the earliest of (i) the date
of a Series C Default and (ii) December 4, 1998, and (b) ending on the
business day prior to the date fixed for redemption or the payment of any
amounts distributable on liquidation to the holders of the Series C Preferred
Shares. Upon conversion, the holder of each Series C Preferred Share shall
receive such number of Common Shares equal to the quotient of (x) the Series
C Liquidation Preference divided by (y) the product of (i) the average market
price for the Common Shares for the 30 trading days prior to conversion times
(ii) the Series C Applicable Conversion Percentage. Provided that no Series
C Default has occurred and is continuing, the "Series C Applicable Conversion
Percentage" shall be (a) 80%, if conversion occurs prior to December 4, 1999,
(b) 75%, if conversion occurs between December 4, 1999 and December 3, 2000,
and (c) 70%, if conversion occurs after December 3, 2000. Holders of the
Series C Preferred Shares are entitled to certain customary anti-dilution
protections in the event the Company issues any of its Common Shares for a
consideration less than the market price in effect on the date of such
issuance. Notwithstanding the foregoing, no holder of Series C Preferred
Shares shall have the right to convert such Series C Preferred Shares into
Common Shares if the Common Shares issued as a result of such conversion of
any Series C Preferred Shares and any conversion of Nomura Preferred Shares,
would (i) have voting power equal to or in excess of 20% of the voting power
of the Common Shares outstanding on November 27, 1996 or (ii) equal or exceed
20% of the number of Common Shares outstanding on November 27, 1996.
Voting
In the event that (i) distributions on any Series C Preferred Shares
shall be in arrears for two or more quarters or (ii) a Series C Default shall
have occurred and be continuing, the holders of a majority of the Series C
Preferred Shares shall have the exclusive right, voting separately as a class
together with the holders of Nomura Preferred Shares, to elect two additional
trustees for one-year terms. The term of office of each trustee elected by
the holders of the Series C Preferred Shares and the Nomura Preferred Shares
shall terminate when all accumulated distributions on the Series C Preferred
Shares and the Nomura Preferred Shares have been paid in full or set aside
for payment in full and no Series C Default shall exist.
Other than as set forth above and as required by law, holders of Series
C Preferred Shares have no other voting rights except that the Company may
not (i) amend or repeal any provision of the Declaration or Bylaws which
would have a dilutive effect on the Series C Preferred Shares, increase the
number of members of the Board of Trustees, or otherwise materially adversely
affect the economic rights of the Series C Preferred Shares, (ii) issue any
preferred shares senior to the Series C Preferred Shares unless all Series C
Preferred Shares are redeemed with the proceeds thereof, (iii) authorize the
sale of substantially all of its assets or any merger with and into another
entity, and (iv) enter into a transaction with certain of its employees and
shareholders on terms less favorable to the Company than those that could
have been obtained in a comparable arm's length transaction with a third
party without, in each such case, first obtaining the affirmative vote of the
holders of a majority of the then outstanding Series C Preferred Shares. In
addition, the Company may not take any action which would adversely affect
the Series C Preferred Shares without the affirmative vote of the holders of
at least two-thirds of the then outstanding number of shares of such
adversely affected Series C Preferred Shares.
Redemption
In the event that cash proceeds are received from any capital
transaction with respect to property owned by Elizabeth MetroMall LLC,
whether or not such proceeds are made available to the Company, the Company
shall be obligated to redeem, at a price equal to the Series C Liquidation
Preference plus an amount equal to any distributions accrued but unpaid
thereon (the "Series C Redemption Price"), such maximum number of whole
Series C Preferred Shares as may be redeemed at the Series C Redemption Price
with such proceeds. In addition, if any Series C Preferred Shares remain
outstanding on or after December 4, 1998, the Company is required to cause
Elizabeth MetroMall LLC to sell all of its assets promptly after December 4,
1998 (and in any event by March 31, 1999), and use the proceeds therefrom to
redeem, at the Series C Redemption Price, such maximum number of whole Series
C Preferred Shares as may be redeemed at the Series C Redemption Price with
such proceeds.
Liquidation
The holders of Series C Preferred Shares shall, in the event of any
liquidation, dissolution or winding up of the Company, be entitled to receive
after and subject to the payment in full to holders of the Series B Preferred
Shares and of any other series of preferred shares senior to the Series C
Preferred Shares with respect to liquidation, but before any payment shall be
made to the holders of the Company's Common Shares, an amount equal to the
Series C Liquidation Preference plus any accrued distributions thereon.
Restrictions on Ownership and Transfer
Ownership of shares of beneficial interest, including the Series C
Preferred Shares, by any person is limited, with certain exceptions, to 8.0%
of the lesser of the number or value of the Company's total outstanding
shares of beneficial interest. For information regarding additional
restrictions on ownership and transfer of the Series C Preferred Shares, see
"Description of Common Shares - Restrictions on Ownership and Transfer."
Other Preferred Shares
The following description of the Preferred Shares which may be offered
pursuant to a Prospectus Supplement sets forth certain general terms and
provisions of the Preferred Shares to which any Prospectus Supplement may
relate. The particular terms of the Preferred Shares being offered and the
extent to which such general provisions may or may not apply will be
described in a Prospectus Supplement relating to such Preferred Shares. The
statements below describing the Preferred Shares are in all respects subject
to and qualified in their entirety by reference to the applicable provisions
of the Declaration of Trust (including the applicable Articles Supplementary)
and the Company's Bylaws, as in effect.
Subject to limitations prescribed by Maryland law and the Declaration of
Trust, the Board of Trustees is authorized to fix the number of shares
constituting each series of Preferred Shares and the terms, preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends or other distributions, qualifications and terms or conditions of
redemption as may be fixed by resolution of the Board of Trustees or a duly
authorized committee thereof. The Preferred Shares will, when issued, be
fully paid and nonassessable and will have no preemptive rights.
Both Maryland statutory law governing real estate investment trusts
organized under the laws of that state and the Declaration of Trust provide
that no shareholder of the Company will be personally liable for any
obligation of the Company solely as a result of his status as a shareholder.
The Company's Bylaws further provide that the Company shall indemnify each
shareholder or former shareholder against any claim or liability to which the
shareholder may become subject by reason of his being or having been a
shareholder or a former shareholder and that the Company shall reimburse each
shareholder for all legal and other expenses reasonably incurred by him in
connection with any such claim or liability. In addition, it is the
Company's policy to include a clause in its contracts which provides that
shareholders assume no personal liability for obligations entered into on
behalf of the Company. However, with respect to tort claims, contractual
claims where shareholder liability is not so negated, claims for taxes and
certain statutory and other liabilities, a shareholder may, in some
jurisdictions, be personally liable to the extent that such claims are not
satisfied by the Company. Inasmuch as the Company carries public liability
insurance which it considers adequate, any risk of personal liability to
shareholders is limited to situations in which the Company's assets plus its
insurance coverage would be insufficient to satisfy the claims against the
Company and its shareholders.
The Register and Transfer Agent for any Preferred Shares will be set
forth in the applicable Prospectus Supplement.
Reference is made to the Prospectus Supplement relating to the Preferred
Shares offered thereby for specific terms, including:
(1) the title and stated value of such Preferred Shares;
(2) the number of such Preferred Shares being offered, the liquidation
preference per share and the offering price of such Preferred
Shares;
(3) the distribution rate(s), period(s) and/or payment date(s) or
method(s) of calculation thereof applicable to such Preferred
Shares;
(4) the date from which distributions on such Preferred Shares shall
accumulate, if applicable;
(5) the procedures for any auction and remarketing, if any, for such
Preferred Shares;
(6) the provision for a sinking fund, if any, for such Preferred
Shares;
(7) the provisions for redemption, if applicable, of such Preferred
Shares;
(8) any listing of such Preferred Shares on any securities exchange;
(9) the terms and conditions, if applicable, upon which such Preferred
Shares will be convertible into Common Shares, including the
conversion price (or manner of calculation thereof);
(10) a discussion of federal income tax considerations applicable to
such Preferred Shares;
(11) the relative ranking and preferences of such Preferred Shares as to
distribution rights (including whether any liquidation preference
as to the Preferred Shares will be treated as a liability for
purposes of determining the availability of assets of the Company
for distributions to holders of Shares remaining junior to the
Preferred Shares as to distribution rights) and rights upon
liquidation, dissolution or winding up of the affairs of the
Company;
(12) any limitations on issuance of any series of preferred shares
ranking senior to or on a parity with such series of Preferred
Shares as to distribution rights and rights upon liquidation,
dissolution or winding up of the affairs of the Company;
(13) any limitations on direct or beneficial ownership and restrictions
on transfer of such Preferred Shares, in each case as may be
appropriate to preserve the status of the Company as a REIT; and
(14) any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Shares.
Rank
Unless otherwise specified in the applicable Prospectus Supplement, the
Preferred Shares will, with respect to distribution rights and/or rights upon
liquidation, dissolution or winding up of the Company, rank (i) senior to all
classes or series of Common Shares, and to all equity securities ranking
junior to such Preferred Shares with respect to distribution rights and/or
rights upon liquidation, dissolution or winding up of the Company, as the
case may be; (ii) on a parity with all equity securities issued by the
Company the terms of which specifically provide that such equity securities
rank on a parity with the Preferred Shares with respect to distribution
rights and/or rights upon liquidation, dissolution or winding up of the
Company, as the case may be; and (iii) junior to all equity securities issued
by the Company the terms of which specifically provide that such equity
securities rank senior to the Preferred Shares with respect to distribution
rights and/or rights upon liquidation, dissolution or winding up of the
Company, as the case may be. As used in the Declaration of Trust, for these
purposes, the term "equity securities" does not include convertible debt
securities. The Preferred Shares will rank on a parity with or junior to the
Nomura Preferred Shares and the Series C Preferred Shares unless the holders
thereof agree otherwise. If the holders of the Nomura Preferred Shares and
the Series C Preferred Shares agree that the Preferred Shares may rank senior
to the Nomura Preferred Shares and the Series C Preferred Shares, then the
Preferred Shares may rank on a parity with or junior to the Series B
Preferred Shares, unless the holders of the Series B Preferred Shares agree
otherwise.
Distributions
Holders of Preferred Shares shall be entitled to receive, when, as and
if authorized by the Board of Trustees of the Company, out of assets of the
Company legally available for payment, cash distributions at such rates (or
method of calculation thereof) and on such dates as will be set forth in the
applicable Prospectus Supplement. Each such distribution shall be payable to
holders of record as they appear on the share transfer books of the Company
on such record dates as shall be fixed by the Board of Trustees of the
Company.
Distributions on any series of the Preferred Shares may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement.
Distributions, if cumulative, will be cumulative from and after the date set
forth in the applicable Prospectus Supplement. If the Board of Trustees of
the Company fails to authorize a distribution payable on a distribution
payment date on any series of the Preferred Shares for which distributions
are noncumulative, then the holders of such series of the Preferred Shares
will have no right to receive a distribution in respect of the distribution
period ending on such distribution payment date, and the Company will have no
obligation to pay the distribution accrued for such period, whether or not
distributions on such series are authorized for payment on any future
distribution payment date.
If any Preferred Shares of any series are outstanding, no full
distributions shall be authorized or paid or set apart for payment on the
preferred shares of the Company of any other series ranking, as to
distributions, on a parity with or junior to the Preferred Shares of such
series for any period unless (i) if such series of Preferred Shares has a
cumulative distribution, full cumulative distributions have been or
contemporaneously are authorized and paid or authorized and a sum sufficient
for the payment thereof set apart for such payment on the Preferred Shares of
such series for all past distribution periods and the then current
distribution period or (ii) if such series of Preferred Shares does not have
a cumulative distribution, full distributions for the then current
distribution period have been or contemporaneously are authorized and paid or
authorized and a sum sufficient for the payment thereof set apart for such
payment on the Preferred Shares of such series. When distributions are not
paid in full (or a sum sufficient for such full payment is not so set apart)
upon the Preferred Shares of any series and the shares of any other series of
preferred shares ranking on a parity as to distributions with the Preferred
Shares of such series, all distributions authorized upon the Preferred Shares
of such series and any other series of preferred shares ranking on a parity
as to distributions with such Preferred Shares shall be authorized pro rata
so that the amount of distributions authorized per share on the Preferred
Shares of such series and such other series of preferred shares shall in all
cases bear to each other the same ratio that accrued and unpaid distributions
per share on the Preferred Shares of such series (which shall not include any
accumulation in respect of unpaid distributions for prior distribution
periods if such Preferred Shares do not have a cumulative distribution) and
such other series of preferred shares bear to each other. No interest, or
sum of money in lieu of interest, shall be payable in respect of any
distribution payment or payments on Preferred Shares of such series which may
be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Shares has a cumulative distribution, full
cumulative distributions on the Preferred Shares of such series have been or
contemporaneously are authorized and paid or authorized and a sum sufficient
for the payment thereof set apart for payment for all past distribution
periods and the then current distribution period and (ii) if such series of
Preferred Shares does not have a cumulative distribution, full distributions
on the Preferred Shares of such series have been or contemporaneously are
authorized and paid or authorized and a sum sufficient for the payment
thereof set apart for payment for the then current distribution period, no
distributions (other than in common shares or other shares of beneficial
interest ranking junior to the Preferred Shares of such series as to
distributions and upon liquidation, dissolution or winding up of the affairs
of the Company) shall be authorized or paid or set aside for payment or other
distribution upon the Common Shares or any other shares of beneficial
interest of the Company ranking junior to or on a parity with the Preferred
Shares of such series as to distributions or upon liquidation, dissolution or
winding up of the affairs of the Company, nor shall any Common Shares or any
other shares of beneficial interest of the Company ranking junior to or on a
parity with the Preferred Shares of such series as to distributions or upon
liquidation, dissolution or winding up of the affairs of the Company be
redeemed, purchased or otherwise acquired for any consideration (or any
moneys be paid to or made available for a sinking fund for the redemption of
any shares of beneficial interest) by the Company (except by conversion into
or exchange for other shares of beneficial interest of the Company ranking
junior to the Preferred Shares of such series as to distributions and upon
liquidation, dissolution or winding up of the affairs of the Company).
Any distribution payment made on a series of Preferred Shares shall
first be credited against the earliest accrued but unpaid distribution due
with respect to shares of such series which remains payable.
Redemption
If so provided in the applicable Prospectus Supplement, the Preferred
Shares of any series will be subject to mandatory redemption or redemption at
the option of the Company, as a whole or in part, in each case upon the
terms, at the times and at the redemption prices set forth in such Prospectus
Supplement.
The Prospectus Supplement relating to a series of Preferred Shares that
is subject to mandatory redemption will specify the number of such Preferred
Shares that shall be redeemed by the Company in each year commencing after a
date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid distributions thereon
(which shall not, if such Preferred Shares does not have a cumulative
distribution, include any accumulation in respect of unpaid distributions for
prior distribution periods) to the date of redemption. The redemption price
may be payable in cash or other property, as specified in the applicable
Prospectus Supplement. If the redemption price for Preferred Shares of any
series is payable only from the net proceeds of the issuance of shares of
beneficial interest of the Company, the terms of such Preferred Shares may
provide that, if no such shares of beneficial interest shall have been issued
or to the extent the net proceeds from any issuance are insufficient to pay
in full the aggregate redemption price then due, such Preferred Shares shall
automatically and mandatorily be converted into shares of the applicable
shares of beneficial interest of the Company pursuant to conversion
provisions specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if such series of Preferred
Shares has a cumulative distribution, full cumulative distributions on all
shares of such series have been or contemporaneously are authorized and paid
or authorized and a sum sufficient for the payment thereof set apart for
payment for all past distribution periods and the then current distribution
period and (ii) if such series of Preferred Shares does not have a cumulative
distribution, full distributions on all shares of such series have been or
contemporaneously are authorized and paid or authorized and a sum sufficient
for the payment thereof set apart for payment for the then current
distribution period, no shares of such series of Preferred Shares shall be
redeemed unless all outstanding Preferred Shares of such series are
simultaneously redeemed; provided, however, that the foregoing shall not
prevent the purchase or acquisition of Preferred Shares of such series
pursuant to a purchase or exchange offer made on the same terms to holders of
all outstanding Preferred Shares of such series, and, unless (i) if such
series of Preferred Shares has a cumulative distribution, full cumulative
distributions on all outstanding shares of such series have been or
contemporaneously are authorized and paid or authorized and a sum sufficient
for the payment thereof set apart for payment for all past distribution
periods and the then current distribution period and (ii) if such series of
Preferred Shares does not have a cumulative distribution, full distributions
on all shares of such series have been or contemporaneously are authorized
and paid or authorized and a sum sufficient for the payment thereof set apart
for payment for the then current distribution period, the Company shall not
purchase or otherwise acquire directly or indirectly any Preferred Shares of
such series (except by conversion into or exchange for shares of beneficial
interest of the Company ranking junior to the Preferred Shares of such series
as to distributions and upon liquidation).
If fewer than all of the outstanding Preferred Shares of any series are
to be redeemed, the number of shares to be redeemed will be determined by the
Company and such shares may be redeemed pro rata from the holders of record
of such shares in proportion to the number of such shares held by such
holders (with adjustments to avoid redemption of fractional shares) or any
other equitable method determined by the Company.
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of record of Preferred
Shares of any series to be redeemed at the address shown on the stock
transfer books of the Company. Each notice shall state: (i) the redemption
date; (ii) the number of shares and series of the Preferred Shares to be
redeemed; (iii) the redemption price; (iv) the place or places where
certificates for such Preferred Shares are to be surrendered for payment of
the redemption price; (v) that distributions on the shares to be redeemed
will cease to accrue on such redemption date; and (vi) the date upon which
the holder's conversion rights, if any, as to such shares shall terminate.
If fewer than all the Preferred Shares of any series are to be redeemed, the
notice mailed to each such holder thereof shall also specify the number of
Preferred Shares to be redeemed from each such holder. If notice of
redemption of any Preferred Shares has been properly given and if the funds
necessary for such redemption have been irrevocably set aside by the Company
in trust for the benefit of the holders of any Preferred Shares so called for
redemption, then from and after the redemption date distributions will cease
to accrue on such Preferred Shares, such Preferred Shares shall no longer be
deemed outstanding and all rights of the holders of such shares will
terminate, except the right to receive the redemption price. Any moneys so
deposited which remain unclaimed by the holders of such Preferred Shares at
the end of two years after the redemption date will be returned by the
applicable bank or trust company to the Company.
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the Company, then, before any distribution or payment shall
be made to the holders of any Common Shares or any other class or series of
shares of beneficial interest of the Company ranking junior to any series of
Preferred Shares in the distribution of assets upon any liquidation,
dissolution or winding up of the Company, the holders of such series of
Preferred Shares shall be entitled to receive, after payment or provision for
payment of the Company's debts and other liabilities, out of assets of the
Company legally available for distribution to shareholders, liquidating
distributions in the amount of the liquidation preference per share (set
forth in the applicable Prospectus Supplement), plus an amount equal to all
distributions accrued and unpaid thereon (which shall not include any
accumulation in respect of unpaid distributions for prior distribution
periods if such Preferred Shares do not have a cumulative distribution).
After payment of the full amount of the liquidating distributions to which
they are entitled, the holders of such series of Preferred Shares will have
no right or claim to any of the remaining assets of the Company. In the
event that, upon any such voluntary or involuntary liquidation, dissolution
or winding up, the legally available assets of the Company are insufficient
to pay the amount of the liquidating distributions on all such outstanding
Preferred Shares and the corresponding amounts payable on all shares of other
classes or series of shares of beneficial interest of the Company ranking on
a parity with such series of Preferred Shares in the distribution of assets
upon liquidation, dissolution or winding up, then the holders of such series
of Preferred Shares and all other such classes or series of shares of
beneficial interest shall share ratably in any such distribution of assets in
proportion to the full liquidating distributions to which they would
otherwise be respectively entitled.
If the liquidating distributions shall have been made in full to all
holders of a series of Preferred Shares, the remaining assets of the Company
shall be distributed among the holders of any other classes or series of
shares of beneficial interest ranking junior to such series of Preferred
Shares upon liquidation, dissolution or winding up, according to their
respective rights and preferences and in each case according to their
respective number of shares. For purposes of this section, a distribution of
assets in any dissolution, winding up or liquidation will not include (i) any
consolidation or merger of the Company with or into any other corporation,
(ii) any dissolution, liquidation, winding up, or reorganization of the
Company immediately followed by organization of another entity to which such
assets are distributed or (iii) a sale or other disposition of all or
substantially all of the Company's assets to another entity; provided that,
in each case, effective provision is made in the charter of the resulting and
surviving entity or otherwise for the recognition, preservation and
protection of the rights of the holders of Preferred Shares.
Voting Rights
Holders of any series of Preferred Shares will not have any voting
rights, except as set forth below or as otherwise from time to time required
by law or as indicated in the applicable Prospectus Supplement.
Unless provided otherwise for any series of Preferred Shares, so long as
any Preferred Shares remain outstanding, the Company will not, without the
affirmative vote or consent of the holders of a majority of the shares of
each series of Preferred Shares outstanding at the time, given in person or
by proxy, either in writing or at a meeting (such series voting separately as
a class), (i) authorize, create or issue, or increase the authorized or
issued amount of, any class or series of shares of beneficial interest
ranking prior to such series of Preferred Shares with respect to payment of
distributions or the distribution of assets upon liquidation, dissolution or
winding up, or reclassify any authorized shares of beneficial interest of the
Company into any such shares, or create, authorize or issue any obligation or
security convertible into or evidencing the right to purchase any such
shares; or (ii) amend, alter or repeal the provisions of the Declaration of
Trust, including the applicable Articles Supplementary for such series of
Preferred Shares, whether by merger, consolidation or otherwise, so as to
materially and adversely affect any right, preference, privilege or voting
power of such series of Preferred Shares or the holders thereof; provided,
however, that any increase in the amount of the authorized preferred shares
or the creation or issuance of any other series of preferred shares, or any
increase in the amount of authorized shares of such series or any other
series of Preferred Shares, in each case ranking on a parity with or junior
to the Preferred Shares of such series with respect to payment of
distributions or the distribution of assets upon liquidation, dissolution or
winding up, shall not be deemed to materially and adversely affect such
rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be affected, all outstanding shares of such series of Preferred Shares
shall have been redeemed or called for redemption upon proper notice and
sufficient funds shall have been irrevocably deposited in trust to effect
such redemption.
Whenever distributions on any Preferred Shares shall be in arrears for
six or more consecutive quarterly periods, the holders of such Preferred
Shares (voting together as a class with all other series of Preferred Shares
upon which like voting rights have been conferred and are exercisable) will
be entitled to vote for the election of two additional trustees of the
Company until, (i) if such series of Preferred Shares has a cumulative
distribution, all distributions accumulated on such Preferred Shares for the
past distribution periods and the then current distribution period shall have
been fully paid or authorized and a sum sufficient for the payment thereof
set aside for payment or (ii) if such series of Preferred Shares does not
have a cumulative distribution, four consecutive quarterly distributions
shall have been fully paid or authorized and a sum sufficient for the payment
thereof set aside for payment. In such case, the entire Board of Trustees of
the Company will be increased by two trustees.
Conversion Rights
The terms and conditions, if any, upon which any series of Preferred
Shares are convertible into Common Shares will be set forth in the applicable
Prospectus Supplement relating thereto. Such terms will include the number
of Common Shares into which the Preferred Shares are convertible, the
conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of
the Preferred Shares or the Company, the events requiring an adjustment of
the conversion price and provisions affecting conversion in the event of the
redemption of such Preferred Shares.
Restrictions on Transfer
For the Company to qualify as a REIT under the Code, not more than 50%
in value of its outstanding shares of beneficial interest may be owned,
directly or indirectly, by five or fewer individuals (as defined in the Code)
during the last half of a taxable year, and the shares of beneficial interest
must be beneficially owned by 100 or more persons during at least 335 days of
a taxable year of 12 months (or during a proportionate part of a shorter
taxable year). Therefore, the Declaration of Trust imposes certain
restrictions on the ownership and transferability of Preferred Shares. For a
general description of such restrictions, see "Description of Common Shares-
Restrictions on Ownership and Transfer." All certificates representing
Preferred Shares will bear a legend referring to these restrictions.
DESCRIPTION OF COMMON SHARES
As of December 21, 1997, the Company had outstanding 23,669,710 Common
Shares. The following description of the Common Shares sets forth certain
general terms and provisions of the Common Shares to which any Prospectus
Supplement may relate, including a Prospectus Supplement providing that
Common Shares will be issuable upon conversion of Preferred Shares or upon
the exercise of Warrants or Rights. The statements below describing the
Common Shares are in all respects subject to and qualified in their entirety
by reference to the applicable provisions of the Declaration of Trust and the
Company's Bylaws.
Subject to the preferential rights of any Preferred Shares and to the
provisions of the Declaration of Trust relating to Excess Shares (as defined
below), holders of the Common Shares are entitled to receive distributions
when, as and if authorized and declared by the Board of Trustees of the
Company, out of assets legally available therefor. Payment and authorization
of distributions on the Common Shares and purchases of Common Shares by the
Company will be subject to certain restrictions if the Company fails to pay
distributions on the Series A-1 Preferred Shares, the Series B Preferred
Shares and Preferred Shares. See "Description of Preferred Shares." Upon
any liquidation, dissolution or winding-up of the Company, holders of Common
Shares will be entitled to share ratably in any assets legally available for
distribution to them, after payment or provision for payment of the known
debts and other liabilities of the Company and the preferential amounts owing
with respect to any outstanding Series A-1 Preferred Shares, the Series B
Preferred Shares and Preferred Shares. Subject to the provisions of the
Declaration of Trust relating to Excess Shares, each outstanding Common Share
entitles the holder to one vote on all matters submitted to a vote of
shareholders, including the election of trustees, and, except as provided
with respect to any other class or series of shares, the holders of such
shares will possess the exclusive voting power. There is no cumulative
voting in the election of trustees, which means that the holders of a
majority of the outstanding Common Shares can elect all of the trustees then
standing for election and the holders of the remaining shares will not be
able to elect any trustees. Holders of Common Shares will have no
preference, conversion, exchange, sinking fund, redemption or appraisal
rights and have no preemptive rights to subscribe for any securities of the
Company. Subject to the provisions of the Declaration of Trust regarding the
restriction on transfer of shares of beneficial interest, Common Shares will
have equal dividend, liquidation and other rights. The Common Shares will,
when issued, be fully paid and nonassessable.
The description of the limitations on the liability of shareholders of
the Company set forth under "Description of Preferred Shares-Other Preferred
Shares" is applicable to holders of Common Shares.
The Registrar and Transfer Agent for the Company's Common Shares is The
Harris Trust and Savings Bank.
Restrictions on Ownership and Transfer
For the Company to continue to qualify as a REIT under the Code, (i) not
more than 50% of the value of its outstanding shares of beneficial interest
("Shares") may be owned, directly or indirectly, by five or fewer individuals
(as defined in the Code to include certain entities) during the last half of
a taxable year and (ii) the Shares must be beneficially owned by 100 or more
persons during at least 335 days of a taxable year of 12 months or during a
proportionate part of a shorter taxable year and certain other requirements
must be satisfied.
The Declaration of Trust, subject to certain exceptions, provides that
no holder (other than (i) Herbert Glimcher, (ii) David J. Glimcher and
(iii) any other person approved by the Board of Trustees, at their option and
in their discretion, provided that such approval will not result in the
termination of the status of the Company as a REIT (collectively, "Excepted
Persons")) may own, or be deemed to own by virtue of the attribution
provisions of the Code, more than 8% (the "Ownership Limit") of the lesser of
the number or value (in either case as determined in good faith by the Board
of Trustees) of the total outstanding Shares. In order to be considered by
the Board of Trustees as an Excepted Person, a person also must not own,
directly or indirectly, an interest in a tenant of the Company (or a tenant
of any entity owned or controlled by the Company) that would cause the
Company to own, directly or indirectly, more than a 9.9% interest in such a
tenant. The Board of Trustees has also deemed Nomura to be an Excepted
Person to the extent necessary to permit it, or its affiliates, to acquire
and maintain ownership of the 34,000 Series A Preferred Shares, the Series C
Preferred Shares and any Common Shares issuable upon conversion thereof to
the extent it does not jeopardize the Company's qualification as a REIT. The
Articles Supplementary for any series of Preferred Shares will provide,
subject to certain exceptions, that no holder (other than any Excepted
Person) may own, or be deemed to own by virtue of the attribution provisions
of the attribution provisions of the Code, more than 9.9% (the "Preferred
Shares Ownership Limit", and together with the Ownership Limit, the
"Ownership Limits") of the lesser of the number or the value (in either case
as determined in good faith by the Board of Trustees) of the total
outstanding Preferred Shares. The Board of Trustees may also waive either of
the Ownership Limits if evidence satisfactory to the Board of Trustees and
the Company's tax counsel is presented, that such ownership will not then or
in the future jeopardize the Company's status as a REIT. As a condition of
such waiver, the intended transferee must give written notice to the Company
of the proposed transfer and must furnish such opinions of counsel,
affidavits, undertakings, agreements and information as may be required by
the Board of Trustees no later than the 15th day prior to any transfer which,
if consummated, would result in the intended transferee owning Shares in
excess of either of the Ownership Limits. The limitation on ownership of
Common Shares owned, directly or indirectly, by Messrs. Herbert Glimcher and
David J. Glimcher is an aggregate of 25% of the lesser of the number or value
of the outstanding Shares.
The foregoing restrictions on transferability and ownership will not
apply if the Board of Trustees determine that it is no longer in the best
interests of the Company to attempt to qualify, or to continue to qualify, as
a REIT. The Ownership Limits will not be automatically removed if the REIT
provisions of the Code are changed so as to no longer contain any ownership
concentration limitation or if the ownership concentration limitation is
increased. In addition to preserving the Company's status as a REIT, the
Ownership Limits may delay, defer or prevent a change of control of the
Company that might involve a premium price for the Shares or otherwise he in
the best interest of the shareholders. Any change in the Ownership Limits
would require an amendment to the Declaration of Trust.
Any transfer or issuance of Shares or any security convertible into
Shares that would (i) create a direct or indirect ownership of Shares in
excess of either of the Ownership Limits, (ii) with respect to transfers
only, result in Shares being owned by fewer than 100 persons or (iii) result
in the Company being "closely held" within the meaning of Section 856(h) of
the Code, shall be null and void, and the intended transferee will acquire
no, rights to the Shares. The Declaration of Trust provides that the
Company, by notice to the holder thereof, may purchase any or all Shares (the
"Excess Shares") that are proposed to be transferred pursuant to a transfer
which, if consummated, would result in the intended transferee owning Shares
in excess of the Ownership Limit or would otherwise jeopardize the REIT
status of the Company. The Articles Supplementary for any series of
Preferred Shares will provide that the Company, by notice to the holder
thereof, may purchase any or all Preferred Shares (the "Excess Preferred
Shares") that are proposed to be transferred pursuant to a transfer which, if
consummated, would result in the intended transferee owning Preferred Shares
in excess of the Preferred Shares Ownership Limit or would otherwise
jeopardize the REIT status of the Company. The purchase price of any Excess
Shares or Excess Preferred Shares, as the case may be, shall be equal to the
fair market value of such Shares reflected in the closing sales price for the
Shares, if then listed on a national securities exchange, or such price for
the Shares on the principal exchange if then listed on more than one national
securities exchange, or, if the Shares are not then listed on a national
securities exchange, the latest bid quotation for the Shares if then traded
over-the-counter, or, if such quotation is not available, the fair market
value as determined by the Board of Trustees in good faith, on the last
trading day immediately preceding the day on which notice of such proposed
purchase is sent by the Company. From and after the date fixed for purchase
by the Board of Trustees, the holder of such Shares to be purchased by the
Company shall cease to be entitled to distributions, voting rights and other
benefits with respect to such Shares except the right to payment of the
purchase price for the Shares. Any distribution paid to a proposed
transferee on Excess Shares or Excess Preferred Shares prior to the discovery
by the Company that such Shares have been transferred in violation of the
provisions of the Declaration of Trust or Articles Supplementary shall be
repaid to the Company upon demand. If the foregoing transfer restrictions
are determined to be void or invalid by virtue of any legal decision,
statute, rule or regulation, then the intended transferee of any Excess
Shares or Excess Preferred Shares shall be deemed, at the option of the
Company, to have acted as an agent on behalf of the Company in acquiring such
Excess Shares or Excess Preferred Shares and to hold such Excess Shares or
Excess Preferred Shares on behalf of the Company.
All persons who own, directly or by virtue of the attribution provisions
of the Code, more than 5% in number or value of the outstanding (i) Shares or
(ii) Preferred Shares must give a written notice to the Company containing
the information specified in the Declaration of Trust or Articles
Supplementary, as the case may be, by January 30 of each year. In addition,
each shareholder shall upon demand be required to disclose to the Company in
writing such information with respect to the direct, indirect and
constructive ownership of Shares as the Board of Trustees deem necessary to
comply with the provisions of the Code applicable to a REIT, to comply with
the requirements of any taxing authority or governmental agency or to
determine any such compliance.
These ownership limitations may delay, defer or prevent a change in
control of the Company unless the Board of Trustees determine that
maintenance of REIT status is no longer in the best interests of the Company.
All certificates representing Common Shares and Preferred Shares will
bear a legend referring to the restrictions described above.
DESCRIPTION OF WARRANTS
The Company may issue Warrants for the purchase of Preferred Shares or
Common Shares. Warrants may be issued independently or together with any
Offered Securities and may be attached to or separate from such securities.
Each series of Warrants will be issued under a separate warrant agreement
(each, a "Warrant Agreement") to be entered into between the Company and a
warrant agent ("Warrant Agent"). The Warrant Agent will act solely as an
agent of the Company in connection with the Warrants of such series and will
not assume any obligation or relationship of agency or trust for or with any
holders or beneficial owners of Warrants. The following sets forth certain
general terms and provisions of the Warrants offered hereby. Further terms
of the Warrants and the applicable Warrant Agreement will be set forth in the
applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the following terms,
where applicable, of the Warrants in respect of which this Prospectus is
being delivered: (1) the title of such Warrants; (2) the aggregate number of
such Warrants; (3) the price or prices at which such Warrants will be issued;
(4) the currencies in which the price of such Warrants may be payable; (5)
the designation, aggregate principal amount and terms of the securities
purchasable upon exercise of such Warrants; (6) the designation and terms of
the Offered Securities with which such Warrants are issued and the number of
such Warrants issued with each such security; (7) the currency or currencies,
including composite currencies, in which the principal of or any premium or
interest on the securities purchasable upon exercise of such Warrants will be
payable; (8) if applicable, the date on and after which such Warrants and the
related securities will be separately transferable; (9) the price at which
and currency or currencies, including composite currencies, in which the
securities purchasable upon exercise of such Warrants may be purchased; (10)
the date on which the right to exercise such Warrants shall commence and the
date on which such right shall expire; (11) the minimum or maximum amount of
such Warrants which may be exercised at any one time; (12) information with
respect to book-entry procedures, if any; (13) a discussion of certain
Federal income tax considerations; and (14) any other terms of such Warrants,
including terms, procedures and limitations relating to the exchange and
exercise of such Warrants.
DESCRIPTION OF RIGHTS
The Company may issue Rights to its shareholders for the purchase of
Common Shares. Each series of Rights will be issued under a separate rights
agreement (a "Rights Agreement") to be entered into between the Company and a
bank or trust company, as Rights agent, all as set forth in the Prospectus
Supplement relating to the particular issue of Rights. The Rights agent will
act solely as an agent of the Company in connection with the certificates
relating to the Rights and will not assume any obligation or relationship of
agency or trust for or with any holders of Rights certificates or beneficial
owners of Rights. The Rights Agreement and the Rights certificates relating
to each series of Rights will be filed with the Commission and incorporated
by reference as an exhibit to the Registration Statement of which this
Prospectus is a part at or prior to the time of the issuance of such series
of Rights.
The applicable Prospectus Supplement will describe the terms of the
Rights to be issued, including the following where applicable: (i) the date
for determining the shareholders entitled to the Rights distribution; (ii)
the aggregate number of Common Shares purchasable upon exercise of such
Rights and the exercise price; (iii) the aggregate number of Rights being
issued; (iv) the date, if any, on and after which such Rights may be
transferable separately; (v) the date on which the right to exercise such
Rights shall commence and the date on which such right shall expire; (vi) any
special United States federal income tax consequences; and (vii) any other
terms of such Rights, including terms, procedures and limitations relating to
the distribution, exchange and exercise of such Rights.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of the provisions of the Code,
governing the Federal income tax treatment of a REIT and of certain Federal
tax considerations relevant to the purchase, ownership and disposition of
Offered Securities and is not tax advice. These provisions are highly
technical and complex, and this summary is qualified in its entirety by the
applicable Code provisions, rules and regulations promulgated thereunder, and
administrative and judicial interpretations thereof. Moreover, this summary
is directed to prospective purchasers who will hold Offered Securities as
capital assets and does not deal with all tax aspects that might be relevant
to a particular prospective shareholder in light of his personal
circumstances; nor does it deal with particular types of shareholders that
are subject to special treatment under the Code, such as tax-exempt
organizations, insurance companies, financial institutions, foreign taxpayers
and broker-dealers.
The information in this section is based on the Code, current, temporary
and proposed Treasury Regulations thereunder, the legislative history of the
Code, current administrative interpretations and practices of the IRS
(including its practices and policies as endorsed in private letter rulings,
which are not binding on the IRS except with respect to a taxpayer that
receives such a ruling), and court decisions, all as of the date hereof. The
Taxpayer Relief Act of 1997 (the "1997 Act") was enacted on August 5, 1997.
The 1997 Act contains many provisions which generally make it easier to
operate and to continue to qualify as a REIT for taxable years beginning
after the date of enactment (which, for the Company, would be applicable
commencing with its taxable year beginning January 1, 1998). No assurance
can be given that future legislation, Treasury Regulations, administrative
interpretations and court decisions will not significantly change the current
law or adversely affect existing interpretations of current law. Any such
change could apply retroactively to transactions preceding the date of the
change.
EACH PROSPECTIVE PURCHASER OF THE COMMON SHARES, PREFERRED SHARES,
RIGHTS AND/OR WARRANTS IS ADVISED TO CONSULT THE APPLICABLE PROSPECTUS
SUPPLEMENT, AS WELL AS HIS OWN TAX ADVISOR WITH RESPECT TO HIS SPECIFIC
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE ACQUISITION,
OWNERSHIP AND SALE OF COMMON SHARES, PREFERRED SHARES, RIGHTS AND/OR WARRANTS
AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
Federal Income Taxation of the Company
General
The Company elected to be taxed as a REIT under Sections 856 and 860 of
the Code, commencing with its taxable year ended December 31, 1994. In the
opinion of Robinson Silverman Pearce Aronsohn & Berman LLP, commencing with
the Company's taxable year ended December 31, 1994, the Company was organized
in conformity with the requirements for qualification as a REIT, and its
method of operation enabled it to meet the requirements for qualification and
taxation as a REIT under the Code. The Company intends to continue to
operate in a manner that will enable it to qualify for taxation as a REIT,
but no assurance can be given that it will operate in a manner so as to
qualify or remain qualified. It must be emphasized that this opinion is
based on various assumptions and is conditioned upon certain representations
made by the Company as to factual matters. In addition, this opinion is
based upon the factual representations made by the management of the Company
concerning its business and properties. Moreover, such qualification and
taxation as a REIT depends upon the Company's ability to meet, through actual
annual operating results, distribution levels, diversity of share ownership,
and the various other qualification tests imposed under the Code discussed
below, the results of which have not been and will not be reviewed by
Robinson Silverman Pearce Aronsohn & Berman LLP. Accordingly, no assurance
can be given that the actual results of the Company's operation for any one
taxable year will satisfy such requirements. See "Federal Income Tax
Considerations-Failure to Qualify as a Real Estate Investment Trust."
If the Company qualifies for tax treatment as a REIT, it will generally
not be subject to Federal corporate taxation on its net income to the extent
currently distributed to its shareholders. This substantially eliminates the
"double taxation" (at both the corporate and stockholder levels) that
typically results from the use of corporate investment vehicles.
The Company will be subject to Federal income tax, however, as follows:
First, the Company will be taxed at regular corporate rates on its
undistributed REIT taxable income, including undistributed net capital gains.
Second, under certain circumstances, the Company may be subject to the
"alternative minimum tax" to the extent that tax exceeds its regular tax.
Third, if the Company has net income from the sale or other disposition of
"foreclosure property" that is held primarily for sale to customers in the
ordinary course of business or other nonqualifying income from foreclosure
property, it will be subject to tax at the highest corporate rate on such
income. Fourth, any net income that the Company has from prohibited
transactions (which are, in general, certain sales or other dispositions of
property other than foreclosure property held primarily for sale to customers
in the ordinary course of business and, effective for the Company's taxable
year ending December 31, 1998, other than dispositions of property that occur
due to an involuntary conversion) will be subject to a 100% tax. Fifth, if
the Company should fail to satisfy either the 75% or 95% gross income tests
(as discussed below), and has nonetheless maintained its qualification as a
REIT because certain other requirements have been met, it will be subject to
a 100% tax on an amount equal to (a) the gross income attributable to the
greater of the amount by which the Company fails the 75% or 95% test,
multiplied by (b) a fraction intended to reflect the Company's profitability.
Sixth, if the Company fails to distribute during each year at least the sum
of (i) 85% of its REIT ordinary income for such year, (ii) 95% of its REIT
capital gain net income for such year, and (iii) any undistributed taxable
income from preceding periods, the Company will be subject to a 4% excise tax
on the excess of such required distribution over the amounts actually
distributed. Seventh, if the Company acquires any asset from a C corporation
(i.e., generally a corporation subject to full corporate-level tax) in
certain transactions in which the basis of the asset in the Company's hands
is determined by reference to the basis of the asset (or any other property)
in the hands of the C corporation, and the Company recognizes gain on the
disposition of such an asset during the 10-year period (the "Recognition
Period") beginning on the date on which such asset was acquired by the
Company, then, to the extent of the excess, if any, of the fair market value
over the adjusted basis of such asset as of the beginning of the Recognition
Period such gain will be subject to tax at the highest regular corporate
rate.
Requirements for Qualification
A REIT is defined in the Code as a corporation, trust or association:
(1) which is managed by one or more trustees or directors; (2) the beneficial
ownership of which is evidenced by transferable shares or by transferable
certificates of beneficial interest; (3) which would be taxable as a domestic
corporation, but for Sections 856 through 860 of the Code; (4) which is
neither a financial institution nor an insurance company subject to certain
provisions of the Code; (5) the beneficial ownership of which is held by 100
or more persons; (6) not more than 50% in value of the outstanding stock of
which is owned during the last half of each taxable year, directly or
indirectly, by or for five or fewer individuals (as defined in the Code to
include certain entities) (the "Five or Fewer Requirement"); and (7) which
meets certain income and asset tests described below. Conditions (1) to (4),
inclusive, must be met during the entire taxable year and condition (5) must
be met during at least 335 days of a taxable year of 12 months, or during a
proportionate part of a taxable year of less than 12 months. For purposes of
conditions (5) and (6), pension funds and certain other tax-exempt entities
are treated as individuals, subject to "look-through" exception in the case
of condition (6).
The Company has represented that it has satisfied the share ownership
requirements set forth in (5) and (6) above. In addition, the Company's
Declaration of Trust provides restrictions regarding the transfer of its
shares which are intended to assist the Company in continuing to satisfy the
share ownership requirements described in (5) and (6) above. Such transfer
restrictions are described in "Description of Preferred Shares-Other
Preferred Shares-Restrictions on Transfer" and "Description of Common Shares-
Restrictions on Ownership and Transfer."
Pursuant to the 1997 Act, for the Company's taxable years commencing on
and after January 1, 1998, if the Company complies with regulatory rules
pursuant to which it is required to send annual letters to certain of its
shareholders requesting information regarding the actual ownership of its
stock, but does not know, or exercising reasonable diligence would not have
known, whether it failed to meet the requirement that it not be closely held,
the Company will be treated as having met the requirement described in (6)
above. If the Company were to fail to comply with these regulatory rules for
any year, it would be subject to a $25,000 penalty. If the Company's failure
to comply was due to intentional disregard of the requirements, the penalty
is increased to $50,000. However, if the Company's failure to comply was due
to reasonable cause and not willful neglect, no penalty would be imposed.
Ownership of a Partnership Interest
In the case of a REIT that is a partner in a partnership, treasury
regulations promulgated under the Code ("Treasury Regulations") provide that
the REIT is deemed to own its proportionate share of the assets of the
partnership and is deemed to be entitled to the income of the partnership
attributable to such share. In addition, the character of the assets and
gross income of the partnership retain the same character in the hands of the
REIT for purposes of the REIT qualification tests, including satisfying the
gross income tests and the asset tests. Accordingly, the Company's
proportionate share of the assets, liabilities, and items of income of the
Operating Partnership will be treated as assets, liabilities, and items of
income of the Company for purposes of applying the requirements described
herein, provided that such partnership is treated as a partnership for
federal income tax purposes and is not taxable as a corporation for federal
income tax purposes.
Income Tests
There are three percentage tests relating to the sources of the
Company's gross income that the Company must satisfy annually to maintain its
qualification as a REIT. First, at least 75% of the Company's gross income
(excluding gross income from certain sales of property held primarily for
sale and from discharge of indebtedness) must be directly or indirectly
derived each taxable year from investments relating to real property or
mortgages on real property or certain temporary investments. Second, at
least 95% of the Company's gross income (excluding gross income from certain
sales of property held primarily for sale and from discharge of indebtedness)
must be directly or indirectly derived each taxable year from any of the
sources qualifying for the 75% test and from dividends, interest, and gain
from the sale or disposition of stock or securities. Third, in each taxable
year short-term gains from sales of stock or securities, gains from sales of
property (other than foreclosure property) held primarily for sale and gains
from the sale or other taxable disposition of real property held for less
than four years (other than from involuntary conversions and foreclosure
property) must represent less than 30% of the Company's gross income.
However, the 1997 Act repeals the 30% gross income test effective for the
Company's taxable year beginning January 1, 1998. As discussed earlier (see
"Ownership of a Partnership Interest"), in applying these tests, if the
Company invests in a partnership, such as the Operating Partnership, the
Company will be treated as realizing its share of the income and bearing its
share of the loss of the partnership, and the character of such income or
loss, as well as other partnership items, will be determined at the
partnership level.
With respect to the 30% of gross income limitation on gains from sales
of real properties, the Company has disposed of certain real properties in
1996 and 1997. However, the total amount of gain recognized on those
dispositions was not material and the 30% limitation was satisfied in 1996
(and is expected to be satisfied in 1997). Furthermore, with respect to the
tax on prohibited transactions described above, the Company believes that
none of those sales were subject to such tax.
Rents received by the Company will qualify as "rents from real property"
for purposes of satisfying the gross income tests for a REIT only if several
conditions are met. First, the amount of rent must not be based in whole or
in part on the income or profits of any person, although rents generally will
not be excluded merely because they are based on a fixed percentage of
receipts or sales. Second, rents received from a tenant will not qualify as
"rents from real property" if the REIT, or an owner of 10% or more of the
REIT, also directly or constructively owns 10% or more of such tenant.
Third, if rent attributable to personal property leased in connection with a
lease of real property is greater than 15% of the total rent received under
the lease, then the portion of rent attributable to such personal property
will not qualify as "rents from real property." Finally, for rents to qualify
as "rents from real property," the REIT generally must not operate or manage
the property or furnish or render services to the tenants of such property,
other than through an independent contractor from whom the REIT derives no
income; provided, however, the Company may directly perform certain services
customarily furnished or rendered in connection with the rental of real
property in the geographic area in which the property is located other than
services which are considered rendered to the occupant of the property. The
Company will, in a timely manner, hire independent contractors from whom it
derives no revenue to perform such services, except that the Company will
directly perform services under certain of its leases with respect to which
it will receive an opinion of counsel or otherwise satisfy itself that its
performance of such services will not cause the rents to fail to qualify as
"rents from real property." The Company has represented that each of the
above requirements has been satisfied. In addition, for its 1998 taxable year
and thereafter, the Company is permitted to receive up to 1% of the gross
income from each property from the provision of non-customary services and
still treat all other amounts received from such property as "rents from real
property."
The term "interest" generally does not include any amount if the
determination of such amount depends in whole or in part on the income or
profits of any person, although an amount generally will not be excluded from
the term "interest" solely by reason of being based on a fixed percentage of
receipts or sales.
If the Company fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may nevertheless qualify as a REIT for
such year if it is eligible for relief under certain provisions of the Code.
These relief provisions will be generally available if the Company's failure
to meet such tests was due to reasonable cause and not due to willful
neglect, the Company attaches a schedule of the sources of its income to its
return, and any incorrect information on the schedule was not due to fraud
with intent to evade tax. It is not now possible to determine the
circumstances under which the Company may be entitled to the benefit of these
relief provisions. If these relief provisions apply, a 100% tax is imposed
on the net income attributable to the greater of the amount by which the
Company failed the 75% test or the 95% test.
Asset Tests
At the close of each quarter of its taxable year, the Company must also
satisfy several tests relating to the nature and diversification of its
assets. First, at least 75% of the value of the Company's total assets must
be represented by real estate assets, cash, cash items (including receivables
arising in the ordinary course of the Company's operation) and government
securities. In addition, not more than 25% of the value of the Company's
total assets may be represented by securities other than those includible in
the 75% asset class. Moreover, of the investments included in the 25% asset
class, the value of any one issuer's securities owned by the Company may not
exceed 5% of the value of the Company's total assets. Finally, of the
investments included in the 25% asset class, the Company may not own more
than 10% of any one issuer's outstanding voting securities.
Annual Distribution Requirements
The Company, in order to avoid being taxed as a regular corporation, is
required to make distributions (other than capital gain dividends) to its
shareholders which qualify for the dividends paid deduction in an amount at
least equal to (A) the sum of (i) 95% of the Company's "REIT taxable income"
(computed without regard to the dividends paid deduction and the Company's
net capital gain) and (ii) 95% of the after tax net income, if any, from
foreclosure property, minus (B) the sum of certain items of non-cash income.
Such distributions must be paid in the taxable year to which they relate, or
in the following taxable year if declared before the Company timely files its
tax return for such year and if paid on or before the first regular
distribution payment after such declaration. To the extent that the Company
does not distribute all of its net capital gain or distributes at least 95%,
but less than 100%, of its "REIT taxable income," as adjusted, it will be
subject to tax thereon at regular corporate tax rates. Finally, as discussed
above, the Company may be subject to an excise tax if it fails to meet
certain other distribution requirements. The Company intends to make timely
distributions sufficient to satisfy these annual distribution requirements.
It is possible that the Company, from time to time, may not have
sufficient cash or other liquid assets to meet the 95% distribution
requirement, or to distribute such greater amount as may be necessary to
avoid income and excise taxation, due to, among other things, (a) timing
differences between (i) the actual receipt of income and actual payment of
deductible expenses and (ii) the inclusion of such income and deduction of
such expenses in arriving at taxable income of the Company, or (b) the
payment of severance benefits that may not be deductible to the Company. In
the event that such timing differences occur, the Company may find it
necessary to arrange for borrowings or, if possible, pay taxable share
distributions in order to meet the distribution requirement.
Under certain circumstances, in the event of a deficiency determined by
the IRS, the Company may be able to rectify a resulting failure to meet the
distribution requirement for a year by paying "deficiency dividends" to
shareholders in a later year, which may be included in the Company's
deduction for distributions paid for the earlier year. Thus, although the
Company may be able to avoid being taxed on amounts distributed as deficiency
distributions, it will be required to pay interest based upon the amount of
any deduction taken for deficiency distributions.
Failure to Qualify as a Real Estate Investment Trust
The Company's election to be treated as a REIT will be automatically
terminated if the Company fails to meet the requirements described above and
is ineligible for relief from such failure. In that event, the Company will
be subject to tax (including any applicable minimum tax) on its taxable
income at regular corporate rates, and distributions to shareholders will not
be deductible by the Company. Also, all distributions to shareholders will
be taxable as ordinary income to the extent of current and accumulated
earnings and profits allocable to such distributions and, subject to certain
limitations of the Code, will be eligible for the 70% dividends received
deduction for corporate shareholders (although special rules apply in the
case of any "extraordinary dividend" as defined in Code Section 1059). The
Company will not be eligible again to elect REIT status until the fifth
taxable year which begins after the year for which the Company's election was
terminated unless the Company did not willfully fail to file a timely return
with respect to the termination taxable year, inclusion of incorrect
information in such return was not due to fraud with intent to evade tax, and
the Company establishes that failure to meet the requirement was due to
reasonable cause and not willful neglect. Failure to qualify for even one
year could result in the Company incurring substantial indebtedness (to the
extent borrowings are feasible) or liquidating substantial investments in
order to pay the resulting taxes.
Federal Income Taxation of Shareholders
General
So long as the Company qualifies for taxation as a REIT, distributions
with respect to Common Shares, Preferred Shares or Common Shares acquired in
conversion of any convertible Preferred Shares (collectively "Shares") made
out of current or accumulated earnings and profits allocable thereto (and not
designated as capital gain dividends) will be includible by the shareholders
as ordinary income for Federal income tax purposes. For this purpose, the
current and accumulated earnings and profits of the Company will be allocated
first to distributions with respect to Preferred Shares and then to
distributions with respect to Common Shares. None of these distributions
will be eligible for the dividends received deduction for corporate
shareholders. Distributions that are designated as capital gain dividends
will be taxed as long-term capital gains (to the extent they do not exceed
the Company's actual net capital gain for the taxable year) without regard to
the period for which the shareholder has held his shares. For a
U.S. shareholder who is an individual or an estate or trust, such capital
gain dividends generally will be taxable at the 28% rate applicable to
mid-term capital gain (i.e., gains from the sale of capital assets held for
more than one year but not more than 18 months) except to the extent the
Company designates the capital gain dividend as a 20% rate distribution or a
25% rate distribution, as the case may be, based on certain IRS guidelines.
Corporate shareholders may be required to treat up to 20% of certain capital
gain dividends as ordinary income.
The 1997 Act provides that, beginning with the Company's taxable year
ending December 31, 1998, if the Company elects to retain and pay income tax
on any net long term capital gain, domestic shareholders of the Company would
include in their income as long term capital gain their proportionate share
of such net long term capital gain. A domestic shareholder would also
receive a refundable tax credit for such shareholder's proportionate share of
the tax paid by the Company on such retained capital gains and an increase in
its basis in the shares of the Company in an amount equal to the
shareholder's includible capital gains less its share of the tax deemed paid.
Distributions in excess of current or accumulated earnings and profits
will not be taxable to a shareholder to the extent that they do not exceed
the adjusted basis of the shareholder's Shares. Shareholders will be
required to reduce the tax basis of their Shares by the amount of such
distributions until such basis has been reduced to zero, after which such
distributions will be taxable as capital gain (ordinary income in the case of
a shareholder who holds his Shares as a dealer). The tax basis as so reduced
will be used in computing the capital gain or loss, if any, realized upon
sale of the Shares. Any loss upon a sale or exchange of Shares by a
shareholder who held such Shares for six months or less (after applying
certain holding period rules) will generally be treated as a long-term
capital loss to the extent such shareholder previously received capital gain
distributions with respect to such Shares.
Capital gain realized by the Company on the sale of its assets generally
will equal the difference between the sale price and the Company's tax basis
in the asset sold. This initial tax basis will be subsequently reduced by
annual depreciation deductions. Inasmuch as the initial contribution of
certain properties (the "Contributed Properties") was not fully taxable, the
Operating Partnership's initial basis in each of the Contributed Properties,
as such basis may be adjusted, is at least equal to the transferors' basis in
the Contributed Properties immediately prior to the transactions, which is a
lower basis than had such properties been purchased from the transferors
thereof in a fully taxable transaction. However, by reason of certain
partnership allocation provisions, this lower initial tax basis should not
result in a greater taxable gain to the Company than would have been the case
if the Contributed Properties had been purchased by the Company in a fully
taxable transaction. See "Tax Aspects of the Operating Partnership and the
Subsidiary Partnerships-Income Taxation of the Operating Partnership and Its
Partners-Tax Allocations with Respect to Contributed Properties" and "-Sale
of the Operating Partnership's Property." Additionally, such lower initial
tax basis may result in lower aggregate depreciation deductions over the
lives of the Properties than if the Company had purchased the Contributed
Properties in a fully taxable transaction; however, by reason of certain
partnership allocation provisions, the Company may be entitled to greater
depreciation deductions in the initial years following the formation of the
Company. Depreciation deductions reduce taxable income and thus may
effectively increase the portion of distributions which would represent a
non-taxable return of capital.
Shareholders may not include in their individual Federal income tax
returns any net operating losses or capital losses of the Company. In
addition, any distribution declared by the Company in October, November or
December of any year payable to a shareholder of record on a specified date
in any such month shall be treated as both paid by the Company and received
by the shareholder on December 31 of such year, provided that the
distribution is actually paid by the Company no later than January 31 of the
following year. The Company may be required to withhold a portion of capital
gain distributions to any shareholders who fail to certify their non-foreign
status to the Company.
The IRS has ruled that if a REIT's dividend reinvestment plan allows
shareholders of the REIT to elect to have cash distributions reinvested
automatically in shares of the REIT at a purchase price equal to at least 95%
of fair market value on the distribution date, then such cash distributions
qualify under the 95% distribution test described above at "Federal Income
Taxation of the Company-Annual Distribution Requirements." Under the terms of
the Company's Distribution Reinvestment and Share Purchase Plan (the
"Purchase Plan"), shares are generally thereunder acquired at 100% of fair
market value without a discount. Thus, distributions reinvested under the
Purchase Plan will count towards satisfying the 95% distribution test.
Shareholders should be aware that amounts of dividends reinvested pursuant to
the Purchase Plan will be taxable income to them, regardless of the fact that
such dividends have been reinvested with the Company (i.e., the tax is not
deferred until the shares received from participation in the Purchase plan
are sold or disposed of).
Conversion of Convertible Preferred Shares into Common Shares
No gain or loss will be recognized to a shareholder upon conversion of
any convertible Preferred Shares solely into Common Shares. However, gain
realized upon the receipt of cash paid in lieu of fractional Common Shares
will be taxed immediately to a converting shareholder. Except to the extent
of cash paid in lieu of fractional Common Shares, the adjusted tax basis for
the Common Shares received upon the conversion will be equal to the adjusted
tax basis of any convertible Preferred Shares converted, and the holding
period of the Common Shares will include the holding period of any
convertible Preferred Shares converted. A holder of any convertible
Preferred Shares may recognize gain or dividend income to the extent there
are dividends in arrears on such shares at the time of conversion into Common
Shares.
Adjustment of Conversion Price
Section 305(c) of the Code and the Treasury Regulations thereunder treat
as a dividend certain constructive distributions of shares with respect to
Preferred Shares. The operation of the conversion price adjustment
provisions of any convertible Preferred Shares, or the failure to adjust
fully the conversion price for any convertible Preferred Shares to reflect a
distribution of shares, share warrants or share rights with respect to the
Common Shares, or a reverse share split, may result in the deemed receipt of
a dividend by the holders of any convertible Preferred Shares or the Common
Shares if the effect is to increase such holders' proportionate interests in
the Company. However, adjustments to reflect nontaxable share splits or
distributions of shares, share warrants or share rights will, generally, not
be so treated. Any such constructive dividends may constitute (and cause
other dividends to constitute) extraordinary dividends to corporate holders.
Redemption of Preferred Shares
If the redemption price of Preferred Shares that is subject to optional
redemption by the Company exceeds its issue price, and if such excess is not
considered "reasonable", the entire amount of the redemption premium will be
treated as being distributed to the holder of such shares, on an economic
accrual basis, over the period from issuance of such shares until the date
the shares is first redeemable. In this respect, the regulations provide as
a safe harbor that a redemption premium not in excess of ten percent of the
issue price of shares which is not redeemable for five years from the date of
issue is considered reasonable for this purpose. Even if the precise tests
of the safe harbor cannot be met, however, a call premium will be regarded as
reasonable if such premium is in the nature of a penalty for a premature
redemption of the Preferred Shares and such premium does not exceed the
amount the issuer would be required to pay for the right to make such
premature redemption under the market conditions existing at the time of
issuance.
Gain or loss recognized by a holder on a redemption of Preferred Shares
will be treated as a gain or loss from the sale or exchange of the Preferred
Shares (see "Other Disposition" below), if, taking into account shares that
are actually or constructively owned under the rules of Code Section 318 by
such holder, either (i) the holder's interest in Common Shares and Preferred
Shares is completely terminated as a result of the redemption, (ii) the
redemption is "substantially disproportionate" with respect to the holder or
(iii) the redemption is "not essentially equivalent to a dividend". Whether
a redemption is not essentially equivalent to a dividend depends on each
holder's facts and circumstances, but in any event, requires a "meaningful
reduction" in such holder's interest in the Company.
If none of the above conditions is satisfied, the entire amount of the
cash received on a redemption of the Preferred Shares will be treated as a
distribution taxable as a dividend (to the extent of the Company's current
and accumulated earnings and profits). The holder's basis in the redeemed
Preferred Shares would, in such case, be transferred to the holder's
remaining shares of the Company (if any).
Other Disposition
Upon the sale or exchange of Shares to or with a person other than the
Company or a sale or exchange of Shares with the Company to the extent not
taxable as a dividend, a holder will recognize capital gain or loss equal to
the difference between the amount realized on such sale or exchange and the
holder's adjusted tax basis in such shares. Any capital gain or loss
recognized will generally be treated as mid-term capital gain or loss if the
holder held such Shares for more than one year but less than 18 months
(subject to tax at a maximum tax rate of 28%), or as net adjusted capital
gain or loss if the holder held such shares for more than 18 months (subject
to tax at a maximum tax rate of 20%). For these purposes, the period for
which any convertible Preferred Shares was held would be included in the
holding period of any Common Shares received upon conversion thereof.
Warrants
A holder generally will not recognize income or loss upon the
acquisition of a Warrant. A holder who receives shares upon the exercise of
a Warrant should not recognize gain or loss except to extent of any cash
received for fractional shares. Such a holder would have a tax basis in the
shares acquired pursuant to a Warrant equal to the amount of the purchase
price allocated to the Warrant plus the amount paid for the shares pursuant
to the Warrant. The holding period for the shares acquired pursuant to a
Warrant would begin on the date of exercise. Upon the subsequent sale the
shares acquired pursuant to a Warrant or upon a sale of a Warrant, the holder
thereof would generally recognize capital gain or loss in an amount equal to
the difference between the amount realized on the sale and its tax basis in
such shares or Warrant, as the case may be. Such gain or loss would be
mid-term capital gain or loss if the holding period for the shares or Warrant
sold is more than one year but less than 18 months (subject to tax at a
maximum tax rate of 28%), or as net adjusted capital gain or loss if the
holder held such shares for more than 18 months (subject to tax at a maximum
tax rate of 20%). The foregoing assumes that Warrants will not be held as a
hedge, straddle or as a similar offsetting position with respect to shares of
the Company and that Code Section 1092 will not apply.
Backup Withholding and Information Reporting
A noncorporate holder of Shares who is not otherwise exempt from backup
withholding may be subject to backup withholding at the rate of 31% with
respect to dividends paid on, or the proceeds of a sale, exchange or
redemption of, any Shares. Generally, backup withholding applies only when
the taxpayer (i) fails to furnish or certify his correct taxpayer
identification number to the payor in the manner requested, (ii) is notified
by the IRS that he has failed to report payments of interest or dividends
properly, or (iii) under certain circumstances, fails to certify that he has
not been notified by the IRS that he is subject to backup withholding for
failure to report interest or dividend payments. Any amounts withheld under
the backup withholding rules from a payment to a holder will be allowed as a
credit against the holder's federal income tax liability or as a refund,
provided that the required information is furnished to the IRS. Holders
should consult their own tax advisors regarding their qualification for
exemption from backup withholding and the procedure for obtaining any
applicable exemption.
Foreign Shareholders
The rules governing United States Federal income taxation of nonresident
alien individuals, foreign corporations, foreign partnerships and other
foreign shareholders (collectively, "Non-U.S. Shareholders") are complex and
no attempt will be made herein to provide more than a general summary of such
rules. Prospective Non-U.S. Shareholders should consult with their own tax
advisors to determine the impact of Federal, state and local income tax laws
with regard to an investment in Shares, including any reporting requirements,
as well as the tax treatment of such an investment under their home country
laws.
Distributions that are not attributable to gain from sales or exchanges
by the Company of United States real property interests and not designated by
the Company as capital gain dividends will be treated as dividends of
ordinary income to the extent that they are made out of current or
accumulated earnings and profits of the Company. Such distributions
ordinarily will be subject to a withholding tax equal to 30% of the gross
amount of the distribution unless an applicable tax treaty reduces or
eliminates that tax. However, if income from the investment in the Shares is
treated as effectively connected with the Non-U.S. Shareholder's conduct of a
United States trade or business, the Non-U.S. Shareholder generally will be
subject to a tax at graduated rates, in the same manner as U.S. Shareholders
are taxed with respect to such dividends (and may also be subject to the 30%
branch profits tax in the case of a shareholder that is a foreign
corporation). The Company expects to withhold United States income tax at
the rate of 30% on the gross amount of any such dividends paid to a
Non-U.S. Shareholder unless (i) a lower treaty rate applies and the Non-U.S.
Shareholder files an IRS Form 1001 with the Company claiming a lower treaty
rate or (ii) the Non-U.S. Shareholder files an IRS Form 4224 with the Company
claiming that the distribution is effectively connected income.
Distributions in excess of current and accumulated earnings and profits of
the Company will not be taxable to a shareholder to the extent that they do
not exceed the adjusted basis of the shareholder's Shares, but rather will
reduce the adjusted basis of such Shares. To the extent that such
distributions exceed the adjusted basis of a Non-U.S. Shareholder's Shares,
they will give rise to tax liability if the Non-U.S. Shareholder would
otherwise be subject to tax on any gain from the sale or disposition of his
Shares in the Company, as described below. If it cannot be determined at the
time a distribution is made whether or not such distribution will be in
excess of current and accumulated earnings and profits, the distributions
will be subject to withholding at the same rate as dividends. However,
amounts thus withheld are refundable if it is subsequently determined that
such distribution was, in fact, in excess of current and accumulated earnings
and profits of the Company.
Recently adopted Treasury Regulations not yet in effect (the "Final
Regulations") would alter the foregoing rules in certain respects. In
general, the Final Regulations are effective January 1, 1999. Under the
Final Regulations, a Non-U.S. Holder seeking an exemption from withholding or
a reduced rate of withholding on account of a treaty or the effectively
connected income exemption would generally be required to provide a
beneficial owner certificate on Form W-8, which form may include, among other
things, the Non-U.S. Holder's taxpayer identification number and certain
other information and representations. The Final Regulations also provide
special rules to determine whether, for purposes of determining the
applicability of a tax treaty, distributions paid to a Non-U.S. Holder that
is an entity should be treated as paid to the entity or those holding an
interest in the entity. With respect to withholding the 30% tax on
distributions to Non-U.S. Shareholders, the Final Regulations would allow the
Company to make an election to estimate its earnings and profits and withhold
the tax only on that portion of the gross distribution that would constitute
a dividend. The Company may or may not make any such elections in the
future.
For any year in which the Company qualifies as a REIT, distributions
that are attributable to gain from sales or exchanges by the Company of
United States real property interests will be taxed to a Non-U.S. Shareholder
under the provisions of the Foreign Investment in Real Property Tax Act of
1980 ("FIRPTA"). Under FIRPTA, these distributions are taxed to a
Non-U.S. Shareholder as if such gain were effectively connected with a United
States business. Non-U.S. Shareholders would thus be taxed at the normal
capital gain rates applicable to U.S. shareholders (subject to applicable
alternative minimum tax and a special alternative minimum tax in the case of
nonresident alien individuals). Also, distributions subject to FIRPTA may be
subject to a 30% branch profits tax in the hands of a foreign corporate
shareholder not entitled to treaty exemption. The Company is required to
withhold 35% of any distribution that could be designated by the Company as a
capital gain dividend. This amount is creditable against the
Non-U.S. Shareholder's FIRPTA tax liability.
Gain recognized by a Non-U.S. Shareholder upon a sale of Shares
generally will not be taxed under FIRPTA if the Company is a "domestically
controlled REIT," defined generally as a REIT in which at all times during a
specified testing period less than 50% in value of the stock was held
directly or indirectly by foreign persons. It is currently anticipated that
the Company will be a "domestically controlled REIT," and therefore the sale
of Shares will not be subject to taxation under FIRPTA. However, gain not
subject to FIRPTA will be taxable to a Non-U.S. Shareholder if (i) investment
in the Shares is effectively connected with the Non-U.S. Shareholder's United
States trade or business, in which case the Non-U.S. Shareholder will be
subject to the same treatment as U.S. shareholders with respect to such gain,
or (ii) the Non-U.S. Shareholder is a nonresident alien individual who was
present in the United States for 183 days or more during the taxable year and
has a "tax home" in the United States, in which case the nonresident alien
individual will be subject to a 30% tax on the individual's capital gains.
If the gain on the sale of Shares were to be subject to taxation under
FIRPTA, the Non-U.S. Shareholder will be subject to the same treatment as
U.S. shareholders with respect to such gain (subject to applicable
alternative minimum tax and a special alternative minimum tax in the case of
nonresident alien individuals) and the purchaser of the Shares would be
required to withhold and remit to the IRS 10% of the purchase price.
Tax-Exempt Shareholders
Dividends from the Company to a tax-exempt employee pension trust or
other domestic tax-exempt shareholder generally will not constitute
"unrelated business taxable income" ("UBTI") unless the shareholder has
borrowed to acquire or carry its Shares. Qualified trusts that hold more
than 10% (by value) of the shares of certain REITs, however, may be required
to treat a certain percentage of such a REIT's distributions as UBTI. This
requirement will apply only if (i) the REIT would not qualify as such for
Federal income tax purposes but for the application of a "look-through"
exception to the Five or Fewer Requirement applicable to shares held by
qualified trusts and (ii) the REIT is "predominantly held" by qualified
trusts. A REIT is predominantly held by qualified trusts if either (i) a
single qualified trust holds more than 25% by value of the interests in the
REIT or (ii) one or more qualified trusts, each owning more than 10% by value
of the interests in the REIT, hold in the aggregate more than 50% of the
interests in the REIT. The percentage of any REIT dividend treated as UBTI
is equal to the ratio of (a) the UBTI earned by the REIT (treating the REIT
as if it were a qualified trust and therefore subject to tax on UBTI) to
(b) the total gross income of the REIT. A de minimis exception applies where
the percentage is less than 5% for any year. For these purposes, a qualified
trust is any trust described in section 401(a) of the Code and exempt from
tax under section 501(a) of the Code. The provisions requiring qualified
trusts to treat a portion of REIT distributions as UBTI will not apply if the
REIT is able to satisfy the Five or Fewer Requirement without relying upon
the "look-through" exception.
Tax Risks of the Company's Ownership Interest in the Operating Partnership
All of the Company's investments are through the Operating Partnership,
which in turn will hold interests in the Subsidiary Partnerships. The
ownership of these partnership interests may involve special tax risks for
the Company. Such risks include possible challenge by the IRS of allocations
of income and expense items which could affect the computation of taxable
income of the Company, or a challenge to the status of the partnerships as
partnerships (as opposed to associations taxable as corporations) for income
tax purposes, as well as the possibility of action being taken by the
Company's partners or by the partnerships that could adversely affect the
Company's qualification as a REIT, for example, by requiring the sale of a
property. If any of the Operating Partnership or any other partnership (as
similarly taxed entity) were treated as an association, such partnership (or
entity) would be taxable as a corporation, with the consequences, among
others, that if the Company's ownership interest in any of such partnerships
(or entities) exceeded 10% of such partnership's (or entity's) voting
interests or the value of such interest exceeded 5% of the value of the
Company's assets, the Company would cease to qualify as a REIT; distributions
from any of such partnerships (or entities) to the Company would be treated
as dividends and the Company would not be able to deduct its share of losses,
if any, generated by any of such partnerships (or entities) in computing its
taxable income. See "Federal Income Tax Considerations."
Tax Aspects of the Operating Partnership and the Subsidiary Partnerships
The following discussion summarizes certain Federal income tax
considerations applicable solely to the Company's investment in the Operating
Partnership and the Subsidiary Partnerships and the Operating Partnership's
investment in the Subsidiary Partnerships. (The Operating Partnership and
the Subsidiary Partnerships are sometimes collectively referred to herein
individually as a "Partnership" and collectively as the "Partnerships".) The
discussion does not cover state or local tax laws or any Federal tax laws
either than income tax laws.
Classification
In general, a partner of a partnership is entitled to include in its
income its distributive share of the income and to deduct its distributive
share of the losses of the partnership only if the partnership is classified
for Federal income tax purposes as a partnership rather than as an
association taxable as a corporation.
An organization formed as a partnership will be treated as a partnership
for Federal income tax purposes rather than as a corporation if it (i) is an
association and is not described in Treasury Regulations Sections
301.7701-2(b)(1), (3), (4), (5), (6), (7) or (8), (ii) has two or more
members, and (iii) does not elect to be classified for Federal income tax
purposes as a corporation. In the opinion of Robinson Silverman Pearce
Aronsohn & Berman LLP, based on certain representations of the Company, each
Partnership qualifies as a partnership (as opposed to an association taxable
as a corporation) for Federal income tax purposes.
If any of the Operating Partnership or any other partnership (as
similarly taxed entity) were treated as an association taxable as a
corporation, such partnership (or entity) would be taxable as a corporation
with the consequences, among others, that if the Company's ownership interest
in any of such partnerships (or entities) exceeded 10% of such partnership's
(or entities) voting interests or the value of such interest exceeded 5% of
the value of the Company's assets, the Company would cease to qualify as a
REIT; distributions from any of such partnerships (or entities) to the
Company would be treated as dividends, and the Company would not be able to
deduct its share of losses, if any, generated by any of such partnerships (or
entities) in computing its taxable income. See "Federal Income Taxation of
the Company-General", and "-Income Tests" and "-Asset Tests" above for a
discussion of the effect of the Company's failure to meet such tests for a
taxable year.
Income Taxation of the Operating Partnership and Its Partners
A partnership is not a taxable entity for Federal income tax purposes.
Rather, the Company, in the case of each of the Partnerships (and the
Operating Partnership, in the case of the Subsidiary Partnerships), will be
required to take into account its allocable share of the income, gains,
losses, deductions, and credits for any taxable year of such Partnership
ending within or with the taxable year of such partner, without regard to
whether such partner has received or will receive any distribution from such
Partnership.
Partnership Allocations
Although a partnership agreement will generally determine the allocation
of income and losses among partners, such allocations will be disregarded for
tax purposes under Section 704(b) of the Code if they do not comply with the
provisions of Section 704(b) of the Code and the Treasury Regulations
promulgated thereunder.
If an allocation is not recognized for Federal income tax purposes, the
item subject to the allocation will be reallocated in accordance with the
partner's interest in the partnership, which will be determined by taking
into account all of the facts and circumstances relating to the economic
arrangement of the partners with respect to such item. The allocations of
taxable income and loss of each of the Partnerships generally are in
accordance with its partners' respective percentage interests and are
intended to comply with the requirements of Section 704(b) of the Code and
the Treasury Regulations promulgated thereunder.
Tax Allocations with Respect to Contributed Properties
Pursuant to Section 704(c) of the Code, items of income, gain, loss, and
deduction attributable to appreciated or depreciated property that is
contributed to a partnership in exchange for an interest in the partnership
must be allocated for Federal income tax purposes in a manner such that the
contributor is charged with, or benefits from, the unrealized gain or
unrealized loss associated with the property at the time of the contribution.
The amount of such unrealized gain or unrealized loss is generally equal to
the difference between the fair market value of contributed property at the
time of contribution and the adjusted tax basis of such property at the time
of contribution. The partnership agreement of the Operating Partnership
requires allocations of income, gain, loss, and deduction attributable to
such contributed property to be made in a manner that is consistent with
Section 704(c) of the Code using the equivalent of the "traditional method"
described in Treasury Regulations Section 1.704-3(b).
Depreciation
Section 704(c) of the Code requires that depreciation as well as gain
and loss be allocated in a manner so as to take into account the variation
between the fair market value and tax basis of the property contributed.
Accordingly, depreciation on any property contributed to the Operating
Partnership will be allocated to its partners in a manner designed to reduce
the difference between such property's fair market value and its tax basis,
using methods that are intended to be consistent with statutory intent under
Section 704(c) of the Code. On the other hand, depreciation with respect to
any property purchased by the Operating Partnership (or the Subsidiary
Partnerships) will generally be allocated among the partners in accordance
with their respective percentage interests in the Operating Partnership (or
the Subsidiary Partnerships).
As of the closing of the Initial Offering, the Operating Partnership
revalued its assets and restated the capital account of the partners to fair
market value pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(f).
As a result, depreciation as well as gain and loss will again be allocated in
such manner so as to take into account the variation between fair market
value and tax basis pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)(f)(4). The method used to allocate depreciation is
intended to comply with the statutory intent under Section 704(c) of the
Code, and will be made in accordance with a permissible method under the
Treasury Regulations under Section 704(c) of the Code.
Sale of the Operating Partnership Property
Generally, any gain realized upon a sale of the property held by any of
the Partnerships for more than one year will be long-term capital gain,
except for any portion of such gain that is treated as depreciation or cost
recovery recapture. Under Section 704(c) of the Code and the Treasury
Regulations governing the revaluation of the Operating Partnership's assets
and the restatement of its capital accounts to fair market value, any
unrealized gain attributable to appreciation in its property prior to the
closing of the Initial Offering ("Built-in-Gain") must, when recognized, be
allocated to the partner who contributed such property. Such Built-in-Gain
would generally be equal to the difference between the fair market value of
the property upon the closing of the Initial Offering and the adjusted tax
basis of the Operating Partnership in such property upon the closing of the
Initial Offering. However, the Company will not be allocated any
Built-in-Gains by the Operating Partnership. In addition, as described above
and pursuant to the Code, depreciation will be allocated to reduce the
disparity between fair market value and tax basis with respect to appreciated
property contributed to the Partnership.
The Company's share of any gain realized by any of the Partnerships on
the sale of any property held by a Partnership as inventory or other property
held primarily for sale to customers in the ordinary course of its trade or
business will, however, be treated as income from a prohibited transaction
that is subject to a 100% penalty tax. Such prohibited transaction income
will also have an adverse effect upon the Company's ability to satisfy the
income tests for REIT status. Under existing law, whether property is held
as inventory or primarily for sale to customers in the ordinary course of a
trade or business is a question of fact that depends on all the facts and
circumstances with respect to the particular transaction. Each of the
Partnerships intends to hold its properties for investment with a view to
long-term appreciation, to engage in the business of acquiring, developing,
owning, and operating similar properties and to make such occasional sales as
are consistent with its investment objectives.
Partnership Anti-Abuse Regulations
Under the "Partnership Anti-Abuse Rules" contained in Treasury
Regulations Section 1.702-2, the IRS is authorized to recharacterize
transactions involving partnerships where the partnership has a principal
purpose of reducing federal tax labilities in a manner inconsistent with the
intent of the partnership rules contained in the Code. In Treasury
Regulation Section 1.702-2(d), Example 4, the IRS concluded under the facts
described therein, that the use of a partnership structure by a REIT was
consistent with the intent of the partnership rules; accordingly,
recharacterization in that case was not appropriate. Thus, the Partnership
Anti-Abuse Rules should not affect the Company's ability to qualify as a
REIT.
State, Local and Foreign Taxation
The Company and its shareholders may be subject to state, local or
foreign taxation in various state, local or foreign jurisdictions, including
those in which it or they transact business or reside. Such state, local or
foreign taxation may differ from the Federal income tax treatment described
above. Consequently, prospective purchasers should consult their own tax
advisors regarding the effect of state, local and foreign tax laws on an
investment in the Company.
PLAN OF DISTRIBUTION
The Company may sell the Offered Securities to one or more underwriters
for public offering and sale by them or may sell the Offered Securities to
investors directly or through agents or through a combination of any such
methods of sale. Any such underwriter or agent involved in the offer and
sale of the Offered Securities will be named in the applicable Prospectus
Supplement.
Underwriters may offer and sell the Offered Securities at a fixed price
or prices, which may be changed, at prices related to the prevailing market
prices at the time of sale or at negotiated prices. The Company also may
offer and sell the Offered Securities in exchange for one or more of its then
outstanding issues of debt or convertible debt securities. The Company also
may, from time to time, authorize underwriters acting as the Company's agents
to offer and sell the Offered Securities upon the terms and conditions as are
set forth in the applicable Prospectus Supplement. In connection with the
sale of Offered Securities, underwriters may be deemed to have received
compensation from the Company in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of Offered
Securities for whom they may act as agent. Underwriters may sell Offered
Securities to or through dealers, and such dealers may receive compensation
in the form of discounts, concessions or commissions from the underwriters
and/or commissions from the purchasers for whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or
agents in connection with the offering of Offered Securities, and any
discounts, concessions or commissions allowed by underwriters to
participating dealers, will be set forth in the applicable Prospectus
Supplement. Underwriters, dealers and agents participating in the
distribution of the Offered Securities may be deemed to be underwriters, and
any discounts and commissions received by them and any profit realized by
them on resale of the Offered Securities may be deemed to be underwriting
discounts and commissions, under the Securities Act. Underwriters, dealers
and agents may be entitled, under agreements entered into with the Company,
to indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act. In the opinion of the
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
Unless otherwise specified in the applicable Prospectus Supplement, each
series of Offered Securities will be a new issue with no established trading
market, other than the Common Shares and the Series B Preferred Shares which
are listed on the NYSE. Any Common Shares or Series B Preferred Shares sold
pursuant to a Prospectus Supplement will be listed on the NYSE, subject to
official notice of issuance. The Company may elect to list any series of
Offered Securities on an exchange, but is not obligated to do so. It is
possible that one or more underwriters may make a market in a series of
Offered Securities, but will not be obligated to do so and may discontinue
any market making at any time without notice. Therefore, no assurance can be
given as to the liquidity of, or the trading market for, the Offered
Securities.
If so indicated in a Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers by certain institutional
investors to purchase Offered Securities of the series to which such
Prospectus Supplement relates providing for payment and delivery on a future
date specified in such Prospectus Supplement. There may be limitations on
the minimum amount which may be purchased by any such institutional investor
or on the portion of the aggregate principal amount of the particular Offered
Securities which may be sold pursuant to such arrangements. Institutional
investors to which such offers may be made, when authorized, include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and such other
institutions as may be approved by the Company. The obligations of any such
purchasers pursuant to such delayed delivery and payment arrangements will
not be subject to any conditions except that (i) the purchase by an
institution of the particular Offered Securities shall not at the time of
delivery be prohibited under the laws of any jurisdiction in the United
States to which such institution is subject, and (ii) if the particular
Offered Securities are being sold to underwriters, the Company shall have
sold to such underwriters the total principal amount of such Offered
Securities or number of Warrants less the principal amount or number thereof,
as the case may be, covered by such arrangements. Underwriters will not have
any responsibility in respect of the validity of such arrangements or the
performance of the Company or such institutional investors thereunder.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for the Company and its
subsidiaries in the ordinary course of business.
In order to comply with the securities laws of certain states, if
applicable, the Offered Securities offered hereby will be sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states Offered Securities may not be sold unless they
have been registered or qualified for sale in the applicable state or an
exemption from the registration or qualification requirement is available and
is complied with.
ERISA MATTERS
The Company may be considered a "party in interest" within the meaning
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and a "disqualified person" under corresponding provisions of the Code with
respect to certain employee benefit plans. Certain transactions between an
employee benefit plan and a party in interest or disqualified person may
result in "prohibited transactions" within the meaning of ERISA and the Code,
unless such transactions are effected pursuant to an applicable exemption.
Any employee benefit plan or other entity subject to such provisions of ERISA
or the Code proposing to invest in the Offered Securities should consult with
its legal counsel.
LEGAL OPINIONS
Certain legal matters will be passed upon for the Company by Robinson
Silverman Pearce Aronsohn & Berman LLP, New York, New York. The legal
authorization and issuance of the Offered Securities, as well as certain
other legal matters concerning Maryland law, will be passed upon for the
Company by Ballard Spahr Andrews & Ingersoll, Baltimore, Maryland. In
addition, the description of Federal income tax consequences contained in
this Prospectus entitled "Federal Income Tax Considerations" is based upon
the opinion of Robinson Silverman Pearce Aronsohn & Berman LLP.
EXPERTS
The audited financial statements and schedule incorporated by reference
in this Prospectus and elsewhere in this Registration Statement have been
incorporated by reference herein in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm
as experts in accounting and auditing.
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table itemizes the expenses incurred by the Company in
connection with the offering of the Offered Securities being registered. All
the amounts shown are estimates except the Securities and Exchange Commission
registration fee.
Item Amount
---- ------
Registration Fee -- Securities and
Exchange Commission (1) . . . . . . . . . . . . $109,201
New York Stock Exchange Listing Fee . . . . . . . 51,300
Fees of Rating Agencies . . . . . . . . . . . . . 75,000
Legal Fees and Expenses . . . . . . . . . . . . . 150,000
Accounting Fees and Expenses. . . . . . . . . . . 25,000
Printing and Engraving Expenses . . . . . . . . . 50,000
Blue Sky Fees and Expenses. . . . . . . . . . . . 25,000
Trustee's Fees (including counsel fees) . . . . . 20,000
Miscellaneous Expenses. . . . . . . . . . . . . . 19,499
--------
Total. . . . . . . . . . . . . . . . . . . . $525,000
========
- -----------
(1) Includes the registration fee of $3,140.90 pertaining to the aggregate
initial public offering price of $10,365,000 of Offered Securities previously
registered on Form S-3, Registration No. 33-91084 and carried over to this
Registration Statement.
Item 15. Indemnification of Trustees and Officers.
Under Maryland law, a real estate investment trust formed in Maryland is
permitted to limit, by provision in its declaration of trust, the liability
of trustees and officers to the trust or to its shareholders for money
damages except for the liability of a trustee or officer resulting from (i)
active and deliberate dishonesty established by a final judgment as being
material to the cause of action or (ii) actual receipt of an improper benefit
or profit in money, property or services. The Company's Amended and Restated
Declaration of Trust, as amended (the "Declaration of Trust"), contains such
a provision which eliminates such liability to the maximum extent permitted
by the Maryland law.
The Declaration of Trust of the Company authorizes it, to the maximum
extent provided in its By-Laws, to obligate itself to indemnify and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding
to (a) any present or former trustee or officer or (b) any individual who,
while a trustee of the Company and at the request of the Company, serves or
has served another corporation, partnership, joint venture, trust, employee
benefit plan or any other enterprise as a trustee, director, officer or
partner, of such corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise from and against any claim or liability to
which such person may become subject or which such person may incur by reason
of his status as a present or former trustee or officer of the Company. The
Company's By-Laws obligate it, to the maximum extent permitted by Maryland
Law, to indemnify and to pay or reimburse reasonable expenses in advance of
final disposition of a proceeding to (a) any individual who, while a trustee
or officer and at the request of the Company, serves or has served another
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise as a trustee, director, officer or partner of such
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise and who is made a party to the proceeding by reason of his
service in that capacity, and (b) any present or former trustee or officer
against any claim or liability to which he may become a party by reason of
his service in that capacity unless it is established that (i) his act or
omission was committed in bad faith or was the result of active and
deliberate dishonesty, (ii) he actually received an improper personal benefit
in money, property or services or (iii) in the case of a criminal proceeding,
he had reasonable cause to believe that his act or omission was unlawful. In
addition, the Company's By-Laws require it to pay or reimburse, in advance of
final disposition of a proceeding, reasonable expenses incurred by a present
or former trustee or officer made a party to a proceeding by reason of his
status as a trustee or officer provided that the Company shall have received
(i) a written affirmation by the trustee or officer of his good faith belief
that he has met the standard of conduct necessary for indemnification by the
Company as authorized by the By-Laws and (ii) a written undertaking by or on
his behalf to repay the amount paid or reimbursed by the Company if it shall
ultimately be determined that the standard of conduct was not met. The
Company's By-Laws also (i) permit the Company to provide indemnification and
payment or reimbursement of expenses to a present or former trustee or
officer who served a predecessor of the Company in such capacity and to any
employee or agent of the Company or a predecessor of the Company, (ii)
provide that any indemnification or payment or reimbursement of the expenses
permitted by the Company's By-Laws shall be furnished in accordance with the
procedures provided for indemnification and payment or reimbursement of
expenses under Section 2-418 of the Maryland General Corporation Law ("MGCL")
for directors of Maryland corporations and (iii) permit the Company to
provide such other and further indemnification or payment or reimbursement of
expenses as may be permitted by Section 2-418 of the MGCL for directors of
Maryland corporations.
The Company maintains a standard policy of officers' and directors'
liability insurance.
Item 16. Exhibits
1.1 Form of Underwriting Agreement(s).*
3.1 Articles Supplementary for the Series C Preferred Shares.
3.2 Form of Articles Supplementary for the Preferred Shares.*
4.1 Specimen Certificate for Common Shares of Beneficial Interest.(1)
4.2 Specimen Certificate evidencing 34,000 Series A-1 Preferred
Shares.(2)
4.3 Specimen Certificate evidencing 5,118,000 Series B Preferred
Shares.(2)
4.4 Specimen Certificate evidencing 56,000 Series C Preferred Shares.
4.5 Specimen Preferred Share Certificate.*
4.6 Specimen Common Shares Warrant Agreement.*
4.7 Specimen Preferred Shares Warrant Agreement.*
4.8 Specimen Rights Agreement.*
5.1 Opinion of Ballard Spahr Andrews & Ingersoll re: legality of the
Offered Securities.
8.1 Opinion of Robinson Silverman Pearce Aronsohn & Berman LLP re: tax
matters.
12.1 Calculation of Ratios of Earnings to Fixed Charges.
23.1 Consent of Coopers & Lybrand LLP.
23.2 Consent of Ballard Spahr Andrews & Ingersoll (included as part of
Exhibit 5.1).
23.3 Consent of Robinson Silverman Pearce Aronsohn & Berman LLP
(included as part of Exhibit 8.1).
24.1 Power of attorney (included on signature page).
______________________
* To be filed by amendment or incorporated by reference in connection with
the offering of Offered Securities.
(1) Incorporated by reference to GRT's Registration Statement No. 33-69740.
(2) Incorporated by reference to GRT's Form 8-K filed with the Securities
and Exchange Commission on November 12, 1997.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in
the information set forth in the registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
registration pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
The undersigned Registrant hereby further undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification
is against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a trustee, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issues.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing a Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Columbus, State of Ohio, on
December 24, 1997.
GLIMCHER REALTY TRUST
By: /s/ David J. Glimcher
---------------------------------
David J. Glimcher
President and Chief Operating Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints David J. Glimcher or Herbert Glimcher,
his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-
effective amendments) to this registration statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Herbert Glimcher Chairman, Chief Executive December 24, 1997
__________________________ Officer and Trustee
Herbert Glimcher (Principal Executive
Officer)
/s/ David J. Glimcher President, Chief December 24, 1997
__________________________ Operating Officer
David J. Glimcher and Trustee
/s/ William G. Cornely Senior Vice President, December 24, 1997
__________________________ Chief Financial Officer
William G. Cornely and Treasurer (Principal
FinancialOfficer)
/s/ Michael P. Glimcher Senior Vice President December 24, 1997
__________________________ of Leasing and Trustee
Michael P. Glimcher
/s/ William R. Husted Senior Vice President December 24, 1997
__________________________ of Construction
William R. Husted and Trustee
/s/ Philip G. Barach Trustee December 24, 1997
__________________________
Philip G. Barach
/s/ Oliver Birckhead Trustee December 24, 1997
__________________________
Oliver Birckhead
/s/ E. Gordon Gee Trustee December 24, 1997
__________________________
E. Gordon Gee
/s/ Alan R. Weiler Trustee December 24, 1997
__________________________
Alan R. Weiler
/s/ Harvey Weinberg Trustee December 24, 1997
__________________________
Harvey Weinberg
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
1.1 Form of Underwriting Agreement(s).*
3.1 Articles Supplementary for the Series C Preferred Shares.
3.2 Form of Articles Supplementary for the Preferred Shares.*
4.1 Specimen Certificate for Common Shares of Beneficial Interest.(1)
4.2 Specimen Certificate evidencing 34,000 Series A-1 Preferred
Shares.(2)
4.3 Specimen Certificate evidencing 5,118,000 Series B Preferred
Shares.(2)
4.4 Specimen Certificate evidencing 56,000 Series C Preferred Shares.
4.5 Specimen Preferred Share Certificate.*
4.6 Specimen Common Shares Warrant Agreement.*
4.7 Specimen Preferred Shares Warrant Agreement.*
4.8 Specimen Rights Agreement.*
5.1 Opinion of Ballard Spahr Andrews & Ingersoll re: legality of the
Offered Securities.
8.1 Opinion of Robinson Silverman Pearce Aronsohn & Berman LLP re: tax
matters.
12.1 Calculation of Ratios of Earnings to Fixed Charges.
23.1 Consent of Coopers & Lybrand LLP.
23.2 Consent of Ballard Spahr Andrews & Ingersoll (included as part of
Exhibit 5.1).
23.3 Consent of Robinson Silverman Pearce Aronsohn & Berman LLP
(included as part of Exhibit 8.1).
24.1 Power of attorney (included on signature page).
______________________
* To be filed by amendment or incorporated by reference in connection with
the offering of Offered Securities.
(1) Incorporated by reference to GRT's Registration Statement No. 33-69740.
(2) Incorporated by reference to GRT's Form 8-K filed with the Securities
and Exchange Commission on November 12, 1997.
EXECUTION COPY
GLIMCHER REALTY TRUST
ARTICLES SUPPLEMENTARY
CLASSIFYING AND DESIGNATING 56,000
SHARES OF BENEFICIAL INTEREST AS 56,000
SHARES OF SERIES C CONVERTIBLE PREFERRED BENEFICIAL INTEREST
Glimcher Realty Trust, a Maryland real estate investment trust (the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: Under a power contained in Article VI, Section 6.3 of the
Declaration of Trust, as amended, of the Corporation (the "Declaration"), the
Board of Trustees of the Corporation (the "Board of Trustees"), by resolution
duly adopted at a meeting duly called and held on December 2, 1997,
classified and designated 56,000 shares (the "Shares") of beneficial interest
(as defined in the Declaration) as shares of Series C Convertible Preferred
Beneficial Interest, with the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends and other
distributions, qualifications and terms and conditions of redemption set
forth on Exhibit 1 hereto, which, upon any restatement of the Declaration,
shall be deemed to be part of Article VI, Section 6.3 of the Declaration,
with any necessary or appropriate changes to the enumeration or lettering of
the subsections thereof.
SECOND: The Shares have been classified and designated by the
Board of Trustees under the authority contained in the Declaration.
THIRD: These Articles Supplementary have been approved by the
Board of Trustees in the manner and by the vote required by law.
FOURTH: The undersigned President of the Corporation acknowledges
these Articles Supplementary to be the act of the Corporation and, as to all
matters or facts required to be verified under oath, each of the undersigned
acknowledges that to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and that this statement
is made under the penalties for perjury.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these Articles
Supplementary to be executed under seal in its name and on its behalf by its
President and attested to by its Secretary on this 3rd of December, 1997.
ATTEST: GLIMCHER REALTY TRUST
/s/ George A. Schmidt By:/s/ David J. Glimcher(SEAL)
- ---------------------------- ---------------------------
George A. Schmidt, Secretary David J. Glimcher, President
<PAGE>
EXHIBIT 1
SERIES C CONVERTIBLE PREFERRED SHARES
OF BENEFICIAL INTEREST
Section 1. DESIGNATION, AMOUNT AND SUBORDINATION. The shares of
the series of preferred shares of beneficial interest established hereunder
is "Series C Convertible Preferred Shares" (the "Series C Preferred Shares")
and the number of shares constituting such series shall be 56,000. Each
Series C Preferred Share shall have a par value of $0.01. The date of
original issuance of any of the Series C Preferred Shares is herein called
the "Original Issuance Date". Notwithstanding anything to the contrary
herein, the Series C Preferred Shares rank junior as to rights to receive
distributions and amounts payable upon liquidation, dissolution or winding up
of the Corporation to the Series B Cumulative Redeemable Preferred Shares of
Beneficial Interest of the Corporation (the "Series B Preferred Shares") to
the extent and in the manner set forth in the terms of the Series B Preferred
Shares set forth in the Articles Supplementary Classifying 5,520,000 Shares
of Beneficial Interest as Series B Cumulative Redeemable Preferred Shares of
Beneficial Interest of the Corporation (the "Series B Articles
Supplementary") as such Series B Articles Supplementary are in effect on the
Original Issuance Date.
Section 2. DIVIDENDS.
(a) The holders of each Series C Preferred Share shall be entitled
to receive, if, as and when authorized, out of the net profits of the
Corporation, dividends at the annual rate per share of the sum of:
(1) the Applicable Dividend Amount, plus
(2) for any portion of a Quarterly Dividend Payment Period during
which a Default shall exist, Forty Dollars ($40.00) per annum (the
"Default Dividend Amount").
Dividends shall be payable in quarterly installments on each April 1, July 1,
October 1 and January 1 (or if any such date is not a Business Day, on the
next succeeding Business Day, such date being herein called a "Quarterly
Payment Date"), commencing on the first such date after the Original Issuance
Date.
Such dividends shall be paid before any dividends shall be set
apart for or paid upon the Common Shares or any other preferred shares
ranking on liquidation junior to the Series C Preferred Shares (the "Junior
Preferred Shares" and together with the Common Shares, the "Junior Shares")
in any year. All dividends authorized upon Series C Preferred Shares shall
be authorized pro rata per share. Dividends payable on the Series C
Preferred Shares for any period shall be computed on the basis of the actual
number of days elapsed over a year of 360 days.
Notwithstanding anything to the contrary herein, in addition to the
dividends otherwise required hereunder, the holders of each Series C
Preferred Share shall be entitled to receive, if, as and when authorized, out
of the net profits of the Corporation, a dividend, payable on June 4, 1998,
equal to $25.35 per share.
The term "Applicable Dividend Amount" means an amount equal to the
product (expressed in dollar and cents and rounded upward to the nearest
cent) of (x) the Liquidation Preference times (y) the sum of (i) at all times
prior to June 4, 1998, 0.0285, and at all times on or after June 4, 1998,
0.05 plus (ii) the Applicable Spread plus (iii) LIBOR (expressed as a decimal
rounded upwards to the nearest hundred thousandth (.00000)) and shall be
determined on the applicable Dividend Determination Date for each Quarterly
Dividend Payment Period.
The term "Applicable Preferred Shares Amount" means with respect to
any period the highest aggregate liquidation preference of all Preferred
Shares of Beneficial Interest of the Corporation issued at any time under the
Securities Purchase Agreement dated as of November 26, 1996 and the
Securities Purchase Agreement dated as of December 4, 1997, as each may have
been or may hereafter be modified supplemented or amended from time to time,
(a "Securities Purchase Agreement" and collectively, the "Securities Purchase
Agreements"), among Partnership Acquisition Trust II, a Delaware business
trust, Nomura Asset Capital Corporation, the Corporation, and Glimcher
Properties Limited Partnership, a Delaware limited partnership, which were
outstanding on any date during such period.
The term "Applicable Spread" shall be determined on the last day of
a Quarterly Dividend Period or other applicable period (and shall be
applicable to every day during such Quarterly Dividend Period or other
applicable period) to be the decimal determined below:
<PAGE>
Applicable
Preferred
Shares Adjusted Equity Ratio as of the last day of the
Amount Quarterly Dividend Period or other applicable period
________________________________________________________________________
Greater Greater Greater Greater
than or than or than or than or
equal to equal to equal to equal to Less
.47000 .4200 but .3700 but .3200 but than
less than less than less than .3200
.4700 .4200 .3700
Equal to .00000 .00250 .01200 .02000 .03200
or less
than $100
million
Greater .00000 .00500 .01700 .02600 .03700
than $100
million but
less than
$200 million
Greater .00000 .00750 .02000 .03000 .04000
than or
equal to
$200
million
The term "Adjusted Equity Ratio" shall mean as of any date of
determination, the ratio (expressed as a decimal to the nearest hundred
thousandth (.00000)) of:
(x) the sum of (i) the aggregate liquidation preference of all
outstanding Junior Preferred Shares plus (ii) the product, expressed in
dollars, of (A) the number of outstanding Common Shares as of the
determination date (including without duplication any Common Shares
which would be issuable upon conversion of any limited partnership
interests in Glimcher Properties Limited Partnership, a Delaware limited
partnership) not owned by the Corporation times (B) the average Market
Price (as defined in Section 5(a) hereof) of the Common Shares during
the Quarterly Dividend Period (or portion thereof, if applicable) prior
to the determination date, to
(y) the sum, without duplication, of (i) the amount determined in
the foregoing clause (x), plus (ii) the liquidation preference of all
Preferred Shares of Beneficial Interest of the Corporation (other than
Junior Preferred Shares), plus (iii) the total consolidated debt of the
Corporation determined in accordance with GAAP.
For purposes of computing the Applicable Dividend Rate for any
Quarterly Dividend Period, the Adjusted Equity Ratio shall be the ratio on
the last day of such Quarterly Dividend Period (e.g., the ratio in effect for
the entire period January 1 through March 31 shall be the ratio computed on
March 31).
The term "Business Day" shall mean any day (other than a Saturday,
Sunday or legal holiday in the State of New York) on which banks are open for
business in New York City.
The term "Common Shares" means the Common Shares of Beneficial
Interest, $.01 par value per share, of the Corporation.
The term "Debt" of any Person means indebtedness of such
Person for borrowed money outstanding (including (i) obligations under
capitalized leases, (ii) obligations for the deferred purchase price of
property (other than trade payables), (iii) liabilities evidenced by notes,
bonds or similar instruments, (iv) guarantees by such Person of any of the
foregoing incurred by any other person, and (v) any of the foregoing
obligations for which such Person is otherwise liable in any other manner
such as liability resulting from such Person being a general partner of the
partnership incurring the foregoing obligation).
The term "Default" shall mean the existence of any of the following
events:
(i) The failure of the Corporation to maintain at the end of each
fiscal quarter, commencing September 30, 1997, a ratio of Consolidated
Debt of the Corporation and its consolidated subsidiaries to
Consolidated Total Assets of the Corporation and its consolidated
subsidiaries of no more than .60 to 1.00 and such failure shall have
continued for a period of 120 consecutive days. The term "Consolidated
Debt" of any Person shall mean, as of any date of determination, without
duplication, the total consolidated Debt of such Person and its
consolidated subsidiaries, determined in accordance with generally
accepted accounting principles ("GAAP") except as otherwise provided
herein. The term "Consolidated Total Assets" of any Person shall mean,
as of any date of determination, the sum, without duplication, of (i)
the cash and cash equivalents (excluding any cash held in escrow) of the
Corporation and its consolidated subsidiaries, (ii) the cost
(unrecovered cost in the case of investments) of all Recently Developed
Real Properties included in the consolidated balance sheet of the
Corporation in accordance with GAAP, (iii) the cost (unrecovered cost in
the case of investments) of all Recently Acquired Operating Real
Properties included in the consolidated balance sheet of the Corporation
in accordance with GAAP plus (iv) the aggregate value of all real
properties and investments in unconsolidated ventures (other than
Recently Developed Real Properties and Recently Acquired Operating Real
Properties) owned by the such Person and its consolidated subsidiaries,
determined in accordance with GAAP, except that the value of such real
properties shall be determined by applying a 9.50% capitalization rate
to the Adjusted Net Income of such Person and its consolidated
Subsidiaries and such Person's share of Adjusted Net Income of
investments in unconsolidated ventures. The term "Adjusted Net Income"
as of the end of any fiscal quarter of any Person shall mean the net
income of such Person and its consolidated subsidiaries for the twelve
months then ended computed in accordance with GAAP, but it shall be
computed by (x) excluding from the computation thereof all income and
expense items related to Recently Acquired Operating Real Properties and
Recently Developed Real Properties, general and administrative expenses,
minority interests, interest expenses, depreciation and amortization
expenses, income taxes and items of gain and loss resulting from sales
and/or extraordinary events and (y) including in the computation thereof
an assumed management fee equal to 4% of total revenues. The term
"Recently Acquired Operating Real Property" shall mean each operating
real property (and investments in unconsolidated ventures owning
operating real properties) acquired by the Corporation and its
consolidated subsidiaries until such property shall have been owned by
the Corporation or a consolidated subsidiary (or such unconsolidated
venture) for at least four (4) fiscal quarters, and the term "Recently
Developed Real Property" shall mean any operating real property (and
investments in unconsolidated ventures owning operating real properties)
under development by the Corporation or any of its consolidated
subsidiaries (or such unconsolidated venture) until the earliest of (i)
the date which is 12 months after the date 85% of the total gross
leaseable area of such property has been leased to tenants that are open
for business on the property and paying rent, (ii) 30 months after the
issuance of a permanent certificate of occupancy for any material
portion of such property and (iii) 48 months after the commencement of
construction in connection with the development of such property.
(ii) The failure of the Corporation to maintain at the end of each
fiscal quarter, commencing September 30, 1997, a ratio of Adjusted
Consolidated Debt to Adjusted Consolidated Total Assets of no more than
.70 to 1.00 and such failure shall have continued for a period of 120
consecutive days. For purposes of this calculation (a) the term
"Adjusted Consolidated Debt" shall mean Consolidated Debt of the
Corporation and its consolidated subsidiaries plus, with respect to any
Debt of any unconsolidated entity, the sum, without duplication, of (x)
the Corporation and its consolidated subsidiaries' pro rata share of
such unconsolidated entity's consolidated Debt which is not Debt of the
Corporation or any of its consolidated subsidiaries, (but the amount
included pursuant to this clause (x) with respect to any unconsolidated
entity shall not exceed the amount of the Corporation's and its
consolidated subsidiaries' pro rata share of the consolidated assets of
such unconsolidated entity using the method of computation set forth in
the definition of Consolidated Total Assets) plus (y) without
duplication, to the extent in excess of the amount included in the
foregoing clause (x), the aggregate amount of the Corporation's and its
consolidated subsidiaries' Debt relative to such unconsolidated entity's
Consolidated Debt; and (b) the term "Adjusted Consolidated Total Assets"
shall mean Consolidated Total Assets of the Corporation and its
consolidated subsidiaries plus, with respect to any consolidated assets
of an unconsolidated entity, the Corporation's and its consolidated
subsidiaries' pro rata share of the consolidated assets of such
unconsolidated entity using the method of computation set forth in the
definition of Consolidated Total Assets.
(iii) The indebtedness in the aggregate principal amount of
$181,000,000 incurred under the Amended and Restated Loan Agreement
dated as of March 15, 1994 among Nomura Asset Capital Corporation,
Glimcher Holdings Limited Partnership, Glimcher Centers Limited
Partnership and Grand Central Limited Partnership shall have been
refinanced in whole or in part without the prior written consent of
Nomura Asset Capital Corporation.
(iv) The Corporation shall have issued any Shares in violation of
Section 4(b) hereof.
(v) Dividends on any shares of Series C Preferred Shares shall be
in arrears for two or more Quarterly Dividend Payment Periods.
(vi) (a) The Development LLC (as defined below) shall sell or
otherwise dispose of any material asset and the Corporation shall fail
to redeem such number of whole shares of Series C Preferred Shares as
may be redeemed with the amount of Net Proceeds (as defined below)
derived from such sale, whether or not such Net Proceeds are made
available to the Corporation, as required by Section 7(a)(i) hereof or
(b) the Corporation shall fail to comply with the provisions of Section
7(a)(i) hereof.
The term "Development LLC" shall mean Elizabeth MetroMall LLC, a
Delaware limited liability company and its successors and assigns; and
The term "Dividend Determination Date" shall mean (i) with respect
to the first Quarterly Dividend Payment Period, the date which is two (2)
Business Days prior to the Original Issuance Date, and (ii) with respect to
all other Quarterly Dividend Payment Periods, the date which is two (2)
Business Days prior to the first day of such Quarterly Dividend Payment
Period.
The term "LIBOR" shall mean, with respect to any Quarterly Dividend
Period, the 3 month London Interbank Offered Rate for United States dollar
deposits as of 11:00 a.m. (London time) on the Dividend Determination Date as
quoted on Telerate page 3750 or on such replacement system as is then
customarily used to quote LIBOR. If two or more such rates appear on
Telerate page 3750 or associated pages, LIBOR in respect of such Quarterly
Dividend Payment Period shall be the arithmetic mean of such offered rates.
If two such rates do not appear on Telerate Page 3750 as of 11:00 a.m.,
London time, on the applicable Dividend Determination Date, LIBOR will be the
arithmetic mean of the offered rates (expressed as a percentage per annum)
for deposits in U.S. Dollars for a 3 month period that appear on the Reuters
Screen LIBO Page (as defined below) as of 11:00 a.m., London time, on such
Dividend Determination Date, if at least two such offered rates so appear.
If fewer than two such offered rates appear on the Reuters Screen LIBO Page
as of 11:00 a.m., London time, on such Dividend Determination Date, the
Corporation will request the principal London office of any four major
reference banks in the London interbank market selected by the Corporation in
good faith to provide such bank's offered quotation (expressed as a
percentage per annum) to prime banks in the London interbank market for
deposits in U.S. Dollars for a three month period as of 11:00 a.m., London
time, on such Dividend Determination Date for amounts of not less than U.S.
$1,000,000. If at least two such offered quotations are so provided, LIBOR
will be the arithmetic mean of such quotations. If fewer than two such
quotations are so provided, the Corporation will request any three major
banks in New York City selected by the Corporation in good faith to provide
such bank's rate (expressed as a percentage per annum) for loans in U.S.
Dollars to leading European banks for a three month period as of
approximately 11:00 a.m., New York City time, on the applicable Dividend
Determination Date for amounts of not less than U.S. $1,000,000. If at least
two such rates are so provided, LIBOR will be the arithmetic mean of such
rates. If fewer than two rates are so provided, then LIBOR will be LIBOR in
effect on the preceding Dividend Determination Date.
The term "Liquidation Preference" shall mean, as of any date of
determination, (x) if such date is prior to the later of the commencement of
the Conversion Period (without regard to the application of Section 5(g))and
the Conversion Termination Date (as defined in Section 5(g)), $1,000, and (y)
at all times thereafter, the quotient of $1,000 divided by the Applicable
Conversion Percentage as of the date of determination. Every change in the
Applicable Conversion Percentage on or after the later of (x) the
commencement of the Conversion Period (without regard to the application of
Section 5(g)) or (y) the Conversion Termination Date shall effect a change in
the Liquidation Preference as of the date of each such change.
The term "Net Proceeds" shall mean the cash proceeds net of actual
expenses incurred from (i) a sale or other disposition of the whole or any
portion of property owned by the Development LLC, (ii) an insurance recovery
(other than for business interruption or similar claim) or condemnation
award, (iii) a mortgage, deed of trust, sale and leaseback or other financing
or refinancing of all or any portion of any such property, and (iv) any other
event which, under generally accepted accounting principles, would be
classified as of a capital nature.
The term "Quarterly Dividend Payment Period" shall mean the period
beginning on and including the last day of each March, June, September and
December of each year and ending on the second to last day of the first to
occur of the next June, September, December and March, respectively, except
that the initial Quarterly Dividend Payment Period shall be the period
beginning on the Original Issuance Date and ending on the next March 31, June
30, September 30 or December 31.
(b) Dividends on the Series C Preferred Shares shall be
cumulative, so that if in any fiscal year or years, dividends in whole or in
part are not paid upon the Series C Preferred Shares, unpaid dividends shall
accumulate as against the holders of the Junior Shares. Dividends on the
Series C Preferred Shares shall accrue whether or not the Corporation has
earnings, whether or not there are funds legally available for the payment of
such dividends and whether or not such dividends are authorized. Accrued but
unpaid dividends on the Series C Preferred Shares will accumulate as of the
Quarterly Payment Date on which they first become payable. Each dividend, to
the extent not paid on an applicable Quarterly Payment Date, shall accrue
(whether or not the Corporation has earnings, whether or not there are funds
legally available for the payment of such dividends and whether or not such
dividends are authorized) on a daily basis additional cumulative dividends at
the then applicable dividend rate for the Series C Preferred Shares. Any
dividend payment made on the Series C Preferred Shares shall first be
credited against the earliest accrued but unpaid dividend due which remains
payable.
(c) For so long as the Series C Preferred Shares remain
outstanding, the Corporation shall not pay any dividend upon the Junior
Shares, whether in cash or other property (other than shares of Junior
Shares), or purchase, redeem or otherwise acquire any such Junior Shares
unless, in addition to the payment of the dividend to the holders of the
Series C Preferred Shares as described above, the Corporation has redeemed
all shares of Series C Preferred Shares which it would theretofore have been
required to redeem under Section 7 hereof. Notwithstanding the provisions of
this Section 2(c), without authorizing or paying dividends on the Series C
Preferred Shares, the Corporation may, (1) subject to applicable law,
repurchase or redeem shares of Common Shares of the Corporation from current
or former officers or employees of the Corporation pursuant to the terms of
repurchase or similar agreements in effect from time to time, provided that
such agreements have been approved by the Board of Trustees of the
Corporation and the terms of such agreements provide for a repurchase or
redemption price not in excess of the price per share paid by such employee
for such share, (2) set aside, authorize or pay dividends on the Common
Shares of the Corporation to the extent required in order to maintain the
status of the Corporation as a real estate investment trust under the
provisions of Sections 856 through 858 of the Internal Revenue Code of 1986,
as amended, but only to the extent that the foregoing cannot be achieved
through the payment of dividends on the Series C Preferred Shares except
that, on only one dividend payment date with respect to the Common Shares,
the amount of such dividends payable on the Common Shares may be computed
based on the assumption that the foregoing cannot be achieved through the
payment of dividends on the Series C Preferred Shares, and (3) redeem Shares
pursuant to Section 6.6 of the Declaration.
(d) Promptly (and in any event within three Business Days) after
each Dividend Determination Date, the Corporation shall forthwith file at
each office designated for the conversion of Series C Preferred Shares, a
statement, signed by the Chairman of the Board, the President, any Vice
President or Treasurer of the Corporation, setting forth the Applicable
Dividend Amount (including LIBOR and the Applicable Spread) for the following
Quarterly Dividend Payment Period. The Corporation shall also cause a notice
setting forth such information to be sent by mail, first class, postage
prepaid, to each record holder of Series C Preferred Shares at his or its
address appearing on the Preferred Shares register except that such notice
need not be sent, unless requested by a holder of Preferred Shares, if such
information has not changed from the prior Dividend Determination Date.
(e) Notwithstanding anything in this Section 2 to the contrary, so
long as any Series B Preferred Shares shall remain outstanding, the
provisions of Section B(3) of the Series B Preferred Articles Supplementary
shall supersede this Section 2 solely to the extent inconsistent with the
provisions of this Section 2.
Section 3. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series
C Preferred Shares then outstanding shall be entitled to be paid out of the
assets of the Corporation available for distribution to its Shareholders,
after and subject to the payment in full of all amounts required to be
distributed to the holders of any other Preferred Shares of the Corporation
ranking on liquidation prior and in preference to the Series C Preferred
Shares (such Preferred Shares being referred to hereinafter as "Senior
Preferred Shares") upon such liquidation, dissolution or winding up, but
before any payment shall be made to the holders of Junior Shares, an amount
equal to the Liquidation Preference per share plus any accrued dividends
thereon (whether or not there are funds legally available for the payment of
such dividends and whether or not such dividends are authorized) (subject to
adjustment in the event of any dividend, split, distribution or combination
with respect to such shares). If upon any such liquidation, dissolution or
winding up of the Corporation the remaining assets of the Corporation
available for the distribution to its Shareholders after payment in full of
amounts required to be paid or distributed to holders of Senior Preferred
Shares shall be insufficient to pay the holders of shares of Series C
Preferred Shares the full amount to which they shall be entitled, the holders
of shares of Series C Preferred Shares, and any class of Shares ranking on
liquidation on a parity with the Series C Preferred Shares, shall share
ratably in any distribution of the remaining assets and funds of the
Corporation in proportion to the respective amounts which would otherwise be
payable in respect to the shares held by them upon such distribution if all
amounts payable on or with respect to said shares were paid in full.
(b) After the payment of all preferential amounts required to be
paid to the holders of Senior Preferred Shares and Series C Preferred Shares
and any other series of Preferred Shares upon the dissolution, liquidation or
winding up of the Corporation, the holders of shares of Common Shares then
outstanding shall be entitled to receive the remaining assets and funds of
the Corporation available for distribution to its Shareholders.
(c) Any merger or consolidation of the Corporation into or with
another corporation, any merger or consolidation of any other corporation
into or with the Corporation, or any sale, conveyance, mortgage, pledge or
lease of all or substantially all the assets of the Corporation shall be
deemed to be a liquidation, dissolution or winding up of the Corporation for
purposes of this Section 3 unless approved pursuant to Section 4 (or approval
is not required as set forth in clause (b)(iii)(b) thereof).
(d) In determining whether a distribution (other than upon
voluntary or involuntary liquidation), by dividend, redemption or other
acquisition of shares or otherwise, is permitted under the Maryland General
Corporation Law, amounts that would be needed, if the Corporation were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of holders of Preferred Shares whose preferential rights
upon dissolution are superior to those receiving the distribution shall not
be added to the Corporation's total liabilities.
(e) Notwithstanding anything in this Section 3 to the contrary, so
long as any Series B Preferred Shares shall remain outstanding, the
provisions of Section C of the Series B Preferred Articles Supplementary
shall supersede this Section 3.
Section 4. VOTING
(a) Whenever dividends on any shares of Series C Preferred Shares
shall be in arrears for two or more Quarterly Dividend Payment Periods or a
Default shall have occurred and be continuing (either event being herein
called a "Preferred Default"), the number of members of the Board of Trustees
of the Corporation shall be increased by two and the holders of Series C
Preferred Shares shall have the exclusive right, voting separately as a class
together with the holders of other shares of convertible preferred shares
issued from time to time pursuant to the Securities Purchase Agreements
(collectively, the "Pari Passu Shares"), to elect two Trustees (herein
referred to as the "Series C Trustees"). All such Series C Trustees shall be
elected by the affirmative vote of the holders of record of a majority of the
outstanding Pari Passu Shares either at meetings of Shareholders at which
Trustees are elected, a special meeting of holders of Pari Passu Shares or by
unanimous written consent without a meeting in accordance with the
Corporations and Associations Article of the Annotated Code of Maryland, and
at each subsequent meeting until all dividends accumulated on such shares of
Series C Preferred Shares for the past Quarterly Dividend Payment Periods and
the dividend for the then current Quarterly Dividend Payment Period shall
have been fully paid or authorized and a sum sufficient for the payment
thereof set aside for payment and there shall not exist any Default. Each
Series C Trustee so elected shall serve for a term of one year and until his
successor is elected and qualified. Any vacancy in the position of a Series
C Trustee may be filled only by the holders of the Pari Passu Shares. Each
Series C Trustee may, during his term of office, be removed at any time, with
or without cause, by and only by the affirmative vote, at a special meeting
of holders of Pari Passu Shares called for such purpose, or the written
consent, of the holders of record of a majority of the outstanding shares of
Pari Passu Shares. Any vacancy created by such removal may also be filled at
such meeting or by such consent. If and when all accumulated dividends and
the dividend for the then current dividend period on the Series C Preferred
Shares shall have been paid in full or set aside for payment in full and
there shall exist no Default, the holders thereof shall be divested of the
foregoing voting rights (subject to revesting in the event of each and every
Preferred Default) and, if all accumulated dividends and the dividend for the
then current dividend period have been paid in full or set aside for payment
in full on all Pari Passu Shares upon which like voting rights have been
conferred and are exercisable, the term of office of each Series C Trustee
shall terminate forthwith.
(b) In addition to any other rights provided by law, so long as
any Series C Preferred Shares are outstanding, the Corporation shall not,
without first obtaining the affirmative vote or, if permitted by applicable
law, the written consent of the holders of a majority of the Series C
Preferred Shares:
(i) amend or repeal any provision of the Declaration or Bylaws
which would have a dilutive effect on the Series C Preferred Shares,
increase the number of members of the Board of Trustees of the
Corporation or otherwise materially adversely affect the economic rights
of the Series C Preferred Shares, including permitting the provisions of
Subtitle 7 of Title 3 of the Maryland General Corporation Law, similar
provisions and so-called "poison pills" to apply to any holder of the
Series C Preferred Shares as a result of owning such shares or common
shares upon conversion of any or all of such shares;
(ii) issue any Senior Preferred Shares unless all Series C
Preferred Shares are redeemed with the proceeds thereof or issue any
Preferred Shares (other than Pari Passu Shares) unless all the net
proceeds are used to redeem the Series C Preferred Shares and the Pari
Passu Shares;
(iii) authorize or effect (a) any sale, lease, transfer or
other disposition of all or substantially all the assets of the
Corporation; (b) any merger or consolidation or other reorganization of
the Corporation with or into another entity, except any such event if,
after giving effect thereto the Corporation shall be in compliance with
the ratios set forth in clauses (i) and (ii) of the definition of
Default or (c) a liquidation, winding up, dissolution or adoption of any
plan for the same; or
(iv) enter into any transaction, other than employment agreements
on a basis consistent with past practice, with any officer, director,
trustee or beneficial owner of five percent (5%) or more of the Common
Shares of the Corporation or any Affiliate of any of the foregoing
unless such transaction is on terms no less favorable to the Corporation
or such subsidiary than those that could be obtained in a comparable
arm's length transaction with a person that is not such officer,
director, trustee, owner or Affiliate.
(c) The Corporation shall not amend, alter or repeal the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications or terms
or conditions of redemption of the Series C Preferred Shares so as to affect
adversely the Series C Preferred Shares, without the affirmative vote or, if
permitted by applicable law, the written consent, of the holders of at least
66-2/3% of the then outstanding aggregate number of shares of such adversely
affected Series C Preferred Shares, voting or consenting (as the case may be)
separately as a class.
(d) For all provisions of the Declaration requiring the approval
of the holders of shares of Series C Preferred Shares, all Preferred Shares
owned by the Corporation or any person in which the Corporation has directly
or indirectly a 10% or more equity interest shall be disregarded and shall
not be deemed to be outstanding.
Section 5. CONVERSION. (a) Each share of Series C Preferred Shares
may be converted at any time during the Conversion Period (as defined below),
at the option of the holder thereof, into the number of fully-paid and
nonassessable shares of Common Shares obtained by dividing the then
applicable Liquidation Preference by the Conversion Price (as defined below)
then in effect. The right of conversion given during the Conversion Period
shall not be affected by any notice of redemption. Holders of Series C
Preferred Shares at the close of business on a record date (which shall be
the Business Day next preceding the Quarterly Payment Date) for a
corresponding Quarterly Payment Date will be entitled to receive the dividend
payable on such Series C Preferred Shares on such Quarterly Payment Date
notwithstanding the conversion of Series C Preferred Shares following such
record date. Except as provided in the immediately preceding sentence, the
Corporation will make no payment or allowance for dividends which accrued on
the converted Series C Preferred Shares since the last Quarterly Payment Date
prior to conversion. Holders of Common Shares which are issuable upon
conversion prior to or on a record date for any dividend or distribution on
such shares shall be entitled to receive the same dividend or distribution as
other holders of record of Common Shares. Each conversion will be deemed to
have been effected immediately prior to the close of business on the day on
which the notice of conversion was received by the Corporation. The
"Conversion Price" per share shall be equal to the product of (i) the average
of Market Price (rounded to the nearest $0.01) per share over the 30 trading
days prior to the date of conversion times (ii) the Applicable Conversion
Percentage. As used herein, the term "Market Price" as of any trading day,
subject to adjustment pursuant to Section 6, means (i) if the Common Shares
are listed on any national securities exchange, the last sales price of the
Common Shares on such exchange (or the quoted closing bid price if there
shall have been no sales) on such trading day, or (ii) if the Common Shares
shall not be listed, the mean between the closing bid and asked prices on
such trading day for the Common Shares on the date of conversion as reported
by NASDAQ, or its successor, and if there are not such closing bid and asked
prices, on the basis of the fair market value per share on such trading day
as determined by an appraiser mutually satisfactory to the Board of Trustees
of the Corporation and the holders of a majority of the outstanding shares of
Series C Preferred Shares who have given notice of conversion. Any change in
the Market Price due to an adjustment pursuant to Section 6 shall take effect
on the date of any Triggering Event (as defined in Section 6).
As used herein, the term "Applicable Conversion Percentage" means
(i) at all times during the occurrence and continuance of a Default, the
lesser of 0.80 and the decimal which would otherwise be in effect in clause
(ii) of this definition in the absence of a Default, and (ii) so long as a
Default has not occurred and is continuing the decimal set forth for such
period in the following table:
Period Decimal
December 4, 1998 to December 3, 1999, both included 0.80
December 4, 1999 to December 3, 2000, both included 0.75
December 4, 2000 and thereafter 0.70
As used herein, the term "Conversion Period" means the period (a)
commencing on the earliest of (i) the date of a Default (it being understood
that an event included in clause (i) or (ii) of the definition of the term
"Default" does not constitute a Default until the 120 day period referred to
therein has lapsed and such event remains) whether or not such Default is
subsequently cured, and (ii) December 4, 1998, and (b) ending on the close
of business on the Business Day next preceding the date fixed for redemption
or for the payment of any amounts distributable on liquidation to the holders
of the Series C Preferred Shares.
(b) The Corporation shall not issue fractions of shares of Common
Shares upon conversion of Series C Preferred Shares or scrip in lieu thereof.
If any fraction of a share of Common Shares would, except for the provisions
of this Section (b), be issuable upon conversion of any Series C Preferred
Shares, the Corporation shall in lieu thereof pay to the person entitled
thereto an amount in cash equal to the current value of such fraction,
calculated to the nearest one-hundredth (1/100) of a share, to be computed
(i) if the Common Shares are listed on any national securities exchange on
the basis of the last sales price of the Common Shares on such exchange (or
the quoted closing bid price if there shall have been no sales) on the date
of conversion, or (ii) if the Common Shares shall not be listed, on the basis
of the mean between the closing bid and asked prices for the Common Shares on
the date of conversion as reported by NASDAQ, or its successor, and if there
are not such closing bid and asked prices, on the basis of the fair market
value per share on the date of conversion as determined by an appraiser
mutually satisfactory to the Board of Trustees of the Corporation and the
holders of a majority of the outstanding shares of Series C Preferred Shares
who have given notice of conversion.
(c) Whenever the Conversion Price shall be adjusted as provided in
Section 6 hereof, the Corporation shall forthwith file at each office
designated for the conversion of Series C Preferred Shares, a statement,
signed by the Chairman of the Board, the President, any Vice President or the
Treasurer of the Corporation, showing in reasonable detail the facts
requiring such adjustment and the Conversion Price that will be effective
after such adjustment. The Corporation shall also cause a notice setting
forth any such adjustments to be sent by mail, first class, postage prepaid,
to each record holder of Series C Preferred Shares at his or its address
appearing on the Shares register. If such notice relates to an adjustment
resulting from an event referred to in Section 6(g), such notice shall be
included as part of the notice required to be mailed and published under the
provisions of Section 6(g) hereof.
(d) In order to exercise the conversion privilege, the holder of
any Series C Preferred Shares to be converted shall surrender his or its
certificate or certificates therefor to the transfer agent for the Series C
Preferred Shares at the principal office of the transfer agent (or if no
transfer agent be at the time appointed, to the Corporation at its principal
office), and shall give written or facsimile notice (which may be given on
the date of conversion) to the transfer agent, if any, and to the Corporation
at such office that the holder elects to convert the Series C Preferred
Shares evidenced by such certificates, or any number thereof. Such notice
shall also state the name or names (with address) in which the certificate or
certificates for shares of Common Shares which shall be issuable on such
conversion shall be issued, subject to any restrictions on transfer relating
to shares of the Series C Preferred Shares or shares of Common Shares upon
conversion thereof. If so required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by written
instrument or instruments of transfer, in form satisfactory to the
Corporation, duly authorized in writing. The date of receipt by the transfer
agent (or by the Corporation if the Corporation serves as its own transfer
agent) of the certificates and notice shall be the conversion date. As soon
as practicable after receipt of such notice and the surrender of the
certificate or certificates for Series C Preferred Shares as aforesaid, the
Corporation shall cause to be issued and delivered at such office to such
holder, or on his or its written order, a certificate or certificates for the
number of full shares of Common Shares issuable on such conversion in
accordance with the provisions hereof and cash as provided in Section 5(b) in
respect of any fraction of a share of Common Shares otherwise issuable upon
such conversion.
(e) The Corporation shall at all times when the Series C Preferred
Shares shall be outstanding reserve and keep available out of its authorized
but unissued Common Shares, for the purposes of effecting the conversion of
the Series C Preferred Shares, such number of its duly authorized shares of
Common Shares as shall from time to time be sufficient to effect the
conversion of all outstanding Series C Preferred Shares. Before taking any
action which would cause an adjustment reducing the Conversion Price below
the then par value of the shares of Common Shares issuable upon conversion of
the Series C Preferred Shares, the Corporation will take any corporate action
which may, in the opinion of its counsel, be necessary in order that the
Corporation may validly and legally issue fully-paid and nonassessable shares
of such Common Shares at such adjusted conversion price.
(f) All shares of Series C Preferred Shares which shall have been
surrendered for conversion as herein provided shall no longer be deemed to be
outstanding and all rights with respect to such shares, including the rights,
if any, to receive notices and to vote, shall forthwith cease and terminate
except only the right of the holder thereof to receive shares of Common
Shares in exchange therefor and payment of any accrued and unpaid dividends
thereon. Any shares of Series C Preferred Shares so converted shall be
retired and cancelled and shall not be reissued, and the Corporation may from
time to time take such appropriate action as may be necessary to reduce the
number of authorized Series C Preferred Shares accordingly, including the
filing of articles supplementary.
(g) Notwithstanding anything to the contrary herein contained,
unless and until approval ("Shareholder Approval") of the holders of the
Common Shares shall have been obtained in compliance with the rules and
policies of the New York Stock Exchange, no holder of Series C Preferred
Shares shall have the right to convert such Series C Preferred Shares into
Common Shares if, as a result of such conversion and all prior or concurrent
conversions of Pari Passu Shares, (1) all Common Shares issued as a result of
such conversions would have voting power equal to or in excess of 20 percent
of the voting power of the Common Shares outstanding (excluding treasury
shares, shares held by a subsidiary and shares reserved for issuance upon
conversion or exercise of options or warrants) on November 27, 1996, or (2)
the number of Common Shares issued as a result of such conversions would be
equal to or in excess of 20 percent of the number of Common Shares
outstanding on November 27, 1996. The date on and after which conversion
shall no longer be permitted as a result of the operation of this Section
5(g) is herein called the "Conversion Termination Date", it being understood
that if Shareholder Approval is obtained or if any Pari Passu Shares which
are convertible without Shareholder Approval have not been converted, no
Conversion Termination Date shall occur. Promptly, and in any event within
three (3) Business Days, after the Conversion Termination Date, the
Corporation shall forthwith file, at each office designated for the
conversion of Series C Preferred Shares, a statement, signed by the Chairman
of the Board, the President, any Vice President or Treasurer of the
Corporation, stating that the Conversion Termination Date has occurred and
setting forth the reason therefor. The Corporation shall also cause a notice
setting forth such information to be sent by mail, first class, postage
prepaid, to each record holder of Series C Preferred Shares at his or its
address appearing on the Preferred Shares register.
Section 6. ANTI-DILUTION PROVISIONS.
(a) The provisions of this Section 6 shall not be applicable
except in connection with a conversion pursuant to Section 5. In order to
prevent dilution of the right granted hereunder, the Market Price on any date
shall be subject to adjustment from time to time in accordance with this
Section 6(a). For purposes of this Section 6, the term "Number of Common
Shares Deemed Outstanding" at any given time shall mean the sum of (x) the
number of shares of the Corporation's Common Shares outstanding at such time,
(y) the number of shares of the Corporation's Common Shares issuable assuming
conversion at such time of the Corporation's Series C Preferred Shares and
the Pari Passu Shares and (z) the number of shares of the Corporation's
Common Shares deemed to be outstanding under Sections 6(b)(1) to (9),
inclusive, at such time.
Except as provided in Section 6(c) or 6(f) below, if and whenever
on or after the Original Issuance Date, the Corporation shall issue or sell,
or shall in accordance with Sections 6(b)(1) to (9), inclusive, be deemed to
have issued or sold, any shares of its Common Shares for a consideration per
share less than the Market Price in effect immediately prior to the time of
such issue or sale, then forthwith upon such issue or sale (the "Triggering
Transaction"), the Market Price for all trading days prior to such Triggering
Transaction shall, subject to Sections 6(b)(1) to 6(b)(9), be reduced to the
Market Price (calculated to the nearest tenth of a cent) determined by
dividing (x) an amount equal to the sum of (1) the product derived by
multiplying the Number of Common Shares Deemed Outstanding immediately prior
to such Triggering Transaction by the Market Price then in effect, plus (2)
the consideration, if any, received by the Company upon consummation of such
Triggering Transaction, by (y) an amount equal to the sum of (1) the Number
of Common Shares Deemed Outstanding immediately prior to such Triggering
Transaction plus (2) the number of shares of Common Shares issued (or deemed
to be issued in accordance with Sections 6(b)(1) to 6(b)(9)) in connection
with the Triggering Transaction.
(b) This Section 6(b) shall apply only in connection with events
referred to in Sections 6(b)(1) through 6(b)(9) which occur within the 30
days immediately preceding a notice of conversion and only with respect to
the specific shares of Series C Preferred Shares which are the subject of the
notice of conversion and are in fact converted. For purposes of determining
the adjusted Conversion Price under this Section 6(b), the following Sections
6(b)(1) to 6(b)(9), inclusive, shall be applicable:
(1) In case the Corporation at any time shall in any manner
grant (whether directly or by assumption in a merger or otherwise)
any rights to subscribe for or to purchase, or any options for the
purchase of, Common Shares or any Preferred Shares (other than the
Series C Shares and the Pari Passu Shares) or other securities
convertible into or exchangeable for Common Shares (such rights or
options being herein called "Options" and such convertible or
exchangeable Shares or securities being herein called "Convertible
Securities"), whether or not such Options or the right to convert
or exchange any such Convertible Securities are immediately
exercisable, and the price per share for which the Common Shares is
issuable upon exercise, conversion or exchange (determined by
dividing (x) the total amount, if any, received or receivable by
the Corporation as consideration for the granting of such Options,
plus the minimum aggregate amount of additional consideration
payable to the Corporation upon the exercise of all such Options,
plus, in the case of such Options which relate to Convertible
Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such
Convertible Securities and upon the conversion or exchange thereof,
by (y) the total maximum number of shares of Common Shares issuable
upon the exercise of such Options or the conversion or exchange of
such Convertible Securities) shall be less than the Market Price in
effect immediately prior to the time of the granting of such
Option, then the total maximum amount of Common Shares issuable
upon the exercise of such Options or, in the case of Options for
Convertible Securities, upon the conversion or exchange of such
Convertible Securities shall (as of the date of granting of such
Options) be deemed to be outstanding and to have been issued and
sold by the Corporation for such price per share. No adjustment of
the Market Price shall be made upon the actual issue of such shares
of Common Shares or such Convertible Securities upon the exercise
of such Options, except as otherwise provided in Section 6(b)(3)
below.
(2) In case the Corporation at any time shall in any manner
issue (whether directly or by assumption in a merger or otherwise)
or sell any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the
price per share for which Common Shares are issuable upon such
conversion or exchange (determined by dividing (x) the total amount
received or receivable by the Corporation as consideration for the
issue or sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to
the Corporation upon the conversion or exchange thereof, by (y) the
total maximum number of shares of Common Shares issuable upon the
conversion or exchange of all such Convertible Securities) shall be
less than the Market Price in effect immediately prior to the time
of such issue or sale, then the total maximum number of shares of
Common Shares issuable upon conversion or exchange of all such
Convertible Securities shall (as of the date of the issue or sale
of such Convertible Securities) be deemed to be outstanding and to
have been issued and sold by the Corporation for such price per
share. No adjustment of the Market Price shall be made upon the
actual issue of such Common Shares upon exercise of the rights to
exchange or convert under such Convertible Securities, except as
otherwise provided in Section 6(b)(3) below.
(3) If the purchase price provided for in any Options
referred to in Section 6(b)(1), the additional consideration, if
any, payable upon the conversion or exchange of any Convertible
Securities referred to in Sections 6(b)(1) or 6(b)(2), or the rate
at which any Convertible Securities referred to in Section 6(b)(1)
or 6(b)(2) are convertible into or exchangeable for Common Shares
shall change at any time (other than under or by reason of
provisions designed to protect against dilution of the type set
forth in Sections 6(b) or 6(d)), the Market Price in effect at the
time of such change shall forthwith be readjusted to the Market
Price which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion
rate, as the case may be, at the time initially granted, issued or
sold. If the purchase price provided for in any Option referred to
in Section 6(b)(1) or the rate at which any Convertible Securities
referred to in Sections 6(b)(1) or 6(b)(2) are convertible into or
exchangeable for Common Shares shall be reduced at any time under
or by reason of provisions with respect thereto designed to protect
against dilution, then in case of the delivery of Common Shares
upon the exercise of any such Option or upon conversion or exchange
of any such Convertible Security, the Market Price then in effect
hereunder shall forthwith be adjusted to such respective amount as
would have been obtained had such Option or Convertible Security
never been issued as to such Common Shares and had adjustments been
made upon the issuance of the shares of Common Shares delivered as
aforesaid, but only if as a result of such adjustment the Market
Price then in effect hereunder is hereby reduced.
(4) On the expiration of any Option or the termination of any
right to convert or exchange any Convertible Securities, the
Conversion Price then in effect hereunder shall forthwith be
increased to the Conversion Price which would have been in effect
at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior
to such expiration or termination, never been issued.
(5) In case any Options shall be issued in connection with
the issue or sale of other securities of the Corporation, together
comprising one integral transaction in which no specific
consideration is allocated to such Options by the parties thereto,
such Options shall be deemed to have been issued for an amount
equal to the fair market value thereof, determined by allocating to
the other securities the market price thereof.
(6) In case any shares of Common Shares, Options or
Convertible Securities shall be issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor
shall be deemed to be the amount received by the Corporation
therefor. In case any shares of Common Shares, Options or
Convertible Securities shall be issued or sold for a consideration
other than cash, the amount of the consideration other than cash
received by the Corporation shall be the fair value of such
consideration as determined in good faith by the Board of Trustees
of the Corporation, whose determination shall be conclusive. In
case any shares of Common Shares, Options or Convertible Securities
shall be issued in connection with any merger in which the
Corporation is the surviving Corporation, the amount of
consideration therefor shall be deemed to be the fair value of such
portion of the net assets and business of the non-surviving
Corporation as shall be attributable to such Common Shares, Options
or Convertible Securities, as the case may be, as determined in
good faith by the Board of Trustees, whose determination shall be
conclusive.
(7) The number of shares of Common Shares outstanding at any
given time shall not include shares owned or held by or for the
account of the Corporation, and the disposition (but not redemption
or retirement) of any shares so owned or held shall be considered
an issue or sale of Common Shares for the purpose of this Section
6(b).
(8) In case the Corporation shall declare a dividend or make
any other distribution upon the Shares of the Corporation payable
in Options or Convertible Securities, then in such case any Options
or Convertible Securities, as the case may be, issuable in payment
of such dividend or distribution shall be deemed to have been
issued or sold without consideration.
(9) For purposes of this Section 6(b), in case the
Corporation shall take a record of the holders of its Common Shares
for the purpose of entitling them (x) to receive a dividend or
other distribution payable in Common Shares, Options or in
Convertible Securities, or (y) to subscribe for or purchase Common
Shares, Options or Convertible Securities, then such record date
shall be deemed to be the date of the issue or sale of the shares
of Common Shares deemed to have been issued or sold upon the
declaration of such dividend or the making of such other
distribution or the date of the granting of such right or
subscription or purchase, as the case may be.
(c) In the event that within the thirty days immediately prior to
the date of conversion of Series C Preferred Shares the Board of Trustees
shall authorize a dividend upon the Common Shares (other than a dividend
payable in Common Shares) payable otherwise than out of earnings or earned
surplus, determined in accordance with generally accepted accounting
principles, including the making of appropriate deductions for minority
interests, if any, in subsidiaries (herein referred to as "Liquidating
Dividends"), then, as soon as possible after the conversion of any Series C
Preferred Shares, the Corporation shall pay to the person converting such
Series C Preferred Shares an amount equal to the Pro Rata Share of the
aggregate value at the time of such exercise of all Liquidating Dividends
(including but not limited to the Common Shares which would have been issued
at the time of such earlier exercise and all other securities which would
have been issued with respect to such Common Shares by reason of share
splits, share dividends, mergers or reorganizations, or for any other
reason). The Pro Rata Share shall be a fraction, the numerator of which is
the number of days within such thirty day period that are before the record
date and the denominator of which is thirty. For the purposes of this
Section 6(c), a dividend other than in cash shall be considered payable out
of earnings or earned surplus only to the extent that such earnings or earned
surplus are charged an amount equal to the fair value of such dividend as
determined in good faith by the Board of Trustees of the Corporation.
(d) In case the Corporation shall at any time (i) subdivide the
outstanding Common Shares or (ii) pay a dividend on its outstanding Common
Shares in shares of beneficial interests of the Corporation, the number of
shares of Common Shares issuable upon conversion of the Series C Preferred
Shares shall be proportionately increased by the same ratio as the
subdivision or dividend (with appropriate adjustments to the Conversion Price
in effect immediately prior to such subdivision or dividend). In case the
Corporation shall at any time combine its outstanding Common Shares, the
number of shares issuable upon conversion of the Series C Preferred Shares
immediately prior to such combination shall be proportionately decreased by
the same ratio as the combination (with appropriate adjustments to the
Conversion Price in effect immediately prior to such combination).
(e) If any capital reorganization or reclassification of the
shares of beneficial interest of the Corporation, or consolidation or merger
of the Corporation with another entity, or the sale of all or substantially
all of its assets to another entity shall be effected in such a way that
holders of Common Shares shall be entitled to receive stock, securities, cash
or other property with respect to or in exchange for Common Shares, then, as
a condition of such reorganization, reclassification, consolidation, merger
or sale, lawful and adequate provision shall be made whereby the holders of
the Series C Preferred Shares shall have the right to acquire and receive
upon conversion of the Series C Preferred Shares, which right shall be prior
to the rights of the holders of Junior Shares (but after and subject to the
rights of holders of Senior Preferred Shares, if any), such shares of stock,
securities, cash or other property issuable or payable (as part of the
reorganization, reclassification, consolidation, merger or sale) with respect
to or in exchange for such number of outstanding shares of the Corporation's
Common Shares as would have been received upon conversion of the Series C
Preferred Shares at the Conversion Price then in effect. The Corporation
will not effect any such consolidation, merger or sale, unless prior to the
consummation thereof the successor entity (if other than the Corporation)
resulting from such consolidation or merger or the entity purchasing such
assets shall assume by written instrument mailed or delivered to the holders
of the Series C Preferred Shares at the last address of each such holder
appearing on the books of the Corporation, the obligation to deliver to each
such holder such shares of Shares, securities or assets as, in accordance
with the foregoing provisions, such holder may be entitled to purchase. If a
purchase, tender or exchange offer is made to and accepted by the holders of
more than 50% of the outstanding Common Shares of the Corporation, the
Corporation shall not effect any consolidation, merger or sale with the
person having made such offer or with any Affiliate of such person, unless
prior to the consummation of such consolidation, merger or sale the holders
of the Series C Preferred Shares shall have been given a reasonable
opportunity to then elect to receive upon the conversion of the Series C
Preferred Shares either the stock, securities or assets then issuable with
respect to the Common Shares of the Corporation or the stock, securities or
assets, or the equivalent, issued to previous holders of the Common Shares in
accordance with such offer. For purposes hereof, the term "Affiliate" with
respect to any given person shall mean any person controlling, controlled by
or under common control with the given person.
(f) The provisions of this Section 6 shall not apply to any Common
Shares issued, issuable or deemed outstanding under Sections 6(b)(1) to (9)
inclusive: (i) to any person pursuant to any stock option, stock purchase or
similar plan or arrangement for the benefit of employees or Trustees of the
Corporation or its subsidiaries in effect on the Original Issuance Date or
thereafter adopted by the Board of Trustees of the Corporation and a majority
of the Series C Trustees, (ii) pursuant to options, warrants and conversion
rights in existence on the Original Issuance Date, or (iii) on the conversion
of the Series C Preferred Shares or the sale or conversion of the Pari Passu
Shares.
(g) In the event that during any time when the Series C Preferred
Shares are subject to conversion rights:
(1) the Corporation shall authorize any extraordinary cash
dividend upon its Common Shares, or
(2) the Corporation shall authorize any dividend upon its
Common Shares payable in Shares or make any special dividend or
other distribution to the holders of its Common Shares, or
(3) the Corporation shall offer for subscription pro rata to
the holders of its Common Shares any additional shares of any class
or other rights, or
(4) there shall be any capital reorganization or
reclassification of the shares of beneficial interest of the
Corporation, including any subdivision or combination of its
outstanding shares of Common Shares, or consolidation or merger of
the Corporation with, or sale of all or substantially all of its
assets to, another entity, or
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in connection with such event, the Corporation shall give to the
holders of the Series C Preferred Shares:
(i) at least five (5) days prior written notice of the date on
which the books of the Corporation shall close or a record shall be
taken for such dividend, distribution or subscription rights or for
determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation
or winding up; and
(ii) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at
least twenty (20) days prior written notice of the date when the same
shall take place. Such notice in accordance with the foregoing clause
(i) shall also specify, in the case of any such dividend, distribution
or subscription rights, the date on which the holders of Common Shares
shall be entitled thereto, and such notice in accordance with the
foregoing clause (i) shall also specify the date on which the holders of
Common Shares shall be entitled to exchange their Common Shares for
securities or other property deliverable upon such reorganization,
reclassification consolidation, merger, sale, dissolution, liquidation
or winding up, as the case may be. Each such written notice shall be
given by first class mail, postage prepaid, addressed to the holders of
the Series C Preferred Shares at the address of each such holder as
shown on the books of the Corporation.
(h) If at any time or from time to time on or after the Original
Issuance Date, the Corporation shall grant, issue or sell any Options,
Convertible Securities or rights to purchase property (the "Purchase Rights")
pro rata to the record holders of Common Shares of the Corporation and such
grants, issuances or sales do not result in an adjustment of the Conversion
Price under Section 6(b) hereof, then each holder of Series C Preferred
Shares shall be entitled to acquire (within thirty (30) days after the later
to occur of the initial exercise date of such Purchase Rights or receipt by
such holder of the notice concerning Purchase Rights to which such holder
shall be entitled under Section 6(g)) upon the terms applicable to such
Purchase Rights either:
(i) the aggregate Purchase Rights which such holder could have
acquired if it had held the number of shares of Common Shares acquirable
upon conversion of the Series C Preferred Shares immediately before the
grant, issuance or sale of such Purchase Rights; provided that if any
Purchase Rights were distributed to holders of Common Shares without the
payment of additional consideration by such holders, corresponding
Purchase Rights shall be distributed to the exercising holders of the
Series C Preferred Shares as soon as possible after such exercise and it
shall not be necessary for the exercising holder of the Series C
Preferred Shares specifically to request delivery of such rights; or
(ii) in the event that any such Purchase Rights shall have expired
or shall expire prior to the end of said thirty (30) day period, the
number of shares of Common Shares or the amount of property which such
holder could have acquired upon such exercise at the time or times at
which the Corporation granted, issued or sold such expired Purchase
Rights.
Section 7. REDEMPTION.
(a) The Corporation (i) shall on each date (a "Mandatory
Redemption Date") on which Net Proceeds (as defined in Section 2 above) are
received by the Development LLC (as defined in Section 2 above), whether or
not such Net Proceeds are made available to the Corporation (and the
Corporation shall, solely if any Series C Preferred Shares shall remain
outstanding on or after December 4, 1998, cause the Development LLC to sell
substantially all of its assets promptly (and in any event by March 31, 1999)
after December 4, 1998 in order to maximize the Net Proceeds therefrom) and
(ii) may on any date (an "Optional Redemption Date" and each Mandatory
Redemption Date and Optional Redemption Date are herein called a "Redemption
Date") (unless notice of conversion shall have been previously given) redeem
(to the extent that such redemption shall not violate any applicable
provisions of the laws of the State of Maryland or result in a failure of the
Corporation to qualify as a real estate investment trust under the provisions
of Sections 856 through 858 of the Internal Revenue Code of 1986, as amended
(after taking into account the ability of the Corporation to borrow funds or
raise capital to effect the redemption)), at a price equal to the Liquidation
Preference per share (subject to adjustment in the event of any share
dividend, share split, share distribution or combination with respect to such
shares), plus an amount equal to any dividends accrued but unpaid thereon
(such amount is hereinafter referred to as the "Redemption Price"), (x) in
the case of clause (i) above, such maximum number of whole shares of Series C
Preferred Shares as may be redeemed at the Redemption Price with the Net
Proceeds and (y) in the case of clause (ii) above, such number of whole
shares of Series C Preferred Shares as determined by the Board of Trustees.
If the Corporation is unable at any Redemption Date to redeem any shares of
the Series C Preferred Shares then required to be redeemed because such
redemption would violate the applicable laws of the State of Maryland or
result in such failure to qualify as a real estate investment trust as
aforesaid, then the Corporation shall redeem such shares as soon thereafter
as redemption would not violate such laws.
(b) In the event of any redemption of only a part of the then
outstanding Series C Preferred Shares, the Corporation shall effect such
redemption pro rata among the holders thereof (based on the number of shares
of Series C Preferred Shares held on the date of notice of redemption).
(c) At least thirty (30) days prior to each Optional Redemption
Date, written notice shall be mailed, postage prepaid, to each holder of
record of Series C Preferred Shares to be redeemed, at his or its post office
address last shown on the records of the Corporation, notifying such holder
of the number of shares so to be redeemed, specifying the Redemption Date and
the date on which such holder's conversion rights (pursuant to Section 5
hereof) as to such shares terminate and calling upon such holder to surrender
to the Corporation, in the manner and at the place designated, his or its
certificate or certificates representing the shares to be redeemed (such
notice is hereinafter referred to as a "Redemption Notice"). On or prior to
each Redemption Date, each holder of Series C Preferred Shares to be redeemed
shall surrender his or its certificate or certificates evidencing such shares
to the Corporation, in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Price of such shares shall be
payable to the order of the person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate shall be
cancelled. In the event less than all the shares evidenced by any such
certificate are redeemed, a new certificate shall be issued evidencing the
unredeemed shares. From and after the Redemption Date, unless there shall
have been a default in payment of the Redemption Price, all rights of the
holders of the Series C Preferred Shares designated for redemption in the
Redemption Notice as holders of Series C Preferred Shares of the Corporation
(except the right to receive the Redemption Price without interest upon
surrender of their certificate or certificates) shall cease with respect to
such shares, and such shares shall not thereafter be transferred on the books
of the Corporation or be deemed to be outstanding for any purpose
whatsoever.
(d) Except as provided in Section (a) above, the Corporation shall
have no right to redeem the shares of Series C Preferred Shares. Any shares
of Series C Preferred Shares so redeemed shall be permanently retired, shall
no longer be deemed outstanding and shall not under any circumstances be
reissued, and the Corporation may from time to time take such appropriate
trust action as may be necessary to reduce the authorized Series C Preferred
Shares accordingly, including the filing of articles supplementary. Nothing
herein contained shall prevent or restrict the purchase by the Corporation,
from time to time either at public or private sale, of the whole or any part
of the Series C Preferred Shares at such price or prices as the Corporation
may determine, subject to the provisions of applicable law.
Section 8. NO RECOURSE TO SHAREHOLDERS, TRUSTEES, OFFICERS OR
AGENTS.
It is a condition of the Preferred Shares that any obligations of
the Corporation hereunder shall bind only the Corporation as provided in
Section 8.1 of the Declaration and no shareholder, trustee, officer or agent
of the Corporation shall be bound or held to any personal liability in
connection herewith.
Section 9. NO PREEMPTIVE OR APPRAISAL RIGHTS.
The Preferred Shares shall not be entitled to any preemptive rights
or, except as specifically required by applicable statute, appraisal rights.
Series C Preferred Number I Shares 56,000
GLIMCHER REALTY TRUST
a Real Estate Investment Trust
Formed Under the Laws of the State of Maryland
THIS CERTIFIES THAT Partnership Acquisition Trust II, a Delaware
business trust is the owner of
Fifty-Six Thousand (56,000) fully paid and nonassessable Series C Convertible
Preferred Shares of the Beneficial Interest of
GLIMCHER REALITY TRUST
(the "Trust") transferable on the books of the Trust by the holder
hereof in person or by its duly authorized attorney, upon surrender of this
Certificate properly endorsed. This Certificate and the Shares represented
hereby are issued and shall have the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends and other
distributions, qualifications and terms and conditions of redemption set
forth in Exhibit 1 of the Articles Supplementary-Classifying and Designating
56,000 Shares of Beneficial Interest as 56,00 Shares of Series C Convertible
Preferred Beneficial Interest.
IN WITNESS WHEREOF, the Trust has caused this Certificate to be
signed by its duly authorized officers and its seal to be hereunder affixed
this ___ day of December, 1997.
______________________________ ________________________________(SEAL)
George A. Schmidt, Secretary David J. Glimcher, President
The securities evidenced hereby have not been registered under the
Securities Act of 1933, as amended (the "Act"), and may not be transferred
except pursuant to an effective registration under the Act or in a
transaction which, in the opinion of counsel (who may be inside counsel of
the holder of these securities) reasonably satisfactory to GRT, qualifies as
an exempt transaction under the Act and the rules and regulations promulgated
thereunder.
The Trust will furnish to any stockholder, upon request and without
charge, a full statement regarding: (i) the designations and any
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption of the stock of each class which the Trust is authorized to issue;
(ii) the differences in the relative rights and preferences between the
shares of each series to the extent they have been set; (iii) the authority
of the Board of Trustees to set the relative rights and preferences of
subsequent series; and (iv) restrictions on transferability.
[Letterhead of Ballard Spahr Andrews & Ingersoll]
December 24, 1997
Glimcher Realty Trust
20 South Third Street
Columbus, Ohio 43215
Re: Registration Statement on Form S-3, filed with Securities
and Exchange Commission on December 24, 1997
---------------------------------------------------------
Ladies and Gentlemen:
We have served as Maryland counsel to Glimcher Realty Trust, a
Maryland real estate investment trust (the "Company"), in connection with
certain matters of Maryland law arising out of the registration of the
following securities having an aggregate initial offering price of up to
$250,000,000 (collectively, the "Securities"): (a) common shares of
beneficial interest, $.01 par value per share ("Common Shares"), including
Common Shares which may be issued upon the exercise of Warrants (as defined
herein) or Rights (as defined herein), (b) preferred shares of beneficial
interest, $.01 par value per share ("Preferred Shares"), including Preferred
Shares which may be issued upon the exercise of Warrants, (c) warrants to
purchase Common Shares or Preferred Shares ("Warrants") and (d) rights to
purchase Common Shares ("Rights"), covered by the above-referenced
Registration Statement, and all amendments thereto (the "Registration
Statement"), filed by the Company with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the "1933
Act"). Capitalized terms used but not defined herein shall have the meanings
given to them in the Registration Statement.
In connection with our representation of the Company, and as a
basis for the opinion hereinafter set forth, we have examined originals, or
copies certified or otherwise identified to our satisfaction, of the
following documents (collectively, the "Documents"):
1. The Registration Statement and the related form of prospectus
included therein in the form in which it was transmitted to the Commission
under the 1933 Act;
2. The Amended and Restated Declaration of Trust, as amended, of
the Company (the "Declaration of Trust"), certified as of a recent date by
the State Department of Assessments and Taxation of Maryland (the "SDAT");
3. The Bylaws of the Company, certified as of a recent date by
its Secretary;
4. Resolutions adopted by the Board of Trustees of the Company
(the "Board") relating to the sale, issuance and registration of the
Securities, certified as of a recent date by the Secretary of the Company
(the "Resolutions");
5. The form of certificate evidencing a Common Share, certified
as of a recent date by the Secretary of the Company;
6. A certificate of the SDAT as to the good standing of the
Company, dated as of a recent date;
7. A certificate executed by the Secretary of the Company, dated
as of a recent date; and
8. Such other documents and matters as we have deemed necessary
or appropriate to express the opinion set forth in this letter, subject to
the assumptions, limitations and qualifications stated herein.
In expressing the opinion set forth below, we have assumed, and so
far as is known to us there are no facts inconsistent with, the following:
1. Each individual executing any of the Documents, whether on
behalf of such individual or another person, is legally competent to do so.
2. Each individual executing any of the Documents on behalf of a
party (other than the Company) is duly authorized to do so.
3. Each of the parties (other than the Company) executing any of
the Documents has duly and validly executed and delivered each of the
Documents to which such party is a signatory, and such party's obligations
set forth therein are legal, valid and binding and are enforceable in
accordance with all stated terms.
4. All Documents submitted to us as originals are authentic. All
Documents submitted to us as certified or photostatic copies conform to the
original documents. All signatures on all such Documents are genuine. All
public records reviewed or relied upon by us or on our behalf are true and
complete. All statements and information contained in the Documents are true
and complete. There are no oral or written modifications or amendments to
the Documents, and there has been no waiver of any of the provisions of the
Documents, by action or omission of the parties or otherwise.
5. The Securities will not be issued or transferred in violation
of any restriction or limitation contained in Section 6.6 of the Declaration
of Trust.
6. All Preferred Shares will be evidenced by certificates meeting
the requirements of Section 8-203(d) of the Corporations and Association
Article of the Annotated Code of Maryland.
7. In accordance with the Resolutions, the issuance of, and
certain terms of, the Securities to be issued by the Company from time to
time will be approved by the Board or a duly authorized committee thereof in
accordance with Title 8 of the Corporations and Associations Article of the
Annotated Code of Maryland (with such approval referred to herein as the
"Trust Proceedings").
The phrases "known to us" is limited to the actual knowledge,
without independent inquiry, of the lawyers at our firm who have performed
legal services in connection with the issuance of this opinion.
Based upon the foregoing, and subject to the assumptions,
limitations and qualifications stated herein, it is our opinion that:
1. The Company is a real estate investment trust duly formed and
existing under and by virtue of the laws of the State of Maryland and is in
good standing with the SDAT.
2. Upon the completion of all Trust Proceedings relating to the
Securities that are Common Shares (the "Common Securities") and the due
execution, countersignature and delivery of certificates evidencing Common
Securities and assuming that the sum of (a) all Common Shares issued as of
the date hereof, (b) any Common Shares issued between the date hereof and the
date on which any of the Common Securities are actually issued (not including
any of the Common Securities), and (c) the Common Securities will not exceed
the total number of Common Shares that the Company is then authorized to
issue, the Common Securities will be duly authorized and, when and if
delivered against payment therefor in accordance with the Resolutions and the
Trust Proceedings, will be validly issued, fully paid and nonassessable.
3. Upon the completion of all Trust Proceedings relating to the
Securities that are Preferred Shares (the "Preferred Securities") and the due
execution, countersignature and delivery of certificates evidencing Preferred
Securities and assuming that the sum of (a) all Preferred Shares issued as of
the date hereof, (b) any Preferred Shares issued between the date hereof and
the date on which any of the Preferred Securities are actually issued (not
including any of the Preferred Securities), and (c) the Preferred Securities
will not exceed the total number of Preferred Securities that the Company is
then authorized to issue, the Preferred Securities will be duly authorized
and, when and if delivered against payment therefor in accordance with the
Resolutions and the Trust Proceedings, will be validly issued, fully paid and
nonassessable.
4. Upon the completion of all Trust Proceedings relating to the
Securities that are Warrants and the due execution, countersignature and
delivery of certificates evidencing the Warrants and assuming (i) that the
sum of (a) all Common Shares issued as of the date hereof, (b) any Common
Shares issued between the date hereof and the date on which any Common Shares
issuable upon exercise of the Warrants are actually issued (not including any
such Common Shares), and (c) the Common Shares issuable upon exercise of the
Warrants will not exceed the total number of Common Shares that the Company
is then authorized to issue and (ii) that the sum of (a) all Preferred Shares
issued as of the date hereof, (b) any Preferred Shares issued between the
date hereof and the date on which any Preferred Shares issuable upon exercise
of the Warrants are actually issued (not including any such Preferred
Shares), and (c) the Preferred Shares issuable upon exercise of the Warrants
will not exceed the total number of Preferred Shares that the Company is then
authorized to issue, the issuance of the Warrants will be duly authorized by
all necessary trust action and, when duly executed and delivered by the
Company against payment therefor and countersigned by the applicable Warrant
Agent in accordance with the applicable Warrant Agreement and delivered to
and paid for by the purchasers of the Warrants in the manner contemplated by
the Registration Statement and/or the applicable Prospectus Supplement, the
Warrants will be validly issued.
5. Upon the completion of all Trust Proceedings relating to the
Securities that are Rights and the due execution, countersignature and
delivery of certificates evidencing the Rights and assuming that the sum of
(a) all Common Shares issued as of the date hereof, (b) any Common Shares
issued between the date hereof and the date on which any Common Shares
issuable upon exercise of the Rights are actually issued (not including any
such Common Shares), and (c) the Common Shares issuable upon exercise of the
Rights will not exceed the total number of Common Shares that the Company is
then authorized to issue, the issuance of the Rights will be duly authorized
by all necessary trust action and, when duly executed and delivered by the
Company against payment therefor and countersigned by the applicable Rights
Agent in accordance with the applicable Rights Agreement and delivered to
and paid for by the purchasers of the Rights in the manner contemplated by
the Registration Statement and/or the applicable Prospectus Supplement, the
Rights will be validly issued.
The foregoing opinion is limited to the laws of the State of
Maryland, and we do not express any opinion herein concerning any other law
or concerning any document not governed by the laws of the State of Maryland.
The opinion expressed herein is subject to the effect of judicial decisions
which may permit the introduction of parol evidence to modify the terms or
the interpretation of agreements. We express no opinion as to compliance
with the securities (or "blue sky") laws of the State of Maryland.
We assume no obligations to supplement this opinion if any
applicable law changes after the date hereof or if we become aware of any
fact that might change the opinion expressed herein after the date hereof.
This opinion is being furnished to you for submission to the
Commission as an exhibit to the Registration Statement and, accordingly, may
not be relied upon by, quoted in any manner to, or delivered to any other
person or entity without, in each instance, our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and to the use of the name of our firm therein.
In giving this consent, we do not admit that we are within the category of
persons whose consent is required by Section 7 of the 1933 Act.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll
[LETTERHEAD OF ROBINSON SILVERMAN PEARCE ARONSOHN & BERMAN LLP]
December 24, 1997
Glimcher Realty Trust
20 South Third Street
Columbus, Ohio 43215
Ladies and Gentlemen:
You have requested our opinion concerning the qualification and
taxation of Glimcher Realty Trust, a Maryland real estate investment trust
(the "Company"), as a real estate investment trust ("REIT") under the
Internal Revenue Code of 1986, as amended (the "Code") for the taxable years
ended December 31, 1994 through December 31, 1996. We have examined such
documents as we have deemed necessary, including the Company's Form S-3
Registration Statement under the Securities Act of 1933, filed with the
Securities and Exchange Commission on December 24, 1997 (the "Registration
Statement"). In our review, we have assumed, with your consent, that all of
the representations and statements set forth in the documents we reviewed are
true and correct, and all of the obligations imposed by any such documents on
the parties thereto have been and will be performed or satisfied in
accordance with their terms. We have also assumed the genuineness of all
signatures, the proper execution of all documents, the authenticity of all
documents submitted to us as originals, the conformity to originals of
documents submitted to us as copies, and the authenticity of the originals
from which any copies were made. Our understanding of the facts is based on
the information set forth in such documents and various assumptions and
factual representations made by the Company, including the representation
letter dated December 24, 1997.
For the purposes of our opinion, we have not made an independent
investigation of the facts set forth in the documents we reviewed. We
consequently have assumed that the information presented in such documents or
otherwise furnished to us accurately and completely describes all material
facts relevant to our opinion. We have also assumed that (i) during the
relevant periods, all persons who were required under the Securities and
Exchange Act of 1934 to file or amend Schedules 13D and 13G with respect to
the Trust's outstanding shares appropriately made such filings and that the
Company was duly apprised of all such filings, and (ii) the information
concerning the Company and its affiliates set forth in the Company's Federal
income tax returns is true and correct. Moreover, the qualification and
taxation of the Company as a REIT depends upon its ability to meet, through
actual annual operating results, distribution levels and diversity of share
ownership and the various income and asset tests imposed under the Code, the
results of which will not be reviewed by the undersigned. Accordingly, no
assurance can be given that the actual results of the operations of the
Company for any one taxable year will satisfy such requirements.
Based upon and subject to the foregoing, we are of the opinion that
the Company was organized and has operated in conformity with the
requirements for qualification as REIT under the Code for the taxable years
ended December 31, 1994 through December 31, 1996.
Our opinion is based upon our examination and review of the
documents noted above, the facts, circumstances and assumptions referred to
above and existing law as contained in the Code, applicable Treasury
Regulations promulgated thereunder, administrative rulings of the Internal
Revenue Service, and judicial decisions as of the date hereof, all of which
are subject to change either prospectively or retroactively. Any change in
applicable law or any of the facts and circumstances upon which we have
relied may affect the continuing validity of the opinion set forth herein.
We express no opinion concerning any tax consequences other than as expressly
set forth herein.
We assume no obligation to supplement this opinion if any
applicable law changes after the date hereof or if we become aware of any
fact after the date hereof that might change the opinion expressed herein.
This opinion is being furnished to you solely for submission as an exhibit to
the Registration Statement and, accordingly, may not be relied upon by,
quoted in any manner to, or delivered to any other person or entity without,
in each instance, our prior written consent.
We consent to the use of this opinion as an exhibit to the
Registration Statement and to the use of the name of our firm therein. In
giving this consent, we do not admit that we are within the category of
persons whose consent is required by Section 7 of the Securities Act of 1933.
Very truly yours,
/S/ ROBINSON SILVERMAN PEARCE ARONSOHN & BERMAN LLP
<TABLE>
<CAPTION>
Exhibit 12.1
Glimcher Realty Trust
Computation of Ratio of Earnings to Fixed Charges
(thousands, except ratios)
Nine months ended
September 30, Year ended December 31,
1997 1996 1995 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss) available to
common shareholders $18,254 $27,781 $25,713 $12,604 $(450) $(1,666) $(1,948) $(4,663)
Add back:
Preferred dividend 2,169 268
Extraordinary item 5,864
Minority interest 2,502 3,385 3,294 2,137 436
Interest expense 31,850 29,297 26,215 22,928 23,764 20,729 20,799 18,671
Amortization of previously
capitalized interest 463 276 225 190 152 134 115 76
Amortization of deferred costs 1,150 1,349 1,869 1,319 130 111 64 70
Interest portion of rent expense 169 471 227 201 95 89 82 96
------- ------- ------- ------- ------- ------- ------- -------
Earnings 56,557 62,827 57,543 45,243 24,127 19,397 19,112 14,250
Interest expense 31,850 29,297 26,215 22,928 23,764 20,729 20,799 18,671
Preferred dividend 2,169 268
Interest capitalized 3,039 3,394 690 2,139 893 588 858 2,261
Amortization of deferred costs 1,150 1,349 1,869 1,319 130 111 64 70
Interest portion of rent expense 169 471 227 201 95 89 82 96
------- ------- ------- ------- ------- ------- ------- -------
Fixed charges $38,377 $34,779 $29,001 $26,587 $24,882 $21,517 $21,803 $21,098
Computation of ratio of
earnings to fixed charges 1.47 1.81 1.98 1.70 0.97(1) 0.90(1) 0.88(1) 0.68(1)
(1) The Company's earnings were inadequate to cover fixed charges by $755,
$2,120, $2,691, and $6,848 for the years ended December 31, 1993 through
December 31, 1990 respectively, all of which were prior to the Company's
initial public offering.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Exhibit 12.1
Glimcher Realty Trust
Computation of Ratio of Earnings to Fixed Charges
(thousands, except ratios)
Nine months ended
September 30, Year ended December 31,
1996 1996 1995 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss) available to
common shareholders $19,893 $27,781 $25,713 $12,604 $(450) $(1,666) $(1,948) $(4,663)
Add back:
Preferred dividend - 268
Extraordinary item 5,864
Minority interest 2,406 3,385 3,294 2,137 436
Interest expense 19,477 29,297 26,215 22,928 23,764 20,729 20,799 18,671
Amortization of previously
capitalized interest 341 276 225 190 152 134 115 76
Amortization of deferred costs 1,011 1,349 1,869 1,319 130 111 64 70
Interest portion of rent expense 278 471 227 201 95 89 82 96
------- ------- ------- ------- ------- ------- ------- -------
Earnings 43,406 62,827 57,543 45,243 24,127 19,397 19,112 14,250
Interest expense 19,477 29,297 26,215 22,928 23,764 20,729 20,799 18,671
Preferred dividend - 268
Interest capitalized 2,302 3,394 690 2,139 893 588 858 2,261
Amortization of deferred costs 1,011 1,349 1,869 1,319 130 111 64 70
Interest portion of rent expense 278 471 227 201 95 89 82 96
------- ------- ------- ------- ------- ------- ------- -------
Fixed charges $23,068 $34,779 $29,001 $26,587 $24,882 $21,517 $21,803 $21,098
Computation of ratio of earnings
to fixed charges 1.88 1.81 1.98 1.70 0.97(1) 0.90(1) 0.88(1) 0.68(1)
(1) The Company's earnings were inadequate to cover fixed charges by $755,
$2,120, $2,691, and $6,848 for the years ended December 31, 1993 through
December 31, 1990 respectively, all of which were prior to the Company's
initial public offering.
</TABLE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Glimcher Realty Trust on Form S-3 of our report dated February 21, 1997, on
our audits of the consolidated financial statements and financial statement
schedule of Glimcher Realty Trust as of December 31, 1996 and 1995, and for
the years ended December 31, 1996, 1995, and 1994. We also consent to the
reference to our firm under the caption "Experts."
COOPERS
& LYBRAND L.L.P.
Columbus, Ohio
December 22, 1997
