UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2013
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-11690
DDR Corp.
(Exact name of registrant as specified in its charter)
Ohio | 34-1723097 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
3300 Enterprise Parkway, Beachwood, Ohio 44122
(Address of principal executive offices - zip code)
(216) 755-5500
(Registrants telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | x | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ (Do not check if smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of April 30, 2013, the registrant had 319,993,087 outstanding common shares, $0.10 par value per share.
FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS - Unaudited | ||||
Condensed Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012 |
2 | |||
3 | ||||
4 | ||||
Consolidated Statement of Equity for the Three-Month Period Ended March 31, 2013 |
5 | |||
6 | ||||
7 |
1
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share amounts)
(Unaudited)
March 31, 2013 | December 31, 2012 | |||||||
Assets |
||||||||
Land |
$ | 1,894,986 | $ | 1,900,401 | ||||
Buildings |
5,824,030 | 5,773,961 | ||||||
Fixtures and tenant improvements |
498,390 | 489,626 | ||||||
|
|
|
|
|||||
8,217,406 | 8,163,988 | |||||||
Less: Accumulated depreciation |
(1,721,378 | ) | (1,670,717 | ) | ||||
|
|
|
|
|||||
6,496,028 | 6,493,271 | |||||||
Land held for development and construction in progress |
489,381 | 475,123 | ||||||
Real estate held for sale, net |
7,255 | | ||||||
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|
|
|
|||||
Total real estate assets, net |
6,992,664 | 6,968,394 | ||||||
Investments in and advances to joint ventures |
617,010 | 613,017 | ||||||
Cash and cash equivalents |
18,872 | 31,174 | ||||||
Restricted cash |
22,498 | 23,658 | ||||||
Notes receivable, net |
57,558 | 68,718 | ||||||
Other assets, net |
353,220 | 350,876 | ||||||
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|
|
|||||
$ | 8,061,822 | $ | 8,055,837 | |||||
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Liabilities and Equity |
||||||||
Unsecured indebtedness: |
||||||||
Senior notes |
$ | 2,149,724 | $ | 2,147,097 | ||||
Unsecured term loan |
350,000 | 350,000 | ||||||
Revolving credit facilities |
190,468 | 147,905 | ||||||
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|
|||||
2,690,192 | 2,645,002 | |||||||
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Secured indebtedness: |
||||||||
Secured term loan |
400,000 | 400,000 | ||||||
Mortgage indebtedness |
1,263,900 | 1,274,141 | ||||||
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|
|
|
|||||
1,663,900 | 1,674,141 | |||||||
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|
|||||
Total indebtedness |
4,354,092 | 4,319,143 | ||||||
Accounts payable and other liabilities |
290,330 | 326,024 | ||||||
Dividends payable |
49,813 | 44,210 | ||||||
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|
|
|
|||||
Total liabilities |
4,694,235 | 4,689,377 | ||||||
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|
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Commitments and contingencies (Note 8) |
||||||||
DDR Equity: |
||||||||
Class H7.375% cumulative redeemable preferred shares, without par value, $500 liquidation value; 750,000 shares authorized; 410,000 shares issued and outstanding at March 31, 2013 and December 31, 2012 |
205,000 | 205,000 | ||||||
Class J6.5% cumulative redeemable preferred shares, without par value, $500 liquidation value; 750,000 shares authorized; 400,000 shares issued and outstanding at March 31, 2013 and December 31, 2012 |
200,000 | 200,000 | ||||||
Common shares, with par value, $0.10 stated value; 500,000,000 shares authorized; 317,465,639 and 315,239,299 shares issued at March 31, 2013 and December 31, 2012, respectively |
31,747 | 31,524 | ||||||
Paid-in capital |
4,668,142 | 4,629,257 | ||||||
Accumulated distributions in excess of net income |
(1,738,333 | ) | (1,694,822 | ) | ||||
Deferred compensation obligation |
15,532 | 15,556 | ||||||
Accumulated other comprehensive loss |
(24,136 | ) | (27,925 | ) | ||||
Less: Common shares in treasury at cost: 799,678 and 977,673 shares at March 31, 2013 and December 31, 2012, respectively |
(14,445 | ) | (16,452 | ) | ||||
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|
|
|
|||||
Total DDR shareholders equity |
3,343,507 | 3,342,138 | ||||||
Non-controlling interests |
24,080 | 24,322 | ||||||
|
|
|
|
|||||
Total equity |
3,367,587 | 3,366,460 | ||||||
|
|
|
|
|||||
$ | 8,061,822 | $ | 8,055,837 | |||||
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|
|
|
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE-MONTH PERIODS ENDED MARCH 31,
(Dollars in thousands, except per share amounts)
(Unaudited)
2013 | 2012 | |||||||
Revenues from operations: |
||||||||
Minimum rents |
$ | 144,596 | $ | 128,279 | ||||
Percentage and overage rents |
1,784 | 1,414 | ||||||
Recoveries from tenants |
47,390 | 42,496 | ||||||
Fee and other income |
17,067 | 18,395 | ||||||
|
|
|
|
|||||
210,837 | 190,584 | |||||||
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|
|
|||||
Rental operation expenses: |
||||||||
Operating and maintenance |
33,659 | 32,851 | ||||||
Real estate taxes |
27,940 | 24,844 | ||||||
Impairment charges |
6,926 | 1,541 | ||||||
General and administrative |
19,760 | 19,012 | ||||||
Depreciation and amortization |
68,980 | 58,779 | ||||||
|
|
|
|
|||||
157,265 | 137,027 | |||||||
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|
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|
|||||
Other income (expense): |
||||||||
Interest income |
7,877 | 1,841 | ||||||
Interest expense |
(54,894 | ) | (55,521 | ) | ||||
Loss on debt retirement, net |
| (5,602 | ) | |||||
Other income (expense), net |
(2,901 | ) | (1,602 | ) | ||||
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|
|||||
(49,918 | ) | (60,884 | ) | |||||
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Income (loss) before earnings from equity method investments and other items |
3,654 | (7,327 | ) | |||||
Equity in net income of joint ventures |
2,954 | 8,248 | ||||||
Impairment of joint venture investments |
| (560 | ) | |||||
|
|
|
|
|||||
Income before tax expense of taxable REIT subsidiaries and state franchise and income taxes |
6,608 | 361 | ||||||
Tax expense of taxable REIT subsidiaries and state franchise and income taxes |
(367 | ) | (177 | ) | ||||
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|
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Income from continuing operations |
6,241 | 184 | ||||||
Income (loss) from discontinued operations |
310 | (15,730 | ) | |||||
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|
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Income (loss) before (loss) gain on disposition of real estate |
6,551 | (15,546 | ) | |||||
(Loss) gain on disposition of real estate, net of tax |
(57 | ) | 665 | |||||
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|
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Net income (loss) |
$ | 6,494 | $ | (14,881 | ) | |||
Non-controlling interests |
(191 | ) | (176 | ) | ||||
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|
|||||
Net income (loss) attributable to DDR |
$ | 6,303 | $ | (15,057 | ) | |||
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|
|||||
Preferred dividends |
(7,030 | ) | (6,967 | ) | ||||
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|
|
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Net loss attributable to DDR common shareholders |
$ | (727 | ) | $ | (22,024 | ) | ||
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Per share data: |
||||||||
Basic earnings per share data: |
||||||||
Loss from continuing operations attributable to DDR common shareholders |
$ | 0.00 | $ | (0.02 | ) | |||
Income (loss) from discontinued operations attributable to DDR common shareholders |
0.00 | (0.06 | ) | |||||
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|
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Net loss attributable to DDR common shareholders |
$ | 0.00 | $ | (0.08 | ) | |||
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Diluted earnings per share data: |
||||||||
Loss from continuing operations attributable to DDR common shareholders |
$ | 0.00 | $ | (0.02 | ) | |||
Income (loss) from discontinued operations attributable to DDR common shareholders |
0.00 | (0.06 | ) | |||||
|
|
|
|
|||||
Net loss attributable to DDR common shareholders |
$ | 0.00 | $ | (0.08 | ) | |||
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE THREE-MONTH PERIODS ENDED MARCH 31,
(Dollars in thousands)
(Unaudited)
2013 | 2012 | |||||||
Net income (loss) |
$ | 6,494 | $ | (14,881 | ) | |||
|
|
|
|
|||||
Other comprehensive income (loss): |
||||||||
Foreign currency translation |
1,667 | 4,127 | ||||||
Change in fair value of interest-rate contracts |
1,754 | 1,266 | ||||||
Amortization of interest-rate contracts |
118 | 53 | ||||||
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|
|||||
Total other comprehensive income |
3,539 | 5,446 | ||||||
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|
|||||
Comprehensive income (loss) |
10,033 | (9,435 | ) | |||||
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|
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Comprehensive income (loss) attributable to non-controlling interests: |
||||||||
Allocation of net income |
(191 | ) | (176 | ) | ||||
Foreign currency translation |
250 | (323 | ) | |||||
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|
|
|||||
Total comprehensive income (loss) attributable to non-controlling interests |
59 | (499 | ) | |||||
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|
|||||
Total comprehensive income (loss) attributable to DDR |
$ | 10,092 | $ | (9,934 | ) | |||
|
|
|
|
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
CONSOLIDATED STATEMENT OF EQUITY
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2013
(Dollars in thousands)
(Unaudited)
DDR Equity | ||||||||||||||||||||||||||||||||||||
Preferred
Shares |
Common
Shares |
Paid-in
Capital |
Accumulated
Distributions in Excess of Net Income (Loss) |
Deferred
Compensation Obligation |
Accumulated
Other Comprehensive Income (Loss) |
Treasury
Stock at Cost |
Non-
Controlling Interests |
Total | ||||||||||||||||||||||||||||
Balance, December 31, 2012 |
$ | 405,000 | $ | 31,524 | $ | 4,629,257 | $ | (1,694,822 | ) | $ | 15,556 | $ | (27,925 | ) | $ | (16,452 | ) | $ | 24,322 | $ | 3,366,460 | |||||||||||||||
Issuance of common shares related to stock plans |
3 | 125 | 114 | 242 | ||||||||||||||||||||||||||||||||
Issuance of common shares for cash offering |
220 | 37,917 | 1,237 | 39,374 | ||||||||||||||||||||||||||||||||
Issuance of restricted stock |
(3,118 | ) | 44 | 3,074 | | |||||||||||||||||||||||||||||||
Vesting of restricted stock |
2,913 | (68 | ) | (2,418 | ) | 427 | ||||||||||||||||||||||||||||||
Stock-based compensation |
1,048 | 1,048 | ||||||||||||||||||||||||||||||||||
Contributions from non-controlling interests |
94 | 94 | ||||||||||||||||||||||||||||||||||
Distributions to non-controlling interests |
(277 | ) | (277 | ) | ||||||||||||||||||||||||||||||||
Dividends declared-common shares |
(42,784 | ) | (42,784 | ) | ||||||||||||||||||||||||||||||||
Dividends declared-preferred shares |
(7,030 | ) | (7,030 | ) | ||||||||||||||||||||||||||||||||
Comprehensive income |
6,303 | 3,789 | (59 | ) | 10,033 | |||||||||||||||||||||||||||||||
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Balance, March 31, 2013 |
$ | 405,000 | $ | 31,747 | $ | 4,668,142 | $ | (1,738,333 | ) | $ | 15,532 | $ | (24,136 | ) | $ | (14,445 | ) | $ | 24,080 | $ | 3,367,587 | |||||||||||||||
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE-MONTH PERIODS ENDED MARCH 31,
(Dollars in thousands)
(Unaudited)
2013 | 2012 | |||||||
Net cash flow provided by operating activities: |
$ | 53,296 | $ | 33,858 | ||||
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|
|||||
Cash flow from investing activities: |
||||||||
Proceeds from disposition of real estate |
36,068 | 17,114 | ||||||
Real estate developed or acquired, net of liabilities assumed |
(133,743 | ) | (83,797 | ) | ||||
Equity contributions to joint ventures |
(1,101 | ) | (3,749 | ) | ||||
Repayments of joint venture advances, net |
| 25 | ||||||
Return of investments in joint ventures |
1,558 | 2,801 | ||||||
Issuance of notes receivable |
| (75 | ) | |||||
Repayment of notes receivable |
11,453 | | ||||||
(Decrease) increase in restricted cash capital improvements |
(2,060 | ) | 2,971 | |||||
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|
|||||
Net cash flow used for investing activities: |
(87,825 | ) | (64,710 | ) | ||||
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|
|||||
Cash flow from financing activities: |
||||||||
Proceeds from (repayments of) revolving credit facilities, net |
43,160 | (67,898 | ) | |||||
Repayment of senior notes |
| (187,670 | ) | |||||
Proceeds from mortgages and other secured debt |
37,659 | 353,506 | ||||||
Repayment of term loans and mortgage debt |
(47,240 | ) | (52,360 | ) | ||||
Payment of debt issuance costs |
(4,068 | ) | (2,258 | ) | ||||
Proceeds from issuance of common shares, net of underwriting commissions and offering expenses of $226 in 2013 |
39,374 | (101 | ) | |||||
Repurchase of common shares in conjunction with equity award plans |
(2,244 | ) | (1,447 | ) | ||||
Contributions from non-controlling interests |
94 | 93 | ||||||
Distributions to non-controlling interests and redeemable operating partnership units |
(271 | ) | (6,553 | ) | ||||
Dividends paid |
(44,210 | ) | (29,128 | ) | ||||
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|
|||||
Net cash flow provided by financing activities: |
22,254 | 6,184 | ||||||
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|
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Cash and cash equivalents |
||||||||
Decrease in cash and cash equivalents |
(12,275 | ) | (24,668 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents |
(27 | ) | (450 | ) | ||||
Cash and cash equivalents, beginning of period |
31,174 | 41,206 | ||||||
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Cash and cash equivalents, end of period |
$ | 18,872 | $ | 16,088 | ||||
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Supplemental disclosure of non-cash investing and financing activities:
At March 31, 2013 and 2012, dividends payable were $49.8 million and $40.3 million, respectively. At March 31, 2013, accounts payable included $19.5 million for real estate asset expenditures. The foregoing transactions did not provide for or require the use of cash for the three-month periods ended March 31, 2013 or 2012.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
6
Notes to Condensed Consolidated Financial Statements
1. | NATURE OF BUSINESS AND FINANCIAL STATEMENT PRESENTATION |
DDR Corp. and its related real estate joint ventures and subsidiaries (collectively, the Company or DDR) are primarily engaged in the business of acquiring, owning, developing, redeveloping, expanding, leasing and managing shopping centers. In addition, the Company engages in the origination and acquisition of loans and debt securities, which are generally collateralized directly or indirectly by shopping centers. Unless otherwise provided, references herein to the Company or DDR include DDR Corp., its wholly-owned and majority-owned subsidiaries and its consolidated and unconsolidated joint ventures. The Companys tenant base primarily includes national and regional retail chains and local retailers. Consequently, the Companys credit risk is concentrated in the retail industry.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates.
Unaudited Interim Financial Statements
These financial statements have been prepared by the Company in accordance with generally accepted accounting principles for interim financial information and the applicable rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the results of the periods presented. The results of operations for the three-month periods ended March 31, 2013 and 2012, are not necessarily indicative of the results that may be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the Companys audited financial statements and notes thereto included in the Companys Annual Report on Form 10-K, as amended, for the year ended December 31, 2012.
Principles of Consolidation
The condensed consolidated financial statements include the results of the Company and all entities in which the Company has a controlling interest or has been determined to be the primary beneficiary of a variable interest entity (VIE). Investments in joint ventures that the Company does not control are accounted for under the equity method of accounting.
At March 31, 2013 and December 31, 2012, the Companys investments in consolidated real estate joint ventures in which the Company was deemed to be the primary beneficiary had total real estate assets of $189.5 million and $184.6 million, respectively, mortgages of $21.0 million and $21.5 million, respectively, and other liabilities of $1.2 million and $1.9 million, respectively.
7
New Accounting Standards Implemented
Presentation of Other Comprehensive Income
In February 2013, the Financial Accounting Standards Board (FASB) issued guidance on the presentation of comprehensive income. This guidance requires presentation of reclassification adjustments from other comprehensive income to net income in a single note or on the face of the financial statements. The effective date for this guidance was effective for the Company on January 1, 2013. This guidance did not materially impact the Companys consolidated financial statements.
2. | INVESTMENTS IN AND ADVANCES TO JOINT VENTURES |
At March 31, 2013 and December 31, 2012, the Company had ownership interests in various unconsolidated joint ventures that had an investment in 206 shopping center properties. Condensed combined financial information of the Companys unconsolidated joint venture investments is as follows (in thousands):
March 31, 2013 | December 31, 2012 | |||||||
Condensed Combined Balance Sheets |
||||||||
Land |
$ | 1,568,719 | $ | 1,569,548 | ||||
Buildings |
4,684,265 | 4,681,462 | ||||||
Fixtures and tenant improvements |
248,372 | 244,293 | ||||||
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|
|||||
6,501,356 | 6,495,303 | |||||||
Less: Accumulated depreciation |
(870,903 | ) | (833,816 | ) | ||||
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|
|||||
5,630,453 | 5,661,487 | |||||||
Land held for development and construction in progress |
409,242 | 348,822 | ||||||
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|
|||||
Real estate, net |
6,039,695 | 6,010,309 | ||||||
Cash and restricted cash |
435,297 | 467,200 | ||||||
Receivables, net |
101,823 | 99,098 | ||||||
Other assets |
402,977 | 427,014 | ||||||
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|
|||||
$ | 6,979,792 | $ | 7,003,621 | |||||
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|
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Mortgage debt |
$ | 4,269,039 | $ | 4,246,407 | ||||
Notes and accrued interest payable to DDR (A) |
147,885 | 143,338 | ||||||
Other liabilities |
302,202 | 342,614 | ||||||
|
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|
|
|||||
4,719,126 | 4,732,359 | |||||||
Redeemable preferred equity |
155,252 | 154,556 | ||||||
Accumulated equity |
2,105,414 | 2,116,706 | ||||||
|
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|
|||||
$ | 6,979,792 | $ | 7,003,621 | |||||
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|||||
Companys share of Accumulated Equity |
$ | 433,765 | $ | 432,500 | ||||
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|
(A) | The Company has amounts receivable from several joint ventures aggregating $35.1 million and $34.3 million at March 31, 2013 and December 31, 2012, respectively, which are included in Investments in and Advances to Joint Ventures on the condensed consolidated balance sheets. The remaining amounts were fully reserved by the Company in prior years. |
8
Three-Month Periods
Ended March 31, |
||||||||
2013 | 2012 | |||||||
Condensed Combined Statements of Operations |
||||||||
Revenues from operations |
$ | 186,911 | $ | 159,106 | ||||
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|
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Operating expenses |
65,026 | 52,082 | ||||||
Depreciation and amortization |
65,361 | 39,786 | ||||||
Interest expense |
62,119 | 55,094 | ||||||
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|||||
192,506 | 146,962 | |||||||
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(Loss) income before tax expense and discontinued operations |
(5,595 | ) | 12,144 | |||||
Income tax expense (primarily Sonae Sierra Brasil), net |
(6,615 | ) | (5,972 | ) | ||||
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|
|||||
(Loss) income from continuing operations |
(12,210 | ) | 6,172 | |||||
Discontinued operations: |
||||||||
Loss from discontinued operations |
(39 | ) | (1,902 | ) | ||||
Loss on disposition of real estate, net of tax |
(5,537 | ) | (139 | ) | ||||
|
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|
|||||
(Loss) income before gain on disposition of real estate, net |
(17,786 | ) | 4,131 | |||||
Gain on disposition of real estate, net |
479 | 13,852 | ||||||
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|
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Net (loss) income |
$ | (17,307 | ) | $ | 17,983 | |||
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Non-controlling interests |
(7,219 | ) | (8,934 | ) | ||||
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Net (loss) income attributable to unconsolidated joint ventures |
$ | (24,526 | ) | $ | 9,049 | |||
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Companys share of equity in net income of joint ventures |
$ | 3,049 | $ | 10,180 | ||||
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|
|||||
Amortization of basis differentials ( A ) |
(95 | ) | (1,932 | ) | ||||
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|||||
Equity in net income of joint ventures |
$ | 2,954 | $ | 8,248 | ||||
|
|
|
|
(A) | The difference between the Companys share of net (loss) income, as reported above, and the amounts included in the condensed consolidated statements of operations is attributable to the amortization of basis differentials, deferred gains and differences in gain (loss) on sale of certain assets due to the basis differentials and other than temporary impairment charges. The Company is not recording income or loss from those investments in which its investment basis is zero and the Company does not have the obligation or intent to fund any additional capital. |
Investments in and Advances to Joint Ventures include the following items, which represent the difference between the Companys investment and its share of all of the unconsolidated joint ventures underlying net assets (in millions):
March 31,
2013 |
December 31,
2012 |
|||||||
Companys share of accumulated equity |
$ | 433.8 | $ | 432.5 | ||||
Redeemable preferred equity and notes receivable from investments (A) |
155.7 | 155.0 | ||||||
Basis differentials |
(4.6 | ) | (5.9 | ) | ||||
Deferred development fees, net of portion related to the Companys interest |
(3.0 | ) | (2.9 | ) | ||||
Notes and accrued interest payable to DDR |
35.1 | 34.3 | ||||||
|
|
|
|
|||||
Investments in and Advances to Joint Ventures |
$ | 617.0 | $ | 613.0 | ||||
|
|
|
|
(A) | Primarily relates to a $155.3 million and $154.6 million of preferred equity investment in BRE DDR Retail Holdings, LLC at March 31, 2013 and December 31, 2012, respectively. |
9
Service fees and income earned by the Company through management, financing, leasing and development activities performed related to all of the Companys unconsolidated joint ventures are as follows (in millions):
Three-Month Periods
Ended March 31, |
||||||||
2013 | 2012 | |||||||
Management and other fees |
$ | 7.4 | $ | 6.8 | ||||
Development fees and leasing commissions |
2.9 | 2.0 | ||||||
Interest income |
4.5 | |
3. | ACQUISITIONS |
In the three-month period ended March 31, 2013, the Company acquired the following operating shopping centers at an aggregate cash consideration of $80.6 million:
Location |
Date Acquired |
Gross
Purchase Price (in millions) |
Face Value of
Mortgage Debt Assumed (in millions) |
|||||||
Oakland, CA |
February 2013 | $ | 41.1 | N/A | ||||||
Highland Village, TX |
March 2013 | 40.3 | N/A |
The Company accounted for these acquisitions utilizing the purchase method of accounting. The acquisition cost of the operating shopping centers was allocated as follows (in thousands):
Weighted Average
Amortization Period (in Years) |
||||||||
Land |
$ | 9,907 | N/A | |||||
Buildings |
60,378 | N/A | ||||||
Tenant improvements |
1,525 | N/A | ||||||
In-place leases (including lease origination costs and fair market value of leases) ( A ) |
6,915 | 9.5 | ||||||
Tenant relations |
3,480 | 9.3 | ||||||
|
|
|||||||
82,205 | ||||||||
Less: Below-market leases |
(840 | ) | 17.9 | |||||
|
|
|||||||
Net assets acquired |
$ | 81,365 | ||||||
|
|
(A) | Includes above-market value of leases of $1.9 million. |
The costs related to the acquisition of these assets, which were not material, were expensed as incurred and included in other income (expense), net.
10
4. | NOTES RECEIVABLE |
The Company has notes receivable, including accrued interest, that are collateralized by certain rights in development projects, partnership interests, sponsor guaranties and/or real estate assets, some of which are subordinate to other financings.
Notes receivable consist of the following (in millions):
March 31, 2013 | December 31, 2012 | |||||||
Loans receivable (A) |
$ | 49.4 | $ | 60.4 | ||||
Other notes |
3.0 | 3.1 | ||||||
Tax Increment Financing Bonds (TIF Bonds) (B) |
5.1 | 5.2 | ||||||
|
|
|
|
|||||
$ | 57.5 | $ | 68.7 | |||||
|
|
|
|
(A) | Amounts include loans in default and exclude notes receivable and advances from unconsolidated joint ventures at March 31, 2013 and December 31, 2012 (Note 2). |
(B) | Principal and interest are payable solely from the incremental real estate taxes, if any, generated by the respective shopping center and development project pursuant to the terms of the financing agreement. |
As of March 31, 2013 and December 31, 2012, the Company had five and six loans receivable outstanding, respectively. The following table reconciles the loans receivable on real estate for the three-month periods ended March 31, 2013 and 2012 (in thousands):
2013 | 2012 | |||||||
Balance at January 1 |
$ | 60,378 | $ | 84,541 | ||||
Additions: |
||||||||
New mortgage loans |
| 75 | ||||||
Interest |
123 | 793 | ||||||
Accretion of discount |
214 | 202 | ||||||
Deductions: |
||||||||
Payments of principal |
(11,310 | ) | | |||||
|
|
|
|
|||||
Balance at March 31 |
$ | 49,405 | $ | 85,611 | ||||
|
|
|
|
In addition, at March 31, 2013, the Company had one loan outstanding aggregating $9.8 million that matured in September 2011 and was more than 90 days past due. The Company is no longer accruing interest income on this note as no payments have been received. A loan loss reserve of $4.3 million was established in 2012 based on the estimated value of the underlying real estate collateral.
11
5. | OTHER ASSETS, NET |
Other assets consist of the following (in thousands):
March 31, 2013 | December 31, 2012 | |||||||
Intangible assets: |
||||||||
In-place leases (including lease origination costs and fair market value of leases), net |
$ | 68,745 | $ | 67,105 | ||||
Tenant relations, net |
63,105 | 62,175 | ||||||
|
|
|
|
|||||
Total intangible assets, net (A) |
131,850 | 129,280 | ||||||
Other assets: |
||||||||
Accounts receivable, net (B) |
113,934 | 126,228 | ||||||
Deferred charges, net |
41,581 | 42,498 | ||||||
Prepaid expenses |
25,128 | 12,469 | ||||||
Deposits |
10,284 | 10,580 | ||||||
Other assets |
30,443 | 29,821 | ||||||
|
|
|
|
|||||
Total other assets, net |
$ | 353,220 | $ | 350,876 | ||||
|
|
|
|
(A) | The Company recorded amortization expense of $6.7 million and $3.2 million for the three-month periods ended March 31, 2013 and 2012, respectively, related to these intangible assets. |
(B) | Includes straight-line rents receivable, net, of $59.4 million and $58.2 million at March 31, 2013 and December 31, 2012, respectively. |
6. | REVOLVING CREDIT FACILITIES AND TERM LOANS |
The following table discloses certain information regarding the Companys Revolving Credit Facilities (as defined below) and term loans (in millions):
Carrying Value at
March 31, 2013 |
Weighted-Average
Interest Rate at March 31, 2013 |
Maturity Date | ||||||||
Unsecured indebtedness: |
||||||||||
Unsecured Credit Facility |
$ | 190.5 | 1.7 | % | April 2017 | |||||
PNC Facility |
| N/A | April 2017 | |||||||
Unsecured Term Loan Tranche 1 |
50.0 | 2.3 | % | January 2017 | ||||||
Unsecured Term Loan Tranche 2 |
300.0 | 3.4 | % | January 2019 | ||||||
Secured indebtedness: |
||||||||||
Secured Term Loan |
400.0 | 2.0 | % | April 2017 |
Revolving Credit Facilities
The Company maintains an unsecured revolving credit facility with a syndicate of financial institutions, arranged by JP Morgan Securities, LLC and Wells Fargo Securities, LLC (the Unsecured Credit Facility), which was last amended in January 2013. The Unsecured Credit Facility provides for borrowings of up to $750 million, if certain financial covenants are maintained, and an accordion
12
feature for expansion of availability to $1.25 billion upon the Companys request, provided that new or existing lenders agree to the existing terms of the facility and increase their commitment level and the ability to extend the maturity for one year to April 2018 at the Companys option. The Unsecured Credit Facility includes a competitive bid option on periodic interest rates for up to 50% of the facility. The Unsecured Credit Facility also provides for an annual facility fee, which was 30 basis points on the entire facility at March 31, 2013. The Unsecured Credit Facility also allows for foreign currency-denominated borrowings. At March 31, 2013, the Company had US$4.7 million of Euro borrowings and US$25.7 million of Canadian dollar borrowings outstanding (Note 7).
The Company also maintains a $65 million unsecured revolving credit facility with PNC Bank, National Association, (the PNC Facility and, together with the Unsecured Credit Facility, the Revolving Credit Facilities). The PNC Facility was also amended in January 2013 to reflect terms consistent with those contained in the Unsecured Credit Facility.
The Companys borrowings under the Revolving Credit Facilities bear interest at variable rates at the Companys election, based on either (i) the prime rate plus a specified spread (0.40% at March 31, 2013), as defined in the respective facility, or (ii) LIBOR, plus a specified spread (1.40% at March 31, 2013). The specified spreads vary depending on the Companys long-term senior unsecured debt rating from Moodys Investors Service and Standard and Poors. The Company is required to comply with certain covenants relating to total outstanding indebtedness, secured indebtedness, maintenance of unencumbered real estate assets and fixed charge coverage. The Company was in compliance with these covenants at March 31, 2013.
Secured Term Loan
The Company maintains a collateralized term loan (the Secured Term Loan) with a syndicate of financial institutions, for which KeyBank National Association serves as the administrative agent, which was amended in January 2013. The Secured Term Loan includes an option to extend the maturity for one year to April 2018, at the Companys option. Borrowings under the Secured Term Loan bear interest at variable rates based on LIBOR, as defined in the loan agreement, plus a specified spread based on the Companys long-term senior unsecured debt rating (1.55% at March 31, 2013). The collateral for the Secured Term Loan is real estate assets, or investment interests in certain assets, that are already encumbered by first mortgage loans. The Company is required to comply with covenants similar to those contained in the Revolving Credit Facilities. The Company was in compliance with these covenants at March 31, 2013.
7. | FINANCIAL INSTRUMENTS |
Measurement of Fair Value
At March 31, 2013, the Company used pay-fixed interest rate swaps to manage its exposure to changes in benchmark interest rates (the Swaps). The estimated fair values were determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and volatility. The fair values of interest rate swaps are estimated using the market standard methodology
13
of netting the discounted fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of interest rates (forward curves) derived from observable market interest rate curves. In addition, credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, are incorporated in the fair values to account for potential nonperformance risk, including the Companys own nonperformance risk and the respective counterpartys nonperformance risk. The Company determined that the significant inputs used to value its derivatives fell within Level 2 of the fair value hierarchy.
Items Measured at Fair Value on a Recurring Basis
The following table presents information about the Companys financial assets and liabilities, which consist of interest rate swap agreements (included in Other Liabilities) and marketable securities (included in Other Assets) from investments in the Companys elective deferred compensation plan at March 31, 2013 and December 31, 2012, measured at fair value on a recurring basis as of March 31, 2013 and December 31, 2012, and indicates the fair value hierarchy of the valuation techniques used by the Company to determine such fair value (in millions):
Fair Value Measurements | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets (liabilities): |
||||||||||||||||
March 31, 2013 |
||||||||||||||||
Derivative financial instruments |
$ | | $ | (15.3 | ) | $ | | $ | (15.3 | ) | ||||||
Marketable securities |
$ | 3.0 | $ | | $ | | $ | 3.0 | ||||||||
December 31, 2012 |
||||||||||||||||
Derivative financial instruments |
$ | | $ | (17.1 | ) | $ | | $ | (17.1 | ) | ||||||
Marketable securities |
$ | 2.9 | $ | | $ | | $ | 2.9 |
The unrealized gain of $1.8 million included in other comprehensive income (loss) (OCI) is attributable to the net change in fair value during the three-month period ended March 31, 2013, related to derivative financial instruments, none of which were reported in the Companys condensed consolidated statements of operations because the swaps are documented and qualify as hedging instruments.
Other Fair Value Instruments
Investments in unconsolidated joint ventures are considered financial assets. See discussion of related fair value consideration in Note 12.
Cash and Cash Equivalents, Restricted Cash, Accounts Receivable, Accounts Payable, Accrued Expenses and Other Liabilities
The carrying amounts reported in the condensed consolidated balance sheets for these financial instruments approximated fair value because of their short-term maturities. The fair value of cash and cash equivalents and restricted cash are classified as Level 1 in the fair value hierarchy.
14
Notes Receivable and Advances to Affiliates
The fair value is estimated using a discounted cash flow analysis, in which the Company used unobservable inputs such as market interest rates determined by the loan to value and market capitalization rates related to the underlying collateral at which management believes similar loans would be made and classified as Level 3 in the fair value hierarchy. The fair value of these notes was approximately $250.5 million and $250.7 million at March 31, 2013 and December 31, 2012, respectively, as compared to the carrying amounts of $240.1 million and $250.4 million, respectively. The carrying value of the TIF bonds, which was $5.1 million and $5.2 million at March 31, 2013 and December 31, 2012, respectively, approximated their fair value.
Debt
The fair market value of senior notes, except convertible senior notes, is determined using the trading price of the Companys public debt. The fair market value for all other debt is estimated using a discounted cash flow technique that incorporates future contractual interest and principal payments and a market interest yield curve with adjustments for duration, optionality and risk profile including the Companys nonperformance risk and loan to value. The Companys senior notes, except convertible senior notes, and all other debt including convertible senior notes are classified as Level 2 and Level 3, respectively, in the fair value hierarchy.
Considerable judgment is necessary to develop estimated fair values of financial instruments. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments.
Debt instruments at March 31, 2013 and December 31, 2012, with carrying values that are different than estimated fair values, are summarized as follows (in thousands):
March 31, 2013 | December 31, 2012 | |||||||||||||||
Carrying
Amount |
Fair Value |
Carrying
Amount |
Fair Value | |||||||||||||
Senior notes |
$ | 2,149,724 | $ | 2,497,008 | $ | 2,147,097 | $ | 2,503,127 | ||||||||
Revolving Credit Facilities and term loans |
940,468 | 942,436 | 897,905 | 903,210 | ||||||||||||
Mortgage indebtedness |
1,263,900 | 1,314,789 | 1,274,141 | 1,324,969 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 4,354,092 | $ | 4,754,233 | $ | 4,319,143 | $ | 4,731,306 | |||||||||
|
|
|
|
|
|
|
|
Risk Management Objective of Using Derivatives
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its debt funding and, from time to time, through the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the values of which are determined by interest rates. The Companys derivative financial instruments are used to manage differences in the amount, timing and duration of the Companys known or expected cash receipts and its known or expected cash payments principally related to the Companys investments and borrowings.
15
The Company has interests in consolidated joint ventures that own real estate assets in Canada and Russia. The net assets of these subsidiaries are exposed to volatility in currency exchange rates. The Company uses non-derivative financial instruments to economically hedge a portion of this exposure. The Company manages its currency exposure related to the net assets of its Canadian and European subsidiaries through foreign currency-denominated debt agreements.
Cash Flow Hedges of Interest Rate Risk
The Companys objectives in using interest rate derivatives are to manage its exposure to interest rate movements. To accomplish this objective, the Company generally uses interest rate swaps as part of its interest rate risk management strategy. Swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
As of March 31, 2013 and December 31, 2012, the aggregate fair value of the Companys $632.5 million and $632.8 million notional amount of Swaps was a liability of $15.3 million and $17.1 million, respectively, which is included in Other Liabilities in the condensed consolidated balance sheets. The following table discloses certain information regarding the Companys ten outstanding interest rate swaps (not including the specified spreads):
Aggregate Notional
|
LIBOR Fixed
Rate |
Maturity Date | ||||||
$ | 100.0 | 1.0 | % | June 2014 | ||||
$ | 50.0 | 0.6 | % | June 2015 | ||||
$ | 100.0 | 0.5 | % | July 2015 | ||||
$ | 82.5 | 2.8 | % | September 2017 | ||||
$ | 100.0 | 0.9 | % | January 2018 | ||||
$ | 100.0 | 1.6 | % | February 2019 | ||||
$ | 100.0 | 1.5 | % | February 2019 |
All components of the Swaps were included in the assessment of hedge effectiveness. The Company expects that within the next 12 months it will reflect an increase to interest expense (and a corresponding decrease to earnings) of approximately $6.9 million, which includes amortization of previously settled interest rate contracts.
The effective portion of changes in the fair value of derivatives designated, and that qualify, as cash flow hedges is recorded in accumulated OCI and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During 2013, such derivatives were used to hedge the forecasted variable cash flows associated with existing or probable future obligations. The ineffective portion of the change in the fair value of derivatives is recognized directly in earnings. During the three-month periods ended March 31, 2013 and 2012, the amount of hedge ineffectiveness recorded was not material.
16
The table below presents the fair value of the Companys Swaps as well as their classification on the condensed consolidated balance sheets as of March 31, 2013 and December 31, 2012, as follows (in millions):
Liability Derivatives |
||||||||||||
March 31, 2013 |
December 31, 2012 |
|||||||||||
Derivatives Designated as Hedging
|
Balance Sheet Location |
Fair
Value |
Balance Sheet Location |
Fair
Value |
||||||||
Interest rate products |
Other liabilities | $ | 15.3 | Other liabilities | $ | 17.1 |
The effect of the Companys derivative instruments on net income (loss) is as follows (in millions):
The Company is exposed to credit risk in the event of non-performance by the counterparties to the Swaps if the derivative position has a positive balance. The Company believes it mitigates its credit risk by entering into swaps with major financial institutions. The Company continually monitors and actively manages interest costs on its variable-rate debt portfolio and may enter into additional interest rate swap positions or other derivative interest rate instruments based on market conditions. The Company has not entered, and does not plan to enter, into any derivative financial instruments for trading or speculative purposes.
Credit Risk-Related Contingent Features
The Company has agreements with each of its Swap counterparties that contain a provision whereby if the Company defaults on certain of its unsecured indebtedness, the Company could also be declared in default on its Swaps, resulting in an acceleration of payment under the Swaps.
Net Investment Hedges
The Company is exposed to foreign exchange risk from its consolidated and unconsolidated international investments. The Company has foreign currency-denominated debt agreements that expose the Company to fluctuations in foreign exchange rates. The Company has designated these foreign currency borrowings as a hedge of its net investment in its Canadian and European subsidiaries. Changes in the spot rate value are recorded as adjustments to the debt balance with offsetting unrealized gains and losses recorded in OCI. Because the notional amount of the non-derivative instrument substantially matches the portion of the net investment designated as being hedged, and the non-derivative instrument is denominated in the functional currency of the hedged net investment, the hedge ineffectiveness recognized in earnings is not material.
17
The effect of the Companys net investment hedge derivative instruments on OCI is as follows (in millions):
Amount of Gain (Loss)
Recognized in OCI on Derivatives (Effective Portion) |
||||||||
Three-Month Periods Ended
March 31, |
||||||||
Derivatives in Net Investment Hedging Relationships |
2013 | 2012 | ||||||
Euro denominated revolving credit facilities designated as a hedge of the Companys net investment in its subsidiary |
$ | 0.1 | $ | (0.1 | ) | |||
|
|
|
|
|||||
Canadian dollar denominated revolving credit facilities designated as a hedge of the Companys net investment in its subsidiaries |
$ | 0.4 | $ | (1.3 | ) | |||
|
|
|
|
8. | COMMITMENTS AND CONTINGENCIES |
Legal Matters
Coventry II
The Company is a party to various joint ventures with the Coventry II Fund, through which 10 existing or proposed retail properties, along with a portfolio of former Service Merchandise locations, were acquired at various times from 2003 through 2006. The properties were acquired by the joint ventures as value-add investments, with major renovation and/or ground-up development contemplated for many of the properties. The Company was generally responsible for day-to-day management of the properties through December 2011. On November 4, 2009, Coventry Real Estate Advisors L.L.C., Coventry Real Estate Fund II, L.L.C. and Coventry Fund II Parallel Fund, L.L.C. (collectively, Coventry) filed suit against the Company and certain of its affiliates and officers in the Supreme Court of the State of New York, County of New York. The complaint alleges that the Company: (i) breached contractual obligations under a co-investment agreement and various joint venture limited liability company agreements, project development agreements and management and leasing agreements; (ii) breached its fiduciary duties as a member of various limited liability companies; (iii) fraudulently induced the plaintiffs to enter into certain agreements; and (iv) made certain material misrepresentations. The complaint also requests that a general release made by Coventry in favor of the Company in connection with one of the joint venture properties be voided on the grounds of economic duress. The complaint seeks compensatory and consequential damages in an amount not less than $500 million, as well as punitive damages.
In response to this action, the Company filed a motion to dismiss the complaint or, in the alternative, to sever the plaintiffs claims. In June 2010, the court granted the motion in part (which was affirmed on appeal), dismissing Coventrys claim that the Company breached a fiduciary duty owed to Coventry. The Company also filed an answer to the complaint, and asserted various counterclaims against Coventry. On October 10, 2011, the Company filed a motion for summary judgment, seeking dismissal of all of Coventrys remaining claims. On April 18, 2013, the court issued an order granting the majority of the Companys motion. Among other findings, the order dismissed all claims of fraud and misrepresentation against the Company and its officers, dismissed all
18
claims for breach of the joint venture agreements and development agreements, and dismissed Coventrys claim of economic duress. The courts decision denied the Companys motion solely with respect to several claims for breach of contract under the Companys prior management agreements in connection with certain assets.
The Company believes that the allegations in the lawsuit are without merit and that it has strong defenses against this lawsuit. The Company will continue to vigorously defend itself against the allegations contained in the complaint. This lawsuit is subject to the uncertainties inherent in the litigation process and, therefore, no assurance can be given as to its ultimate outcome and no loss provision has been recorded in the accompanying financial statements because a loss contingency is not deemed probable or estimable. However, based on the information presently available to the Company, the Company does not expect that the ultimate resolution of this lawsuit will have a material adverse effect on the Companys financial condition, results of operations or cash flows.
Contract Termination
In January 2008, the Company entered into a Services Agreement (the Agreement) with Oxford Building Services, Inc. (Oxford). Oxfords obligations under the Agreement were guaranteed by Control Building Services, Inc. (Control), an affiliate of Oxford. The Agreement required that Oxford identify and contract directly with various service providers (Vendors) to provide maintenance, repairs, supplies and a variety of on-site services to certain properties in the Companys portfolio, in exchange for which Oxford would pay such Vendors for the services. Under the Agreement, the Company remitted funds to Oxford to pay the Vendors under the Vendors contracts with Oxford.
On or about January 23, 2013, Oxford advised the Company that approximately $11 million paid by the Company to Oxford for the sole purpose of paying various Vendors had instead been used to repay commercial financing obligations incurred by Oxford and its affiliates to a third-party lender. As a result, Oxford had insufficient funds to pay the Vendors in accordance with the Agreement. On January 28, 2013, the Company terminated the Agreement based upon Oxfords violations of the Agreement principally due to its insolvency. On February 26, 2013, Oxford and several affiliates filed petitions for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of New Jersey (Case No. 13-13821).
In its initial filings in the bankruptcy case, Oxford has claimed that the Company refused to pay Oxford approximately $5 million allegedly due and owing to Vendors for work performed at the Companys properties prior to the termination of the Agreement. Further, Oxford threatened to commence litigation against the Company to recover the alleged amounts owed should a consensual solution not be reached. The Company denies that any sums are due to Oxford, and if any such claim is filed, the Company will vigorously defend against it. Furthermore, as a result of the funds previously paid by the Company to Oxford, the Company also denies that any sums are due from the Company to any Vendors, and if any such claim is made, the Company will vigorously defend against it. On March 18, 2013, the Company filed suit in the Court of Common Pleas, Cuyahoga County, Ohio, against Control, Control Equity Group, Inc. (the non-bankrupt parent company of Oxford) and the individual principals of Oxford. The suit asserts claims for, among other things, breach of the Control guaranty, fraud, conversion and civil conspiracy.
19
Other
In addition to the litigation discussed above, the Company and its subsidiaries are subject to various legal proceedings, which, taken together, are not expected to have a material adverse effect on the Company. The Company is also subject to a variety of legal actions for personal injury or property damage arising in the ordinary course of its business, most of which are covered by insurance. While the resolution of all matters cannot be predicted with certainty, management believes that the final outcome of such legal proceedings and claims will not have a material adverse effect on the Companys liquidity, financial position or results of operations.
9. | EQUITY |
Common Shares
In March 2013, the Company sold 2.3 million of its common shares through its continuous equity program. The Company generated gross proceeds of $40.0 million for the three-month period ended March 31, 2013, at a weighted-average price of $17.57 per share. The net proceeds were used to acquire shopping center assets (Note 3).
Common share dividends declared were $0.135 and $0.12 per share for the three-month periods ended March 31, 2013 and 2012, respectively.
2013 Value Sharing Equity Program
On December 31, 2012, the Company adopted the 2013 Value Sharing Equity Program (2013 VSEP), which granted awards to certain officers of the Company on January 1, 2013. 2013 VSEP awards, if earned, may result in the granting of common shares of the Company to participants on future measurement dates over three years, subject to an additional time-based vesting schedule. As a result, in general, the total compensation available to participants under the 2013 VSEP, if any, will be fully earned only after seven years (the three-year performance period and the final four-year time-based vesting period).
The 2013 VSEP is designed to allow DDR to reward participants for superior financial performance and allow them to share in value created (as defined below), based upon (1) increases in DDRs adjusted market capitalization over pre-established periods of time and (2) increases in relative total shareholder return of DDR as compared to the performance of the FTSE NAREIT Equity REITs Total Return Index for the FTSE International Limited NAREIT U.S. Real Estate Index Series (the NAREIT Index). Under the 2013 VSEP, participants are granted two types of performance-based awards a relative performance award and an absolute performance award that, if earned, are settled with DDR common shares that are generally subject to additional time-based vesting requirements for a period of four years.
Absolute Performance Awards. Under the absolute performance awards, on five specified measurement dates (occurring on December 31, 2013 and every six months thereafter through December 31, 2015), DDR will measure the Value Created during the period between the start of the 2013 VSEP and the applicable measurement date. Value Created is measured for each period for the absolute performance awards as the increase in DDRs market capitalization (i.e. the product of
20
DDRs five-day trailing average share price as of each measurement date (price-only appreciation, not total shareholder return) and the number of shares outstanding as of the measurement date), as adjusted for equity issuances and/or equity repurchases, between the start of the 2013 VSEP and the applicable measurement date. The share price used for purposes of determining Value Created for the absolute performance awards during any measurement period is capped based on an 8.0% per year compound annual growth rate for DDR shares from the start of the 2013 VSEP through the end of 2015 (the Maximum Ending Share Price).
Each participant has been assigned a percentage share of the Value Created for the absolute performance awards, but the total share of Value Created for all participants for the absolute performance awards is capped at $18.0 million (the aggregate percentage share for all participants for the absolute performance awards is 1.4133%). As a result, each participants total share of Value Created for the absolute performance awards is capped at an individual maximum limit. After the first measurement date, each participant will earn DDR common shares with an aggregate value equal to two-sixths of the participants percentage share of the Value Created for this award. After each of the next three measurement dates, each participant will earn DDR common shares with an aggregate value equal to three-sixths, then four-sixths, and then five-sixths, respectively, of the participants percentage share of the Value Created for this award. After the final measurement date (or, if earlier, upon a change in control, as defined in the 2013 VSEP), each participant will earn DDR common shares with an aggregate value equal to the participants full percentage share of the Value Created. In addition, for each measurement date, the number of DDR common shares earned by a participant will be reduced by the number of DDR common shares previously earned by the participant for prior measurement periods.
Relative Performance Awards. Under the relative performance awards, on December 31, 2015 (or, if earlier, upon a change in control), DDR will compare its dividend-adjusted share price performance during the period between the start of the 2013 VSEP and December 31, 2015, to the performance of a comparable hypothetical investment in the NAREIT Index (in each case as adjusted for equity issuances and/or equity repurchases during the same period). No relative performance awards will be earned by participants unless and until the absolute performance awards have already been earned by DDR achieving its Maximum Ending Share Price, and thus achieving maximum performance for the absolute performance awards.
If DDRs relative performance exceeds the NAREIT Index, then the relative performance awards may be earned provided certain conditions are met. First, DDRs five-day trailing average share price as of December 31, 2015, must be equal to or exceed the Maximum Ending Share Price. Second, the participant must be employed with DDR on the measurement date for the relative performance awards. If, after satisfaction of those conditions, DDRs relative performance exceeds the NAREIT Index performance (subject to a not-less-than-minimum level of NAREIT Index performance), then each participant will earn DDR common shares based on the participants full percentage share of the Value Created for the relative performance awards, which percentage shares have been assigned by DDR. The total share of Value Created for all participants for the relative performance awards is capped at $36.0 million (the aggregate percentage share for all participants for the relative performance awards is 1.9337%), and, as a result, each participants total share of Value Created for the relative performance awards is capped at an individual maximum limit.
21
Unless otherwise determined by DDR, the DDR shares earned under the absolute performance awards and relative performance awards will generally be subject to additional time-based restrictions that are expected to vest in 20% annual increments beginning on the date of grant and on each of the first four anniversaries of the date of grant. The fair value of the 2013 VSEP grants was estimated on the date of grant using a Monte Carlo approach model based on the following assumptions:
Range | ||||
Risk-free interest rate |
0.36 | % | ||
Weighted-average dividend yield |
4.0 | % | ||
Expected life |
3 years | |||
Expected volatility |
18-24 | % |
As of March 31, 2013, $8.7 million of total unrecognized compensation costs are related to the two market metric components associated with the awards granted under the 2013 VSEP and are expected to be recognized over the seven-year term, which includes the vesting period.
10. | OTHER COMPREHENSIVE INCOME (LOSS) |
The changes in accumulated other comprehensive income (loss) by component are as follows:
Gains and
Losses on Cash Flow Hedges |
Foreign
Currency Items |
Total | ||||||||||
Beginning balance |
$ | (22,247 | ) | $ | (5,678 | ) | $ | (27,925 | ) | |||
|
|
|
|
|
|
|||||||
Other comprehensive income (loss) before reclassifications |
1,754 | 1,917 | 3,671 | |||||||||
Amounts reclassified from accumulated other comprehensive income (loss) (A) |
118 | | 118 | |||||||||
|
|
|
|
|
|
|||||||
Net current-period other comprehensive income |
1,872 | 1,917 | 3,789 | |||||||||
|
|
|
|
|
|
|||||||
Ending balance |
$ | (20,375 | ) | $ | (3,761 | ) | $ | (24,136 | ) | |||
|
|
|
|
|
|
(A) | Primarily reflects amortization classified in Interest Expense of amounts previously recognized in Accumulated Other Comprehensive Income in the Companys condensed consolidated statement of operations for the three months ended March 31, 2013. |
11. | FEE AND OTHER INCOME |
Fee and other income from continuing operations was composed of the following (in millions):
Three-Month Periods
Ended March 31, |
||||||||
2013 | 2012 | |||||||
Management, development, financing and other fee income |
$ | 10.8 | $ | 11.7 | ||||
Ancillary and other property income |
5.7 | 6.1 | ||||||
Lease termination fees |
0.5 | 0.5 | ||||||
Other miscellaneous |
0.1 | 0.1 | ||||||
|
|
|
|
|||||
Total fee and other income |
$ | 17.1 | $ | 18.4 | ||||
|
|
|
|
22
12. | IMPAIRMENT CHARGES AND IMPAIRMENT OF JOINT VENTURE INVESTMENTS |
The Company recorded impairment charges during the three-month periods ended March 31, 2013 and 2012, based on the difference between the carrying value of the assets or investments and the estimated fair market value as follows (in millions):
Three-Month Periods
Ended March 31, |
||||||||
2013 | 2012 | |||||||
Assets marketed for sale (A ) |
$ | 6.9 | $ | 1.5 | ||||
|
|
|
|
|||||
Total continuing operations |
$ | 6.9 | $ | 1.5 | ||||
|
|
|
|
|||||
Sold assets or assets held for sale |
0.8 | 15.8 | ||||||
|
|
|
|
|||||
Total discontinued operations |
$ | 0.8 | $ | 15.8 | ||||
Joint venture investments |
| 0.6 | ||||||
|
|
|
|
|||||
Total impairment charges |
$ | 7.7 | $ | 17.9 | ||||
|
|
|
|
(A) | The impairment charges were triggered primarily due to the Companys marketing of these assets for sale and managements assessment of the likelihood and timing of a potential transaction. |
Items Measured at Fair Value on a Non-Recurring Basis
For a description of the Companys methodology on determining fair value, refer to Note 11 of the Companys Financial Statements filed on its Annual Report on Form 10-K, as amended, for the year ended December 31, 2012.
The following table presents information about the Companys impairment charges on both financial and nonfinancial assets that were measured on a fair value basis for the three-month period ended March 31, 2013 and the year ended December 31, 2012. The table also indicates the fair value hierarchy of the valuation techniques used by the Company to determine such fair value (in millions):
Fair Value Measurements | ||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total |
Total
Losses |
||||||||||||||||
March 31, 2013 |
||||||||||||||||||||
Long-lived assets held and used and held for sale |
$ | | $ | | $ | 29.3 | $ | 29.3 | $ | 7.7 | ||||||||||
December 31, 2012 |
||||||||||||||||||||
Long-lived assets held and used and held for sale |
| | 180.7 | 180.7 | 126.5 | |||||||||||||||
Unconsolidated joint venture investments |
| | 4.7 | 4.7 | 26.7 | |||||||||||||||
Deconsolidated joint venture investment |
| | 56.1 | 56.1 | 9.3 |
23
The following table presents quantitative information about the significant unobservable inputs used by the Company to determine the fair value of non-recurring items (in millions):
(A) | These fair value measurements were developed by third-party sources (including offers and comparable sales values), subject to the Companys corroboration for reasonableness. The Company does not have access to certain unobservable inputs used by these third parties to determine these estimated fair values. |
(B) | Vacant space in certain assets was valued on a price per square foot. |
(C) | The fair value measurements also includes consideration of the fair market value of debt. These inputs are further described in the debt section of Note 7. |
(D) | Related to loss reported in Change in Control and Sale of Interests recorded in 2012. |
24
13. | DISCONTINUED OPERATIONS |
The Company sold seven properties during the three-month period ended March 31, 2013, and had two properties held for sale at March 31, 2013. In addition, the Company sold 29 properties in 2012. These asset sales are included in discontinued operations for the three-month periods ended March 31, 2013 and 2012. The balance sheet related to the assets held for sale and the operating results related to assets sold or designated as held for sale as of March 31, 2013, are as follows (in thousands):
March 31, 2013 | ||||
Land |
$ | 3,347 | ||
Buildings |
4,976 | |||
Fixtures and tenant improvements |
60 | |||
|
|
|||
8,383 | ||||
Less: Accumulated depreciation |
(1,128 | ) | ||
|
|
|||
Total assets held for sale |
$ | 7,255 | ||
|
|
Three-Month Periods Ended March 31, |
||||||||
2013 | 2012 | |||||||
Revenues |
$ | 777 | $ | 6,157 | ||||
|
|
|
|
|||||
Operating expenses |
| 2,943 | ||||||
Impairment charges |
753 | 15,830 | ||||||
Interest, net |
106 | 1,367 | ||||||
Depreciation and amortization |
209 | 1,817 | ||||||
|
|
|
|
|||||
1,068 | 21,957 | |||||||
|
|
|
|
|||||
Loss from discontinued operations |
(291 | ) | (15,800 | ) | ||||
Gain on disposition of real estate, net of tax |
601 | 70 | ||||||
|
|
|
|
|||||
Income (loss) from discontinued operations |
$ | 310 | $ | (15,730 | ) | |||
|
|
|
|
25
14. | EARNINGS PER SHARE |
The following table calculates the Companys earnings per share (EPS) and provides a reconciliation of net (loss) income from continuing operations and the number of common shares used in the computations of basic EPS, which utilizes the weighted-average number of common shares outstanding without regard to dilutive potential common shares, and diluted EPS, which includes all such shares (in thousands, except per share amounts):
Three-Month Periods Ended March 31, |
||||||||
2013 | 2012 | |||||||
Basic Earnings: |
||||||||
Continuing Operations: |
||||||||
Income from continuing operations |
$ | 6,241 | $ | 184 | ||||
Plus: (Loss) gain on disposition of real estate |
(57 | ) | 665 | |||||
Plus: Loss attributable to non-controlling interests |
(191 | ) | (176 | ) | ||||
|
|
|
|
|||||
Income from continuing operations attributable to DDR |
5,993 | 673 | ||||||
Preferred dividends |
(7,030 | ) | (6,967 | ) | ||||
|
|
|
|
|||||
BasicLoss from continuing operations attributable to DDR common shareholders |
(1,037 | ) | (6,294 | ) | ||||
Less: Earnings attributable to unvested shares and operating partnership units |
(364 | ) | (292 | ) | ||||
|
|
|
|
|||||
BasicLoss from continuing operations |
$ | (1,401 | ) | $ | (6,586 | ) | ||
Discontinued Operations: |
||||||||
BasicIncome (loss) from discontinued operations |
310 | (15,730 | ) | |||||
|
|
|
|
|||||
BasicNet loss attributable to DDR common shareholders after allocation to participating securities |
$ | (1,091 | ) | $ | (22,316 | ) | ||
|
|
|
|
|||||
Diluted Earnings: |
||||||||
Continuing Operations: |
||||||||
BasicLoss from continuing operations |
$ | (1,037 | ) | $ | (6,294 | ) | ||
Less: Earnings attributable to unvested shares and operating partnership units |
(364 | ) | (292 | ) | ||||
|
|
|
|
|||||
DilutedLoss from continuing operations |
(1,401 | ) | (6,586 | ) | ||||
Discontinued Operations: |
||||||||
BasicIncome (loss) from discontinued operations |
310 | (15,730 | ) | |||||
|
|
|
|
|||||
DilutedNet loss attributable to DDR common shareholders after allocation to participating securities |
$ | (1,091 | ) | $ | (22,316 | ) | ||
|
|
|
|
|||||
Number of Shares: |
||||||||
Basic and DilutedAverage shares outstanding |
313,231 | 275,214 | ||||||
|
|
|
|
|||||
Basic Earnings Per Share: |
||||||||
Loss from continuing operations attributable to DDR common shareholders |
$ | 0.00 | $ | (0.02 | ) | |||
Income (loss) from discontinued operations attributable to DDR common shareholders |
0.00 | (0.06 | ) | |||||
|
|
|
|
|||||
Net loss attributable to DDR common shareholders |
$ | 0.00 | $ | (0.08 | ) | |||
|
|
|
|
|||||
Dilutive Earnings Per Share: |
||||||||
Loss from continuing operations attributable to DDR common shareholders |
$ | 0.00 | $ | (0.02 | ) | |||
Income (loss) from discontinued operations attributable to DDR common shareholders |
0.00 | (0.06 | ) | |||||
|
|
|
|
|||||
Net loss attributable to DDR common shareholders |
$ | 0.00 | $ | (0.08 | ) | |||
|
|
|
|
The following potentially dilutive securities are considered in the calculation of EPS as described below:
Potentially dilutive Securities:
|
Options to purchase 2.8 million and 2.9 million common shares were outstanding at March 31, 2013 and 2012, respectively. These outstanding options were not considered in the computation of diluted EPS for all periods presented, as the options were anti-dilutive due to the Companys loss from continuing operations. |
26
|
The exchange into common shares associated with operating partnership units was not included in the computation of diluted shares outstanding for all periods presented because the effect of assuming conversion was anti-dilutive. |
|
The Companys senior convertible notes due 2040, which are convertible into common shares of the Company with a conversion price of $15.65 at March 31, 2013, were not included in the computation of diluted EPS for the three-month periods ended March 31, 2013 and 2012, because the Companys common share price did not exceed 125% of the conversion price in these periods and would therefore be anti-dilutive. The Companys senior convertible notes due 2012, which were convertible into common shares of the Company, were not included in the computation of diluted EPS for the three-month period ended March 31, 2012, because the Companys common share price did not exceed the conversion price in this period and would therefore be anti-dilutive. The senior convertible notes due 2012 were repaid at maturity in March 2012. In addition, the purchase option related to this debt issuance was not included in the computation of diluted EPS for the three-month period ended March 31, 2012, as the purchase option was anti-dilutive. |
|
Shares subject to issuance under the Companys 2013 VSEP were not considered in the computation of diluted EPS for the three-month period ended March 31, 2013, as they were anti-dilutive due to the Companys loss from continuing operations (Note 9). Shares subject to issuance under the Companys 2009 VSEP were not considered in the computation of diluted EPS for the three-month period ended March 31, 2012, as they were anti-dilutive due to the Companys loss from continuing operations. The final measurement date for the 2009 VSEP was December 31, 2012. |
|
The 18,975,000 common shares that were subject to the forward equity agreements entered into in January 2012 were not included in the computation of diluted EPS using the treasury stock method for the three-month period ended March 31, 2012, as they were anti-dilutive due to the Companys loss from continuing operations. The Company settled the forward equity agreements in June 2012. |
15. | SEGMENT INFORMATION |
The Company has three reportable operating segments: shopping centers, loan investments and Brazil equity investment. Each consolidated shopping center is considered a separate operating segment; however, each shopping center on a stand-alone basis represents less than 10% of the revenues, profit or loss, and assets of the combined reported operating segment and meets the majority of the aggregation criteria under the applicable standard.
27
The tables below present information about the Companys reportable operating segments and reflect the impact of discontinued operations (Note 13) (in thousands):
Three-Month Period Ended March 31, 2013 | ||||||||||||||||||||
Shopping
Centers |
Loan
Investments |
Brazil
Equity
Investment (A) |
Other | Total | ||||||||||||||||
Total revenues |
$ | 210,832 | $ | 5 | $ | 210,837 | ||||||||||||||
Operating expenses ( B ) |
(68,375 | ) | (150 | ) | (68,525 | ) | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net operating income (loss) |
142,457 | (145 | ) | 142,312 | ||||||||||||||||
Depreciation and amortization |
(68,980 | ) | (68,980 | ) | ||||||||||||||||
Interest income |
7,877 | 7,877 | ||||||||||||||||||
Other income (expense), net |
$ | (2,901 | ) | (2,901 | ) | |||||||||||||||
Unallocated expenses ( C ) |
(75,021 | ) | (75,021 | ) | ||||||||||||||||
Equity in net (loss) income of joint ventures |
(1,330 | ) | $ | 4,284 | 2,954 | |||||||||||||||
|
|
|||||||||||||||||||
Income from continuing operations |
$ | 6,241 | ||||||||||||||||||
|
|
|||||||||||||||||||
As of March 31, 2013: |
||||||||||||||||||||
Total gross real estate assets |
$ | 8,715,170 | $ | 8,715,170 | ||||||||||||||||
|
|
|
|
|||||||||||||||||
Notes receivable, net |
$ | 236,630 | (D) | $ | (179,072 | ) ( D ) | $ | 57,558 | ||||||||||||
|
|
|
|
|
|
Three-Month Period Ended March 31, 2012 | ||||||||||||||||||||
Shopping
Centers |
Loan
Investments |
Brazil
Equity
Investment (A) |
Other | Total | ||||||||||||||||
Total revenues |
$ | 190,577 | $ | 7 | $ | 190,584 | ||||||||||||||
Operating expenses ( B ) |
(59,103 | ) | (133 | ) | (59,236 | ) | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net operating income (loss) |
131,474 | (126 | ) | 131,348 | ||||||||||||||||
Depreciation and amortization |
(58,779 | ) | (58,779 | ) | ||||||||||||||||
Interest income |
1,841 | 1,841 | ||||||||||||||||||
Other income (expense), net |
$ | (1,602 | ) | (1,602 | ) | |||||||||||||||
Unallocated expenses ( C ) |
(80,312 | ) | (80,312 | ) | ||||||||||||||||
Equity in net (loss) income of joint ventures |
(659 | ) | $ | 8,907 | 8,248 | |||||||||||||||
Impairment of joint venture investments |
(560 | ) | ||||||||||||||||||
|
|
|||||||||||||||||||
Income from continuing operations |
$ | 184 | ||||||||||||||||||
|
|
|||||||||||||||||||
As of March 31, 2012: |
||||||||||||||||||||
Total gross real estate assets |
$ | 8,234,810 | $ | 47,511 | $ | 8,282,321 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Notes receivable, net |
$ | 85,611 | $ | 9,493 | $ | 95,104 | ||||||||||||||
|
|
|
|
|
|
(A) | The carrying value of the Brazil Equity Investment is not a measure used by executive management for purposes of decision making related to asset allocation or performance assessment of this segment. |
(B) | Includes impairment charges of $6.9 million and $1.5 million for the three-month periods ended March 31, 2013 and 2012, respectively. |
(C) | Unallocated expenses consist of general and administrative expenses, interest expense, loss/gain on debt retirement, and tax benefit/expense as listed in the condensed consolidated statements of operations. |
(D) | Amount includes loans to affiliates classified in Investments in and Advances to Joint Ventures on the condensed consolidated balance sheet. |
28
16. | SUBSEQUENT EVENTS |
In April 2013, the Company issued $150.0 million of its newly designated 6.250% Class K Cumulative Redeemable Preferred Shares (the Class K Preferred Shares) at a price of $500.00 per Class K Preferred Share (or $25.00 per depositary share). In addition, the Company redeemed in May 2013, $150.0 million of its $205.0 million of 7.375% Class H Cumulative Redeemable Preferred Shares (the Class H Preferred Shares) at a redemption price of $500.00 per Class H Preferred Share (or $25.00 per depositary share) plus accrued and unpaid dividends of $2.2535 per Class H Preferred Share (or $0.1127 per depositary share). The proceeds from the issuance of Class K Preferred Shares were used to redeem the $150.0 million portion of Class H Preferred Shares. The Company expects to record a non-cash charge of $5.2 million to net income attributable to common shareholders in the second quarter of 2013 relating to the prorated write-off of the Class H Preferred Shares original issuance costs.
In April 2013, the Company acquired its partners 85% interest in five prime power centers for $93.9 million. The Company funded its investment primarily with proceeds from the issuance of common shares, proceeds from asset sales and corporate debt. Upon closing, these prime power centers will be unencumbered. The Company acquired its partners interest in The Walk at Highwoods Preserve (Tampa, FL), Douglasville Pavilion (Atlanta, GA), Commonwealth Center and Chesterfield Crossing (Richmond, VA), and Jefferson Plaza (Norfolk, VA).
In April 2013, the Company issued 2.5 million common shares at a weighted-average price of $17.83 per share, generating gross proceeds of $45.0 million.
29
Item 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) provides readers with a perspective from management on the Companys financial condition, results of operations, liquidity and other factors that may affect the Companys future results. The Company believes it is important to read the MD&A in conjunction with its Annual Report on Form 10-K for the year ended December 31, 2012, as amended, as well as other publicly available information.
Executive Summary
The Company is a self-administered and self-managed Real Estate Investment Trust (REIT) in the business of acquiring, owning, developing, redeveloping, expanding, leasing and managing shopping centers. In addition, the Company engages in the origination and acquisition of loans and debt securities collateralized directly or indirectly by shopping centers. As of March 31, 2013, the Companys portfolio consisted of 445 shopping centers (including 206 shopping centers owned through unconsolidated joint ventures and three shopping centers that are otherwise consolidated by the Company) in which the Company had an economic interest. These properties consist of shopping centers, lifestyle centers and enclosed malls owned in the United States, Puerto Rico and Brazil. At March 31, 2013, the Company owned more than 115 million total square feet of gross leasable area (GLA), which includes all of the aforementioned properties. These amounts do not include 29 assets that the Company has not managed since January 1, 2012. At March 31, 2013, the aggregate occupancy of the Companys operating shopping center portfolio in which the Company has an economic interest was 91.3%, as compared to 89.8% at March 31, 2012. The Company owned 420 shopping centers (including 172 shopping centers owned through unconsolidated joint ventures and two that were otherwise consolidated by the Company) and four office properties at March 31, 2012. The average annualized base rent per occupied square foot was $13.74 at March 31, 2013, as compared to $13.66 at December 31, 2012 and $14.08 at March 31, 2012.
Net loss attributable to DDR common shareholders for the three-month period ended March 31, 2013 was $0.7 million, or $0.00 per share (basic and diluted), compared to net loss attributable to DDR common shareholders of $22.0 million, or $0.08 per share (basic and diluted), for the prior-year period. Funds from operations attributable to DDR common shareholders (FFO) for the three-month period ended March 31, 2013, was $82.5 million, compared to $59.7 million for the prior-year period. The increase in FFO for the three-month period ended March 31, 2013, primarily was due to organic growth and shopping center acquisitions, as well as the loss on debt retirement recorded in the first quarter of 2012 related to the Companys repurchase of a portion of its 9.625% unsecured senior notes.
First Quarter 2013 Operating Results
During the first quarter of 2013, the Company continued to pursue opportunities to position itself for long-term growth while also lowering the Companys risk profile and cost of capital. The Company continued making progress on its balance sheet initiatives; strengthening the operations of its prime portfolio and recycling capital from non-prime asset sales into the acquisition of prime assets
30
(i.e., market-dominant shopping centers with high-quality tenants located in attractive markets with strong demographic profiles, which are referred to as Prime Portfolio or Prime Assets) to improve portfolio quality. The Company continues to carefully consider opportunities that fit its selective acquisition requirements and remains prudent in its underwriting and bidding practices.
Significant first quarter 2013 and other recent transactional activity included the following:
|
Acquired $81.4 million of Prime Assets; |
|
Issued $40.0 million of common shares under the Companys continuous equity program to fund the net investment in Prime Assets; |
|
Completed the disposition of $46.5 million of non-Prime Assets, of which DDRs pro-rata share of the proceeds was $34.9 million; |
|
Refinanced two unsecured revolving credit facilities with an aggregate availability of $815 million and a $400 million secured term loan; |
|
Issued $150.0 million of newly designated 6.250% Class K Cumulative Redeemable Preferred Shares in April 2013 and redeemed $150.0 million of the 7.375% Class H Cumulative Redeemable Preferred Shares in May 2013 and |
|
Announced an increase in the quarterly common share dividend in the first quarter of 2013 to $0.135 per share from $0.12 per share in the first quarter of 2012. |
The Company continued its improvement in operating performance and internal growth in the first quarter of 2013 as evidenced by the number of leases executed during the quarter, the increase in the occupancy rate and the continued upward trend in the average annualized base rental rates.
|
The Company leased approximately 2.1 million square feet in the first quarter of 2013, including 198 new leases and 233 renewals for a total of 431 leases. |
|
The Company continued to execute both new leases and renewals at positive rental spreads. At December 31, 2012, the Company had 1,466 leases expiring in 2013 with an average base rent per square foot of $16.94. For the comparable leases executed in the first quarter of 2013, the Company generated positive leasing spreads on a pro rata basis in the first quarter of 11.9% for new leases and 7.5% for renewals. The Companys leasing spread calculation only includes deals that were executed within one year of the date the prior tenant vacated and, as a result, is a good benchmark to compare the average annualized base rent of expiring leases with the comparable executed market rental rates. |
|
The aggregate occupancy of the Companys operating shopping center portfolio increased to 91.3% at March 31, 2013, as compared to 89.8% at March 31, 2012. In addition, the Companys total portfolio average annualized base rent per square foot increased to $13.74 at March 31, 2013, as compared to $13.66 at December 31, 2012. |
31
|
The weighted-average cost of tenant improvements and lease commissions estimated to be incurred for new leases executed during the first quarter of 2013 remained low at $3.38 per rentable square foot over the lease term. The Company generally does not expend a significant amount of capital on lease renewals. |
Results of Operations
Continuing Operations
Shopping center properties owned as of January 1, 2012, but excluding properties under development or redevelopment and those classified in discontinued operations, are referred to herein as the Comparable Portfolio Properties.
Revenues from Operations (in thousands)
Three-Month Periods
Ended March 31, |
||||||||||||
2013 | 2012 | $ Change | ||||||||||
Base and percentage rental revenues (A) |
$ | 146,380 | $ | 129,693 | $ | 16,687 | ||||||
Recoveries from tenants (B) |
47,390 | 42,496 | 4,894 | |||||||||
Fee and other income (C) |
17,067 | 18,395 | (1,328 | ) | ||||||||
|
|
|
|
|
|
|||||||
Total revenues |
$ | 210,837 | $ | 190,584 | $ | 20,253 | ||||||
|
|
|
|
|
|
(A) | The increase is due to the following (in millions): |
Increase | ||||
Acquisition of shopping centers |
$ | 12.2 | ||
Comparable Portfolio Properties |
3.0 | |||
Straight-line rents |
0.9 | |||
Development or redevelopment properties |
0.6 | |||
|
|
|||
$ | 16.7 | |||
|
|
The following tables present the statistics for the Companys operating shopping center portfolio (in which the Company has an economic interest) affecting base and percentage rental revenues summarized by the following portfolios: combined shopping center portfolio, wholly-owned shopping center portfolio and joint venture shopping center portfolio:
Shopping Center
Portfolio (1) |
||||||||
March 31, | ||||||||
2013 | 2012 | |||||||
Centers owned |
445 | 420 | ||||||
Aggregate occupancy rate |
91.3 | % | 89.8 | % | ||||
Average annualized base rent per occupied square foot |
$ | 13.74 | (2) | $ | 14.08 |
32
Wholly-Owned
Shopping Centers March 31, |
Joint Venture Shopping Centers (1) March 31, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Centers owned |
236 | 246 | 206 | 172 | ||||||||||||
Centers owned through Consolidated joint ventures |
N/A | N/A | 3 | 2 | ||||||||||||
Aggregate occupancy rate |
91.6 | % | 89.5 | % | 91.0 | % | 90.3 | % | ||||||||
Average annualized base rent per occupied square foot |
$ | 13.03 | $ | 12.61 | $ | 14.63 | (2) | $ | 16.13 | |||||||
Comparable Portfolio Properties: |
||||||||||||||||
Aggregate occupancy rate |
92.2 | % | 90.2 | % | ||||||||||||
Average annualized base rent per occupied square foot |
$ | 12.65 | $ | 12.56 |
(1) |
Excludes shopping centers owned through the Companys joint venture with Coventry Real Estate Fund II (Coventry II Fund), which are no longer managed by the Company and in which the Companys investment basis is not material. |
(2) |
Decrease within the joint venture portfolio is primarily due to the impact of exchange rate fluctuations with the Brazilian Real, the sale of assets in Brazil in the fourth quarter of 2012 and the inclusion of the BRE DDR Retail Holdings, LLC assets in the second quarter of 2012. |
(B) | Recoveries were approximately 89.0% and 88.5% of reimbursable operating expenses and real estate taxes for the three-month periods ended March 31, 2013 and 2012, respectively. The increased percentage of recoveries from tenants primarily is attributable to newly acquired assets with higher recovery rates and increased occupancy within the comparable properties. |
(C) | Composed of the following (in millions): |
Three-Month Periods Ended March 31, |
||||||||||||
2013 | 2012 | (Decrease) | ||||||||||
Management, development, financing and other fee income |
$ | 10.8 | $ | 11.7 | $ | (0.9 | ) | |||||
Ancillary and other property income |
5.7 | 6.1 | (0.4 | ) | ||||||||
Lease termination fees |
0.5 | 0.5 | | |||||||||
Other miscellaneous |
0.1 | 0.1 | | |||||||||
|
|
|
|
|
|
|||||||
$ | 17.1 | $ | 18.4 | $ | (1.3 | ) | ||||||
|
|
|
|
|
|
The decrease in management, development, financing and other fee income in 2013 is largely the result of changes in the composition of the Companys unconsolidated joint ventures.
33
Expenses from Operations (in thousands)
Three-Month Periods
Ended March 31, |
||||||||||||
2013 | 2012 | $ Change | ||||||||||
Operating and maintenance (A) |
$ | 33,659 | $ | 32,851 | $ | 808 | ||||||
Real estate taxes (A) |
27,940 | 24,844 | 3,096 | |||||||||
Impairment charges (B) |
6,926 | 1,541 | 5,385 | |||||||||
General and administrative (C) |
19,760 | 19,012 | 748 | |||||||||
Depreciation and amortization (A) |
68,980 | 58,779 | 10,201 | |||||||||
|
|
|
|
|
|
|||||||
$ | 157,265 | $ | 137,027 | $ | 20,238 | |||||||
|
|
|
|
|
|
(A) | The changes for the three-month period ended March 31, 2013, compared to the same period in 2012, are due to the following (in millions): |
Operating
and Maintenance |
Real Estate
Taxes |
Depreciation
and Amortization |
||||||||||
Acquisitions of shopping centers |
$ | 1.6 | $ | 2.4 | $ | 8.7 | ||||||
Comparable Portfolio Properties |
(0.7 | ) | 0.4 | 0.1 | ||||||||
Development or redevelopment properties |
(0.1 | ) | 0.3 | 1.4 | ||||||||
|
|
|
|
|
|
|||||||
$ | 0.8 | $ | 3.1 | $ | 10.2 | |||||||
|
|
|
|
|
|
The increase in depreciation expense for the development or redevelopment properties is attributable to accelerated depreciation charges related to changes in the estimated useful life of certain assets that are expected to be redeveloped in future periods.
(B) | The Company recorded impairment charges during the three-month periods ended March 31, 2013 and 2012, related to its shopping center assets marketed for sale and held for sale. These impairments are more fully described in Note 12, Impairment Charges and Impairment of Joint Venture Investments, in the notes to the condensed consolidated financial statements included herein. |
(C) | General and administrative expenses were approximately 4.9% and 4.7% of total revenues, including total revenues of unconsolidated joint ventures, managed properties and discontinued operations, for the three-month periods ended March 31, 2013 and 2012, respectively. The Company continues to expense certain internal leasing salaries, legal salaries and related expenses associated with leasing and re-leasing of existing space. |
34
Other Income and Expenses (in thousands)
Three-Month Periods
Ended March 31, |
||||||||||||
2013 | 2012 | $ Change | ||||||||||
Interest income (A) |
$ | 7,877 | $ | 1,841 | $ | 6,036 | ||||||
Interest expense (B) |
(54,894 | ) | (55,521 | ) | 627 | |||||||
Loss on retirement of debt, net (C) |
| (5,602 | ) | 5,602 | ||||||||
Other income (expense), net (D) |
(2,901 | ) | (1,602 | ) | (1,299 | ) | ||||||
|
|
|
|
|
|
|||||||
$ | (49,918 | ) | $ | (60,884 | ) | $ | 10,966 | |||||
|
|
|
|
|
|
(A) | The weighted-average interest rate of loan receivables, including loans to affiliates, was 9.0% and 7.6% at March 31, 2013 and 2012, respectively. The increase in the amount of interest income recognized in the first quarter of 2013 primarily is due to the preferred equity investment in the unconsolidated joint venture with an affiliate of The Blackstone Group L.P. (Blackstone). |
(B) | The weighted-average debt outstanding and related weighted-average interest rates, including amounts allocated to discontinued operations, are as follows: |
Three-Month Periods Ended
March 31, |
||||||||
2013 | 2012 | |||||||
Weighted-average debt outstanding (in billions) |
$ | 4.4 | $ | 4.2 | ||||
Weighted-average interest rate |
5.1 | % | 5.5 | % |
The weighted-average interest rate (based on contractual rates and excluding convertible debt accretion and deferred financing costs) at March 31, 2013 and 2012 was 4.7% and 5.0%, respectively. The decrease in the weighted-average interest rate is a result of the repurchase of $25.5 million aggregate principal amount of 9.625% senior unsecured notes in 2012 and the issuance of senior unsecured notes at 4.625% in 2012, as well as the refinancing of mortgage debt at lower rates.
Interest costs capitalized in conjunction with development and redevelopment projects and unconsolidated development and redevelopment joint venture interests were $2.7 million for the three-month period ended March 31, 2013, as compared to $3.1 million for the respective period in 2012. The Company ceases the capitalization of interest as assets are placed in service or upon the suspension of construction activities.
(C) | For the three-month period ended March 31, 2012, the Company repurchased $25.5 million aggregate principal amount of its 9.625% senior unsecured notes at a premium to par value. |
(D) | Other income (expense) was composed of the following (in millions): |
Three-Month Periods Ended March 31, |
||||||||
2013 | 2012 | |||||||
Transaction and other (expenses) income |
$ | (0.5 | ) | $ | (0.6 | ) | ||
Litigation-related expenses |
(0.3 | ) | (0.7 | ) | ||||
Debt extinguishment costs, net |
(2.1 | ) | (0.3 | ) | ||||
|
|
|
|
|||||
$ | (2.9 | ) | $ | (1.6 | ) | |||
|
|
|
|
35
Other Items (in thousands)
Three-Month Periods
Ended March 31, |
||||||||||||
2013 | 2012 | $ Change | ||||||||||
Equity in net income of joint ventures (A) |
$ | 2,954 | $ | 8,248 | $ | (5,294 | ) | |||||
Impairment of joint venture investments |
| (560 | ) | 560 | ||||||||
Tax expense of taxable REIT subsidiaries and state franchise and income taxes |
(367 | ) | (177 | ) | (190 | ) |
(A) | The decrease in equity in net income of joint ventures for the three-month period ended March 31, 2013, compared to the prior-year period primarily is a result of lower income from the Companys investment in Sonae Sierra Brasil in 2013, as discussed below. |
At March 31, 2013 and 2012, the Company had an approximate 33% interest in an unconsolidated joint venture, Sonae Sierra Brasil, which owns real estate in Brazil and is headquartered in Sao Paulo, Brazil. This entity uses the functional currency of Brazilian Real. The Company has generally chosen not to mitigate any of the foreign currency risk through the use of hedging instruments for this entity. The operating cash flow generated by this investment has been generally retained by the joint venture and reinvested in the operation of the joint venture including ground-up developments and expansions in Brazil. The weighted-average exchange rate of Brazilian Real to U.S. Dollar used for recording the equity in net income was 2.01 and 1.77 for the three-month periods ended March 31, 2013 and 2012, respectively. The overall decrease in equity in net income from the Sonae Sierra Brasil joint venture, net of the impact of foreign currency translation, for the three-month period ended March 31, 2013, as compared to the same period in 2012, primarily is due to the sale of three shopping centers in the fourth quarter of 2012, and a gain recognized on the strategic asset swap and partial sale of two assets in the portfolio in the first quarter of 2012, partially offset by expansion activity coming on line as well as increases in parking revenue and ancillary income.
Discontinued Operations (in thousands)
Three-Month Periods
Ended March 31, |
||||||||||||
2013 | 2012 | $ Change | ||||||||||
Loss from discontinued operations |
$ | (291 | ) | $ | (15,800 | ) | $ | 15,509 | ||||
Gain on disposition of real estate, net of tax |
601 | 70 | 531 | |||||||||
|
|
|
|
|
|
|||||||
$ | 310 | $ | (15,730 | ) | $ | 16,040 | ||||||
|
|
|
|
|
|
The Company sold seven shopping center properties during the three-month period ended March 31, 2013, aggregating 0.4 million square feet. In addition, the Company sold 29 properties in 2012, aggregating 3.1 million square feet. Included in the reported loss from discontinued operations for the three-month periods ended March 31, 2013 and 2012, is $0.8 million and $15.8 million, respectively, of impairment charges related to assets classified as discontinued operations.
36
(Loss) Gain on Disposition of Real Estate (in thousands)
Three-Month Periods
Ended March 31, |
||||||||||||
2013 | 2012 | $ Change | ||||||||||
(Loss) gain on disposition of real estate, net (A) |
$ | (57 | ) | $ | 665 | $ | (722 | ) |
(A) | Amounts are generally attributable to the sale of land. The sales of land did not meet the criteria for discontinued operations because the land did not have any significant operations prior to disposition. |
Non-Controlling Interests (in thousands)
Three-Month Periods
Ended March 31, |
||||||||||||
2013 | 2012 | $ Change | ||||||||||
Non-controlling interests |
$ | (191 | ) | $ | (176 | ) | $ | (15 | ) |
Net Income (Loss) (in thousands)
Three-Month Periods
Ended March 31, |
||||||||||||
2013 | 2012 | $ Change | ||||||||||
Net income (loss) attributable to DDR |
$ | 6,303 | $ | (15,057 | ) | $ | 21,360 |
A summary of changes in net income (loss) attributable to DDR in the three-month period ended March 31, 2013 as compared to the same period in 2012 is as follows (in millions):
Three-Month
Period Ended March 31, |
||||
Increase in net operating revenues (total revenues in excess of operating and maintenance expenses and real estate taxes) |
$ | 16.4 | ||
Increase in consolidated impairment charges |
(5.4 | ) | ||
Increase in general and administrative expenses |
(0.7 | ) | ||
Increase in depreciation expense |
(10.2 | ) | ||
Increase in interest income |
6.0 | |||
Decrease in interest expense |
0.6 | |||
Decrease in loss on retirement of debt, net |
5.6 | |||
Change in other income (expense), net |
(1.3 | ) | ||
Decrease in equity in net income of joint ventures |
(5.3 | ) | ||
Decrease in impairment of joint venture investments |
0.6 | |||
Increase in income tax expense |
(0.2 | ) | ||
Decrease in loss from discontinued operations |
16.0 | |||
Decrease in gain on disposition of real estate |
(0.7 | ) | ||
|
|
|||
Increase in net income attributable to DDR |
$ | 21.4 | ||
|
|
37
Funds From Operations
Definition and Basis of Presentation
The Company believes that FFO, which is a non-GAAP financial measure, provides an additional and useful means to assess the financial performance of REITs. FFO is frequently used by securities analysts, investors and other interested parties to evaluate the performance of REITs, most of which present FFO along with net income as calculated in accordance with GAAP.
FFO excludes GAAP historical cost depreciation and amortization of real estate and real estate investments, which assume that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions, and many companies use different depreciable lives and methods. Because FFO excludes depreciation and amortization unique to real estate, gains and losses from depreciable property dispositions and extraordinary items, it can provide a performance measure that, when compared year over year, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, acquisition, disposition and development activities and interest costs. This provides a perspective of the Companys financial performance not immediately apparent from net income determined in accordance with GAAP.
FFO is generally defined and calculated by the Company as net income (loss), adjusted to exclude: (i) preferred share dividends, (ii) gains and losses from disposition of depreciable real estate property, which are presented net of taxes, (iii) impairment charges on depreciable real estate property and related investments, (iv) extraordinary items and (v) certain non-cash items. These non-cash items principally include real property depreciation and amortization of intangibles, equity income (loss) from joint ventures and equity income (loss) from non-controlling interests, and the Companys proportionate share of FFO from its unconsolidated joint ventures and non-controlling interests, determined on a consistent basis. For the periods presented below, the Companys calculation of FFO is consistent with the definition of FFO provided by the National Association of Real Estate Investment Trusts (NAREIT). Other real estate companies may calculate FFO in a different manner.
The Company believes that certain gains and charges recorded in its operating results are not reflective of its core operating performance. As a result, the Company also computes Operating FFO and discusses it with the users of its financial statements, in addition to other measures such as net income/loss determined in accordance with GAAP as well as FFO. Operating FFO is generally calculated by the Company as FFO excluding certain charges and gains that management believes are not indicative of the results of the Companys operating real estate portfolio. The disclosure of these charges and gains is regularly requested by users of the Companys financial statements.
Operating FFO is a non-GAAP financial measure, and, as described above, its use combined with the required primary GAAP presentations has been beneficial to management in improving the understanding of the Companys operating results among the investing public and making comparisons of other REITs operating results to the Companys more meaningful. The adjustments may not be comparable to how other REITs or real estate companies calculate their results of operations, and the Companys calculation of Operating FFO differs from NAREITs definition of FFO. The Company will continue to evaluate the usefulness and relevance of the reported non-GAAP
38
measures, and such reported measures could change. Additionally, the Company provides no assurances that these charges and gains are non-recurring. These charges and gains could be reasonably expected to recur in future results of operations.
These measures of performance are used by the Company for several business purposes and by other REITs. The Company uses FFO and/or Operating FFO in part: (i) as a measure of a real estate assets performance, (ii) to influence acquisition, disposition and capital investment strategies and (iii) to compare the Companys performance to that of other publicly traded shopping center REITs.
For the reasons described above, management believes that FFO and Operating FFO provide the Company and investors with an important indicator of the Companys operating performance. They provide recognized measures of performance other than GAAP net income, which may include non-cash items (often significant). Other real estate companies may calculate FFO and Operating FFO in a different manner.
Management recognizes the limitations of FFO and Operating FFO when compared to GAAPs income from continuing operations. FFO and Operating FFO do not represent amounts available for dividends, capital replacement or expansion, debt service obligations or other commitments and uncertainties. Management does not use FFO or Operating FFO as an indicator of the Companys cash obligations and funding requirements for future commitments, acquisitions or development activities. Neither FFO nor Operating FFO represents cash generated from operating activities in accordance with GAAP, and neither is necessarily indicative of cash available to fund cash needs, including the payment of dividends. Neither FFO nor Operating FFO should be considered an alternative to net income (computed in accordance with GAAP) or as an alternative to cash flow as a measure of liquidity. FFO and Operating FFO are simply used as additional indicators of the Companys operating performance. The Company believes that to further understand its performance, FFO and Operating FFO should be compared with the Companys reported net income (loss) and considered in addition to cash flows in accordance with GAAP, as presented in its condensed consolidated financial statements.
Reconciliation Presentation
For the three-month period ended March 31, 2013, FFO attributable to DDR common shareholders was $82.5 million, compared to $59.7 million for the same period in 2012. The increase in FFO for the three-month period ended March 31, 2013, as compared to the same period in 2012, primarily was due to organic growth and shopping center acquisitions, as well as the loss on debt retirement recorded in the first quarter of 2012 related to the Companys repurchase of a portion of its 9.625% unsecured senior notes.
For the three-month period ended March 31, 2013, Operating FFO attributable to DDR common shareholders was $86.1 million, compared to $66.8 million for the same period in 2012. The increase in Operating FFO for the three-month period ended March 31, 2013, as compared to the same period in 2012, primarily was due to organic growth and shopping center acquisitions.
39
The Companys reconciliation of net loss attributable to DDR common shareholders to FFO attributable to DDR common shareholders and Operating FFO attributable to DDR common shareholders is as follows (in millions):
Three-Month Periods Ended March 31, |
||||||||
2013 | 2012 | |||||||
Net loss attributable to DDR common shareholders (A), (B) |
$ | (0.7 | ) | $ | (22.0 | ) | ||
Depreciation and amortization of real estate investments |
67.0 | 58.4 | ||||||
Equity in net income of joint ventures |
(3.0 | ) | (8.2 | ) | ||||
Impairment of depreciable joint venture investments |
| 0.6 | ||||||
Joint ventures FFO (C) |
12.2 | 14.0 | ||||||
Non-controlling interests (OP Units) |
0.1 | | ||||||
Impairment of depreciable real estate assets, net of non-controlling interests |
7.7 | 17.3 | ||||||
Gain on disposition of depreciable real estate |
(0.8 | ) | (0.4 | ) | ||||
|
|
|
|
|||||
FFO attributable to DDR common shareholders |
$ | 82.5 | $ | 59.7 | ||||
Non-operating items (D) |
3.6 | 7.1 | ||||||
|
|
|
|
|||||
Operating FFO attributable to DDR common shareholders |
$ | 86.1 | $ | 66.8 | ||||
|
|
|
|
(A) | Includes the following deductions from net income (in millions): |
Three-Month Periods
Ended March 31, |
||||||||
2013 | 2012 | |||||||
Preferred dividends |
$ | 7.0 | $ | 7.0 |
(B) | Straight-line rental revenue and straight-line ground rent expense, including discontinued operations were as follows (in millions): |
Three-Month Periods
Ended March 31, |
||||||||
2013 | 2012 | |||||||
Straight-line rents |
$ | 1.4 | $ | 0.4 | ||||
Straight-line ground rent expense |
0.3 | 0.3 |
(C) | At March 31, 2013 and 2012, the Company had an economic investment in unconsolidated joint venture interests relating to 206 and 172 operating shopping center properties, respectively. These joint ventures represent the investments in which the Company was recording its share of equity in net income or loss and, accordingly, FFO. |
Joint ventures FFO and Operating FFO is summarized as follows (in millions):
Three-Month Periods
Ended March 31, |
||||||||
2013 | 2012 | |||||||
Net (loss) income attributable to unconsolidated joint ventures (1) |
$ | (24.5 | ) | $ | 9.1 | |||
Depreciation and amortization of real estate investments |
64.8 | 45.3 | ||||||
Impairment of depreciable real estate assets |
| 1.3 | ||||||
Loss (gain) on sale of depreciable real estate, net |
5.0 | (13.7 | ) | |||||
|
|
|
|
|||||
FFO |
$ | 45.3 | $ | 42.0 | ||||
|
|
|
|
|||||
FFO at DDRs ownership interests (2) |
$ | 12.2 | $ | 14.0 | ||||
|
|
|
|
|||||
Operating FFO at DDRs ownership interests (D) |
$ | 12.4 | $ | 14.1 | ||||
|
|
|
|
(1) | Revenues include the following (in millions): |
Three-Month Periods
Ended March 31, |
||||||||
2013 | 2012 | |||||||
Straight-line rents |
$ | 1.6 | $ | 0.9 | ||||
DDRs proportionate share |
0.3 | 0.2 |
40
(2) | FFO at DDR ownership interests considers the impact of basis differentials. |
(D) | Amounts are described in the Operating FFO Adjustments section below. |
Operating FFO Adjustments
The Companys adjustments to arrive at Operating FFO are composed of the following for the three-month periods ended March 31, 2013 and 2012 (in millions). The Company provides no assurances that these charges and gains are non-recurring. These charges and gains could be reasonably expected to recur in future results of operations.
Three-Month Periods Ended March 31, |
||||||||
2013 | 2012 | |||||||
Loss on debt retirement, net (A) |
$ | | $ | 5.6 | ||||
Other (income) expense, net (B) |
3.2 | 1.7 | ||||||
Equity in net loss of joint ventures currency adjustments, debt extinguishment and other expenses |
0.2 | 0.1 | ||||||
Loss (gain) on disposition of non-depreciable real estate, net |
0.2 | (0.3 | ) | |||||
|
|
|
|
|||||
Total nonoperating items |
$ | 3.6 | $ | 7.1 | ||||
FFO attributable to DDR common shareholders |
82.5 | 59.7 | ||||||
|
|
|
|
|||||
Operating FFO attributable to DDR common shareholders |
$ | 86.1 | $ | 66.8 | ||||
|
|
|
|
(A) | Amount agrees to the face of the condensed consolidated statements of operations. |
(B) | Amounts included in other income (expense) are detailed as follows: |
Three-Month Periods
Ended March 31, |
||||||||
2013 | 2012 | |||||||
Transaction and other (income) expenses |
$ | 0.8 | $ | 0.6 | ||||
Litigation-related expenses, net of tax |
0.3 | 0.8 | ||||||
Debt extinguishment costs, net |
2.1 | 0.3 | ||||||
|
|
|
|
|||||
$ | 3.2 | $ | 1.7 | |||||
|
|
|
|
Liquidity and Capital Resources
The Company periodically evaluates opportunities to issue and sell additional debt or equity securities, obtain credit facilities from lenders, or repurchase, refinance or otherwise restructure long-term debt for strategic reasons or to further strengthen the financial position of the Company. In the first three months of 2013, the Company continued to strategically manage cash flow from operating and financing activities. The Company also completed public equity offerings in order to strengthen its balance sheet and improve its financial flexibility.
41
The Companys consolidated and unconsolidated debt obligations generally require monthly or semi-annual payments of principal and/or interest over the term of the obligation. While the Company currently believes that it has several viable sources to obtain capital and fund its business, including capacity under its facilities described below, no assurance can be provided that these obligations will be refinanced or repaid as currently anticipated.
The Company maintains an unsecured revolving credit facility with a syndicate of financial institutions, arranged by JP Morgan Securities, LLC and Wells Fargo Securities, LLC (the Unsecured Credit Facility), which was last amended in January 2013. The Unsecured Credit Facility provides for borrowings of $750 million, and includes an accordion feature for expansion of availability to $1.25 billion upon the Companys request, provided that new or existing lenders agree to the existing terms of the facility and increase their commitment level. The Company also maintains a $65 million unsecured revolving credit facility with PNC Bank, National Association (together with the Unsecured Credit Facility, the Revolving Credit Facilities), which was also amended in January 2013. The Companys borrowings under these facilities bear interest at variable rates based on LIBOR plus 140 basis points at March 31, 2013, subject to adjustment based on the Companys current corporate credit ratings from Moodys Investors Service (Moodys) and Standard and Poors (S&P).
The Revolving Credit Facilities and the indentures under which the Companys senior and subordinated unsecured indebtedness is, or may be, issued contain certain financial and operating covenants including, among other things, leverage ratios and debt service coverage and fixed charge coverage ratios, as well as limitations on the Companys ability to incur secured and unsecured indebtedness, sell all or substantially all of the Companys assets and engage in mergers and certain acquisitions. These credit facilities and indentures also contain customary default provisions including the failure to make timely payments of principal and interest payable thereunder, the failure to comply with the Companys financial and operating covenants, the occurrence of a material adverse effect on the Company and the failure of the Company or its majority-owned subsidiaries (i.e., entities in which the Company has a greater than 50% interest) to pay, when due, certain indebtedness in excess of certain thresholds beyond applicable grace and cure periods. In the event the Companys lenders or note holders declare a default, as defined in the applicable agreements governing the debt, the Company may be unable to obtain further funding, and/or an acceleration of any outstanding borrowings may occur. As of March 31, 2013, the Company was in compliance with all of its financial covenants in the agreements governing its debt. Although the Company intends to operate in compliance with these covenants, if the Company were to violate these covenants, the Company may be subject to higher finance costs and fees or accelerated maturities. The Company believes it will continue to be able to operate in compliance with these covenants for the remainder of 2013 and beyond.
Certain of the Companys credit facilities and indentures permit the acceleration of the maturity of the underlying debt in the event certain other debt of the Company has been accelerated. Furthermore, a default under a loan by the Company or its affiliates, a foreclosure on a mortgaged property owned by the Company or its affiliates or the inability to refinance existing indebtedness may have a negative impact on the Companys financial condition, cash flows and results of operations. These facts, and an inability to predict future economic conditions, have led the Company to adopt a strict focus on lowering leverage and increasing financial flexibility.
42
The Company expects to fund its obligations from available cash, current operations and utilization of its Revolving Credit Facilities; however, the Company may issue long-term debt and/or equity securities in lieu of, or in addition to, borrowing under its Revolving Credit Facilities. The following information summarizes the availability under the Revolving Credit Facilities at March 31, 2013 (in millions):
Cash and cash equivalents |
$ | 18.9 | ||
|
|
|||
Revolving Credit Facilities |
$ | 815.0 | ||
Less: |
||||
Amount outstanding |
(190.5 | ) | ||
Letters of credit |
(10.9 | ) | ||
|
|
|||
Borrowing capacity available |
$ | 613.6 | ||
|
|
As of April 30, 2013, the Company had $45 million of its common shares available for future issuance under its continuous equity program.
The Company intends to maintain a longer-term financing strategy and continue to reduce its reliance on short-term debt. The Company believes its Revolving Credit Facilities are sufficient for its liquidity strategy and longer-term capital structure needs. Part of the Companys overall strategy includes scheduling future debt maturities in a balanced manner, including incorporating a healthy level of conservatism regarding possible future market conditions.
The Company does not have any significant consolidated secured debt maturing until April 2014. The Company has $357.9 million of mortgage debt maturing in 2014. In addition, there were no other unsecured maturities until May 2015.
Management believes that the scheduled debt maturities in future years are manageable. The Company continually evaluates its debt maturities and, based on managements assessment, believes it has viable financing and refinancing alternatives. The Company continues to look beyond 2013 to ensure that it executes its strategy to lower leverage, increase liquidity, improve the Companys credit ratings and extend debt duration, with the goal of lowering the Companys balance sheet risk and cost of capital.
Unconsolidated Joint Ventures
The Companys unconsolidated joint venture mortgage debt that had matured and is now past due was $50.3 million at March 31, 2013 (of which the Companys proportionate share was $1.1 million), all of which was attributable to the Coventry II Fund assets (see Off-Balance Sheet Arrangements).
On April 1, 2013, the Company completed a significant refinancing at one of the unconsolidated joint ventures. Subsequent to this refinancing, the Companys unconsolidated joint venture mortgage debt maturing in 2013 was $181.0 million (of which the Companys proportionate share was $23.3 million). Of this amount, $94.8 million (of which the Companys proportionate share is $19.0 million) is attributable to the Coventry II Fund assets (see Off-Balance Sheet Arrangements).
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Cash Flow Activity
The Companys core business of leasing space to well-capitalized retailers continues to generate consistent and predictable cash flow after expenses, interest payments and preferred share dividends. This capital is available for use at the Companys discretion for investment, debt repayment and the payment of dividends on common shares.
The Companys cash flow activities are summarized as follows (in thousands):
Three-Month Periods Ended March 31, |
||||||||
2013 | 2012 | |||||||
Cash flow provided by operating activities |
$ | 53,296 | $ | 33,858 | ||||
Cash flow used for investing activities |
(87,825 | ) | (64,710 | ) | ||||
Cash flow provided by financing activities |
22,254 | 6,184 |
Operating Activities: The change in cash flow from operating activities for the three-month period ended March 31, 2013, as compared to the same period in 2012, primarily was due to additional cash flow from acquired properties and the decrease in settlement of accreted debt discount on the repayment of senior convertible notes, partially offset by changes in accounts receivable, accounts payable and accrued expenses.
Investing Activities: The change in cash flow from investing activities for the three-month period ended March 31, 2013, as compared to the same period in 2012, primarily was due to an increase in asset acquisitions in 2013, partially offset by the repayment of a notes receivable in 2013.
Financing Activities: The change in cash flow used for financing activities for the three-month period ended March 31, 2013, as compared to the same period in 2012, primarily was due to the proceeds from issuance of common shares in 2013, partially offset by an increase in dividends paid.
The Company satisfied its REIT requirement of distributing at least 90% of ordinary taxable income with declared common and preferred share cash dividends of $49.8 million for the three-month period ended March 31, 2013, as compared to $40.3 million for the same period in 2012. Because actual distributions were greater than 100% of taxable income, federal income taxes have not been incurred by the Company thus far during 2013.
The Company declared a quarterly dividend of $0.135 per common share for the first quarter of 2013. The Board of Directors of the Company will continue to monitor the 2013 dividend policy and provide for adjustments as determined to be in the best interests of the Company and its shareholders to maximize the Companys free cash flow, while still adhering to REIT payout requirements.
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Sources and Uses of Capital
Acquisitions
The Company has a portfolio management strategy to recycle capital from lower quality, lower growth potential assets into Prime Assets with long-term growth potential.
In April 2013, the Company acquired its partners 85% interest in five prime power centers for $93.9 million. The Company funded its investment primarily with proceeds from the issuance of common shares, proceeds from asset sales and corporate debt. These prime power centers will be unencumbered. The Company acquired its partners interest in The Walk at Highwoods Preserve (Tampa, FL), Douglasville Pavilion (Atlanta, GA), Commonwealth Center and Chesterfield Crossing (Richmond, VA), and Jefferson Plaza (Norfolk, VA). The five prime power centers aggregate 1.3 million of total square feet.
In the first quarter of 2013, the Company acquired Whole Foods at Bay Place in Oakland, CA, and Marketplace at Highland Village in Highland Village, TX, for an aggregate purchase price of $81.4 million. No debt was assumed in these transactions, nor was debt placed on the properties at closing.
Dispositions
During the three-month period ended March 31, 2013, the Company sold seven shopping center properties aggregating 0.4 million square feet and other consolidated non-income producing assets at an aggregate sales price of $32.0 million. The Company recorded a net gain of $0.5 million, which excludes the impact of an aggregate $24.3 million in related impairment charges that were recorded in prior periods related to the assets sold in 2013. During the three-month period ended March 31, 2013, the Companys unconsolidated joint ventures sold 15 assets, generating gross proceeds of $14.5 million, of which the Companys proportionate share was $2.9 million. The Company had previously written down its investment in these assets to zero.
As discussed above, a part of the Companys portfolio management strategy is to recycle capital from lower quality, lower growth potential assets into Prime Assets with long-term growth potential. The Company has been marketing certain non-Prime Assets for sale and is focused on selling single-tenant assets and/or smaller shopping centers that do not meet the Companys current business strategy. The Company has entered into agreements, including contracts executed through April 30, 2013, to sell real estate assets that are subject to contingencies. An aggregate loss of approximately $18 million could be recorded if all such sales were consummated on the terms as negotiated through April 30, 2013. Given the Companys experience over the past few years, it is difficult for many buyers to complete these transactions in the timing contemplated or at all. The Company has not recorded an impairment charge on the assets that would result in a loss at March 31, 2013, as the undiscounted cash flows, when considering and evaluating the various alternative courses of action that may occur, exceeded the assets current carrying values at March 31, 2013. The Company evaluates all potential sale opportunities taking into account the long-term growth prospects of assets being sold, the use of proceeds and the impact to the Companys balance sheet, in addition to the impact on operating results. As a result, if actual results differ from expectations, it is possible that additional assets could be sold in subsequent periods for a gain or loss after taking into account the above considerations.
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Development Opportunities
The Company and its joint venture partners may commence construction on various developments only after substantial tenant leasing has occurred and acceptable construction financing is available.
The Company will continue to closely monitor its expected spending in 2013 for developments and redevelopments, both for consolidated and unconsolidated projects, as the Company considers this funding to be discretionary spending. The Company does not anticipate expending a significant amount of funds on joint venture development projects for the remainder of 2013, excluding projects through Sonae Sierra Brasil. The projects in Brazil are expected to be funded with operating cash flow generated by Sonae Sierra Brasil, proceeds from assets sales or proceeds from the local debt financing.
One of the important benefits of the Companys asset class is the ability to phase development projects over time until appropriate leasing levels can be achieved. To maximize the return on capital spending and balance the Companys de-leveraging strategy, the Company generally adheres to strict investment criteria thresholds. The revised underwriting criteria, generally followed for the past three years, includes a higher cash-on-cost project return threshold and incorporates a longer period before the leases commence and a higher stabilized vacancy rate. The Company applies this revised strategy to both its consolidated and certain unconsolidated joint ventures that own assets under development because the Company has significant influence and, in most cases, approval rights over decisions relating to significant capital expenditures.
The Companys consolidated land holdings are classified in two separate line items on the condensed consolidated balance sheets of the condensed consolidated financial statements included herein, Land and Land held for development and construction in progress. At March 31, 2013, the $1.9 billion of Land primarily included land that is part of the Companys operating shopping portfolio. However, it also includes a small portion of vacant land comprised primarily of outlots or expansion pads adjacent to the shopping center properties. The Company believes that approximately 220 acres of this land with a recorded cost basis of approximately $27 million is available for future development.
Included in Land held for development and construction in progress at March 31, 2013, are $264.7 million of recorded costs related to land and projects under development, for which active construction had temporarily ceased or had not yet commenced. The Company estimates that if it proceeded with the development of these sites, approximately 2.5 to 4.0 million square feet of GLA could be developed. Based on the Companys intentions and business plans, the Company believes that the expected undiscounted cash flows exceed its current carrying value on each of these projects. However, if the Company were to dispose of certain of these assets in the market, the Company would likely incur a loss, which may be material. The Company evaluates its intentions with respect to these assets each reporting period and records an impairment charge equal to the difference between the current carrying value and fair value when the expected undiscounted cash flows are less than the assets carrying value.
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Developments and Redevelopments (Wholly-Owned and Consolidated Joint Ventures)
As part of its portfolio management strategy to develop, expand, improve and re-tenant various consolidated properties, the Company has invested $224.7 million on various development and redevelopment projects and expects to expend on a net basis, after deducting sales proceeds from outlot sales, an aggregate of approximately $192.7 million for the remainder of 2013. The current significant development projects are as follows:
Location |
Estimated Initial
Owned Anchor Opening |
Estimated
Owned GLA (Thousands) |
Estimated
Net Cost ($ Millions) |
Cost Incurred at
March 31, 2013 ($ Millions) |
||||||||||||
Charlotte, NC (Belgate) |
2Q13 | 178.2 | $ | 20.4 | $ | 40.2 | ||||||||||
Seabrook, NH (Seabrook Town Center) |
2Q14 | 182.3 | 69.0 | 36.6 | ||||||||||||
|
|
|
|
|
|
|||||||||||
Total |
360.5 | $ | 89.4 | $ | 76.8 | |||||||||||
|
|
|
|
|
|
The Companys significant redevelopment projects expected to open in 2013 and 2014 are as follows:
Location |
Estimated
Owned GLA (Thousands) |
Estimated
Net Cost ($ Millions) |
Cost Incurred at
March 31, 2013 ($ Millions) |
|||||||||
Denver, CO (Tamarac Square) |
11.6 | $ | 2.0 | $ | 5.0 | |||||||
Littleton, CO (Aspen Grove) |
46.7 | 13.6 | 12.6 | |||||||||
Roswell, GA (Sandy Plains Village) |
142.6 | 14.3 | 2.7 | |||||||||
Tinley Park, IL (Brookside Marketplace) |
72.3 | 11.8 | 0.6 | |||||||||
Lansing, MI (Marketplace at Delta Township) |
38.6 | 6.6 | 0.1 | |||||||||
Columbus, OH (Easton Market) |
128.0 | 6.5 | 2.8 | |||||||||
Bayamon, PR (Plaza Del Sol) |
172.5 | 64.3 | 16.8 | |||||||||
Fajardo, PR (Plaza Fajardo) |
34.3 | 8.4 | 1.2 | |||||||||
San Antonio, TX (Terrell Plaza) |
90.8 | 12.0 | 12.4 | |||||||||
Midvale, UT (Family Center at Ft. Union) |
78.7 | 13.2 | 10.9 | |||||||||
|
|
|
|
|
|
|||||||
Total |
816.1 | $ | 152.7 | $ | 65.1 | |||||||
|
|
|
|
|
|
For redevelopment assets completed in 2012 and in the first quarter of 2013, the assets placed in service were completed at $148 cost per foot.
Development and Redevelopments (Unconsolidated Joint Ventures)
In addition, the Companys unconsolidated joint ventures have projects being developed that have incurred $63.3 million in project costs in the first quarter of 2013, with projected net expenditures of approximately $195.6 million in the remaining three quarters of 2013. A significant amount of the projected expenditures is related to projects under development at the Companys joint venture in Brazil as follows:
Location |
DDRs Effective
Ownership Percentage |
Estimated Initial
Owned Anchor Opening |
Estimated
Owned GLA (Thousands) |
Estimated
Net Cost ($ Millions) |
Cost Incurred at
March 31, 2013 ($ Millions) |
|||||||||||||||
Londrina, Brazil |
29.5 | % | 2Q13 | 521.6 | $ | 173.7 | $ | 174.7 | ||||||||||||
Goiania, Brazil |
33.3 | % | 4Q13 | 821.0 | 230.4 | 163.4 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total |
1,342.6 | $ | 404.1 | $ | 338.1 | |||||||||||||||
|
|
|
|
|
|
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Off-Balance Sheet Arrangements
The Company has a number of off-balance sheet joint ventures and other unconsolidated entities with varying economic structures. Through these interests, the Company has investments in operating properties, development properties, two management companies and one development company. Such arrangements are generally with institutional investors located throughout the United States and Brazil.
The unconsolidated joint ventures that have total assets greater than $250 million (based on the historical cost of acquisition by the unconsolidated joint venture) at March 31, 2013, are as follows (in order of gross asset book value):
Unconsolidated Real Estate Ventures |
Effective
Ownership Percentage (A) |
Assets Owned |
Company-
Owned Square Feet (Millions) |
Total Debt
(Millions) |
||||||||||
DDRTC Core Retail Fund LLC |
15.0 | % | 39 shopping centers in several states | 10.8 | $ | 1,038.5 | ||||||||
DDR Domestic Retail Fund I |
20.0 | % | 59 shopping centers in several states | 8.2 | 929.8 | |||||||||
BRE DDR Retail Holdings, LLC |
5.0 | % (B ) | 46 shopping centers in several states | 10.6 | 936.6 | |||||||||
Sonae Sierra Brasil BV Sarl |
33.3 | % | Eight shopping centers, a management company and two development projects in Brazil | 3.3 | 412.8 | |||||||||
DDR SAU Retail Fund LLC |
20.0 | % | 27 shopping centers in several states | 2.4 | 182.1 |
(A) | Ownership may be held through different investment structures. Percentage ownerships are subject to change, as certain investments contain promoted structures. |
(B) | Excludes interest owned through $150.0 million preferred equity investment. |
Funding for Unconsolidated Joint Ventures
The Company has provided loans and advances to certain unconsolidated entities and/or related partners in the amount of $254.1 million at March 31, 2013, for which the Companys joint venture partners have not funded their proportionate share. Included in this amount is the $155.3 million in preferred equity with a fixed distribution rate of 10% due from BRE DDR Retail Holdings, LLC. Also included in this amount is $66.9 million of financing that the Company advanced to one of its unconsolidated joint ventures, which accrued interest at the greater of LIBOR plus 700 basis points, or 12%, and a default rate of 16%, and had an initial maturity of July 2011 (the Bloomfield Loan). This advance is reserved in full (see Coventry II Fund discussion below).
Coventry II Fund
At March 31, 2013, the Company maintained several investments with the Coventry II Fund. The Company co-invested approximately 20% in each joint venture. The Companys management and leasing agreements with the joint ventures expired by their own terms on December 31, 2011, and the Company decided not to renew these agreements (see Part II, Item 1. Legal Proceedings).
As of March 31, 2013, the aggregate carrying amount of the Companys net investment in the Coventry II Fund joint ventures was $3.2 million. The Service Holdings LLC joint venture sold 15 assets in the first quarter of 2013. The Company had previously written down its investment to zero in
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these assets. In addition to its existing equity and notes receivable, including the Bloomfield Loan, the Company has provided partial payment guaranties to third-party lenders in connection with the financing for three of the Coventry II Fund projects. The amount of each such guaranty is not greater than the proportion of the Companys investment percentage in the underlying projects, and the aggregate amount of the Companys guaranties was $8.2 million at March 31, 2013.
Although the Company will not acquire additional investments through the Coventry II Fund joint ventures, additional funds may be required to address ongoing operational needs and costs associated with the joint ventures undergoing development or redevelopment. The Coventry II Fund is exploring a variety of strategies to obtain such funds, including potential dispositions and financings. The Company continues to maintain the position that it does not intend to fund any of its joint venture partners capital contributions or their share of debt maturities.
A summary of the Coventry II Fund investments as of March 31, 2013, is as follows (in millions):
Unconsolidated Real Estate Ventures |
Shopping Center or Development Owned |
Loan Balance
Outstanding At March 31, 2013 |
||||
Coventry II DDR Bloomfield LLC |
Bloomfield Hills, Michigan | $ | 39.8 | (A), (B), (C), (D) | ||
Coventry II DDR Buena Park LLC |
Buena Park, California | 73.0 | (B) | |||
Coventry II DDR Fairplain LLC |
Benton Harbor, Michigan | 14.0 | (B), (E) | |||
Coventry II DDR Marley Creek Square LLC |
Orland Park, Illinois | 10.5 | (B), (C), (D), (E) | |||
Coventry II DDR Phoenix Spectrum LLC |
Phoenix, Arizona | 66.5 | ||||
Coventry II DDR Totem Lakes LLC |
Kirkland, Washington | 26.6 | (B), (D), (E) | |||
Coventry II DDR Tri-County LLC |
Cincinnati, Ohio | 149.6 | (B), (C), (D) | |||
Coventry II DDR Westover LLC |
San Antonio, Texas | 19.7 | (B) | |||
Service Holdings LLC |
22 retail sites in several states | 81.7 | (B), (D) |
(A) | In 2009, the senior secured lender sent to the borrower a formal notice of default and filed a foreclosure action. The Company paid its 20% guaranty of this loan in 2009, and the senior secured lender initiated legal proceedings against the Coventry II Fund for its failure to fund its 80% payment guaranty. The senior secured lender and the Coventry II Fund subsequently entered into a settlement agreement in connection with the legal proceedings. In addition, the Bloomfield Loan from the Company is cross-defaulted with this third-party loan. The Bloomfield Loan is considered past due and has been fully reserved by the Company. |
(B) | As of April 30, 2013, lenders are managing the cash receipts and expenditures related to the assets collateralizing these loans. |
(C) | As of April 30, 2013, these loans are in default, and the Coventry II Fund is exploring a variety of strategies with the lenders. |
(D) | The Company has written its investment basis in this joint venture down to zero and is no longer reporting an allocation of income or loss. |
(E) | As of April 30, 2013, the Company provided partial loan or interest payment guaranties that were not greater than the proportion of its investment interest. |
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Other Joint Ventures
The Company is involved with overseeing the development activities for several of its unconsolidated joint ventures that are constructing or redeveloping shopping centers. The Company earns a fee for its services commensurate with the level of oversight provided. The Company generally provides a completion guaranty to the third-party lending institution(s) providing construction financing.
The Companys unconsolidated joint ventures had aggregate outstanding indebtedness to third parties of $4.3 billion and $3.9 billion at March 31, 2013 and 2012, respectively (see Item 3. Quantitative and Qualitative Disclosures About Market Risk). Such mortgages are generally non-recourse to the Company and its partners; however, certain mortgages may have recourse to the Company and its partners in certain limited situations, such as misuse of funds and material misrepresentations. In connection with certain of the Companys unconsolidated joint ventures, the Company agreed to fund any amounts due to the joint ventures lender if such amounts are not paid by the joint venture based on the Companys pro rata share of such amount, which aggregated $13.4 million at March 31, 2013, including guaranties associated with the Coventry II Fund joint ventures.
The Company has generally chosen not to mitigate any of the foreign currency risk through the use of hedging instruments for Sonae Sierra Brasil. The Company will continue to monitor and evaluate this risk and may enter into hedging agreements at a later date.
The Company has interests in consolidated joint ventures that own real estate assets in Canada and Russia. The net assets of these subsidiaries are exposed to volatility in currency exchange rates. As such, the Company uses non-derivative financial instruments to hedge this exposure. The Company manages currency exposure related to the net assets of the Companys Canadian and European subsidiaries primarily through foreign currency-denominated debt agreements into which the Company enters. Gains and losses in the parent companys net investments in its subsidiaries are economically offset by losses and gains in the parent companys foreign currency-denominated debt obligations.
For the three months ended March 31, 2013, $0.5 million of net gains related to the foreign currency-denominated debt agreements were included in the Companys cumulative translation adjustment. As the notional amount of the non-derivative instrument substantially matches the portion of the net investment designated as being hedged and the non-derivative instrument is denominated in the functional currency of the hedged net investment, the hedge ineffectiveness recognized in earnings was not material.
Financing Activities
In April 2013, the Company issued 2.5 million common shares at a weighted-average price of $17.83 per share, generating gross proceeds of $45.0 million, to partially fund the acquisition of five Prime Assets.
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In April 2013, the Company issued $150.0 million of newly designated 6.250% Class K Preferred Shares at a price of $500.00 per preferred share (or $25.00 per depositary share). In addition, in May 2013, the Company redeemed $150 million of its 7.375% Class H Cumulative Redeemable Preferred Shares at a redemption price of $25.1127 per depositary share (the sum of $25.00 per depositary share and dividends per depositary share of $0.1127 prorated to the redemption date). The Company recorded a non-cash charge of $5.2 million to net income attributable to common shareholders in the second quarter of 2013 related to the prorated write-off of 7.375% Class H Cumulative Redeemable Preferred Shares original issuance costs.
In the first quarter of 2013, the Company issued 2.3 million common shares at a weighted-average share price of $17.57 through its continuous equity program, which raised $40.0 million of gross proceeds. The net proceeds were used to partially fund the acquisition of Prime Assets (see Liquidity and Capital Resources and Sources and Uses of Capital).
Capitalization
At March 31, 2013, the Companys capitalization consisted of $4.4 billion of debt, $405 million of preferred shares and $5.5 billion of market equity (market equity is defined as common shares and OP Units outstanding multiplied by $17.42, the closing price of the Companys common shares on the New York Stock Exchange at March 31, 2013), resulting in a debt to total market capitalization ratio of 0.42 to 1.0, as compared to the ratio of 0.48 to 1.0 at March 31, 2012. The closing price of the common shares on the New York Stock Exchange was $14.60 at March 31, 2012. At March 31, 2013 and 2012, the Companys total debt consisted of the following (in billions):
At March 31, | ||||||||
2013 | 2012 | |||||||
Fixed-rate debt (A) |
$ | 3.9 | $ | 3.5 | ||||
Variable-rate debt |
0.5 | 0.6 | ||||||
|
|
|
|
|||||
$ | 4.4 | $ | 4.1 | |||||
|
|
|
|
(A) | Includes $632.5 million and $383.8 million of variable-rate debt that had been effectively swapped to a fixed rate through the use of interest rate derivative contracts at March 31, 2013 and 2012, respectively. |
It is managements strategy to have access to the capital resources necessary to manage the Companys balance sheet, to repay upcoming maturities and to consider making prudent opportunistic investments. Accordingly, the Company may seek to obtain funds through additional debt or equity financings and/or joint venture capital in a manner consistent with its intention to operate with a conservative debt capitalization policy and to reduce the Companys cost of capital by maintaining an investment grade rating with Moodys, S&P and Fitch. The security rating is not a recommendation to buy, sell or hold securities, as it may be subject to revision or withdrawal at any time by the rating organization. Each rating should be evaluated independently of any other rating. The Company may not be able to obtain financing on favorable terms, or at all, which may negatively affect future ratings.
The Companys credit facilities and the indentures under which the Companys senior and subordinated unsecured indebtedness is, or may be, issued contain certain financial and operating covenants, including, among other things, debt service coverage and fixed charge coverage ratios, as well as limitations on the Companys ability to incur secured and unsecured indebtedness, sell all or substantially all of the Companys assets and engage in mergers and certain acquisitions. Although the Company intends to operate in compliance with these covenants, if the Company were to violate
51
these covenants, the Company may be subject to higher finance costs and fees or accelerated maturities. In addition, certain of the Companys credit facilities and indentures may permit the acceleration of maturity in the event certain other debt of the Company has been accelerated. Foreclosure on mortgaged properties or an inability to refinance existing indebtedness would have a negative impact on the Companys financial condition and results of operations.
Contractual Obligations and Other Commitments
At March 31, 2013, the Companys consolidated secured debt maturing in 2013 was $0.8 million, which is expected to be repaid from available cash, current operations or utilization of its Revolving Credit Facilities. No assurance can be provided that this obligation will be refinanced or repaid as currently anticipated. In addition, there were no other unsecured maturities until May 2015.
At March 31, 2013, the Company had letters of credit outstanding of $27.1 million. The Company has not recorded any obligations associated with these letters of credit, the majority of which are collateral for existing indebtedness and other obligations of the Company.
In conjunction with the development of shopping centers, the Company had entered into commitments with general contractors aggregating approximately $29.3 million for its wholly-owned and consolidated joint venture properties at March 31, 2013. These obligations, composed principally of construction contracts, are generally due in 12 to 36 months, as the related construction costs are incurred, and are expected to be financed through operating cash flow, new or existing construction loans, asset sales or revolving credit facilities.
The Company routinely enters into contracts for the maintenance of its properties. These contracts typically can be cancelled upon 30 to 60 days notice without penalty. At March 31, 2013, the Company had purchase order obligations, typically payable within one year, aggregating approximately $3.6 million related to the maintenance of its properties and general and administrative expenses.
Inflation
Most of the Companys long-term leases contain provisions designed to mitigate the adverse impact of inflation. Such provisions include clauses enabling the Company to receive additional rental income from escalation clauses that generally increase rental rates during the terms of the leases and/or percentage rentals based on tenants gross sales. Such escalations are determined by negotiation, increases in the consumer price index or similar inflation indices. In addition, many of the Companys leases are for terms of less than 10 years, permitting the Company to seek increased rents at market rates upon renewal. Most of the Companys leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes, insurance and utilities, thereby reducing the Companys exposure to increases in costs and operating expenses resulting from inflation.
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Economic Conditions
The Company believes there has been a favorable shift in the supply-and-demand dynamic for quality locations in well-positioned shopping centers. Many retailers have strong store opening plans for 2013 and 2014. The Company continues to see strong demand from a broad range of retailers for its space, particularly in the off-price sector, which is a reflection of the general outlook of consumers who are demanding more value for their dollars. This is evidenced by the continued high volume of leasing activity, which was 2.1 million square feet of space for both new leases and renewals for the first three months of 2013. The Company also benefits from its real estate asset class (shopping centers) typically having a higher return on capital expenditures, as well as a diversified tenant base with only one tenant exceeding 3.0% of annualized consolidated revenues and the Companys proportionate share of unconsolidated joint venture revenues (Walmart at 4.0%). Other significant tenants include Target, Lowes, Home Depot, Kohls, TJX Companies, PetSmart, Publix and Bed Bath & Beyond, all of which have relatively strong credit ratings, remain well-capitalized and have outperformed other retail categories on a relative basis over time. The Company believes these tenants should continue providing it with a stable revenue base for the foreseeable future, given the long-term nature of these leases. Moreover, the majority of the tenants in the Companys shopping centers provide day-to-day consumer necessities with a focus toward value and convenience versus high-priced discretionary luxury items, which the Company believes will enable many of the tenants to continue operating even in a challenging economic environment.
The retail shopping sector continues to be affected by the competitive nature of the retail business and the competition for market share as well as general economic conditions where stronger retailers have out-positioned some of the weaker retailers. These shifts can force some market share away from weaker retailers which could require them to downsize and close stores and/or declare bankruptcy. In many cases, the loss of a weaker tenant or downsizing of space creates a value-add opportunity to re-lease space at higher rents to a stronger retailer. Overall, the Company believes its portfolio remains stable at March 31, 2013 as evidenced by the increase in the occupancy rate. However, there can be no assurance that these events will not adversely affect the Company (see Item 1A. Risk Factors in the Companys Annual Report on Form 10-K, as amended, for the year ended December 31, 2012).
Historically, the Companys portfolio has performed consistently throughout many economic cycles, including downward cycles. Broadly speaking, national retail sales have grown since World War II, including during several recessions and housing slowdowns. In the past, the Company has not experienced significant volatility in its long-term portfolio occupancy rate. The Company has experienced downward cycles before and has made the necessary adjustments to leasing and development strategies to accommodate the changes in the operating environment and mitigate risk. More importantly, the quality of the property revenue stream is high and consistent, as it is generally derived from retailers with good credit profiles under long-term leases, with very little reliance on overage rents generated by tenant sales performance.
The Company believes that the quality of its shopping center portfolio is strong, as evidenced by the high historical occupancy rates, which have generally ranged from 92% to 96% since the Companys initial public offering in 1993. The shopping center portfolio occupancy was at 91.3% at March 31, 2013 as compared to 89.8% at March 31, 2012. Notwithstanding the lower occupancy rate compared to historic levels, the Company continues to sign new leases at rental rates that have reflected consistent growth on an annual basis.
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The total portfolio average annualized base rent per occupied square foot, including the results of Sonae Sierra Brasil, was $13.74 at March 31, 2013, as compared to $13.66 at December 31, 2012, $14.08 at March 31, 2012. The decrease in the average annualized base rent per square foot primarily was due to exchange rate fluctuations with the Brazilian Real, the sale of assets in Brazil in the fourth quarter of 2012 and the inclusion of the BRE DDR Retail Holdings, LLC assets in the second quarter of 2012. Moreover, the Company has been able to achieve these results without significant capital investment in tenant improvements or leasing commissions. The weighted-average cost of tenant improvements and lease commissions estimated to be incurred for new leases executed during the first quarter of 2013 for the U.S. portfolio was only $3.38 per rentable square foot. The Company generally does not expend a significant amount of capital on lease renewals. The Company is very conscious of and sensitive to the risks posed by the economy, but believes that the position of its portfolio and the general diversity and credit quality of its tenant base should enable it to successfully navigate through these challenging economic times.
New Accounting Standards
New Accounting Standards are more fully described in Note 1, Nature of Business and Financial Statement Presentation, of the Companys condensed consolidated financial statements.
FORWARD-LOOKING STATEMENTS
Managements discussion and analysis should be read in conjunction with the condensed consolidated financial statements and the notes thereto appearing elsewhere in this report. Historical results and percentage relationships set forth in the condensed consolidated financial statements, including trends that might appear, should not be taken as indicative of future operations. The Company considers portions of this information to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, with respect to the Companys expectations for future periods. Forward-looking statements include, without limitation, statements related to acquisitions (including any related pro forma financial information) and other business development activities, future capital expenditures, financing sources and availability and the effects of environmental and other regulations. Although the Company believes that the expectations reflected in these forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. For this purpose, any statements contained herein that are not statements of historical fact should be deemed to be forward-looking statements. Without limiting the foregoing, the words will, believes, anticipates, plans, expects, seeks, estimates and similar expressions are intended to identify forward-looking statements. Readers should exercise caution in interpreting and relying on forward-looking statements because such statements involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Companys control and that could cause actual results to differ materially from those expressed or implied in the forward-looking statements and that could materially affect the Companys actual results, performance or achievements. For additional factors that could cause the results of the Company to differ materially from those indicated in the forward looking statements, please refer to Item 1A. Risk Factors in the Companys Annual Report on Form 10-K, as amended, for the year ended December 31, 2012.
54
Factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, but are not limited to, the following:
|
The Company is subject to general risks affecting the real estate industry, including the need to enter into new leases or renew leases on favorable terms to generate rental revenues, and the economic downturn may adversely affect the ability of the Companys tenants, or new tenants, to enter into new leases or the ability of the Companys existing tenants to renew their leases at rates at least as favorable as their current rates; |
|
The Company could be adversely affected by changes in the local markets where its properties are located, as well as by adverse changes in national economic and market conditions; |
|
The Company may fail to anticipate the effects on its properties of changes in consumer buying practices, including sales over the Internet and the resulting retailing practices and space needs of its tenants, or a general downturn in its tenants businesses, which may cause tenants to close stores or default in payment of rent; |
|
The Company is subject to competition for tenants from other owners of retail properties, and its tenants are subject to competition from other retailers and methods of distribution. The Company is dependent upon the successful operations and financial condition of its tenants, in particular its major tenants, and could be adversely affected by the bankruptcy of those tenants; |
|
The Company relies on major tenants, which makes it vulnerable to changes in the business and financial condition of, or demand for its space by, such tenants; |
|
The Company may not realize the intended benefits of acquisition or merger transactions. The acquired assets may not perform as well as the Company anticipated, or the Company may not successfully integrate the assets and realize improvements in occupancy and operating results. The acquisition of certain assets may subject the Company to liabilities, including environmental liabilities; |
|
The Company may fail to identify, acquire, construct or develop additional properties that produce a desired yield on invested capital, or may fail to effectively integrate acquisitions of properties or portfolios of properties. In addition, the Company may be limited in its acquisition opportunities due to competition, the inability to obtain financing on reasonable terms or any financing at all, and other factors; |
|
The Company may fail to dispose of properties on favorable terms. In addition, real estate investments can be illiquid, particularly as prospective buyers may experience increased costs of financing or difficulties obtaining financing, and could limit the Companys ability to promptly make changes to its portfolio to respond to economic and other conditions; |
|
The Company may abandon a development opportunity after expending resources if it determines that the development opportunity is not feasible due to a variety of factors, including a lack of availability of construction financing on reasonable terms, the impact of |
55
the economic environment on prospective tenants ability to enter into new leases or pay contractual rent, or the inability of the Company to obtain all necessary zoning and other required governmental permits and authorizations; |
|
The Company may not complete development projects on schedule as a result of various factors, many of which are beyond the Companys control, such as weather, labor conditions, governmental approvals, material shortages or general economic downturn resulting in limited availability of capital, increased debt service expense and construction costs and decreases in revenue; |
|
The Companys financial condition may be affected by required debt service payments, the risk of default and restrictions on its ability to incur additional debt or to enter into certain transactions under its credit facilities and other documents governing its debt obligations. In addition, the Company may encounter difficulties in obtaining permanent financing or refinancing existing debt. Borrowings under the Companys revolving credit facilities are subject to certain representations and warranties and customary events of default, including any event that has had or could reasonably be expected to have a material adverse effect on the Companys business or financial condition; |
|
Changes in interest rates could adversely affect the market price of the Companys common shares, as well as its performance and cash flow; |
|
Debt and/or equity financing necessary for the Company to continue to grow and operate its business may not be available or may not be available on favorable terms; |
|
Disruptions in the financial markets could affect the Companys ability to obtain financing on reasonable terms and have other adverse effects on the Company and the market price of the Companys common shares; |
|
The Company is subject to complex regulations related to its status as a REIT and would be adversely affected if it failed to qualify as a REIT; |
|
The Company must make distributions to shareholders to continue to qualify as a REIT, and if the Company must borrow funds to make distributions, those borrowings may not be available on favorable terms or at all; |
|
Joint venture investments may involve risks not otherwise present for investments made solely by the Company, including the possibility that a partner or co-venturer may become bankrupt, may at any time have interests or goals different from those of the Company and may take action contrary to the Companys instructions, requests, policies or objectives, including the Companys policy with respect to maintaining its qualification as a REIT. In addition, a partner or co-venturer may not have access to sufficient capital to satisfy its funding obligations to the joint venture. The partner could cause a default under the joint venture loan for reasons outside the Companys control. Furthermore, the Company could be required to reduce the carrying value of its equity method investments if a loss in the carrying value of the investment is other than temporary; |
|
The Companys decision to dispose of real estate assets, including land held for development and construction in progress, would change the holding period assumption in the undiscounted cash flow impairment analyses, which could result in material impairment losses and adversely affect the Companys financial results; |
56
|
The outcome of pending or future litigation, including litigation with tenants or joint venture partners, may adversely affect the Companys results of operations and financial condition; |
|
The Company may not realize anticipated returns from its real estate assets outside the United States. The Company may continue to pursue international opportunities that may subject the Company to different or greater risks than those associated with its domestic operations. The Company owns assets in Puerto Rico, an interest in an unconsolidated joint venture that owns properties in Brazil and an interest in consolidated joint ventures that were formed to develop and own properties in Canada and Russia; |
|
International development and ownership activities carry risks in addition to those the Company faces with its domestic properties and operations. Although the Companys international activities are currently a relatively small portion of its business, to the extent the Company expands its international activities, these risks could significantly increase and adversely affect its results of operations and financial condition. These risks include the following: |
|
Adverse effects of changes in exchange rates for foreign currencies; |
|
Changes in foreign political or economic environments; |
|
Challenges of complying with a wide variety of foreign laws, including tax laws, and addressing different practices and customs relating to corporate governance, operations and litigation; |
|
Different lending practices; |
|
Cultural and consumer differences; |
|
Changes in applicable laws and regulations in the United States that affect foreign operations; |
|
Difficulties in managing international operations and |
|
Obstacles to the repatriation of earnings and cash. |
|
The Company is subject to potential environmental liabilities; |
|
The Company may incur losses that are uninsured or exceed policy coverage due to its liability for certain injuries to persons, property or the environment occurring on its properties and |
|
The Company could incur additional expenses to comply with or respond to claims under the Americans with Disabilities Act or otherwise be adversely affected by changes in government regulations, including changes in environmental, zoning, tax and other regulations. |
57
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
The Companys primary market risk exposure is interest rate risk. The Companys debt, excluding unconsolidated joint venture debt, is summarized as follows:
March 31, 2013 | December 31, 2012 | |||||||||||||||||||||||||||||||
Amount
(Millions) |
Weighted-
Average Maturity (Years) |
Weighted-
Average Interest Rate |
Percentage
of Total |
Amount
(Millions) |
Weighted-
Average Maturity (Years) |
Weighted-
Average Interest Rate |
Percentage
of Total |
|||||||||||||||||||||||||
Fixed-Rate Debt (A) |
$ | 3,871.5 | 5.2 | 5.1 | % | 88.9 | % | $ | 3,885.0 | 5.3 | 5.1 | % | 89.9 | % | ||||||||||||||||||
Variable-Rate Debt (A) |
$ | 482.6 | 4.5 | 1.7 | % | 11.1 | % | $ | 434.1 | 3.0 | 1.9 | % | 10.1 | % |
(A) | Adjusted to reflect the $632.5 million and $632.8 million of variable-rate debt that LIBOR was swapped to at a fixed-rate of 1.3% at March 31, 2013 and December 31, 2012, respectively. |
The Companys unconsolidated joint ventures indebtedness is summarized as follows:
March 31, 2013 | December 31, 2012 | |||||||||||||||||||||||||||||||
Joint
Venture Debt (Millions) |
Companys
Proportionate Share (Millions) |
Weighted-
Average Maturity (Years) |
Weighted-
Average Interest Rate |
Joint
Venture Debt (Millions) |
Companys
Proportionate Share (Millions) |
Weighted-
Average Maturity (Years) |
Weighted-
Average Interest Rate |
|||||||||||||||||||||||||
Fixed-Rate Debt |
$ | 3,150.1 | $ | 532.3 | 3.8 | 5.3 | % | $ | 3,083.7 | $ | 518.6 | 4.0 | 5.3 | % | ||||||||||||||||||
Variable-Rate Debt |
$ | 1,118.9 | $ | 202.2 | 4.8 | 7.2 | % | $ | 1,162.7 | $ | 206.3 | 4.3 | 6.9 | % |
The Company intends to use retained cash flow, proceeds from asset sales, equity and debt financing and variable-rate indebtedness available under its Revolving Credit Facilities to repay indebtedness and fund capital expenditures of the Companys shopping centers. Thus, to the extent the Company incurs additional variable-rate indebtedness, its exposure to increases in interest rates in an inflationary period could increase. The Company does not believe, however, that increases in interest expense as a result of inflation will significantly impact the Companys distributable cash flow.
The interest rate risk on a portion of the Companys variable-rate debt described above has been mitigated through the use of interest rate swap agreements (the Swaps) with major financial institutions. At March 31, 2013 and December 31, 2012, the interest rate on the Companys $632.5 million and $632.8 million, respectively, consolidated floating rate debt was swapped to fixed rates. The Company is exposed to credit risk in the event of nonperformance by the counterparties to the Swaps. The Company believes it mitigates its credit risk by entering into Swaps with major financial institutions.
58
The carrying value of the Companys fixed-rate debt is adjusted to include the $632.5 million and $632.8 million of variable-rate debt that was swapped to a fixed rate at March 31, 2013 and December 31, 2012, respectively. The fair value of the Companys fixed-rate debt is adjusted to (i) include the swaps reflected in the carrying value and (ii) include the Companys proportionate share of the joint venture fixed-rate debt. An estimate of the effect of a 100 basis-point increase at March 31, 2013 and December 31, 2012, is summarized as follows (in millions):
March 31, 2013 | December 31, 2012 | |||||||||||||||||||||||
Carrying
Value |
Fair Value |
100 Basis
Point Increase in Market Interest Rates |
Carrying
Value |
Fair Value |
100 Basis
Point Increase in Market Interest Rates |
|||||||||||||||||||
Companys fixed-rate debt |
$ | 3,871.5 | $ | 4,288.0 | (A) | $ | 4,048.1 | (B) | $ | 3,885.0 | $ | 4,311.8 | (A) | $ | 4,132.2 | (B) | ||||||||
Companys proportionate share of joint venture fixed-rate debt |
$ | 532.3 | $ | 540.9 | $ | 524.7 | $ | 518.6 | $ | 528.1 | $ | 510.2 |
(A) | Includes the fair value of interest rate swaps, which was a liability of $15.3 million and $17.1 million at March 31, 2013 and December 31, 2012, respectively. |
(B) | Includes the fair value of interest rate swaps, which was an asset of $8.1 million and $7.8 million at March 31, 2013 and December 31, 2012, respectively. |
The sensitivity to changes in interest rates of the Companys fixed-rate debt was determined using a valuation model based upon factors that measure the net present value of such obligations that arise from the hypothetical estimate as discussed above.
Further, a 100 basis point increase in short-term market interest rates on variable-rate debt at March 31, 2013, would result in an increase in interest expense of approximately $1.2 million for the Company and $0.5 million representing the Companys proportionate share of the joint ventures interest expense relating to variable-rate debt outstanding for the three-month period. The estimated increase in interest expense for the year does not give effect to possible changes in the daily balance of the Companys or joint ventures outstanding variable-rate debt.
The Company and its joint ventures intend to continually monitor and actively manage interest costs on their variable-rate debt portfolio and may enter into swap positions based on market fluctuations. In addition, the Company believes that it has the ability to obtain funds through additional equity and/or debt offerings and joint venture capital. Accordingly, the cost of obtaining such protection agreements in relation to the Companys access to capital markets will continue to be evaluated. The Company has not entered, and does not plan to enter, into any derivative financial instruments for trading or speculative purposes. As of March 31, 2013, the Company had no other material exposure to market risk.
59
ITEM 4. | CONTROLS AND PROCEDURES |
Based on their evaluation as required by Securities Exchange Act Rules 13a-15(b) and 15d-15(b), the Companys Chief Executive Officer (CEO) and Chief Financial Officer (CFO) have concluded that the Companys disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e)) were effective as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and were effective as of the end of such period to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act is accumulated and communicated to the Companys management, including its CEO and CFO, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
During the three-month period ended March 31, 2013, there were no changes in the Companys internal control over financial reporting that materially affected or are reasonably likely to materially affect the Companys internal control over financial reporting.
60
PART II
OTHER INFORMATION
ITEM 1. | LEGAL PROCEEDINGS |
Coventry II
The Company is a party to various joint ventures with the Coventry II Fund, through which 10 existing or proposed retail properties, along with a portfolio of former Service Merchandise locations, were acquired at various times from 2003 through 2006. The properties were acquired by the joint ventures as value-add investments, with major renovation and/or ground-up development contemplated for many of the properties. The Company was generally responsible for day-to-day management of the properties through December 2011. On November 4, 2009, Coventry Real Estate Advisors L.L.C., Coventry Real Estate Fund II, L.L.C. and Coventry Fund II Parallel Fund, L.L.C. (collectively, Coventry) filed suit against the Company and certain of its affiliates and officers in the Supreme Court of the State of New York, County of New York. The complaint alleges that the Company: (i) breached contractual obligations under a co-investment agreement and various joint venture limited liability company agreements, project development agreements and management and leasing agreements; (ii) breached its fiduciary duties as a member of various limited liability companies; (iii) fraudulently induced the plaintiffs to enter into certain agreements; and (iv) made certain material misrepresentations. The complaint also requests that a general release made by Coventry in favor of the Company in connection with one of the joint venture properties be voided on the grounds of economic duress. The complaint seeks compensatory and consequential damages in an amount not less than $500 million, as well as punitive damages.
In response to this action, the Company filed a motion to dismiss the complaint or, in the alternative, to sever the plaintiffs claims. In June 2010, the court granted the motion in part (which was affirmed on appeal), dismissing Coventrys claim that the Company breached a fiduciary duty owed to Coventry. The Company also filed an answer to the complaint, and asserted various counterclaims against Coventry. On October 10, 2011, the Company filed a motion for summary judgment, seeking dismissal of all of Coventrys remaining claims. On April 18, 2013, the court issued an order granting the majority of the Companys motion. Among other findings, the order dismissed all claims of fraud and misrepresentation against the Company and its officers, dismissed all claims for breach of the joint venture agreements and development agreements, and dismissed Coventrys claim of economic duress. The courts decision denied the Companys motion solely with respect to several claims for breach of contract under the Companys prior management agreements in connection with certain assets.
The Company believes that the allegations in the lawsuit are without merit and that it has strong defenses against this lawsuit. The Company will continue to vigorously defend itself against the allegations contained in the complaint. This lawsuit is subject to the uncertainties inherent in the litigation process and, therefore, no assurance can be given as to its ultimate outcome and no loss provision has been recorded in the accompanying financial statements because a loss contingency is not deemed probable or estimable. However, based on the information presently available to the Company, the Company does not expect that the ultimate resolution of this lawsuit will have a material adverse effect on the Companys financial condition, results of operations or cash flows.
61
Contract Termination
In January 2008, the Company entered into a Services Agreement (the Agreement) with Oxford Building Services, Inc. (Oxford). Oxfords obligations under the Agreement were guaranteed by Control Building Services, Inc. (Control), an affiliate of Oxford. The Agreement required that Oxford identify and contract directly with various service providers (Vendors) to provide maintenance, repairs, supplies and a variety of on-site services to certain properties in the Companys portfolio, in exchange for which Oxford would pay such Vendors for the services. Under the Agreement, the Company remitted funds to Oxford to pay the Vendors under the Vendors contracts with Oxford.
On or about January 23, 2013, Oxford advised the Company that approximately $11 million paid by the Company to Oxford for the sole purpose of paying various Vendors had instead been used to repay commercial financing obligations incurred by Oxford and its affiliates to a third-party lender. As a result, Oxford had insufficient funds to pay the Vendors in accordance with the Agreement. On January 28, 2013, the Company terminated the Agreement based upon Oxfords violations of the Agreement principally due to its insolvency. On February 26, 2013, Oxford and several affiliates filed petitions for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of New Jersey (Case No. 13-13821).
In its initial filings in the bankruptcy case, Oxford has claimed that the Company refused to pay Oxford approximately $5 million allegedly due and owing to Vendors for work performed at the Companys properties prior to the termination of the Agreement. Further, Oxford threatened to commence litigation against the Company to recover the alleged amounts owed should a consensual solution not be reached. The Company denies that any sums are due to Oxford, and if any such claim is filed, the Company will vigorously defend against it. Furthermore, as a result of the funds previously paid by the Company to Oxford, the Company also denies that any sums are due from the Company to any Vendors, and if any such claim is made, the Company will vigorously defend against it. On March 18, 2013, the Company filed suit in the Court of Common Pleas, Cuyahoga County, Ohio, against Control, Control Equity Group, Inc. (the non-bankrupt parent company of Oxford) and the individual principals of Oxford. The suit asserts claims for, among other things, breach of the Control guaranty, fraud, conversion and civil conspiracy.
Other
In addition to the litigation discussed above, the Company and its subsidiaries are subject to various legal proceedings, which, taken together, are not expected to have a material adverse effect on the Company. The Company is also subject to a variety of legal actions for personal injury or property damage arising in the ordinary course of its business, most of which are covered by insurance. While the resolution of all matters cannot be predicted with certainty, management believes that the final outcome of such legal proceedings and claims will not have a material adverse effect on the Companys liquidity, financial position or results of operations.
62
ITEM 1A. | RISK FACTORS |
None.
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
ISSUER PURCHASES OF EQUITY SECURITIES
(a) Total Number of
Shares Purchased (1) |
(b) Average Price
Paid per Share |
(c) Total Number
of Shares Purchased as Part of Publicly Announced Plans or Programs |
(d) Maximum Number
(or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (Millions) |
|||||||||||||
January 1 31, 2013 |
72,655 | $ | 16.37 | | | |||||||||||
February 1 28, 2013 |
49,383 | 16.92 | | | ||||||||||||
March 1 31, 2013 |
26,379 | 17.46 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
148,417 | $ | 16.75 | | |
(1) | Consists of common shares surrendered or deemed surrendered to the Company to satisfy statutory minimum tax withholding obligations in connection with the vesting and/or exercise of awards under the Companys equity-based compensation plans. |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
None.
ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
ITEM 5. | OTHER INFORMATION |
None.
63
ITEM 6. | EXHIBITS |
3.1 | Second Amended and Restated Articles of Incorporation of the Company, as amended | |
4.1 | Amendment No. 2 to Eighth Amended and Restated Credit Agreement, dated as of January 17, 2013, by and among DDR Corp., DDR PR Ventures LLC, S.E, the lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent | |
4.2 | First Amendment to Second Amended and Restated Secured Term Loan Agreement, dated as of January 17, 2013, by and among DDR Corp., DDR PR Ventures LLC, S.E, KeyBank National Association, as Administrative Agent, and the other several banks, financial institutions and other entities from time to time parties to such loan agreement | |
10.1 | First Amendment to the Employment Agreement, dated February 27, 2013, by and between DDR Corp. and Christa A. Vesy | |
10.2 | Form of Restricted Shares Agreement | |
10.3 | Form of Non-Qualified Stock Option Agreement | |
10.4 | Form of Incentive Stock Option Agreement | |
10.5 | Form of 2013 Value Sharing Equity Program Award Agreement | |
31.1 | Certification of principal executive officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 | |
31.2 | Certification of principal financial officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 | |
32.1 | Certification of chief executive officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of this report pursuant to the Sarbanes-Oxley Act of 2002 1 | |
32.2 | Certification of chief financial officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of this report pursuant to the Sarbanes-Oxley Act of 2002 1 | |
101.INS | XBRL Instance Document 2 | |
101.SCH | XBRL Taxonomy Extension Schema Document 2 | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document 2 | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document 2 |
64
101.LAB | XBRL Taxonomy Extension Label Linkbase Document 2 | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document 2 |
1 | Pursuant to SEC Release No. 34-4751, these exhibits are deemed to accompany this report and are not filed as part of this report. |
2 | Submitted electronically herewith. |
Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012, (ii) Condensed Consolidated Statements of Operations for the Three-Month Periods Ended March 31, 2013 and 2012, (iii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three-Month Periods Ended March 31, 2013 and 2012, (iv) Consolidated Statement of Equity for the Three-Month Period Ended March 31, 2013, (v) Condensed Consolidated Statements of Cash Flows for the Three-Month Periods Ended March 31, 2013 and 2012, and (vi) Notes to Condensed Consolidated Financial Statements.
65
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DDR CORP. | ||||||
May 10, 2013 |
/s/ Christa A. Vesy |
|||||
(Date) |
Christa A. Vesy Executive Vice President and Chief Accounting Officer (Authorized Officer) |
66
EXHIBIT INDEX
Exhibit No.
Under Reg. S-K
|
Form 10-Q Exhibit No. |
Description |
Filed Herewith or
by Reference |
|||
3 |
3.1 | Second Amended and Restated Articles of Incorporation of the Company, as amended | Filed herewith | |||
4 |
4.1 | Amendment No. 2 to Eighth Amended and Restated Credit Agreement, dated as of January 17, 2013, by and among DDR Corp., DDR PR Ventures LLC, S.E, the lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent. | Current Report on Form 8-K (Filed with the SEC on January 18, 2013; File No. 001-11690) | |||
4 |
4.2 | First Amendment to Second Amended and Restated Secured Term Loan Agreement, dated as of January 17, 2013, by and among DDR Corp., DDR PR Ventures LLC, S.E, KeyBank National Association, as Administrative Agent, and the other several banks, financial institutions and other entities from time to time parties to such loan. | Current Report on Form 8-K (Filed with the SEC on January 18, 2013; File No. 001-11690) | |||
10 |
10.1 | First Amendment to the Employment Agreement, dated February 27, 2013, by and between DDR Corp. and Christa A. Vesy | Current Report on Form 8-K (Filed with the SEC on March 4, 2013; File No. 001-11690) | |||
10 |
10.2 | Form of Restricted Shares Agreement | Filed herewith | |||
10 |
10.3 | Form of Non-Qualified Stock Option Agreement | Filed herewith | |||
10 |
10.4 | Form of Incentive Stock Option Agreement | Filed herewith | |||
10 |
10.5 | Form of 2013 Value Sharing Equity Program Award Agreement | Filed herewith | |||
31 |
31.1 | Certification of principal executive officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 | Filed herewith | |||
31 |
31.2 | Certification of principal financial officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 | Filed herewith | |||
32 |
32.1 | Certification of chief executive officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of this report pursuant to the Sarbanes-Oxley Act of 2002 | Filed herewith | |||
32 |
32.2 | Certification of chief financial officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of this report pursuant to the Sarbanes-Oxley Act of 2002 | Filed herewith | |||
101 |
101.INS | XBRL Instance Document | Submitted electronically herewith | |||
101 |
101.SCH | XBRL Taxonomy Extension Schema Document | Submitted electronically herewith | |||
101 |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | Submitted electronically herewith | |||
101 |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | Submitted electronically herewith | |||
101 |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | Submitted electronically herewith | |||
101 |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | Submitted electronically herewith |
67
Exhibit 3.1
Amendment No. 5
to the
Second Amended and Restated Articles of Incorporation
of
DDR Corp.
RESOLVED, that DDR Corp.s Second Amended and Restated Articles of Incorporation, as amended, will be further amended and restated as set forth below:
ARTICLE FOURTH, Division A, Item XI, Section 6 shall be amended and restated as follows:
Section 6. 6.250% Class K Cumulative Redeemable Preferred Shares . Of the 750,000 authorized Class K Shares, 345,000 shares are designated as a series entitled 6.250% Class K Cumulative Redeemable Preferred Shares (hereinafter called 6.250% Class K Preferred Shares). The 6.250% Class K Preferred Shares shall have the express terms set forth in this Division as being applicable to all Class K Shares as a class and, in addition, the following express terms applicable to all 6.250% Class K Preferred Shares as a series of Class K Shares:
(a) | The annual dividend rate of the 6.250% Class K Preferred Shares shall be 6.250% of the liquidation preference of $500.00 per share. |
(b) | Dividends on the 6.250% Class K Preferred Shares shall be payable, if declared, quarterly in arrears on the fifteenth day of each January, April, July and October or, if not a Business Day (as defined in clause (h) of this Section 6), the next succeeding Business Day (each a Dividend Payment Date), the first quarterly dividend being payable, if declared, on July 15, 2013 (the First Dividend Payment Date). The dividends payable for each full quarterly dividend period on each 6.250% Class K Preferred Share shall be $7.8125. |
Dividends for the initial dividend period on the 6.250% Class K Preferred Shares, or for any period shorter or longer than a full dividend period on the 6.250% Class K Preferred Shares, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The aggregate dividend payable quarterly to each holder of 6.250% Class K Preferred Shares shall be rounded to the nearest one-hundredth of one cent with $.00005 being rounded upward. Each dividend shall be payable to the holders of record as of the close of business on the applicable record date, which shall be the first day of the calendar month in which the applicable Dividend Payment Date falls or on such other date as shall be fixed by the Corporations Board of Directors that is no less than ten nor more than 30 days preceding the applicable Dividend Payment Date (the Dividend Record Date), in each case whether or not such day is a Business Day.
(c) | Dividends on 6.250% Class K Preferred Shares shall be cumulative as follows: |
(1) | with respect to shares included in the initial issue of 6.250% Class K Preferred Shares and shares issued any time thereafter up to and including the Dividend Record Date for the First Dividend Payment Date, dividends shall be cumulative from the date of the initial issue of 6.250% Class K Preferred Shares; and |
(2) | with respect to shares issued any time after the aforesaid Dividend Record Date, dividends shall be cumulative from the Dividend Payment Date next preceding the date of issue of such shares, except that if such shares are issued during the period commencing the day after the Dividend Record Date for the payment of a dividend on 6.250% Class K Preferred Shares and ending on the Dividend Payment Date of that dividend, dividends with respect to such shares shall be cumulative from that Dividend Payment Date. |
Accrued but unpaid dividends on 6.250% Class K Preferred Shares shall not bear interest. Any dividend payment made on the 6.250% Class K Preferred Shares shall first be credited against the earliest accrued but unpaid dividend due with respect to such shares which remains payable.
(d) | Except as required to preserve the Corporations status as a real estate investment trust under the Internal Revenue Code of 1986, as amended, and except pursuant to the Special Optional Redemption Right (as defined in this Section 6(d)), the 6.250% Class K Preferred Shares may not be redeemed prior to April 9, 2018. |
At any time or from time to time on and after April 9, 2018, the Corporation, at its option upon not less than 30 nor more than 60 days written notice, may redeem the 6.250% Class K Preferred Shares, in whole or in part, at a redemption price of $500.00 per share plus, in each case, an amount equal to all dividends accrued and unpaid thereon to, but not including, the redemption date, without interest (the Optional Redemption Right). Upon the occurrence of a Change of Control (as defined in clause (h) of this Section 6), the Corporation, at its option upon not less than 30 nor more than 60 days written notice, may redeem the 6.250% Class K Preferred Shares, in whole or in part, within 120 days after the first date on which such Change of Control occurred, at a redemption price of $500.00 per share plus, in each case, an amount equal to all dividends accrued and unpaid thereon to, but not including, the redemption date, without interest (the Special Optional Redemption Right).
If, prior to the Change of Control Conversion Date (as defined in clause (h) of this Section 6), the Corporation has provided or provides notice of its exercise of any of its redemption rights with respect to the 6.250% Class K Preferred Shares (whether pursuant to the Optional Redemption Right or the Special Optional Redemption Right), the holders of 6.250% Class K Preferred Shares will not have the Change of Control Conversion Right (as defined in clause (e) of this Section 6) in respect of the 6.250% Class K Preferred Shares called for redemption.
If less than all of the outstanding 6.250% Class K Preferred Shares are to be redeemed, the 6.250% Class K Preferred Shares to be redeemed shall be selected pro rata (as nearly as may be practicable without creating fractional shares), or by any other equitable method determined by the Corporation that will not result in the issuance of any 6.250% Class K Preferred Shares in excess of the Ownership Limit (as defined in Section (a) of Item XIV of this Division A of this Article FOURTH).
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Notice of redemption shall be mailed, postage prepaid, as of a date set by the Corporation not less than 30 nor more than 60 days prior to the redemption date, addressed to the respective holders of record of the 6.250% Class K Preferred Shares to be redeemed at their respective addresses then appearing on the books of the Corporation.
(1) | 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 6.250% Class K Preferred Shares except as to the holder to whom such notice was defective or not given. |
(2) | A redemption notice which has been mailed in the manner provided herein shall be conclusively presumed to have been duly given on the date mailed whether or not the holder received the redemption notice. |
In addition to any information required by the applicable rules of any securities exchange upon which the 6.250% Class K Preferred Shares may be listed or admitted to trading, each such notice shall state (i) the redemption date; (ii) the redemption price; (iii) the number of 6.250% Class K Preferred Shares to be redeemed; (iv) the place or places where certificates, if any, for the 6.250% Class K Preferred Shares to be redeemed are to be surrendered for payment of the redemption price; and (v) that dividends in respect of the 6.250% Class K Preferred Shares to be redeemed will cease to accrue on such redemption date. If less than all of the 6.250% Class K Preferred Shares held by any holder are to be redeemed, the notice shall state the number of such 6.250% Class K Preferred Shares held by such holder to be so redeemed.
(3) | In the event the Corporation is exercising the Special Optional Redemption Right, the notice referred to above shall also state: (i) that the 6.250% Class K Preferred Shares are being redeemed pursuant to the Special Optional Redemption Right in connection with the occurrence of a Change of Control and a brief description of the transaction(s) constituting such Change of Control; and (ii) that the 6.250% Class K Preferred Shares to which such notice relates may not be tendered for conversion in connection with the Change of Control by the holder thereof and that each 6.250% Class K Preferred Share so tendered for conversion that is selected, prior to the Change of Control Conversion Date, for redemption will be redeemed on the related redemption date instead of converted on the Change of Control Conversion Date. |
Anything herein to the contrary notwithstanding and except as otherwise required by law, the holders of 6.250% Class K Preferred Shares at the close of business on a Dividend Record Date will be entitled to receive the dividend payable with respect to their 6.250% Class K Preferred Shares on the corresponding Dividend Payment Date notwithstanding the redemption thereof after such Dividend Record Date and on or prior to such Dividend Payment Date or the Corporations default in the payment of the dividend due on such Dividend Payment Date. Except as provided in this Section 6, the Corporation will make no payment or allowance for unpaid dividends, whether or not in arrears, on 6.250% Class K Preferred Shares called for redemption.
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(e) | 6.250% Class K Preferred Shares shall not be convertible into or exchangeable for any other property or securities of the Corporation, except as provided in this Section 6(e) and/or except in connection with the exercise of the Corporations rights pursuant to Section (d) of Item XIV of this Division A of this Article FOURTH, Section 4(d) of Division B of this Article FOURTH, or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation, as amended. |
Upon the occurrence of a Change of Control, each holder of 6.250% Class K Preferred Shares shall have the right, unless, prior to the Change of Control Conversion Date, the Corporation has provided or provides notice of its election to redeem the 6.250% Class K Preferred Shares pursuant to the Optional Redemption Right or Special Optional Redemption Right, to convert some or all of the 6.250% Class K Preferred Shares held by such holder (the Change of Control Conversion Right) on the Change of Control Conversion Date into a number of Common Shares (or equivalent value of Alternative Conversion Consideration (as defined in this Section 6(e)) per 6.250% Class K Preferred Share to be converted (the Common Shares Conversion Consideration) equal to the lesser of (i) the quotient obtained by dividing (1) the sum of $500.00 per share plus the amount of any accrued and unpaid dividends to, but not including, the Change of Control Conversion Date (unless the Change of Control Conversion Date is after a Dividend Record Date and prior to the corresponding Dividend Payment Date, in which case no additional amount for such accrued and unpaid dividends will be included in this sum) by (2) the Common Share Price (as defined in clause (h) of this Section 6); and (ii) 57.1102 (the Share Cap), subject to the adjustments described in the following paragraph.
Anything herein to the contrary notwithstanding and except as otherwise required by law, the persons who are holders of record of 6.250% Class K Preferred Shares at the close of business on a Dividend Record Date will be entitled to receive the dividend payable on the corresponding Dividend Payment Date notwithstanding the conversion of those shares after such Dividend Record Date and on or prior to such Dividend Payment Date and, in such case, the full amount of such dividend shall be paid on such Dividend Payment Date to the persons who were the holders of record of 6.250% Class K Preferred Shares at the close of business on such Dividend Record Date.
The Share Cap is subject to pro rata adjustments for any share splits (including those effected pursuant to a distribution of Common Shares), subdivisions or combinations (in each case, a Share Split) with respect to Common Shares as follows: the adjusted Share Cap as the result of a Share Split will be the number of Common Shares that is equivalent to the product obtained by multiplying (i) the Share Cap in effect immediately prior to such Share Split by (ii) a fraction, the numerator of which is the number of Common Shares outstanding after giving effect to such Share Split and the denominator of which is the number of Common Shares outstanding immediately prior to such Share Split.
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For the avoidance of doubt, subject to the immediately succeeding sentence, the aggregate number of Common Shares (or equivalent Alternative Conversion Consideration, as applicable) issuable in connection with the exercise of the Change of Control Conversion Right shall not exceed 17,133,000 Common Shares (or equivalent Alternative Conversion Consideration, as applicable), subject to increase to the extent the underwriters over-allotment option to purchase additional 6.250% Class K Preferred Shares in the initial public offering of 6.250% Class K Preferred Shares is exercised, not to exceed 19,702,950 Common Shares in total (or equivalent Alternative Conversion Consideration, as applicable) (the Exchange Cap). The Exchange Cap is subject to pro rata adjustments for any Share Splits on the same basis as the corresponding adjustment to the Share Cap and is subject to increase in the event that additional 6.250% Class K Preferred Shares are designated and issued in the future pursuant to an amendment to these Amended and Restated Articles of Incorporation, as amended.
In the case of a Change of Control pursuant to which Common Shares will be converted into cash, securities or other property or assets (including any combination thereof) (the Alternative Form Consideration), a holder of 6.250% Class K Preferred Shares will receive upon conversion of such 6.250% Class K Preferred Shares the kind and amount of Alternative Form Consideration that such holder would have owned or been entitled to receive upon the Change of Control had such holder held a number of Common Shares equal to the Common Shares Conversion Consideration immediately prior to the effective time of the Change of Control (the Alternative Conversion Consideration; the Common Shares Conversion Consideration or the Alternative Conversion Consideration, as may be applicable to a Change of Control, is referred to as the Conversion Consideration).
If the holders of Common Shares have the opportunity to elect the form of consideration to be received in the Change of Control, the consideration that the holders of the 6.250% Class K Preferred Shares will receive will be in the form and proportion of the aggregate consideration elected by the holders of Common Shares who participate in the determination (based on the weighted average of elections) and will be subject to any limitations to which all holders of Common Shares are subject, including, without limitation, pro rata reductions applicable to any portion of the consideration payable in the Change of Control.
No fractional Common Shares will be issued upon the conversion of the 6.250% Class K Preferred Shares. In lieu of fractional shares, holders shall be entitled to receive the cash value of such fractional shares based on the Common Share Price.
Within 15 days following the occurrence of a Change of Control, the Corporation shall deliver a notice of occurrence of the Change of Control, describing the resulting Change of Control Conversion Right, to the holders of record of the 6.250% Class K Preferred Shares at their respective addresses then appearing on the books of the Corporation.
(1) | No failure to give such notice or any defect thereto or in the mailing thereof shall affect the validity of the proceedings for the conversion of any 6.250% Class K Preferred Shares except as to the holder to whom notice was defective or not given. |
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(2) | Each such notice shall state (i) the events constituting the Change of Control; (ii) the date of the Change of Control; (iii) the last date on which the holders of the 6.250% Class K Preferred Shares may exercise their Change of Control Conversion Right; (iv) the method and period for calculating the Common Share Price; (v) the Change of Control Conversion Date; (vi) that if, prior to the Change of Control Conversion Date, the Corporation has provided or provides notice of its election to redeem all or any portion of the 6.250% Class K Preferred Shares, holders of such shares will not be able to convert such shares and such shares will be redeemed on the related redemption date, even if such shares have already been tendered for conversion pursuant to the Change of Control Conversion Right; (vii) if applicable, the type and amount of Alternative Conversion Consideration entitled to be received per 6.250% Class K Preferred Share; (viii) the name and address of the paying agent and the conversion agent; (ix) the procedures that the holders of the 6.250% Class K Preferred Shares must follow to exercise the Change of Control Conversion Right; and (x) the last date on which the holders of the 6.250% Class K Preferred Shares may withdraw shares surrendered for conversion and the procedures that such holders must follow to effect such a withdrawal. |
The Corporation shall issue a press release for publication on the Dow Jones & Company, Inc., Business Wire, PR Newswire or Bloomberg Business News (or, if these organizations are not in existence at the time of issuance of the press release, such other news or press organization as is reasonably calculated to broadly disseminate the relevant information to the public), or post notice on the Corporations website, in any event prior to the opening of business on the first Business Day following any date on which the Corporation provides the Change of Control notice described above to the holders of the 6.250% Class K Preferred Shares.
In order to exercise the Change of Control Conversion Right, a holder of 6.250% Class K Preferred Shares shall be required to deliver, on or before the close of business on the Change of Control Conversion Date, the certificates, if any, evidencing the 6.250% Class K Preferred Shares to be converted, duly endorsed for transfer, together with a written conversion notice completed, to the Corporations transfer agent.
(1) | Such notice shall state (i) the relevant Change of Control Conversion Date; (ii) the number of 6.250% Class K Preferred Shares to be converted; and (iii) that the 6.250% Class K Preferred Shares are to be converted pursuant to the applicable provisions of the 6.250% Class K Preferred Shares. |
(2) | Notwithstanding the foregoing, if the 6.250% Class K Preferred Shares are held in global form, such notice shall comply with applicable procedures of The Depository Trust Company or any other organization acting as depositary for the 6.250% Class K Preferred Shares (the Depositary). |
Holders of 6.250% Class K Preferred Shares may withdraw any notice of exercise of a Change of Control Conversion Right (in whole or in part) by a written notice of withdrawal delivered to the Corporations transfer agent prior to the close of business on the Business Day prior to the Change of Control Conversion Date.
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(1) | The notice of withdrawal must state: (i) the number of withdrawn 6.250% Class K Preferred Shares; (ii) if certificated 6.250% Class K Preferred Shares have been issued, the certificate numbers of the withdrawn 6.250% Class K Preferred Shares; and (iii) the number of 6.250% Class K Preferred Shares, if any, which remain subject to the conversion notice. |
(2) | Notwithstanding the foregoing, if the 6.250% Class K Preferred Shares are held in global form, such notice of withdrawal shall comply with applicable procedures of the Depositary. |
6.250% Class K Preferred Shares as to which the Change of Control Conversion Right has been properly exercised and for which the conversion notice has not been properly withdrawn shall be converted into the applicable Conversion Consideration in accordance with the Change of Control Conversion Right on the Change of Control Conversion Date, unless, prior to the Change of Control Conversion Date, the Corporation has provided or provides notice of its election to redeem such 6.250% Class K Preferred Shares, whether pursuant to the Optional Redemption Right or Special Optional Redemption Right. If the Corporation elects to redeem 6.250% Class K Preferred Shares that would otherwise be converted into the applicable Conversion Consideration on a Change of Control Conversion Date, such 6.250% Class K Preferred Shares shall not be so converted and the holders of such shares shall be entitled to receive on the applicable redemption date $500.00 per share, plus accrued and unpaid dividends to, but not including, the redemption date.
The Corporation shall deliver the applicable Conversion Consideration to the applicable holders of 6.250% Class K Preferred Shares no later than the third Business Day following the Change of Control Conversion Date.
Notwithstanding anything to the contrary contained herein, no holder of 6.250% Class K Preferred Shares will be entitled to convert such shares to the extent that receipt of Common Shares upon conversion of the 6.250% Class K Preferred Shares would cause such holder (or any other person) to exceed either of the ownership limits described in Section (a) of Item XIV of this Division A of this Article FOURTH and Section 4(a) of Division B of this Article FOURTH, unless the Corporation provides an exemption from such ownership limits for such holder.
Notwithstanding the foregoing restrictions on the ability to convert the 6.250% Class K Preferred Shares, any conversion of 6.250% Class K Preferred Shares in violation of the ownership limits described in Section (a) of Item XIV of this Division A of this Article FOURTH and Section 4(a) of Division B of this Article FOURTH, or that causes another person to be in violation of such ownership limits, including as a result of the effect of the operation of this provision, shall be construed as causing any 6.250% Class K Preferred Shares that exceed such ownership limits to be deemed Excess Preferred Shares and subject to the provisions applicable to Excess Preferred Shares set forth in these Amended and Restated Articles of Incorporation, as amended.
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(f) | The amount payable per 6.250% Class K Preferred Share in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation shall be $500.00, plus an amount equal to all dividends accrued and unpaid thereon to, but not including, the date of payment. |
(g) | All dividend payments made on the 6.250% Class K Preferred Shares, at any time during which the Corporation is in default in the payment of dividends on such 6.250% Class K Preferred Shares for any dividend period, shall, for the purposes of Section 5(b)(1) of this Item X, be deemed to be made in respect of the earliest dividend period with respect to which the Corporation is in default. |
(h) | Definitions . For the purposes of this Section 6 of Item X of Division A of this Article FOURTH, the following terms shall have the following meanings: |
Business Day shall mean any day other than a Saturday, Sunday or a day on which banking institutions in The City of New York, New York are authorized or required by law, regulation or executive order to close.
Change of Control is when, after the original issuance of the 6.250% Class K Preferred Shares, the following have occurred and are continuing:
(i) | the acquisition by any person, including any syndicate or group deemed to be a person under Section 13(d)(3) of the Exchange Act, of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of shares of the Corporation entitling that person to exercise more than 50% of the total voting power of all shares of the Corporation entitled to vote generally in elections of directors (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and |
(ii) | following the closing of any transaction referred to in the foregoing clause (i), neither the Corporation nor the acquiring or surviving entity has a class of common securities (or American Depositary Receipts representing such securities) listed on the NYSE, the NYSE MKT or NASDAQ, or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE MKT or NASDAQ. |
Change of Control Conversion Date shall mean the date the 6.250% Class K Preferred Shares are to be converted which shall be a Business Day that is no fewer than 20 days nor more than 35 days after the date on which the Corporation provides notice of the occurrence of a Change of Control (as provided for in clause (e) of this Section 6) to the holders of the 6.250% Class K Preferred Shares.
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Common Share Price shall mean: (i) if the consideration to be received in the Change of Control by the holders of Common Shares is solely cash, the amount of cash consideration per Common Share or (ii) if the consideration to be received in the Change of Control by holders of Common Shares is other than solely cash (x) the average of the closing sale prices per Common Share (or, if no closing sale price is reported, the average of the closing bid and ask prices per Common Share or, if more than one in either case, the average of the average closing bid and the average closing ask prices per Common Share) for the ten consecutive trading days immediately preceding, but not including, the date on which such Change of Control occurred as reported on the principal U.S. securities exchange on which the Common Shares are then traded, or (y) the average of the last quoted bid prices for the Common Shares in the over-the-counter market as reported by OTC Markets Group Inc. or similar organization for the ten consecutive trading days immediately preceding, but not including, the date on which such Change of Control occurred, if the Common Shares are not then listed for trading on a U.S. securities exchange.
Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
NASDAQ shall mean the NASDAQ Stock Market.
NYSE shall mean the New York Stock Exchange.
NYSE MKT shall mean the NYSE MKT (formerly known as the NYSE Amex Equities).
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Amendment No. 4
to the
Second Amended and Restated Articles of Incorporation
of
DDR Corp.
RESOLVED, that DDR Corp.s Second Amended and Restated Articles of Incorporation, as amended, will be further amended and restated as set forth below:
ARTICLE FOURTH, Division A, Item X, Section 6 shall be amended and restated as follows:
Section 6. 6.50% Class J Cumulative Redeemable Preferred Shares . Of the 750,000 authorized Class J Shares, 400,000 shares are designated as a series entitled 6.50% Class J Cumulative Redeemable Preferred Shares (hereinafter called 6.50% Class J Preferred Shares). The 6.50% Class J Preferred Shares shall have the express terms set forth in this Division as being applicable to all Class J Shares as a class and, in addition, the following express terms applicable to all 6.50% Class J Preferred Shares as a series of Class J Shares:
(a) | The annual dividend rate of the 6.50% Class J Preferred Shares shall be 6.50% of the liquidation preference of $500.00 per share. |
(b) | Dividends on the 6.50% Class J Preferred Shares shall be payable, if declared, quarterly in arrears on the fifteenth day of each January, April, July and October or, if not a Business Day (as defined in clause (h) of this Section 6), the next succeeding Business Day (each a Dividend Payment Date), the first quarterly dividend being payable, if declared, on October 15, 2012 (the First Dividend Payment Date). The dividends payable for each full quarterly dividend period on each 6.50% Class J Preferred Share shall be $8.125. |
Dividends for the initial dividend period on the 6.50% Class J Preferred Shares, or for any period shorter or longer than a full dividend period on the 6.50% Class J Preferred Shares, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The aggregate dividend payable quarterly to each holder of 6.50% Class J Preferred Shares shall be rounded to the nearest one-hundredth of one cent with $.00005 being rounded upward. Each dividend shall be payable to the holders of record as of the close of business on the applicable record date, which shall be the first day of the calendar month in which the applicable Dividend Payment Date falls or on such other date as shall be fixed by the Corporations Board of Directors that is no less than ten nor more than 30 days preceding the applicable Dividend Payment Date (the Dividend Record Date), in each case whether or not such day is a Business Day. |
(c) | Dividends on 6.50% Class J Preferred Shares shall be cumulative as follows: |
(1) | with respect to shares included in the initial issue of 6.50% Class J Preferred Shares and shares issued any time thereafter up to and including the Dividend Record Date for the First Dividend Payment Date, dividends shall be cumulative from the date of the initial issue of 6.50% Class J Preferred Shares; and |
(2) | with respect to shares issued any time after the aforesaid Dividend Record Date, dividends shall be cumulative from the Dividend Payment Date next preceding the date of issue of such shares, except that if such shares are issued during the period commencing the day after the Dividend Record Date for the payment of a dividend on 6.50% Class J Preferred Shares and ending on the Dividend Payment Date of that dividend, dividends with respect to such shares shall be cumulative from that Dividend Payment Date. |
Accrued but unpaid dividends on 6.50% Class J Preferred Shares shall not bear interest. Any dividend payment made on the 6.50% Class J Preferred Shares shall first be credited against the earliest accrued but unpaid dividend due with respect to such shares which remains payable. |
(d) | Except as required to preserve the Corporations status as a real estate investment trust under the Internal Revenue Code of 1986, as amended, and except pursuant to the Special Optional Redemption Right (as defined in this Section 6(d)), the 6.50% Class J Preferred Shares may not be redeemed prior to August 1, 2017. |
At any time or from time to time on and after August 1, 2017, the Corporation, at its option upon not less than 30 nor more than 60 days written notice, may redeem the 6.50% Class J Preferred Shares, in whole or in part, at a redemption price of $500.00 per share plus, in each case, an amount equal to all dividends accrued and unpaid thereon to, but not including, the redemption date, without interest (the Optional Redemption Right). Upon the occurrence of a Change of Control (as defined in clause (h) of this Section 6), the Corporation, at its option upon not less than 30 nor more than 60 days written notice, may redeem the 6.50% Class J Preferred Shares, in whole or in part, within 120 days after the first date on which such Change of Control occurred, at a redemption price of $500.00 per share plus, in each case, an amount equal to all dividends accrued and unpaid thereon to, but not including, the redemption date, without interest (the Special Optional Redemption Right). |
If, prior to the Change of Control Conversion Date (as defined in clause (h) of this Section 6), the Corporation has provided or provides notice of its exercise of any of its redemption rights with respect to the 6.50% Class J Preferred Shares (whether pursuant to the Optional Redemption Right or the Special Optional Redemption Right), the holders of 6.50% Class J Preferred Shares will not have the Change of Control Conversion Right (as defined in clause (e) of this Section 6) in respect of the 6.50% Class J Preferred Shares called for redemption. |
If less than all of the outstanding 6.50% Class J Preferred Shares are to be redeemed, the 6.50% Class J Preferred Shares to be redeemed shall be selected pro rata (as nearly as may be practicable without creating fractional shares), or by any other equitable method determined by the Corporation that will not result in the issuance of any 6.50% Class J Preferred Shares in excess of the Ownership Limit (as defined in Section (a) of Item XIV of this Division A of this Article FOURTH). |
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Notice of redemption shall be mailed, postage prepaid, as of a date set by the Corporation not less than 30 nor more than 60 days prior to the redemption date, addressed to the respective holders of record of the 6.50% Class J Preferred Shares to be redeemed at their respective addresses then appearing on the books of the Corporation. |
(1) | 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 6.50% Class J Preferred Shares except as to the holder to whom such notice was defective or not given. |
(2) | A redemption notice which has been mailed in the manner provided herein shall be conclusively presumed to have been duly given on the date mailed whether or not the holder received the redemption notice. |
In addition to any information required by the applicable rules of any securities exchange upon which the 6.50% Class J Preferred Shares may be listed or admitted to trading, each such notice shall state (i) the redemption date; (ii) the redemption price; (iii) the number of 6.50% Class J Preferred Shares to be redeemed; (iv) the place or places where certificates, if any, for the 6.50% Class J Preferred Shares to be redeemed are to be surrendered for payment of the redemption price; and (v) that dividends in respect of the 6.50% Class J Preferred Shares to be redeemed will cease to accrue on such redemption date. If less than all of the 6.50% Class J Preferred Shares held by any holder are to be redeemed, the notice shall state the number of such 6.50% Class J Preferred Shares held by such holder to be so redeemed. |
(3) | In the event the Corporation is exercising the Special Optional Redemption Right, the notice referred to above shall also state: (i) that the 6.50% Class J Preferred Shares are being redeemed pursuant to the Special Optional Redemption Right in connection with the occurrence of a Change of Control and a brief description of the transaction(s) constituting such Change of Control; and (ii) that the 6.50% Class J Preferred Shares to which such notice relates may not be tendered for conversion in connection with the Change of Control by the holder thereof and that each 6.50% Class J Preferred Share so tendered for conversion that is selected, prior to the Change of Control Conversion Date, for redemption will be redeemed on the related date of redemption instead of converted on the Change of Control Conversion Date. |
Anything herein to the contrary notwithstanding and except as otherwise required by law, the holders of 6.50% Class J Preferred Shares at the close of business on a Dividend Record Date will be entitled to receive the dividend payable with respect to their 6.50% Class J Preferred Shares on the corresponding Dividend Payment Date notwithstanding the redemption thereof after such Dividend Record Date and on or prior to such Dividend Payment Date or the Corporations default in the payment of the dividend due on such |
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Dividend Payment Date. Except as provided in this Section 6, the Corporation will make no payment or allowance for unpaid dividends, whether or not in arrears, on 6.50% Class J Preferred Shares called for redemption. |
(e) | 6.50% Class J Preferred Shares shall not be convertible into or exchangeable for any other property or securities of the Corporation, except as provided in this Section 6(e) and/or except in connection with the exercise of the Corporations rights pursuant to Section (d) of Item XIV of this Division A of this Article FOURTH, Section 4(d) of Division B of this Article FOURTH, or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation, as amended. |
Upon the occurrence of a Change of Control, each holder of 6.50% Class J Preferred Shares shall have the right, unless, prior to the Change of Control Conversion Date, the Corporation has provided or provides notice of its election to redeem the 6.50% Class J Preferred Shares pursuant to the Optional Redemption Right or Special Optional Redemption Right, to convert some or all of the 6.50% Class J Preferred Shares held by such holder (the Change of Control Conversion Right) on the Change of Control Conversion Date into a number of Common Shares (or equivalent value of Alternative Conversion Consideration (as defined in this Section 6(e)) per 6.50% Class J Preferred Share to be converted (the Common Shares Conversion Consideration) equal to the lesser of (i) the quotient obtained by dividing (1) the sum of $500.00 per share plus the amount of any accrued and unpaid dividends to, but not including, the Change of Control Conversion Date (unless the Change of Control Conversion Date is after a Dividend Record Date and prior to the corresponding Dividend Payment Date, in which case no additional amount for such accrued and unpaid dividends will be included in this sum) by (2) the Common Share Price (as defined in clause (h) of this Section 6); and (ii) 66.8896 (the Share Cap), subject to the adjustments described in the following paragraph. |
Anything herein to the contrary notwithstanding and except as otherwise required by law, the persons who are holders of record of 6.50% Class J Preferred Shares at the close of business on a Dividend Record Date will be entitled to receive the dividend payable on the corresponding Dividend Payment Date notwithstanding the conversion of those shares after such Dividend Record Date and on or prior to such Dividend Payment Date and, in such case, the full amount of such dividend shall be paid on such Dividend Payment Date to the persons who were the holders of record of 6.50% Class J Preferred Shares at the close of business on such Dividend Record Date. |
The Share Cap is subject to pro rata adjustments for any share splits (including those effected pursuant to a distribution of Common Shares), subdivisions or combinations (in each case, a Share Split) with respect to Common Shares as follows: the adjusted Share Cap as the result of a Share Split will be the number of Common Shares that is equivalent to the product obtained by multiplying (i) the Share Cap in effect immediately prior to such Share Split by (ii) a fraction, the numerator of which is the number of Common Shares outstanding after giving effect to such Share Split and the denominator of which is the number of Common Shares outstanding immediately prior to such Share Split. |
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For the avoidance of doubt, subject to the immediately succeeding sentence, the aggregate number of Common Shares (or equivalent Alternative Conversion Consideration, as applicable) issuable in connection with the exercise of the Change of Control Conversion Right shall not exceed 26,756,000 Common Shares (or equivalent Alternative Conversion Consideration, as applicable) (the Exchange Cap). The Exchange Cap is subject to pro rata adjustments for any Share Splits on the same basis as the corresponding adjustment to the Share Cap and is subject to increase in the event that additional 6.50% Class J Preferred Shares are designated and issued in the future pursuant to an amendment to these Amended and Restated Articles of Incorporation, as amended. |
In the case of a Change of Control pursuant to which Common Shares will be converted into cash, securities or other property or assets (including any combination thereof) (the Alternative Form Consideration), a holder of 6.50% Class J Preferred Shares will receive upon conversion of such 6.50% Class J Preferred Shares the kind and amount of Alternative Form Consideration that such holder would have owned or been entitled to receive upon the Change of Control had such holder held a number of Common Shares equal to the Common Shares Conversion Consideration immediately prior to the effective time of the Change of Control (the Alternative Conversion Consideration; the Common Shares Conversion Consideration or the Alternative Conversion Consideration, as may be applicable to a Change of Control, is referred to as the Conversion Consideration). |
If the holders of Common Shares have the opportunity to elect the form of consideration to be received in the Change of Control, the consideration that the holders of the 6.50% Class J Preferred Shares will receive will be in the form and proportion of the aggregate consideration elected by the holders of Common Shares who participate in the determination (based on the weighted average of elections) and will be subject to any limitations to which all holders of Common Shares are subject, including, without limitation, pro rata reductions applicable to any portion of the consideration payable in the Change of Control. |
No fractional Common Shares will be issued upon the conversion of the 6.50% Class J Preferred Shares. In lieu of fractional shares, holders shall be entitled to receive the cash value of such fractional shares based on the Common Share Price (as defined in clause (h) of this Section 6). |
Within 15 days following the occurrence of a Change of Control, the Corporation shall deliver a notice of occurrence of the Change of Control, describing the resulting Change of Control Conversion Right, to the holders of record of the 6.50% Class J Preferred Shares at their respective addresses then appearing on the books of the Corporation. |
(1) | No failure to give such notice or any defect thereto or in the mailing thereof shall affect the validity of the proceedings for the conversion of any 6.50% Class J Preferred Shares except as to the holder to whom notice was defective or not given. |
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(2) | Each such notice shall state (i) the events constituting the Change of Control; (ii) the date of the Change of Control; (iii) the last date on which the holders of the 6.50% Class J Preferred Shares may exercise their Change of Control Conversion Right; (iv) the method and period for calculating the Common Share Price; (v) the Change of Control Conversion Date; (vi) that if, prior to the Change of Control Conversion Date, the Corporation has provided or provides notice of its election to redeem all or any portion of the 6.50% Class J Preferred Shares, holders of such shares will not be able to convert such shares and such shares will be redeemed on the related redemption date, even if such shares have already been tendered for conversion pursuant to the Change of Control Conversion Right; (vii) if applicable, the type and amount of Alternative Conversion Consideration entitled to be received per 6.50% Class J Preferred Share; (viii) the name and address of the paying agent and the conversion agent; (ix) the procedures that the holders of the 6.50% Class J Preferred Shares must follow to exercise the Change of Control Conversion Right; and (x) the last date on which the holders of the 6.50% Class J Preferred Shares may withdraw shares surrendered for conversion and the procedures that such holders must follow to effect such a withdrawal. |
The Corporation shall issue a press release for publication on the Dow Jones & Company, Inc., Business Wire, PR Newswire or Bloomberg Business News (or, if these organizations are not in existence at the time of issuance of the press release, such other news or press organization as is reasonably calculated to broadly disseminate the relevant information to the public), or post notice on the Corporations website, in any event prior to the opening of business on the first Business Day following any date on which the Corporation provides the Change of Control notice described above to the holders of the 6.50% Class J Preferred Shares. |
In order to exercise the Change of Control Conversion Right, a holder of 6.50% Class J Preferred Shares shall be required to deliver, on or before the close of business on the Change of Control Conversion Date, the certificates, if any, evidencing the 6.50% Class J Preferred Shares to be converted, duly endorsed for transfer, together with a written conversion notice completed, to the Corporations transfer agent. |
(1) | Such notice shall state (i) the relevant Change of Control Conversion Date; (ii) the number of 6.50% Class J Preferred Shares to be converted; and (iii) that the 6.50% Class J Preferred Shares are to be converted pursuant to the applicable provisions of the 6.50% Class J Preferred Shares. |
(2) | Notwithstanding the foregoing, if the 6.50% Class J Preferred Shares are held in global form, such notice shall comply with applicable procedures of The Depository Trust Company or any other organization acting as depositary for the 6.50% Class J Preferred Shares (the Depositary). |
Holders of 6.50% Class J Preferred Shares may withdraw any notice of exercise of a Change of Control Conversion Right (in whole or in part) by a written notice of withdrawal delivered to the Corporations transfer agent prior to the close of business on the Business Day prior to the Change of Control Conversion Date. |
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(1) | The notice of withdrawal must state: (i) the number of withdrawn 6.50% Class J Preferred Shares; (ii) if certificated 6.50% Class J Preferred Shares have been issued, the certificate numbers of the withdrawn 6.50% Class J Preferred Shares; and (iii) the number of 6.50% Class J Preferred Shares, if any, which remain subject to the conversion notice. |
(2) | Notwithstanding the foregoing, if the 6.50% Class J Preferred Shares are held in global form, such notice of withdrawal shall comply with applicable procedures of the Depositary. |
6.50% Class J Preferred Shares as to which the Change of Control Conversion Right has been properly exercised and for which the conversion notice has not been properly withdrawn shall be converted into the applicable Conversion Consideration in accordance with the Change of Control Conversion Right on the Change of Control Conversion Date, unless, prior to the Change of Control Conversion Date, the Corporation has provided or provides notice of its election to redeem such 6.50% Class J Preferred Shares, whether pursuant to the Optional Redemption Right or Special Optional Redemption Right. If the Corporation elects to redeem 6.50% Class J Preferred Shares that would otherwise be converted into the applicable Conversion Consideration on a Change of Control Conversion Date, such 6.50% Class J Preferred Shares shall not be so converted and the holders of such shares shall be entitled to receive on the applicable redemption date $500.00 per share, plus accrued and unpaid dividends to, but not including, the redemption date. |
The Corporation shall deliver the applicable Conversion Consideration to the applicable holders of 6.50% Class J Preferred Shares no later than the third Business Day following the Change of Control Conversion Date. |
Notwithstanding anything to the contrary contained herein, no holder of 6.50% Class J Preferred Shares will be entitled to convert such shares to the extent that receipt of Common Shares upon conversion of the 6.50% Class J Preferred Shares would cause such holder (or any other person) to exceed either of the ownership limits described in Section (a) of Item XIV of this Division A of this Article FOURTH and Section 4(a) of Division B of this Article FOURTH, unless the Corporation provides an exemption from such ownership limits for such holder. |
Notwithstanding the foregoing restrictions on the ability to convert the 6.50% Class J Preferred Shares, any conversion of 6.50% Class J Preferred Shares in violation of the ownership limits described in Section (a) of Item XIV of this Division A of this Article FOURTH and Section 4(a) of Division B of this Article FOURTH, or that causes another person to be in violation of such ownership limits, including as a result of the effect of the operation of this provision, shall be construed as causing any 6.50% Class J Preferred Shares that exceed such ownership limits to be deemed Excess Preferred Shares and subject to the provisions applicable to Excess Preferred Shares set forth in these Amended and Restated Articles of Incorporation, as amended. |
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(f) | The amount payable per 6.50% Class J Preferred Share in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation shall be $500.00, plus an amount equal to all dividends accrued and unpaid thereon to, but not including, the date of payment. |
(g) | All dividend payments made on the 6.50% Class J Preferred Shares, at any time during which the Corporation is in default in the payment of dividends on such 6.50% Class J Preferred Shares for any dividend period, shall, for the purposes of Section 5(b)(1) of this Item X, be deemed to be made in respect of the earliest dividend period with respect to which the Corporation is in default. |
(h) | Definitions . For the purposes of this Section 6 of Item X of Division A of this Article FOURTH, the following terms shall have the following meanings: |
Business Day shall mean any day other than a Saturday, Sunday or a day on which banking institutions in The City of New York, New York are authorized or required by law, regulation or executive order to close.
Change of Control is when, after the original issuance of the 6.50% Class J Preferred Shares, the following have occurred and are continuing:
(i) | the acquisition by any person, including any syndicate or group deemed to be a person under Section 13(d)(3) of the Exchange Act (as defined in this Section 6(h)), of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of shares of the Corporation entitling that person to exercise more than 50% of the total voting power of all shares of the Corporation entitled to vote generally in elections of directors (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and |
(ii) | following the closing of any transaction referred to in the foregoing clause (i), neither the Corporation nor the acquiring or surviving entity has a class of common securities (or American Depositary Receipts representing such securities) listed on the NYSE, the NYSE MKT or NASDAQ, or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE MKT or NASDAQ. |
Change of Control Conversion Date shall mean the date the 6.50% Class J Preferred Shares are to be converted which shall be a Business Day that is no fewer than 20 days nor more than 35 days after the date on which the Corporation provides notice of the occurrence of a Change of Control (as provided for in clause (e) of this Section 6) to the holders of the 6.50% Class J Preferred Shares.
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Common Share Price shall mean: (i) if the consideration to be received in the Change of Control by the holders of Common Shares is solely cash, the amount of cash consideration per Common Share or (ii) if the consideration to be received in the Change of Control by holders of Common Shares is other than solely cash (x) the average of the closing sale prices per Common Share (or, if no closing sale price is reported, the average of the closing bid and ask prices per Common Share or, if more than one in either case, the average of the average closing bid and the average closing ask prices per Common Share) for the ten consecutive trading days immediately preceding, but not including, the date on which such Change of Control occurred as reported on the principal U.S. securities exchange on which the Common Shares are then traded, or (y) the average of the last quoted bid prices for the Common Shares in the over-the-counter market as reported by Pink OTC Markets Inc. or similar organization for the ten consecutive trading days immediately preceding, but not including, the date on which such Change of Control occurred, if the Common Shares are not then listed for trading on a U.S. securities exchange.
Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
NASDAQ shall mean the NASDAQ Stock Market.
NYSE shall mean the New York Stock Exchange.
NYSE MKT shall mean the NYSE MKT (formerly known as the NYSE Amex Equities).
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Certificate of Amendment by Directors
or Incorporators to Articles
(Domestic)
Filing Fee $50.00
RECEIVED | ||||
SECRETARY OF STATE | ||||
2011 SEPT 13 PM 12:24 | ||||
CLIENT SERVICE CENTER |
(CHECK ONLY ONE (1) BOX)
(1) | þ Amendment by Directors | (2) | ¨ Amendment by Incorporators | |||||||
¨ Amended by Directors |
(123-AMDD) | ¨ Amended by Incorporators (124-AMDI) |
Complete the information in this section if box (1) is checked. | ||||||
Name and Title of Officer |
David E. Weiss |
Secretary |
||||
(name) | (title) | |||||
(CHECK ONLY ONE (1) BOX) | ||||||
þ A meeting of the directors was duly called and held on |
September 13, 2011 |
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(Date) |
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¨ In an writing signed by all the Directors pursuant to section 1701.54 of the ORC |
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The following resolution was adopted pursuant to section 1701.70(B) | (6) of the ORC: | |||||
(Insert proper paragraph number) | ||||||
RESOLVED, that the First Article of the Second Amended and Restated Articles of Incorporation of Developers Diversified Realty Corporation be deleted and restated to read in its entirety as follows: The name of the Corporation shall be DDR Corp.
|
540 | Page 1 of 2 | Last Revised: May 2002 |
Complete the information in this section if box (2) is checked. | ||
WE, the undersigned, being all of the incorporators of the above named corporation, do certify that the subscriptions to shares have not been received and the initial directors are not named in the articles. We hereby have elected to amend the articles as follows:
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540 | Page 2 of 2 | Last Revised: May 2002 |
CERTIFICATE OF AMENDMENT NO. 2
TO
SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
DEVELOPERS DIVERSIFIED REALTY CORPORATION
SCOTT A. WOLSTEIN, Chief Executive Officer, and JOAN U. ALLGOOD, Secretary, of Developers Diversified Realty Corporation, an Ohio corporation (the Corporation), do hereby certify that a meeting of the shareholders of the Corporation was duly called and held on June 25, 2009, at which meeting a quorum of the shareholders was present in person or by proxy, and by the affirmative vote of the holders of shares entitling them to exercise a majority of the voting power of the Corporation on a proposal to amend the Corporations Second Amended and Restated Articles of Incorporation (the Articles), resolutions approving the amendment of Article FOURTH of the Articles attached hereto as Exhibit A (the Amendment) was duly approved; and that said resolutions are valid and binding, have not been amended, modified or rescinded, and are in full force and effect on the date hereof.
IN WITNESS WHEREOF, Scott A. Wolstein, Chief Executive Officer, and Joan U. Allgood, Secretary, of the Corporation acting for and on its behalf, do hereunto subscribe their names on this 25th day of June, 2009.
/s/ Scott A. Wolstein |
Scott A. Wolstein, Chief Executive Officer |
/s/ Joan U. Allgood |
Joan U. Allgood, Secretary |
Amendment No. 2
to the
Second Amended and Restated Articles of Incorporation
of
Developers Diversified Realty Corporation
RESOLVED , that the Corporations Second Amended and Restated Articles of Incorporation will be amended as set forth below:
FOURTH: The authorized number of shares of the Corporation is 511,000,000, consisting of 500,000,000 common shares, $0.10 par value per share (hereinafter called Common Shares), 750,000 Class A Cumulative Preferred Shares, without par value (hereinafter called Class A Shares), 750,000 Class B Cumulative Preferred Shares, without par value (hereinafter called Class B Shares), 750,000 Class C Cumulative Preferred Shares, without par value (hereinafter called Class C Shares), 750,000 Class D Cumulative Preferred Shares, without par value (hereinafter called Class D Shares), 750,000 Class E Cumulative Preferred Shares, without par value (hereinafter called Class E Shares), 750,000 Class F Cumulative Preferred Shares, without par value (hereinafter called Class F Shares), 750,000 Class G Cumulative Preferred Shares, without par value (hereinafter called Class G Shares), 750,000 Class H Cumulative Preferred Shares, without par value (hereinafter called Class H Shares), 750,000 Class I Cumulative Preferred Shares, without par value (hereinafter called Class I Shares), 750,000 Class J Cumulative Preferred Shares, without par value (hereinafter called Class J Shares), 750,000 Class K Cumulative Preferred Shares, without par value (hereinafter called Class K Shares), 750,000 Noncumulative Preferred Shares, without par value (hereinafter called Noncumulative Shares), and 2,000,000 Cumulative Voting Preferred Shares, without par value (hereinafter called Voting Preferred Shares). The Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Voting Preferred Shares are sometimes collectively referred to herein as the Cumulative Shares.
CERTIFICATE OF AMENDMENT
TO
SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
DEVELOPERS DIVERSIFIED REALTY CORPORATION
SCOTT A. WOLSTEIN, Chief Executive Officer, and JOAN U. ALLGOOD, Secretary, of Developers Diversified Realty Corporation, an Ohio corporation (the Corporation), do hereby certify that a meeting of the shareholders of the Corporation was duly called and held on April 9, 2009, at which meeting a quorum of the shareholders was present in person or by proxy, and by the affirmative vote of the holders of shares entitling them to exercise a majority of the voting power of the Corporation on proposals to amend the Corporations Second Amended and Restated Articles of Incorporation (the Articles), resolutions approving the amendment of Article FOURTH, Division B of the Articles attached hereto as Exhibit A (the Amendments) were duly approved; and that said resolutions are valid and binding, have not been amended, modified or rescinded, and are in full force and effect on the date hereof.
IN WITNESS WHEREOF, Scott A. Wolstein, Chief Executive Officer, and Joan U. Allgood, Secretary, of the Corporation acting for and on its behalf, do hereunto subscribe their names on this 8th day of May, 2009.
/s/ Scott A. Wolstein |
Scott A. Wolstein, Chief Executive Officer |
/s/ Joan U. Allgood |
Joan U. Allgood, Secretary |
Amendment
to the
Second Amended and Restated Articles of Incorporation
of
Developers Diversified Realty Corporation
RESOLVED , that the Companys Second Amended and Restated Articles of Incorporation will be amended as set forth below:
ARTICLE FOURTH, Division B, shall be amended as follows:
DIVISION B
Subject to the terms of the Cumulative Shares and the Noncumulative Preferred Shares, the Common Shares shall have the following express terms:
S ECTION 1. Dividend Rights . The holders of Common Shares shall be entitled to receive, when, as and if declared by the Board of Directors of the Corporation, out of the assets of the Corporation which are by law available therefor, dividends or distributions payable in cash, in property or in securities of the Corporation.
S ECTION 2. Rights Upon Liquidation . In the event of any voluntary or involuntary liquidation, dissolution or winding up of, or any distribution of the assets of, the Corporation, each holder of Common Shares shall be entitled to receive, ratably with each other holder of Common Shares, that portion of the assets of the Corporation available for distribution to its shareholders as the number of Common Shares held by such holder bears to the total number of Common Shares then outstanding.
S ECTION 3. Voting Rights . The holders of Common Shares shall be entitled to vote on all matters (for which holders of Common Shares shall be entitled to vote thereon) at all meetings of the shareholders of the Corporation, and shall be entitled to one vote for each Common Share entitled to vote at such meeting.
S ECTION 4. Restrictions on Transfer to Preserve Tax Benefit; Common Shares Subject to Redemption .
(a) Definitions. For the purposes of this Section 4 of this Division B of this Article FOURTH, the following terms shall have the following meanings:
Beneficial Ownership shall mean ownership of Common Shares by a Person who would be treated as an owner of such Common Shares either directly or constructively through the application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The terms Beneficial Owner, Beneficially Owns and Beneficially Owned shall have the correlative meanings.
Beneficiary shall mean, with respect to any Trust, one or more organizations described in Section 501(c)(3) of the Code (contributions to which must be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the Code which are named by the Corporation as the beneficiary or beneficiaries of such Trust, in accordance with the provisions of Section 7(a) of this Division B of this Article FOURTH.
Code shall mean the Internal Revenue Code of 1986, as amended from time to time.
Constructive Ownership shall mean ownership of Common Shares by a Person who would be treated as an owner of such Common Shares either directly or Constructively through the application of Section 318 of the Code, as modified by Section 856(d)(5) of the Code. The terms Constructive Owner, Constructively Owns and Constructively Owned shall have the correlative meanings.
Effective Date shall mean May 8, 2009.
Exempt Holder shall mean, collectively, (i) Professor Werner Otto, his wife Maren Otto and/or all descendants of Professor Werner Otto (illegitimate descendants only if they have obtained the status of a legitimate descendant by legitimation or adoption by Professor Werner Otto or one of his legitimate descendants, or if they are children of a female legitimate descendant of Professor Werner Otto), (ii) any trust or any family foundation that has exclusively been established in favor of one or several of the individuals named under (i) above, and (iii) any partnership, firm, corporation, association, trust, unincorporated organization, joint venture, limited liability company or other legal entity, in which the individuals or entities named under (i) and (ii) hold (either directly or indirectly) more than 50% of the voting rights or more than 50% of the equity capital of such any such partnership, firm, corporation, association, trust, unincorporated organization, joint venture, limited liability company or other legal entity.
Exempt Holder Limit shall initially mean 29.8% of the outstanding Common Shares of the Corporation, and after any adjustment pursuant to Section (4)(i)(i) of this Division B of this Article FOURTH, shall mean such percentage of the outstanding Common Shares as so adjusted.
Existing Holder shall mean, collectively, Iris Wolstein and/or all descendants of Iris Wolstein, including, without limitation, Scott A. Wolstein, (ii) any trust or any family foundation that has exclusively been established in favor of one or several of the individuals named under (i) above, and (iii) any partnership, firm, corporation, association, trust, unincorporated organization, joint venture, limited liability company or other legal entity, in which the individuals or entities named under (i) and (ii) hold (either directly or indirectly) more than 50% of the voting rights as well as more than 50% of the equity capital of such any such partnership, firm, corporation, association, trust, unincorporated organization, joint venture, limited liability company or other legal entity.
Existing Holder Limit shall initially mean 5.1% of the outstanding Common Shares of the Corporation, and after any adjustment pursuant to Section 4(i)(ii) of this Division B of this Article FOURTH, shall mean such percentage of the outstanding Common Shares as so adjusted.
2
Market Price shall mean the last reported sales price of Common Shares reported on the New York Stock Exchange on the trading day immediately preceding the relevant date or, if the Common Shares are not then traded on the New York Stock Exchange, the last reported sales price of the Common Shares on the trading day immediately preceding the relevant date as reported on any exchange or quotation system over which the Common Shares may be traded, or if the Common Shares are not then traded over any exchange or quotation system, then the market price of the Common Shares on the relevant date as determined in good faith by the Board of Directors of the Corporation.
Non-Transfer Event shall mean an event other than a purported Transfer that would cause any Person to Beneficially Own or Constructively Own Common Shares in excess of the Ownership Limit (in the case of any Person other than the Exempt Holder) or the Exempt Holder Limit (in the case of the Exempt Holder), including, but not limited to, the acquisition, directly or indirectly, of any Person that Beneficially Owns or Constructively Owns Common Shares.
Non-U.S. Person shall mean a Person other than a U.S. Person.
Ownership Limit shall initially mean 5.0% of the outstanding Common Shares of the Corporation , and after any adjustment pursuant to Section (4)(j) of this Division B of this Article FOURTH, shall mean such percentage of the outstanding Common Shares as so adjusted.
Person shall mean an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, an association, a private foundation within the meaning of Section 509(a) of the Code, a joint stock company, other entity or a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended; provided, however, that a Person does not mean an underwriter which participates in a public offering of the Common Shares, for a period of 35 days following the purchase by such underwriter of the Common Shares.
Prohibited Owner shall mean, with respect to any purported Transfer or Non-Transfer Event, any Person who, but for the provisions of Section 4(c) of this Division B of this Article FOURTH, would own record title to Common Shares.
REIT shall mean a real estate investment trust within the meaning of Section 856 of the Code.
Related Party Limit shall mean 9.8% of the outstanding Common Shares of the Corporation.
Transfer shall mean any sale, transfer, gift, assignment, devise or other disposition of Common Shares (including, without limitation, (i) the granting of any option or entering into any agreement for the sale, transfer or other disposition of Common Shares or (ii) the sale, transfer, assignment or other disposition of any securities or rights convertible into or exchangeable for Common Shares), whether voluntary or involuntary, whether of record or beneficially and whether by operation of law or otherwise.
3
Trust shall mean any separate trust created pursuant to Section 4(c) of this Division B of this Article FOURTH and administered in accordance with the terms of Section 7 of this Division B of this Article FOURTH, for the exclusive benefit of any Beneficiary.
Trustee shall mean any person or entity unaffiliated with both the Corporation and any Prohibited Owner, such Trustee to be designated by the Corporation to act as trustee of any Trust, or any successor trustee thereof.
U.S. Person shall mean (i) a citizen or resident of the United States, (ii) a partnership created or organized in the United States or under the laws of the United States or any state therein (including the District of Columbia), (iii) a corporation created or organized in the United States or under the laws of the United States or any state therein (including the District of Columbia), and (iv) any estate or trust (other than a foreign estate or foreign trust, within the meaning of Section 7701(a)(31) of the Code).
(b) Restrictions on Transfers.
(i) | Except as provided in Section 4(l) of this Division B of this Article FOURTH, from and after the date of the Initial Public Offering, (A) no Person (other than the Exempt Holder and the Existing Holder) shall Beneficially Own Common Shares in excess of the Ownership Limit, (B) the Exempt Holder shall not Beneficially Own Common Shares in excess of the Exempt Holder Limit and (C) the Existing Holder shall not Beneficially Own Common Shares in excess of the Existing Holder Limit. |
(ii) | Except as provided in Section 4(l) of this Division B of this Article FOURTH, any Transfer that, if effective, would result in any Person (other than the Exempt Holder or the Existing Holder) Beneficially Owning Common Shares in excess of the Ownership Limit shall be void ab initio as to the Transfer of such Common Shares which would be otherwise Beneficially Owned by such Person in excess of the Ownership Limit, and the intended transferee shall acquire no rights in such Common Shares. |
(iii) | Except as provided in Section 4(l) of this Division B of this Article FOURTH, any Transfer that, if effective, would result in the Exempt Holder Beneficially Owning Common Shares in excess of the Exempt Holder Limit shall be void ab initio as to the Transfer of such Common Shares which would be otherwise Beneficially Owned by the Exempt Holder in excess of the Exempt Holder Limit, and the Exempt Holder shall acquire no rights in such Common Shares. |
(iv) | Except as provided in Section 4(l) of this Division B of this Article FOURTH, any Transfer that, if effective, would result in the Existing Holder Beneficially Owning Common Shares in excess of the Existing Holder Limit shall be void ab initio as to the Transfer of such Common Shares which would be otherwise Beneficially Owned by the Existing Holder in excess of the Existing Holder Limit, and the Existing Holder shall acquire no rights in such Common Shares. |
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(v) | Except as provided in Section 4(l) of this Division B of this Article FOURTH, any Transfer that, if effective, would result in any Person Constructively Owning Common Shares in excess of the Related Party Limit shall be void ab initio as to the Transfer of such Common Shares which would be otherwise Constructively Owned by such Person in excess of such amount, and the intended transferee shall acquire no rights in such Common Shares. |
(vi) | Except as provided in Section 4(l) of this Division B of this Article FOURTH, any Transfer that, if effective, would result in the Common Shares being beneficially owned by less than 100 Persons (determined without reference to any rules of attribution) shall be void ab initio as to the Transfer of such Common Shares which would be otherwise beneficially owned by the transferee, and the intended transferee shall acquire no rights in such Common Shares. |
(vii) | Any Transfer that, if effective, would result in the Corporation being closely held within the meaning of Section 856(h) of the Code shall be void ab initio as to the Transfer of the Common Shares which would cause the Corporation to be closely held within the meaning of Section 856(h) of the Code, and the intended transferee shall acquire no rights in such Common Shares. |
(viii) | No Person shall acquire Beneficial Ownership of any Common Shares after the Effective Date if, as a result of such acquisition of Beneficial Ownership, the fair market value of the Common Shares owned directly and indirectly by Non-U.S. Persons for purposes of Section 897(h)(4)(B) of the Code would comprise 49% or more of the fair market value of the issued and outstanding Common Shares. |
(c) Transfers in Trust.
(i) | If, notwithstanding the other provisions contained in this Division B of this Article FOURTH, there is a purported Transfer or Non-Transfer Event such that any Person would Beneficially Own Common Shares in excess of (A) the Ownership Limit (in the case of any Person other than the Exempt Holder or the Existing Holder), (B) the Exempt Holder Limit (in the case of the Exempt Holder), or (C) the Existing Holder Limit (in the case of the Existing Holder), then, (1) except as otherwise provided in Section 4(l) of this Division B of this Article FOURTH, the purported transferee shall acquire no right or interest (or, in the case of a Non-Transfer Event, the person holding record title to the Common Shares Beneficially Owned by such Beneficial Owner, shall cease to own any right or interest) in such number of Common Shares which would cause such Beneficial Owner to Beneficially Own Common Shares in excess of the Ownership Limit, the Exempt Holder Limit or the Existing Holder Limit, as the case may be, and (2) such number of Common Shares in excess of the Ownership |
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Limit, the Exempt Holder Limit or the Existing Holder Limit (rounded up to the nearest whole share) shall be designated Shares-in-Trust and, in accordance with Section 7 of this Division B of this Article FOURTH, transferred automatically and by operation of law to a Trust. Such transfer to a Trust and the designation of the shares as Shares-in-Trust shall be effective as of the close of business on the business day prior to the date of the purported Transfer or Non-Transfer Event, as the case may be. |
(ii) | If, notwithstanding the other provisions contained in this Division B of this Article FOURTH, there is a purported Transfer or Non-Transfer Event such that any Person would Constructively Own Common Shares in excess of the Related Party Limit, then, (A) except as otherwise provided in Section 4(l) of this Division B of this Article FOURTH, the purported transferee shall acquire no right or interest (or, in the case of a Non-Transfer Event, the person holding record title to the Common Shares Constructively Owned by such Constructive Owner, shall cease to own any right or interest) in such number of Common Shares which would cause such Constructive Owner to Constructively Own Common Shares in excess of the Related Party Limit, and (B) such number of Common Shares in excess of the Related Party Limit (rounded up to the nearest whole share) shall be designated Shares-in-Trust and, in accordance with Section 7 of this Division B of this Article FOURTH, transferred automatically and by operation of law to a Trust. Such transfer to a Trust and the designation of the shares as Shares-in-Trust shall be effective as of the close of business on the business day prior to the date of the purported Transfer or Non-Transfer Event, as the case may be. |
(iii) | If, notwithstanding the other provisions contained in this Article FOURTH, there is a purported Transfer or Non-Transfer Event that, if effective, would cause the Corporation to become closely held within the meaning of Section 856(h) of the Code, then (A) the purported transferee shall not acquire any right or interest (or, in the case of a Non-Transfer Event, the person holding record title of the Common Shares with respect to which such Non-Transfer Event occurred, shall cease to own any right or interest) in such number of Common Shares, the ownership of which by such purported transferee or record holder would cause the Corporation to be closely held within the meaning of Section 856(h) of the Code, and (B) such number of Common Shares (rounded up to the nearest whole share) shall be designated Shares-in-Trust and, in accordance with the provisions of Section 7 of this Division B of this Article FOURTH, transferred automatically and by operation of law to a Trust. Such transfer to a Trust and the designation of shares as Shares-in-Trust shall be effective as of the close of business on the business day prior to the date of the Transfer or Non-Transfer Event, as the case may be. |
(d) Remedies for Breach. If the Board of Directors or its designees shall at any time determine in good faith that a Transfer has taken place in violation of Section 4(b) of this Division B of this Article FOURTH or that a Person intends to acquire or has attempted to
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acquire beneficial ownership (determined without reference to any rules of attribution), Beneficial Ownership or Constructive Ownership of any Common Shares of the Corporation in violation of Section 4(b) of this Division B of this Article FOURTH, or that any such Transfer, intended or attempted acquisition or acquisition would jeopardize the status of the Corporation as a REIT under the Code, the Board of Directors or its designees shall take such actions as it deems advisable to refuse to give effect or to prevent such Transfer, including, but not limited to, refusing to give effect to such Transfer on the books of the Corporation or instituting proceedings to enjoin such Transfer.
(e) Notice of Restricted Transfer. Any Person who acquires or intends to acquire shares in violation of Section 4(b) of this Division B of this Article FOURTH, or any Person who owned Common Shares that were transferred to a Trust pursuant to the provisions of Section 4(c) of this Division B of this Article FOURTH, shall immediately give written notice to the Corporation of such event and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer, intended Transfer or Non-Transfer Event, as the case may be, on the Corporations status as a REIT.
(f) Owners Required to Provide Information.
(i) | Every Beneficial Owner of more than 5.0% (or such other percentage provided in the regulations promulgated pursuant to the Code) of the outstanding Common Shares of the Corporation shall, within 30 days after January 1 of each year, give written notice to the Corporation stating the name and address of such Beneficial Owner, the number of shares Beneficially Owned, and description of how such shares are held. Each such Beneficial Owner shall provide to the Corporation such additional information as the Corporation may request in order to determine the effect, if any, of such Beneficial Ownership on the Corporations status as a REIT. |
(ii) | Each Person who is a Beneficial Owner or Constructive Owner of Common Shares and each Person (including the shareholder of record) who is holding Common Shares for a Beneficial Owner or Constructive Owner shall provide to the Corporation such information that the Corporation may request, in good faith, in order to determine the Corporations status as a REIT. |
(iii) | Each Person who is a Beneficial or Constructive Owner of Common Shares and each Person (including the shareholder of record) who is holding Common Shares for a Beneficial or Constructive Owner shall provide to the Corporation such information as the Corporation may require, in good faith, in order to determine the Trusts status as a REIT or a domestically controlled qualified investment entity (within the meaning of Section 897(h)(4)(B) of the Code) and to comply with the requirements of any taxing authority or to determine such compliance. |
(g) Remedies Not Limited. Nothing contained in this Division B of this Article FOURTH shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable to protect the Corporation and the interests of its shareholders by preservation of the Corporations status as a REIT.
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(h) Ambiguity. In the case of an ambiguity in the application of any of the provisions of Section 4 of this Division B of this Article FOURTH, including any definition contained in Section 4(a), the Board of Directors shall have the power to determine the application of the provisions of this Section 4 with respect to any situation based on the facts known to it.
(i) Modification of Exempt Holder Limit and Existing Holder Limit .
(i) | Subject to the limitations provided in Section 4(k) of this Division B of this Article FOURTH, the Board of Directors may reduce the Exempt Holder Limit if: (A) based on the annual written notice delivered to the Corporation pursuant to Section 4(f)(i) of this Division B of this Article FOURTH, the Beneficial Ownership of the Exempt Holder is less than 17.5% of the outstanding Common Shares, then the Board of Directors may reduce the Exempt Holder Limit to 17.5%; (B) based on the annual written notice delivered to the Corporation pursuant to Section 4(f)(i) of this Division B of this Article FOURTH, the Beneficial Ownership of the Exempt Holder is 7.5% or less of the outstanding Common Shares, then the Board of Directors may reduce the Exempt Holder Limit to 7.5%; or (C) after the Exempt Holder Limit has been reduced to 7.5%, the Board of Directors may further reduce the Exempt Holder Limit to reflect the Beneficial Ownership of the Exempt Holder as set forth on the annual written notice delivered to the Corporation pursuant to Section 4(f)(i) of this Division B of this Article FOURTH. |
(ii) | Subject to the limitations provided in Section 4(k), this Division B of this Article FOURTH, the Board of Directors may increase the Existing Holder Limit if the Board of Directors reduces the Exempt Holder Limit pursuant to Section 4(i)(i) of this Division B of this Article FOURTH. |
(j) Modification of Ownership Limit. Subject to the limitations provided in Section 4(k) of this Division B of this Article FOURTH, the Board of Directors may from time to time increase the Ownership Limit.
(k) Limitations on Modifications. Notwithstanding any other provision of this Division B of this Article FOURTH:
(i) | Neither the Ownership Limit nor the Existing Holder Limit may be increased if, after giving effect to such increase, five Beneficial Owners of Common Shares (including the Exempt Holder and the Existing Holder) could Beneficially Own, in the aggregate, more than 49.9% of the outstanding Common Shares. |
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(ii) | Prior to the modification of any Exempt Holder Limit, Existing Holder Limit or Ownership Limit pursuant to Section 4(i) or Section 4(j) of this Division B of this Article FOURTH, the Board of Directors of the Corporation may require such opinions of counsel, affidavits, undertakings or agreements as it may deem necessary or advisable in order to determine or ensure the Corporations status as a REIT. |
(iii) | The Exempt Holder Limit shall not be reduced to a percentage which is less than the Ownership Limit. |
(iv) | The Related Party Limit may not be increased to a percentage which is greater than 9.8%. |
(l) Exceptions .
(i) | The Board of Directors, with a ruling from the Internal Revenue Service or an opinion of counsel, may exempt a Person from the Ownership Limit, the Exempt Holder Limit or the Existing Holder Limit, as the case may be, if such Person is not an individual for purposes of Section 542(a)(2) of the Code and the Board of Directors obtains such representations and undertakings from such Person as are reasonably necessary to ascertain that no individuals Beneficial Ownership of such Common Shares will violate the Ownership Limit, the Exempt Holder Limit or the Existing Holder Limit, as the case may be, and agrees that any violation or attempted violation will result in such Common Shares in excess of the Ownership Limit, the Exempt Holder Limit or the Existing Holder Limit, as applicable, being transferred to a Trust in accordance with Section 4(c) of this Division B of this Article FOURTH. |
(ii) | The Board of Directors, with a ruling from the Internal Revenue Service or an opinion of counsel, may exempt a Person from the limitation on such Person Constructively Owning Common Shares in excess of the Related Party Limit if such Person does not own and represents that it will not own, directly or constructively (by virtue of the application of Section 318 of the Code, as modified by Section 856(d)(5) of the Code), more than a 9.9% interest (as set forth in Section 856(d)(2)(B) in a tenant of any real property owned or leased by the Corporation, and the Corporation obtains such representations and undertakings from such Person as are reasonably necessary to ascertain this fact and agrees that any violation or attempted violation will result in such Common Shares in excess of 9.8% being transferred to a Trust in accordance with Section 4(c) of this Division B of this Article FOURTH. |
(iii) | The Board of Directors may exempt the Exempt Holder, and any Person who would Constructively Own Common Shares Constructively Owned by the Exempt Holder, from the limitation on the Exempt Holder (or such other |
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Person who would Constructively Own Common Shares Constructively Owned by the Exempt Holder) Constructively Owning Common Shares in excess of the Related Party Limit in its sole discretion based on the facts and circumstances existing at the time of such proposed exemption and the information provided by the Exempt Holder, including, without limitation, information regarding a tenant of any real property owned or leased by the Corporation, of which tenant the Exempt Holder (or such other Person who would Constructively Own Common Shares Constructively Owned by the Exempt Holder) owns, directly or constructively (by virtue of the application of Section 318 of the Code, as modified by Section 856(d)(5) of the Code), more than a 9.9% interest (as set forth in Section 856(d)(2)(B) of the Code). As a condition to the granting of any such exemption, the Corporation may require that the Exempt Holder provide representations and undertakings as are reasonably necessary to ascertain information regarding the ownership by the Exempt Holder (or such other Person who would Constructively Own Common Shares Constructively Owned by the Exempt Holder) of any interest in a tenant of any real property owned or leased by the Corporation and may impose conditions upon any such exemption as the Board of Directors deems necessary or advisable in order to determine or ensure the Corporations status as a REIT, including that any exemption may terminate upon any violation or attempted violation of any such representations, undertakings, conditions or other terms of any agreement between the Company and the Exempt Holder. If, upon any termination of an exemption granted under this Section 4(l)(iii) of this Division B of this Article FOURTH, the Exempt Holder (or such other Person who would Constructively Own Common Shares Constructively Owned by the Exempt Holder) would Constructively Own Common Shares in excess of the Related Party Limit, then the number of Common Shares actually owned by the Exempt Holder (and such other Person who would Constructively Own Common Shares Constructively Owned by the Exempt Holder) in excess of the Related Party Limit will be transferred to a Trust in accordance with Section 4(c) of this Division B of this Article FOURTH such that the Exempt Holder (and such other Person who would Constructively Own Common Shares Constructively Owned by the Exempt Holder) will not Constructively Own Common Shares in excess of the Related Party Limit. |
(iv) |
The Exempt Holder will not be deemed to have violated the Exempt Holder Limit if the Exempt Holders Beneficial Ownership in excess of the Exempt Holder Limit is solely the result of (A) a stock dividend, stock split or similar transaction effected by the Corporation in which all holders of Common Shares are treated equally or (B) a reduction in the number of Common Shares outstanding, unless and until, in case of either clause (A) or (B) above, such time as the Exempt Holder thereafter becomes the Beneficial Owner of any additional Common Shares (other than as a result of a stock dividend, stock split or similar transaction effected by the Corporation in which all holders of Common Shares are treated equally). In addition, the |
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Board of Directors may exempt the Exempt Holder from the Exempt Holder Limit should it determine that the Beneficial Ownership of the Exempt Holder does not result in the Corporation being closely held within the meaning of Section 856(h) of the Code; provided, however, that notwithstanding the foregoing, this paragraph (iv) shall not be interpreted as a waiver of, or exemption from, the restriction in Section 4(b)(vi). |
S ECTION 5. Legend . Each certificate for Common Shares shall bear the following legend:
The Common Shares represented by this certificate are subject to restrictions on transfer for the purpose of the Corporations maintenance of its status as a Real Estate Investment Trust under the Internal Revenue Code of 1986, as amended. Subject to certain provisions of the Corporations Articles of Incorporation, no Person may Beneficially Own Common Shares in excess of 5.0% of the outstanding Common Shares of the Corporation (unless such Person is an Exempt Holder or an Existing Holder), no Person may Constructively Own Common Shares in excess of 9.8% of the outstanding Common Shares of the Corporation and no Person may acquire Beneficial Ownership of any Common Shares after the Effective Date if, as a result of such acquisition, the fair market value of the Shares owned directly and indirectly by Non-U.S. Persons would comprise more than 49% of the fair market value of the issued and outstanding Common Shares. Any Person who attempts to Beneficially Own or Constructively Own Common Shares in excess of the above limitations must immediately notify the Corporation. All capitalized items in this legend have the meanings defined in the Corporations Articles of Incorporation, a copy of which, including the restrictions on transfer, will be sent without charge to each shareholder who so requests. If the restrictions on transfer are violated, certain of the Common Shares represented hereby will be transferred automatically and by operation of law to a Trust and shall be designated Shares-in-Trust.
S ECTION 7.
Shares-in-Trust .
(a) Trust . Any Common Shares transferred to a Trust and designated Shares-in-Trust pursuant to Section 4(c) of Division B of this Article FOURTH shall be held for the exclusive benefit of the Beneficiary. The Corporation shall name a beneficiary of each Trust within five (5) days after discovery of the existence of such Shares-in-Trust. Any transfer to a Trust, and subsequent designation of Common Shares as Shares-in-Trust, pursuant to Section 4(c) of Division B of this Article FOURTH shall be effective as of the close of business on the business day prior to the date of the Transfer or Non-Transfer Event that results in the transfer to the Trust. Shares-in-Trust shall remain issued and outstanding Common Shares and shall be entitled to the same rights and privileges on identical terms and conditions as are all other issued and outstanding Common Shares. When transferred to the Permitted Transferee in accordance with the provisions of Section 7(e) of Division B of this Article FOURTH, such Shares-in-Trust shall cease to be designated as Shares-in-Trust.
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(b) Dividend Rights . The Trustee, as record holder of Shares-in-Trust, shall be entitled to receive all dividends and distributions as may be declared by the Board of Directors of the Corporation on such Common Shares and shall hold such dividends or distributions in trust for the benefit of the Beneficiary. The Prohibited Owner with respect to Shares-in-Trust shall repay to the Trustee the amount of any dividends or distributions received by it that (i) are attributable to any Common Shares designated as Shares-in-Trust and (ii) the record date of which was on or after the date that such Common Shares became Shares-in-Trust. The Corporation shall take all measures that it determines reasonably necessary to recover the amount of any such dividend or distribution paid to a Prohibited Owner, including, if necessary, withholding any portion of future dividends or distributions payable on Common Shares Beneficially Owned or Constructively Owned by the Person who, but for the provisions of Section 4(c) of Division B of this Article FOURTH, would Beneficially Own or Constructively Own the Shares-in-Trust; and, as soon as reasonably practicable following the Corporations receipt or withholding thereof, shall pay over to the Trustee for the benefit of the Beneficiary the dividends so received or withheld, as the case may be.
(c) Rights Upon Liquidation . In the event of any voluntary or involuntary liquidation, dissolution or winding up of, or any distribution of the assets of, the Corporation, each holder of Shares-in-Trust shall be entitled to receive, ratably with each other holder of Common Shares, that portion of the assets of the Corporation which is available for distribution to the holders of Common Shares. The Trustee shall distribute to the Prohibited Owner the amounts received upon such liquidation, dissolution, or winding up, or distribution; provided, however, that the Prohibited Owner shall not be entitled to receive amounts pursuant to this Section 7(c) of Division B of this Article FOURTH in excess of, in the case of a purported Transfer in which the Prohibited Owner gave value for Common Shares and which Transfer resulted in the transfer of the shares to the Trust, the price per share, if any, such Prohibited Owner paid for the Common Shares and, in the case of a Non-Transfer Event or Transfer in which the Prohibited Owner did not give value for such shares (e.g., if the shares were received through a gift or devise) and which Non-Transfer Event or Transfer, as the case may be, resulted in the transfer of shares to the Trust, the price per share equal to the Market Price on the date of such Non-Transfer Event or Transfer. Any remaining amount in such Trust shall be distributed to the Beneficiary.
(d) Voting Rights . The Trustee shall be entitled to vote all Shares-in-Trust. Any vote by a Prohibited Owner as a holder of Common Shares prior to the discovery by the Corporation that the Common Shares are Shares-in-Trust shall, subject to applicable law, be rescinded and shall be void ab initio with respect to such Shares-in-Trust, and the Prohibited Owner shall be deemed to have given, as of the close of business on the business day prior to the date of the purported Transfer or Non-Transfer Event that results in the transfer to the Trust of the Common Shares Section 4(c) of Division B of this Article FOURTH, an irrevocable proxy to the Trustee to vote the Shares-in-Trust in the manner in which the Trustee, in its sole and absolute discretion, desires.
(e) Designation of Permitted Transferee . The Trustee shall have the exclusive and absolute right to designate a Permitted Transferee of any and all Shares-in-Trust. As reasonably practicable as possible, in an orderly fashion so as not to materially adversely affect the Market Price of the Shares-in-Trust, the Trustee shall designate any Person as Permitted Transferee, provided, however, that (i) the Permitted Transferee so designated purchases for valuable consideration (whether in a public or private sale) the Shares-in-Trust and (ii) the Permitted Transferee so designated may acquire such Shares-in-Trust without such acquisition resulting in
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a transfer to a Trust and the redesignation of such Common Shares so acquired as Shares-in-Trust under Section 4(c) of Division B of this Article FOURTH. Upon the designation by the Trustee of a Permitted Transferee in accordance with the provisions of this subparagraph, the Trustee of a Trust shall (i) cause to be transferred to the Permitted Transferee that number of Shares-in-Trust acquired by the Permitted Transferee, (ii) cause to be recorded on the books of the Corporation that the Permitted Transferee is the holder of record of such number of Common Shares, and (iii) distribute to the Beneficiary any and all amounts held with respect to the Shares-in-Trust after making that payment to the Prohibited Owner pursuant to Section 7(f) of Division B of this Article FOURTH.
(f) Compensation to Record Holder of Common Shares that Become Shares-In-Trust . Any Prohibited Owner shall be entitled (following discovery of the Shares-In-Trust and subsequent designation of the Permitted Transferee in accordance with Section 4(e) of Division B of this Article FOURTH) to receive from the Trustee the lesser of (i) in the case of (A) a purported Transfer in which the Prohibited Owner gave value for Common Shares and which Transfer resulted in the transfer of the Common Shares to the Trust, the price per share, if any, such Prohibited Owner paid for the Common Shares, or (b) a Non-Transfer Event or Transfer in which the Prohibited Owner did not give value for such Common Shares (e.g., if the shares were received through a gift or devise) and which Non-Transfer Event or Transfer, as the case may be, resulted in the transfer of Common Shares to the Trust, the price per share equal to the Market Price on the date of such Non-Transfer Event or Transfer, and (ii) the price per share received by the Trustee of the Trust from the sale or other disposition of such Shares-in-Trust in accordance with Section 7(e) of Division B of this Article FOURTH. Any amounts received by the Trustee in respect of such Shares-in-Trust and in excess of such amounts to be paid the Prohibited Owner pursuant to this Section 7(f) of Division B of this Article FOURTH shall be distributed to the Beneficiary in accordance with the provisions of Section 7(e) of Division B of this Article FOURTH. Each Beneficiary and Prohibited Owner waive any and all claims that they may have against the Trustee and the Corporation arising out of the disposition of Shares-in-Trust, except for claims arising out of the gross negligence or willful misconduct of, or any failure to make payments in accordance with Section 7 of Division B of this Article FOURTH by, such Trustee or the Corporation.
(g) Purchase Right in Shares-in-Trust . Shares-in-Trust shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that created such Shares-in-Trust (or, in the case of devise, gift or Non-Transfer Event, the Market Price at the time of such devise, gift or Non-Transfer Event) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation shall have the right to accept such offer for a period of ninety days after the later of (i) the date of the Non-Transfer Event or purported Transfer which resulted in such Shares-in-Trust and (ii) the date the Corporation determines in good faith that a Transfer or Non-Transfer Event resulting in Shares-in-Trust has occurred, if the Corporation does not receive a notice of such Transfer or Non-Transfer Event pursuant to Section 4(e) of Division B of this Article FOURTH. Prompt payment of the purchase price shall be made in such reasonable manner as may be determined by the Corporation.
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SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
DEVELOPERS DIVERSIFIED REALTY CORPORATION
The undersigned, desiring to form a corporation for profit under Sections 1701.01 to 1701.98, inclusive, of the Ohio Revised Code, does hereby certify:
FIRST: The name of the Corporation shall be Developers Diversified Realty Corporation.
SECOND: The place in the State of Ohio where the principal office of the Corporation is located is Beachwood, Cuyahoga County.
THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be formed under Sections 1701.01 to 1701.98, inclusive of the Ohio Revised Code.
FOURTH: The authorized number of shares of the Corporation is 311,000,000, consisting of 300,000,000 common shares, $0.10 par value per share (hereinafter called Common Shares), 750,000 Class A Cumulative Preferred Shares, without par value (hereinafter called Class A Shares), 750,000 Class B Cumulative Preferred Shares, without par value (hereinafter called Class B Shares), 750,000 Class C Cumulative Preferred Shares, without par value (hereinafter called Class C Shares), 750,000 Class D Cumulative Preferred Shares, without par value (hereinafter called Class D Shares), 750,000 Class E Cumulative Preferred Shares, without par value (hereinafter called Class E Shares), 750,000 Class F Cumulative Preferred Shares, without par value (hereinafter called Class F Shares), 750,000 Class G Cumulative Preferred Shares, without par value (hereinafter called Class G Shares), 750,000 Class H Cumulative Preferred Shares, without par value (hereinafter called Class H Shares), 750,000 Class I Cumulative Preferred Shares, without par value (hereinafter called Class I Shares), 750,000 Class J Cumulative Preferred Shares, without par value (hereinafter called Class J Shares), 750,000 Class K Cumulative Preferred Shares, without par value (hereinafter called Class K Shares), 750,000 Noncumulative Preferred Shares, without par value (hereinafter called Noncumulative Shares), and 2,000,000 Cumulative Voting Preferred Shares, without par value (hereinafter called Voting Preferred Shares). The Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Voting Preferred Shares are sometimes collectively referred to herein as the Cumulative Shares.
DIVISION A
I. The Class A Cumulative Preferred Shares. The Class A Shares shall have the following express terms:
Section 1. Series. The Class A Shares may be issued from time to time in one or more series. All Class A Shares shall be of equal rank and shall be identical, except in respect of the matters that may be fixed by the Board of Directors as hereinafter provided, and each share of a series shall be identical with all other shares of such series, except as to the dates from which dividends shall accrue and be cumulative. All Class A Shares shall rank on a parity with the Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares and shall be identical to all Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares except (1) in respect of the matters that may be fixed by the Board of Directors as provided in clauses (a) through (i), inclusive, of this Section 1 and (2) only dividends on the Cumulative Shares shall be cumulative as set forth herein. Subject to the provisions of Sections 2 through 5, both inclusive, and Item XIII of this Division, which provisions shall apply to all Class A Shares, the Board of Directors hereby is authorized to cause such shares to be issued in one or more series and, with respect to each such series to determine and fix prior to the issuance thereof (and thereafter, to the extent provided in clause (b) of this Section), the following:
(a) The designation of the series, which may be by distinguishing number, letter or title;
(b) The authorized number of shares of the series, which number the Board of Directors may (except where otherwise provided in the creation of the series) increase or decrease from time to time before or after the issuance thereof (but not below the number of shares thereof then outstanding);
(c) The dividend rate or rates of the series, including the means by which such rates may be established;
(d) The date or dates from which dividends shall accrue and be cumulative and the dates on which and the period or periods for which dividends, if declared, shall be payable, including the means by which such dates and periods may be established;
(e) The redemption rights and price or prices, if any, for shares of the series;
(f) The terms and amount of the sinking fund, if any, for the purchase or redemption of shares of the series;
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(g) The amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation;
(h) Whether the shares of the series shall be convertible into Common Shares or shares of any other class and, if so, the conversion rate or rates or price or prices, any adjustments thereof and all other terms and conditions upon which such conversion may be made; and
(i) Restrictions (in addition to those set forth in Subsection 5(d) or 5(e) of this Item I) on the issuance of shares of the same series or of any other class or series.
The Board of Directors is authorized to adopt from time to time amendments to the Amended and Restated Articles of Incorporation, as amended, fixing, with respect to each such series, the matters described in clauses (a) through (i), inclusive, of this Section and is authorized to take such actions with respect thereto as may be required by law in order to effect such amendments.
Section 2. Dividends.
(a) The holders of Class A Shares of each series, in preference to the holders of Common Shares and of any other class of shares ranking junior to the Class A Shares, shall be entitled to receive out of any funds legally available therefor, and when and as declared by the Board of Directors, dividends in cash at the rate or rates for such series fixed in accordance with the provisions of Section 1 above and no more, payable on the dates fixed for such series. Such dividends shall accrue and be cumulative, in the case of shares of each particular series, from and after the date or dates fixed with respect to such series. No dividends shall be paid upon or declared or set apart for any series of the Class A Shares for any dividend period unless at the same time (i) a like proportionate dividend for the dividend periods terminating on the same or any earlier date, ratably in proportion to the respective annual dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Class A Shares of all series then issued and outstanding and entitled to receive such dividend and (ii) the dividends payable for the dividend periods terminating on the same or any earlier date (but, with respect to Noncumulative Shares, only with respect to the then current dividend period), ratably in proportion to the respective dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares then issued and outstanding and entitled to receive such dividends.
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(b) So long as any Class A Shares shall be outstanding no dividend, except a dividend payable in Common Shares or other shares ranking junior to the Class A Shares, shall be paid or declared or any distribution be made, except as aforesaid, in respect of the Common Shares or any other shares ranking junior to the Class A Shares, nor shall any Common Shares or any other shares ranking junior to the Class A Shares be purchased, retired or otherwise acquired by the Corporation, except out of the proceeds of the sale of Common Shares or other shares of the Corporation ranking junior to the Class A Shares received by the Corporation subsequent to the date of first issuance of Class A Shares of any series, unless:
(1) All accrued and unpaid dividends on Cumulative Shares, including the full dividends for all current dividend periods, shall have been declared and paid or a sum sufficient for payment thereof set apart;
(2) All unpaid dividends on Noncumulative Shares for the then current dividend period shall have been declared and paid or a sum sufficient for payment therefor set apart; and
(3) There shall be no arrearages with respect to the redemption of Cumulative Shares or Noncumulative Shares of any series from any sinking fund provided for shares of such series in accordance with the provisions of Section 1 of this Item I.
(c) The foregoing restrictions on the payment of dividends or other distributions on, or on the purchase, redemption retirement or other acquisition of, Common Shares or any other shares ranking on a parity with or junior to the Class A Shares shall be inapplicable to (i) any payments in lieu of issuance of fractional shares thereof, whether upon any merger, conversion, stock dividend or otherwise, (ii) the conversion of Cumulative Shares or Noncumulative Shares into Common Shares, or (iii) the exercise by the Corporation of its rights pursuant to Item XIV(d) of this Division A, Section 4(d) of Division B or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation, as amended, with respect to any other class or series of capital stock hereafter created or authorized.
(d) If, for any taxable year, the Corporation elects to designate as capital gain dividends (as defined in Section 857 of the Code) any portion (the Capital Gains Amount) of the dividends paid or made available for the year to holders of all classes of stock (the Total Dividends), then, to the extent permissible under the Code and to the extent it does not cause any dividends to fail to qualify for the dividends paid deduction under Section 561 of the Code, the portion of the Capital Gains Amount that shall be allocable to holders of the Class A Shares shall be the amount that the total dividends paid or made available to the holders of the Class A Shares for the year bears to the Total Dividends.
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Section 3. Redemption.
(a) Subject to the express terms of each series, the Corporation:
(1) May, from time to time at the option of the Board of Directors, redeem all or any part of any redeemable series of Class A Shares at the time outstanding at the applicable redemption price for such series fixed in accordance with the provisions of Section 1 of this Item I; and
(2) Shall, from time to time, make such redemptions of each series of Class A Shares as may be required to fulfill the requirements of any sinking fund provided for shares of such series at the applicable sinking fund redemption price fixed in accordance with the provisions of Section 1 of this Item I; and shall in each case pay all accrued and unpaid dividends to the redemption date.
(b) (1) Notice of every such redemption shall be mailed, postage prepaid, to the holders of record of the Class A Shares to be redeemed at their respective addresses then appearing on the books of the Corporation, not less than 30 days nor more than 60 days prior to the date fixed for such redemption, or such other time prior thereto as the Board of Directors shall fix for any series pursuant to Section 1 of this Item I prior to the issuance thereof. At any time after notice as provided above has been deposited in the mail, the Corporation may deposit the aggregate redemption price of Class A Shares to be redeemed, together with accrued and unpaid dividends thereon to the redemption date, with any bank or trust company in Cleveland, Ohio, or New York, New York, having capital and surplus of not less than $100,000,000 named in such notice and direct that there be paid to the respective holders of the Class A Shares so to be redeemed amounts equal to the redemption price of the Class A Shares so to be redeemed, together with such accrued and unpaid dividends thereon, on surrender of the share certificate or certificates held by such holders; and upon the deposit of such notice in the mail and the making of such deposit of money with such bank or trust company, such holders shall cease to be shareholders with respect to such shares; and from and after the time such notice shall have been so deposited and such deposit of money shall have been so made, such holders shall have no rights or claim against the Corporation with respect to such shares, except only the right to receive such money from such bank or trust company without interest or to exercise before the redemption date any unexpired privileges of conversion. In the event less than all of the outstanding Class A Shares are to be redeemed, the Corporation shall select by lot the shares so to be redeemed in such manner as shall be prescribed by the Board of Directors.
(2) If the holders of Class A Shares which have been called for redemption shall not within six years after such deposit claim the amount deposited for the redemption thereof, any such bank or trust company shall, upon demand, pay over to the Corporation such unclaimed amounts and thereupon such bank or trust company and the Corporation shall be relieved of all responsibility in respect thereof and to such holders.
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(c) Any Class A Shares which are (1) redeemed by the Corporation pursuant to the provisions of this Section, (2) purchased and delivered in satisfaction of any sinking fund requirements provided for shares of such series, (3) converted in accordance with the express terms thereof, or (4) otherwise acquired by the Corporation shall resume the status of authorized but unissued Class A Shares without serial designation.
(d) Except in connection with the exercise of the Corporations rights pursuant to Section (d) of Item XIV of this Division A, Section 4(d) of Division B or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation, as amended, with respect to any other class or series of capital stock hereafter created or authorized, the Corporation may not purchase or redeem (for sinking fund purposes or otherwise) less than all of the Class A Shares then outstanding except in accordance with a stock purchase offer made to all holders of record of Class A Shares, unless all dividends on all Class A Shares then outstanding for all previous and current dividend periods shall have been declared and paid or funds therefor set apart and all accrued sinking fund obligations applicable thereto shall have been complied with.
Section 4. Liquidation.
(a) (1) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of Class A Shares of any series shall be entitled to receive in full out of the assets of the Corporation, including its capital, before any amount shall be paid or distributed among the holders of the Common Shares or any other shares ranking junior to the Class A Shares, the amounts fixed with respect to shares of such series in accordance with Section 1 of this Item I, plus an amount equal to all dividends accrued and unpaid thereon to the date of payment of the amount due pursuant to such liquidation, dissolution or winding up of the affairs of the Corporation. In the event the net assets of the Corporation legally available therefor are insufficient to permit the payment upon all outstanding Cumulative Shares and Noncumulative Shares of the full preferential amount to which they are respectively entitled, then such net assets shall be distributed ratably upon all outstanding Cumulative Shares and Noncumulative Shares in proportion to the full preferential amount to which each such share is entitled.
(2) After payment to the holders of Class A Shares of the full preferential amounts as aforesaid, the holders of Class A Shares, as such, shall have no right or claim to any of the remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation into or with any other Corporation, the merger of any other Corporation into it, or the sale, lease or conveyance of all or substantially all the assets of the Corporation shall not be deemed to be a dissolution, liquidation or winding up for the purposes of this Section.
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Section 5. Voting.
(a) The holders of Class A Shares shall have no voting rights, except as provided in this Section or required by law.
(b) (1) If, and so often as, the Corporation shall be in default in the payment of dividends on any series of Class A Shares at the time outstanding, whether or not earned or declared, for a number of dividend payment periods, whether consecutive or not, which in the aggregate contain at least 540 days, all holders of such Class A Shares, voting separately as a class, together with all Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares upon which like voting rights have been conferred and are exercisable under the circumstances described in Subsection 5(c), shall be entitled to elect, as herein provided, a total of two members of the Board of Directors of the Corporation; provided, however, that the holders of such Class A Shares shall not exercise such special class voting rights except at meetings of such shareholders for the election of directors at which the holders of not less than 50% of such Class A Shares are present in person or by proxy; and provided further that the special class voting rights provided for in this paragraph when the same shall have become vested shall remain so vested until all accrued and unpaid dividends on such Class A Shares then outstanding shall have been paid or declared and a sum sufficient for the payment thereof set aside for payment, whereupon the holders of such Class A Shares shall be divested of their special class voting rights in respect of subsequent elections of directors, subject to the revesting of such special class voting rights in the event above specified in this paragraph.
(2) In the event of default entitling holders of Class A Shares to elect two directors as specified in paragraph (1) of this Subsection, a special meeting of such holders for the purpose of electing such directors shall be called by the Secretary of the Corporation upon written request of, or may be called by, the holders of record of at least 10% of the Class A Shares upon which such default in the payment of dividends exists and notice thereof shall be given in the same manner as that required for the annual meeting of shareholders; provided, however, that the Corporation shall not be required to call such special meeting if the annual meeting of shareholders shall be called to be held within 90 days after the date of receipt of the foregoing written request from the holders of Class A Shares. At any meeting at which such holders of Class A Shares shall be entitled to elect directors, holders of 50% of such Class A Shares, present in person or by proxy, shall be sufficient to constitute a quorum, and the vote of the holders of a majority of such shares so present at any such meeting at which there shall be such a quorum shall be sufficient to elect the members of the Board of Directors which such holders of Class A Shares are entitled to elect as herein provided.
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Notwithstanding any provision of these Amended and Restated Articles of Incorporation, as amended, or the Code of Regulations of the Corporation or any action taken by the holders of any class of shares fixing the number of directors of the Corporation, the two directors who may be elected by such holders of Class A Shares pursuant to this Subsection shall serve in addition to any other directors then in office or proposed to be elected otherwise than pursuant to this Subsection. Nothing in this Subsection shall prevent any change otherwise permitted in the total number of or classifications of directors of the Corporation or require the resignation of any director elected otherwise than pursuant to this Subsection. Notwithstanding any classification of the other directors of the Corporation, the two directors elected by such holders of Class A Shares shall be elected annually for terms expiring at the next succeeding annual meeting of shareholders.
(3) Upon any divesting of the special class voting rights of the holders of the Class A Shares in respect of elections of directors as provided in this Subsection, the terms of office of all directors then in office elected by such holders shall terminate immediately thereupon. If the office of any director elected by such holders voting as a class becomes vacant by reason of death, resignation, removal from office or otherwise, the remaining director elected by such holders voting as a class may elect a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.
(c) If at any time when the holders of Class A Shares are entitled to elect directors pursuant to the foregoing provisions of this Section the holders of any Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares or Noncumulative Shares are entitled to elect directors pursuant hereto by reason of any default in the payment of dividends thereon, then the voting rights of the Cumulative Shares and Noncumulative Shares then entitled to vote shall be combined (with each class of shares having a number of votes proportional to the aggregate liquidation preference of its outstanding shares). In such case, the holders of Class A Shares and of all such other shares then entitled so to vote, voting as a class, shall elect such directors. If the holders of any such other shares have elected such directors prior to the happening of the default or event permitting the holders of Class A Shares to elect directors, or prior to a written request for the holding of a special meeting being received by the Secretary of the Corporation as required above, then a new election shall be held with all such other shares and the Class A Shares voting together as a single class for such directors, resulting in the termination of the term of such previously elected directors upon the election of such new directors.
(d) The affirmative vote of the holders of at least two-thirds of the Class A Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose, shall be necessary to effect either of the following:
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(1) Any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Amended and Restated Articles of Incorporation, as amended, or of the Code of Regulations of the Corporation which affects adversely and materially the preferences or voting or other rights of the holders of Class A Shares which are set forth in these Amended and Restated Articles of Incorporation, as amended; provided, however, neither the amendment of these Amended and Restated Articles of Incorporation, as amended, so as to authorize, create or change the authorized or outstanding number of Class A Shares or of any shares ranking on a parity with or junior to the Class A Shares nor the amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely and materially preferences or voting or other rights of the holders of Class A Shares; or
(2) The authorization, creation or increase in the authorized number of any shares, or any security convertible into shares, in either case ranking prior to such series of Class A Shares.
(e) In the event, and only to the extent, that (1) Class A Shares are issued in more than one series and (2) Ohio law permits the holders of a series of a class of capital stock to vote separately as a class, the affirmative vote of the holders of at least two-thirds of each series of Class A Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose of voting on such matters, shall be required for any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of these Amended and Restated Articles of Incorporation, as amended, or of the Code of Regulations of the Corporation which affects adversely and materially the preferences or voting or other rights of the holders of such series which are set forth in these Amended and Restated Articles of Incorporation, as amended; provided, however, neither the amendment of these Amended and Restated Articles of Incorporation, as amended, so as to authorize, create or change the authorized or outstanding number of Class A Shares or of any shares ranking on a parity with or junior to the Class A Shares nor the Amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely and materially the preferences or voting or other rights of the holders of such series.
Section 6. 9 1 / 2 % Class A Cumulative Redeemable Preferred Shares. Of the 750,000 authorized Class A Shares, 460,000 shares are designated as a series entitled 9 1 / 2 % Class A Cumulative Redeemable Preferred Shares (hereinafter called 9 1 / 2 % Class A Preferred Shares). The 9 1 / 2 % Class A Preferred Shares shall have the express terms set forth in this Item I as being applicable to all Class A Shares as a class and, in addition, the following express terms applicable to all 9 1 / 2 % Class A Preferred Shares as a series of Class A Shares:
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(a) The annual dividend rate of the 9 1 / 2 % Class A Preferred Shares shall be 9 1 / 2 % of the liquidation preference of $250.00 per share.
(b) Dividends on the 9 1 / 2 % Class A Preferred Shares shall be payable, if declared, quarterly on or about the 15th day of March, June, September, and December each year, the first quarterly dividend being payable, if declared, on December 15, 1995. The dividends payable for each full quarterly dividend period on each 9 1 / 2 % Class A Preferred Share shall be $5.94.
Dividends for the initial dividend period on the 9 1 / 2 % Class A Preferred Shares, or for any period shorter or longer than a full dividend period on the 9 1 / 2 % Class A Preferred Shares, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The aggregate dividend payable quarterly to each holder of 9 1 / 2 % Class A Preferred Shares shall be rounded to the nearest one-hundredth of one cent with $.00005 being rounded upward. Each dividend shall be payable to the holders of record on such record date, no less than 10 nor more than 30 days preceding the payment date thereof, as shall be fixed from time to time by the Corporations Board of Directors.
(c) Dividends on 9 1 / 2 % Class A Preferred Shares shall be cumulative as follows:
(1) With respect to shares included in the initial issue of 9 1 / 2 % Class A Preferred Shares and shares issued any time thereafter up to and including the record date for the payment of the first dividend on the initial issue of 9 1 / 2 % Class A Preferred Shares, dividends shall be cumulative from the date of the initial issue of 9 1 / 2 % Class A Preferred Shares; and
(2) With respect to shares issued any time after the aforesaid record date, dividends shall be cumulative from the dividend payment date next preceding the date of issue of such shares, except that if such shares are issued during the period commencing the day after the record date for the payment of a dividend on 9 1 / 2 % Class A Preferred Shares and ending on the payment date of that dividend, dividends with respect to such shares shall be cumulative from that dividend payment date.
(d) Except as required to preserve the Corporations status as a real estate investment trust under the Internal Revenue Code of 1986, as amended, the 9 1 / 2 % Class A Preferred Shares may not be redeemed prior to November 15, 2000. At any time or from time to time on and after November 15, 2000 the Corporation, at its option upon not less than thirty (30) nor more than sixty (60) days written notice, may redeem all or any part of the 9 1 / 2 % Class A Preferred Shares at a redemption price of $250.00 per share plus, in each case, an amount equal to all dividends accrued and unpaid thereon to the redemption date, without interest. The redemption price (other than the portion thereof consisting of accrued and unpaid dividends) is payable solely out of the sale proceeds of other capital shares of the Corporation, which may include any equity securities (including common shares and preferred shares), shares, interests, participation or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable for equity securities), or options to purchase any of the foregoing.
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(e) The amount payable per 9 1 / 2 % Class A Preferred Share in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation shall be $250.00, plus an amount equal to all dividends accrued and unpaid thereon to the date of payment.
(f) All dividend payments made on the 9 1 / 2 % Class A Preferred Shares, at any time during which the Corporation is in default in the payment of dividends on such 9 1 / 2 % Class A Preferred Shares for any dividend period, shall, for the purposes of Section 5(b)(1) of this Item I, be deemed to be made in respect of the earliest dividend period with respect to which the Corporation is in default.
II. The Class B Cumulative Preferred Shares. The Class B Cumulative Preferred Shares shall have the following express terms:
Section 1. Series. The Class B Shares may be issued from time to time in one or more series. All Class B Shares shall be of equal rank and shall be identical, except in respect of the matters that may be fixed by the Board of Directors as hereinafter provided, and each share of a series shall be identical with all other shares of such series, except as to the dates from which dividends shall accrue and be cumulative. All Class B Shares shall rank on a parity with the Class A Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares and shall be identical to all Class A Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares except (1) in respect of the matters that may be fixed by the Board of Directors as provided in clauses (a) through (i), inclusive, of this Section 1 and (2) only dividends on the Cumulative Shares are cumulative as set forth herein. Subject to the provisions of Sections 2 through 5, both inclusive, and Item XIII of this Division, which provisions shall apply to all Class B Shares, the Board of Directors hereby is authorized to cause such shares to be issued in one or more series and with respect to each such series to determine and fix prior to the issuance thereof (and thereafter, to the extent provided in clause (b) of this Section), the following:
(a) The designation of the series, which may be by distinguishing number, letter or title;
(b) The authorized number of shares of the series, which number the Board of Directors may (except where otherwise provided in the creation of the series) increase or decrease from time to time before or after the issuance thereof (but not below the number of shares thereof then outstanding);
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(c) The dividend rate or rates of the series, including the means by which such rates may be established;
(d) The date or dates from which dividends shall accrue and be cumulative and the dates on which and the period or periods for which dividends, if declared, shall be payable, including the means by which such dates and periods may be established;
(e) The redemption rights and price or prices, if any, for shares of the series;
(f) The terms and amount of the sinking fund, if any, for the purchase or redemption of shares of the series;
(g) The amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation;
(h) Whether the shares of the series shall be convertible into Common Shares or shares of any other class and, if so, the conversion rate or rates or price or prices, any adjustments thereof and all other terms and conditions upon which such conversion may be made; and
(i) Restrictions (in addition to those set forth in Subsection 5(d) or 5(e) of this Item II) on the issuance of shares of the same series or of any other class or series.
The Board of Directors is authorized to adopt from time to time amendments to the Amended and Restated Articles of Incorporation, as amended, fixing, with respect to each such series, the matters described in clauses (a) through (i), both inclusive, of this Section and is authorized to take such actions with respect thereto as may be required by law in order to effect such amendments.
Section 2. Dividends.
(a) The holders of Class B Shares of each series, in preference to the holders of Common Shares and of any other class of shares ranking junior to the Class B Shares, shall be entitled to receive out of any funds legally available therefor, and when and as declared by the Board of Directors, dividends in cash at the rate or rates for such series fixed in accordance with the provisions of Section 1 above and no more, payable on the dates fixed for such series. Such dividends shall accrue and be cumulative, in the case of shares of each particular series, from and after the date or dates fixed with respect to such series. No dividends shall be paid upon or declared or set apart for any series of the Class B Shares for any dividend period unless at the same time (i) a like proportionate dividend for the dividend periods terminating on the same or any earlier date, ratably in proportion to the respective annual dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Class B Shares of all series
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then issued and outstanding and entitled to receive such dividend and (ii) the dividends payable for the dividend periods terminating on the same or any earlier date (but, with respect to the Noncumulative Shares, only with respect to the then current dividend period), ratably in proportion to the respective dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Class A Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares then issued and outstanding and entitled to receive such dividends.
(b) So long as any Class B Shares shall be outstanding no dividend, except a dividend payable in Common Shares or other shares ranking junior to the Class B Shares, shall be paid or declared or any distribution be made, except as aforesaid, in respect of the Common Shares or any other shares ranking junior to the Class B Shares, nor shall any Common Shares or any other shares ranking junior to the Class B Shares be purchased, retired or otherwise acquired by the Corporation, except out of the proceeds of the sale of Common Shares or other shares of the Corporation ranking junior to the Class B Shares received by the Corporation subsequent to the date of first issuance of Class B Shares of any series, unless:
(1) All accrued and unpaid dividends on Cumulative Shares, including the full dividends for all current dividend periods, shall have been declared and paid or a sum sufficient for payment thereof set apart;
(2) All unpaid dividends on Noncumulative Shares for the then current dividend period shall have been declared and paid or a sum sufficient for payment thereof set apart; and
(3) There shall be no arrearages with respect to the redemption of Cumulative Shares or Noncumulative Shares of any series from any sinking fund provided for shares of such series in accordance with the provisions of Section 1 of this Item II.
(c) The foregoing restrictions on the payment of dividends or other distributions on, or on the purchase, redemption, retirement or other acquisition of, Common Shares or any other shares ranking on a parity with or junior to the Class B Shares shall be inapplicable to (i) any payments in lieu of issuance of fractional shares thereof, whether upon any merger, conversion, stock dividend or otherwise, (ii) the conversion of Cumulative Shares or Noncumulative Shares into Common Shares or (iii) the exercise by the Corporation of its rights pursuant to Item XIV(d) of this Division A, Section 4(d) of Division B or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation, as amended, with respect to any other class or series of capital stock hereafter created or authorized.
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(d) If, for any taxable year, the Corporation elects to designate as capital gain dividends (as defined in Section 857 of the Code) any portion (the Capital Gains Amount) of the dividends paid or made available for the year to holders of all classes of stock (the Total Dividends), then, to the extent permissible under the Code and to the extent that it does not cause any dividends to fail to qualify for the dividends paid deduction under Section 561 of the Code, the portion of the Capital Gains Amount that shall be allocable to holders of the Class B Shares shall be the amount that the total dividends paid or made available to the holders of the Class B Shares for the year bears to the Total Dividends.
Section 3. Redemption.
(a) Subject to the express terms of each series, the Corporation:
(1) May, from time to time at the option of the Board of Directors, redeem all or any part of any redeemable series of Class B Shares at the time outstanding at the applicable redemption price for such series fixed in accordance with the provisions of Section 1 of this Item II; and
(2) Shall, from time to time, make such redemptions of each series of Class B Shares as may be required to fulfill the requirements of any sinking fund provided for shares of such series at the applicable sinking fund redemption price fixed in accordance with the provisions of Section 1 of this Item II; and shall in each case pay all accrued and unpaid dividends to the redemption date.
(b) (1) Notice of every such redemption shall be mailed, postage prepaid, to the holders of record of the Class B Shares to be redeemed at their respective addresses then appearing on the books of the Corporation, not less than 30 days nor more than 60 days prior to the date fixed for such redemption, or such other time prior thereto as the Board of Directors shall fix for any series pursuant to Section 1 of this Item II prior to the issuance thereof. At any time after notice as provided above has been deposited in the mail, the Corporation may deposit the aggregate redemption price of Class B Shares to be redeemed, together with accrued and unpaid dividends thereon to the redemption date, with any bank or trust company in Cleveland, Ohio, or New York, New York, having capital and surplus of not less than $100,000,000 named in such notice and direct that there be paid to the respective holders of the Class B Shares so to be redeemed amounts equal to the redemption price of the Class B Shares so to be redeemed, together with such accrued and unpaid dividends thereon, on surrender of the share certificate or certificates held by such holders; and upon the deposit of such notice in the mail and the making of such deposit of money with such bank or trust company, such holders shall cease to be shareholders with respect to such shares; and from and after the time such notice shall have been so deposited and such deposit of money shall have been so made, such holders shall have no rights or claim against the Corporation with respect to such shares, except only the right to receive such money from such bank or trust company without interest or to exercise before the redemption date any unexpired privileges of conversion. In the event less than all of the outstanding Class B Shares are to be redeemed, the Corporation shall select by lot the shares so to be redeemed in such manner as shall be prescribed by the Board of Directors.
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(2) If the holders of Class B Shares which have been called for redemption shall not within six years after such deposit claim the amount deposited for the redemption thereof, any such bank or trust company shall, upon demand, pay over to the Corporation such unclaimed amounts and thereupon such bank or trust company and the Corporation shall be relieved of all responsibility in respect thereof and to such holders.
(c) Any Class B Shares which are (1) redeemed by the Corporation pursuant to the provisions of this Section, (2) purchased and delivered in satisfaction of any sinking fund requirements provided for shares of such series, (3) converted in accordance with the express terms thereof, or (4) otherwise acquired by the Corporation shall resume the status of authorized but unissued Class B Shares without serial designation.
(d) Except in connection with the exercise of the Corporations rights pursuant to Section (d) of Item XIV of this Division A, Section 4(d) of Division B or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation, as amended, with respect to any other class or series of capital stock hereafter created or authorized, the Corporation may not purchase or redeem (for sinking fund purposes or otherwise) less than all of the Class B Shares then outstanding except in accordance with a stock purchase offer made to all holders of record of Class B Shares, unless all dividends on all Class B Shares then outstanding for all previous and current dividend periods shall have been declared and paid or funds therefor set apart and all accrued sinking fund obligations applicable thereto shall have been complied with.
Section 4. Liquidation.
(a) (1) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of Class B Shares of any series shall be entitled to receive in full out of the assets of the Corporation, including its capital, before any amount shall be paid or distributed among the holders of the Common Shares or any other shares ranking junior to the Class B Shares, the amounts fixed with respect to shares of such series in accordance with Section 1 of this Item II, plus an amount equal to all dividends accrued and unpaid thereon to the date of payment of the amount due pursuant to such liquidation, dissolution or winding up of the affairs of the Corporation. In the event the net assets of the Corporation legally available therefor are insufficient to permit the payment upon all outstanding Cumulative Shares and Noncumulative Shares of the full preferential amount to which they are respectively entitled, then such net assets shall be distributed ratably upon all outstanding Cumulative Shares and Noncumulative Shares in proportion to the full preferential amount to which each such share is entitled.
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(2) After payment to the holders of Class B Shares of the full preferential amounts as aforesaid, the holders of Class B Shares, as such, shall have no right or claim to any of the remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation into or with any other Corporation, the merger of any other corporation into it, or the sale, lease or conveyance of all or substantially all the assets of the Corporation shall not be deemed to be a dissolution, liquidation or winding up for the purposes of this Section.
Section 5. Voting.
(a) The holders of Class B Shares shall have no voting rights, except as provided in this Section or required by law.
(b) (1) If, and so often as, the Corporation shall be in default in the payment of dividends on any series of Class B Shares at the time outstanding, whether or not earned or declared, for a number of dividend payment periods, whether consecutive or not, which in the aggregate contain at least 540 days, all holders of Class B Shares, voting separately as a class, together with all Class A Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares upon which like voting rights have been conferred and are exercisable under the circumstances described in Subsection 5(c), shall be entitled to elect, as herein provided, a total of two members of the Board of Directors of the Corporation; provided, however, that the holders of such Class B Shares shall not exercise such special class voting rights except at meetings of such shareholders for the election of directors at which the holders of not less than 50% of such Class B Shares are present in person or by proxy; and provided further that the special class voting rights provided for in this paragraph when the same shall have become vested shall remain so vested until all accrued and unpaid dividends on such Class B Shares then outstanding shall have been paid or declared and a sum sufficient therefor set aside for payment, whereupon the holders of such Class B Shares shall be divested of their special class voting rights in respect of subsequent elections of directors, subject to the revesting of such special class voting rights in the event above specified in this paragraph.
(2) In the event of default entitling holders of Class B Shares to elect two directors as specified in paragraph (1) of this Subsection, a special meeting of such holders for the purpose of electing such directors shall be called by the Secretary of the Corporation upon written request of, or may be called by, the holders of record of at least 10% of the Class B Shares upon which such default in the payment of dividends exists and notice thereof shall be given in the same manner as that required for the annual meeting of shareholders; provided,
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however, that the Corporation shall not be required to call such special meeting if the annual meeting of shareholders shall be called to be held within 90 days after the date of receipt of the foregoing written request from the holders of Class B Shares. At any meeting at which such holders of Class B Shares shall be entitled to elect directors, holders of 50% of such Class B Shares, present in person or by proxy, shall be sufficient to constitute a quorum, and the vote of the holders of a majority of such shares so present at any such meeting at which there shall be such a quorum shall be sufficient to elect the members of the Board of Directors which such holders of Class B Shares are entitled to elect as herein provided. Notwithstanding any provision of these Amended and Restated Articles of Incorporation, as amended, or the Code of Regulations of the Corporation or any action taken by the holders of any class of shares fixing the number of directors of the Corporation, the two directors who may be elected by such holders of Class B Shares pursuant to this Subsection shall serve in addition to any other directors then in office or proposed to be elected otherwise than pursuant to this Subsection. Nothing in this Subsection shall prevent any change otherwise permitted in the total number of or classifications of directors of the Corporation nor require the resignation of any director elected otherwise than pursuant to this Subsection. Notwithstanding any classification of the other directors of the Corporation, the two directors elected by such holders of Class B Shares shall be elected annually for terms expiring at the next succeeding annual meeting of shareholders.
(3) Upon any divesting of the special class voting rights of the holders of the Class B Shares in respect of elections of directors as provided in this Subsection, the terms of office of all directors then in office elected by such holders shall terminate immediately thereupon. If the office of any director elected by such holders voting as a class becomes vacant by reason of death, resignation, removal from office or otherwise, the remaining director elected by such holders voting as a class may elect a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.
(c) If at any time when the holders of Class B Shares are entitled to elect directors pursuant to the foregoing provisions of this Section the holders of any Class A Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares or Noncumulative Shares are entitled to elect directors pursuant hereto by reason of any default in the payment of dividends thereon, then the voting rights of the Cumulative Shares and the Noncumulative Shares then entitled to vote shall be combined (with class of shares having a number of votes proportional to the aggregate liquidation preference of its outstanding shares). In such case, the holders of Class B Shares and of all such other shares then entitled so to vote, voting as a class, shall elect such directors. If the holders of any such other shares have elected such directors prior to the happening of the default or event permitting the holders of Class B Shares to elect directors, or prior to a written request for the holding of a special meeting being received by the Secretary of the Corporation as required above, then a new election shall be held with all such other shares and the Class B Shares voting together as a single class for such directors, resulting in the termination of the term of such previously elected directors upon the election of such new directors.
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(d) The affirmative vote of the holders of at least two-thirds of the Class B Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose, shall be necessary to effect either of the following:
(1) Any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Amended and Restated Articles of Incorporation, as amended, or of the Code of Regulations of the Corporation which affects adversely and materially the preferences or voting or other rights of the holders of Class B Shares which are set forth in these Amended and Restated Articles of Incorporation, as amended; provided, however, neither the amendment of these Amended and Restated Articles of Incorporation, as amended, so as to authorize, create or change the authorized or outstanding number of Class B Shares or of any shares ranking on a parity with or junior to the Class B Shares nor the amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely and materially preferences or voting or other rights of the holders of Class B Shares; or
(2) The authorization, creation or increase in the authorized number of any shares, or any security convertible into shares, in either case ranking prior to such Class B Shares.
(e) In the event, and only to the extent, that (1) Class B Shares are issued in more than one series and (2) Ohio law permits the holders of a series of a class of capital stock to vote separately as a class, the affirmative vote of the holders of at least two-thirds of each series of Class B Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose of voting on such matters, shall be required for any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of these Amended and Restated Articles of Incorporation, as amended, or of the Code of Regulations of the Corporation which affects adversely and materially the preferences or voting or other rights of the holders of such series which are set forth in these Amended and Restated Articles of Incorporation, as amended; provided, however, neither the amendment of these Amended and Restated Articles of Incorporation, as amended, so as to authorize, create or change the authorized or outstanding number of Class B Shares or of any shares remaining on a parity with or junior to the Class B Shares nor the amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely and materially preferences or voting or other rights of the holders of such series.
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Section 6. 9.44% Class B Cumulative Redeemable Preferred Shares. Of the 750,000 authorized Class B Shares, 177,500 shares are designated as a series entitled 9.44% Class B Cumulative Redeemable Preferred Shares (hereinafter called 9.44% Class B Preferred Shares). The 9.44% Class B Preferred Shares shall have the express terms set forth in this Item II as being applicable to all Class B Shares as a class and, in addition, the following express terms applicable to all 9.44% Class B Preferred Shares as a series of Class B Shares:
(a) The annual dividend rate of the 9.44% Class B Preferred Shares shall be 9.44% of the liquidation preference of $250.00 per share.
(b) Dividends on the 9.44% Class B Preferred Shares shall be payable, if declared, quarterly on or about the 15th day of March, June, September, and December each year, the first quarterly dividend being payable, if declared, on March 15, 1996. The dividends payable for each full quarterly dividend period on each 9.44% Class B Preferred Share shall be $5.90.
Dividends for the initial dividend period on the 9.44% Class B Preferred Shares, or for any period shorter or longer than a full dividend period on the 9.44% Class B Preferred Shares, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The aggregate dividend payable quarterly to each holder of 9.44% Class B Preferred Shares shall be rounded to the nearest one-hundredth of one cent with $.00005 being rounded upward. Each dividend shall be payable to the holders of record on such record date, no less than 10 nor more than 30 days preceding the payment date thereof, as shall be fixed from time to time by the Corporations Board of Directors.
(c) Dividends on 9.44% Class B Preferred Shares shall be cumulative as follows:
(1) With respect to shares included in the initial issue of 9.44% Class B Preferred Shares and shares issued any time thereafter up to and including the record date for the payment of the first dividend on the initial issue of 9.44% Class B Preferred Shares, dividends shall be cumulative from the date of the initial issue of 9.44% Class B Preferred Shares; and
(2) With respect to shares issued any time after the aforesaid record date, dividends shall be cumulative from the dividend payment date next preceding the date of issue of such shares, except that if such shares are issued during the period commencing the day after the record date for the payment of a dividend on 9.44% Class B Preferred Shares and ending on the payment date of that dividend, dividends with respect to such shares shall be cumulative from that dividend payment date.
(d) Except as required to preserve the Corporations status as a real estate investment trust under the Internal Revenue Code of 1986, as amended, the 9.44% Class B Preferred Shares may not be redeemed prior to December 26,
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2000. At any time or from time to time on and after December 26, 2000 the Corporation, at its option upon not less than thirty (30) nor more than sixty (60) days written notice, may redeem all or any part of the 9.44% Class B Preferred Shares at a redemption price of $250.00 per share plus, in each case, an amount equal to all dividends accrued and unpaid thereon to the redemption date, without interest. The redemption price (other than the portion thereof consisting of accrued and unpaid dividends) is payable solely out of the sale proceeds of other capital shares of the Corporation, which may include any equity securities (including common shares and preferred shares), shares, interests, participation or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable for equity securities), or options to purchase any of the foregoing.
(e) The amount payable per 9.44% Class B Preferred Share in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation shall be $250.00, plus an amount equal to all dividends accrued and unpaid thereon to the date of payment.
(f) All dividend payments made on the 9.44% Class B Preferred Shares, at any time during which the Corporation is in default in the payment of dividends on such 9.44% Class B Preferred Shares for any dividend period, shall, for the purposes of Section 5(b)(1) of this Item II, be deemed to be made in respect of the earliest dividend period with respect to which the Corporation is in default.
III. The Class C Cumulative Preferred Shares. The Class C Shares shall have the following express terms:
Section 1. Series. The Class C Shares may be issued from time to time in one or more series. All Class C Shares shall be of equal rank and shall be identical, except in respect of the matters that may be fixed by the Board of Directors as hereinafter provided, and each share of a series shall be identical with all other shares of such series, except as to the dates from which dividends shall accrue and be cumulative. All Class C Shares shall rank on a parity with the Class A Shares, Class B Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares and shall be identical to all Class A Shares, Class B Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares except (1) in respect of the matters that may be fixed by the Board of Directors as provided in clauses (a) through (i), inclusive, of this Section 1 and (2) only dividends on Cumulative Shares shall be cumulative as set forth herein. Subject to the provisions of Sections 2 through 5, both inclusive, and Item XIII of this Division, which provisions shall apply to all Class C Shares, the Board of Directors hereby is authorized to cause such shares to be issued in one or more series and, with respect to each such series to determine and fix prior to the issuance thereof (and thereafter, to the extent provided in clause (b) of this Section), the following:
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(a) The designation of the series, which may be by distinguishing number, letter or title;
(b) The authorized number of shares of the series, which number the Board of Directors may (except where otherwise provided in the creation of the series) increase or decrease from time to time before or after the issuance thereof (but not below the number of shares thereof then outstanding);
(c) The dividend rate or rates of the series, including the means by which such rates may be established;
(d) The date or dates from which dividends shall accrue and be cumulative and the dates on which and the period or periods for which dividends, if declared, shall be payable, including the means by which such dates and periods may be established;
(e) The redemption rights and price or prices, if any, for shares of the series;
(f) The terms and amount of the sinking fund, if any, for the purchase or redemption of shares of the series;
(g) The amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation;
(h) Whether the shares of the series shall be convertible into Common Shares or shares of any other class and, if so, the conversion rate or rates or price or prices, any adjustments thereof and all other terms and conditions upon which such conversion may be made; and
(i) Restrictions (in addition to those set forth in Subsection 5(d) or 5(e) of this Item III) on the issuance of shares of the same series or of any other class or series.
The Board of Directors is authorized to adopt from time to time amendments to the Amended and Restated Articles of Incorporation, as amended, fixing, with respect to each such series, the matters described in clauses (a) through (i), inclusive, of this Section and is authorized to take such actions with respect thereto as may be required by law in order to effect such amendments.
Section 2. Dividends.
(a) The holders of Class C Shares of each series, in preference to the holders of Common Shares and of any other class of shares ranking junior to the Class C Shares, shall be entitled to receive out of any funds legally available therefor, and when and as declared by the Board of Directors, dividends in cash at the rate or rates for such series fixed in accordance with the provisions of
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Section 1 above and no more, payable on the dates fixed for such series. Such dividends shall accrue and be cumulative, in the case of shares of each particular series, from and after the date or dates fixed with respect to such series. No dividends shall be paid upon or declared or set apart for any series of the Class C Shares for any dividend period unless at the same time (i) a like proportionate dividend for the dividend periods terminating on the same or any earlier date, ratably in proportion to the respective annual dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Class C Shares of all series then issued and outstanding and entitled to receive such dividend and (ii) the dividends payable for the dividend periods terminating on the same or any earlier date (but, with respect to Noncumulative Shares, only with respect to the then current dividend period), ratably in proportion to the respective dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Class A Shares, Class B Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares then issued and outstanding and entitled to receive such dividends.
(b) So long as any Class C Shares shall be outstanding no dividend, except a dividend payable in Common Shares or other shares ranking junior to the Class C Shares, shall be paid or declared or any distribution be made, except as aforesaid, in respect of the Common Shares or any other shares ranking junior to the Class C Shares, nor shall any Common Shares or any other shares ranking junior to the Class C Shares be purchased, retired or otherwise acquired by the Corporation, except out of the proceeds of the sale of Common Shares or other shares of the Corporation ranking junior to the Class C Shares received by the Corporation subsequent to the date of first issuance of Class C Shares of any series, unless:
(1) All accrued and unpaid dividends on Cumulative Shares, including the full dividends for all current dividend periods, shall have been declared and paid or a sum sufficient for payment thereof set apart;
(2) All unpaid dividends on Noncumulative Shares for the then current dividend period shall have been declared and paid or a sum sufficient for payment therefor set apart; and
(3) There shall be no arrearages with respect to the redemption of Cumulative Shares or Noncumulative Shares of any series from any sinking fund provided for shares of such series in accordance with the provisions of Section 1 of this Item III.
(c) The foregoing restrictions on the payment of dividends or other distributions on, or on the purchase, redemption retirement or other acquisition of, Common Shares or any other shares ranking on a parity with or junior to the Class C Shares shall be inapplicable to (i) any payments in lieu of issuance of fractional shares thereof, whether upon any merger, conversion, stock dividend
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or otherwise, (ii) the conversion of Cumulative Shares or Noncumulative Shares into Common Shares, or (iii) the exercise by the Corporation of its rights pursuant to Item XIV(d) of this Division A, Section 4(d) of Division B or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation, as amended, with respect to any other class or series of capital stock hereafter created or authorized.
(d) If, for any taxable year, the Corporation elects to designate as capital gain dividends (as defined in Section 857 of the Code) any portion (the Capital Gains Amount) of the dividends paid or made available for the year to holders of all classes of stock (the Total Dividends), then, to the extent permissible under the Code and to the extent it does not cause any dividends to fail to qualify for the dividends paid deduction under Section 561 of the Code, the portion of the Capital Gains Amount that shall be allocable to holders of the Class C Shares shall be the amount that the total dividends paid or made available to the holders of the Class C Shares for the year bears to the Total Dividends.
Section 3. Redemption.
(a) Subject to the express terms of each series, the Corporation:
(1) May, from time to time at the option of the Board of Directors, redeem all or any part of any redeemable series of Class C Shares at the time outstanding at the applicable redemption price for such series fixed in accordance with the provisions of Section 1 of this Item III; and
(2) Shall, from time to time, make such redemptions of each series of Class C Shares as may be required to fulfill the requirements of any sinking fund provided for shares of such series at the applicable sinking fund redemption price fixed in accordance with the provisions of Section 1 of this Item III; and shall in each case pay all accrued and unpaid dividends to the redemption date.
(b) (1) Notice of every such redemption shall be mailed, postage prepaid, to the holders of record of the Class C Shares to be redeemed at their respective addresses then appearing on the books of the Corporation, not less than 30 days nor more than 60 days prior to the date fixed for such redemption, or such other time prior thereto as the Board of Directors shall fix for any series pursuant to Section 1 of this Item III prior to the issuance thereof. At any time after notice as provided above has been deposited in the mail, the Corporation may deposit the aggregate redemption price of Class C Shares to be redeemed, together with accrued and unpaid dividends thereon to the redemption date, with any bank or trust company in Cleveland, Ohio, or New York, New York, having capital and surplus of not less than $100,000,000 named in such notice and direct that there be paid to the respective holders of the Class C Shares so to be redeemed amounts equal to the redemption price of the Class C Shares so to be redeemed, together with such accrued and unpaid dividends thereon, on surrender of the share certificate or certificates held by such holders; and upon
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the deposit of such notice in the mail and the making of such deposit of money with such bank or trust company, such holders shall cease to be shareholders with respect to such shares; and from and after the time such notice shall have been so deposited and such deposit of money shall have been so made, such holders shall have no rights or claim against the Corporation with respect to such shares, except only the right to receive such money from such bank or trust company without interest or to exercise before the redemption date any unexpired privileges of conversion. In the event less than all of the outstanding Class C Shares are to be redeemed, the Corporation shall select by lot the shares so to be redeemed in such manner as shall be prescribed by the Board of Directors.
(2) If the holders of Class C Shares which have been called for redemption shall not within six years after such deposit claim the amount deposited for the redemption thereof, any such bank or trust company shall, upon demand, pay over to the Corporation such unclaimed amounts and thereupon such bank or trust company and the Corporation shall be relieved of all responsibility in respect thereof and to such holders.
(c) Any Class C Shares which are (1) redeemed by the Corporation pursuant to the provisions of this Section, (2) purchased and delivered in satisfaction of any sinking fund requirements provided for shares of such series, (3) converted in accordance with the express terms thereof, or (4) otherwise acquired by the Corporation shall resume the status of authorized but unissued Class C Shares without serial designation.
(d) Except in connection with the exercise of the Corporations rights pursuant to Section (d) of Item XIV of this Division A, Section 4(d) of Division B or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation, as amended, with respect to any other class or series of capital stock hereafter created or authorized, the Corporation may not purchase or redeem (for sinking fund purposes or otherwise) less than all of the Class C Shares then outstanding except in accordance with a stock purchase offer made to all holders of record of Class C Shares, unless all dividends on all Class C Shares then outstanding for all previous and current dividend periods shall have been declared and paid or funds therefor set apart and all accrued sinking fund obligations applicable thereto shall have been complied with.
Section 4. Liquidation.
(a) (1) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of Class C Shares of any series shall be entitled to receive in full out of the assets of the Corporation, including its capital, before any amount shall be paid or distributed among the holders of the Common Shares or any other shares ranking junior to the Class C Shares, the amounts fixed with respect to shares of such series in accordance with Section 1 of this Item III, plus an amount equal to all dividends
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accrued and unpaid thereon to the date of payment of the amount due pursuant to such liquidation, dissolution or winding up of the affairs of the Corporation. In the event the net assets of the Corporation legally available therefor are insufficient to permit the payment upon all outstanding Cumulative Shares and Noncumulative Shares of the full preferential amount to which they are respectively entitled, then such net assets shall be distributed ratably upon all outstanding Cumulative Shares and Noncumulative Shares in proportion to the full preferential amount to which each such share is entitled.
(2) After payment to the holders of Class C Shares of the full preferential amounts as aforesaid, the holders of Class C Shares, as such, shall have no right or claim to any of the remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation into or with any other Corporation, the merger of any other Corporation into it, or the sale, lease or conveyance of all or substantially all the assets of the Corporation shall not be deemed to be a dissolution, liquidation or winding up for the purposes of this Section.
Section 5. Voting.
(a) The holders of Class C Shares shall have no voting rights, except as provided in this Section or required by law.
(b) (1) If, and so often as, the Corporation shall be in default in the payment of dividends on any series of Class C Shares at the time outstanding, whether or not earned or declared, for a number of dividend payment periods, whether consecutive or not, which in the aggregate contain at least 540 days, all holders of such Class C Shares, voting separately as a class, together with all Class A Shares, Class B Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares upon which like voting rights have been conferred and are exercisable under the circumstances described in Subsection 5(c), shall be entitled to elect, as herein provided, a total of two members of the Board of Directors of the Corporation; provided, however, that the holders of such Class C Shares shall not exercise such special class voting rights except at meetings of such shareholders for the election of directors at which the holders of not less than 50% of such Class C Shares are present in person or by proxy; and provided further that the special class voting rights provided for in this paragraph when the same shall have become vested shall remain so vested until all accrued and unpaid dividends on such Class C Shares then outstanding shall have been paid or declared and a sum sufficient for the payment thereof set aside for payment, whereupon the holders of such Class C Shares shall be divested of their special class voting rights in respect of subsequent elections of directors, subject to the revesting of such special class voting rights in the event above specified in this paragraph. All dividend payments made on the Class C Shares, at any time during which the Corporation is in default in the payment of dividends on such Class C Shares for any dividend period, shall be deemed to be made in respect of the earliest dividend period with respect to which the Corporation is in default.
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(2) In the event of default entitling holders of Class C Shares to elect two directors as specified in paragraph (1) of this Subsection, a special meeting of such holders for the purpose of electing such directors shall be called by the Secretary of the Corporation upon written request of, or may be called by, the holders of record of at least 10% of the Class C Shares upon which such default in the payment of dividends exists and notice thereof shall be given in the same manner as that required for the annual meeting of shareholders; provided, however, that the Corporation shall not be required to call such special meeting if the annual meeting of shareholders shall be called to be held within 90 days after the date of receipt of the foregoing written request from the holders of Class C Shares. At any meeting at which such holders of Class C Shares shall be entitled to elect directors, holders of 50% of such Class C Shares, present in person or by proxy, shall be sufficient to constitute a quorum, and the vote of the holders of a majority of such shares so present at any such meeting at which there shall be such a quorum shall be sufficient to elect the members of the Board of Directors which such holders of Class C Shares are entitled to elect as herein provided. Notwithstanding any provision of these Amended and Restated Articles of Incorporation, as amended, or the Code of Regulations of the Corporation or any action taken by the holders of any class of shares fixing the number of directors of the Corporation, the two directors who may be elected by such holders of Class C Shares pursuant to this Subsection shall serve in addition to any other directors then in office or proposed to be elected otherwise than pursuant to this Subsection. Nothing in this Subsection shall prevent any change otherwise permitted in the total number of or classifications of directors of the Corporation or require the resignation of any director elected otherwise than pursuant to this Subsection. Notwithstanding any classification of the other directors of the Corporation, the two directors elected by such holders of Class C Shares shall be elected annually for terms expiring at the next succeeding annual meeting of shareholders.
(3) Upon any divesting of the special class voting rights of the holders of the Class C Shares in respect of elections of directors as provided in this Subsection, the terms of office of all directors then in office elected by such holders shall terminate immediately thereupon. If the office of any director elected by such holders voting as a class becomes vacant by reason of death, resignation, removal from office or otherwise, the remaining director elected by such holders voting as a class may elect a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.
(c) If at any time when the holders of Class C Shares are entitled to elect directors pursuant to the foregoing provisions of this Section the holders of any Class A Shares, Class B Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares or Noncumulative Shares are entitled to elect directors pursuant hereto by reason
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of any default in the payment of dividends thereon, then the voting rights of the Cumulative Shares and the Noncumulative Shares then entitled to vote shall be combined (with each class of shares having a number of votes proportional to the aggregate liquidation preference of its outstanding shares). In such case, the holders of Class C Shares and of all such other shares then entitled so to vote, voting as a class, shall elect such directors. If the holders of any such other shares have elected such directors prior to the happening of the default or event permitting the holders of Class C Shares to elect directors, or prior to a written request for the holding of a special meeting being received by the Secretary of the Corporation as required above, then a new election shall be held with all such other shares and the Class C Shares voting together as a single class for such directors, resulting in the termination of the term of such previously elected directors upon the election of such new directors.
(d) The affirmative vote of the holders of at least two-thirds of the Class C Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose, shall be necessary to effect either of the following:
(1) Any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Amended and Restated Articles of Incorporation, as amended, or of the Code of Regulations of the Corporation which affects adversely and materially the preferences or voting or other rights of the holders of Class C Shares which are set forth in these Amended and Restated Articles of Incorporation, as amended; provided, however, neither the amendment of these Amended and Restated Articles of Incorporation, as amended, so as to authorize, create or change the authorized or outstanding number of Class C Shares or of any shares ranking on a parity with or junior to the Class C Shares nor the amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely and materially preferences or voting or other rights of the holders of Class C Shares; or
(2) The authorization, creation or increase in the authorized number of any shares, or any security convertible into shares, in either case ranking prior to such series of Class C Shares.
(e) In the event, and only to the extent, that (1) Class C Shares are issued in more than one series and (2) Ohio law permits the holders of a series of a class of capital stock to vote separately as a class, the affirmative vote of the holders of at least two-thirds of each series of Class C Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose of voting on such matters, shall be required for any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of these Amended and Restated Articles of Incorporation, as amended, or of the Code of Regulations of the Corporation which affects adversely and materially the preferences or voting or other rights
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of the holders of such series which are set forth in these Amended and Restated Articles of Incorporation, as amended; provided, however, neither the amendment of these Amended and Restated Articles of Incorporation, as amended, so as to authorize, create or change the authorized or outstanding number of Class C Shares or of any shares ranking on a parity with or junior to the Class C Shares nor the Amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely and materially the preferences or voting or other rights of the holders of such series.
Section 6. 8 3 / 8 % Class C Cumulative Redeemable Preferred Shares . Of the 750,000 authorized Class C Shares, 460,000 shares are designated as a series entitled 8 3 / 8 % Class C Cumulative Redeemable Preferred Shares (hereinafter called 8 3 / 8 % Class C Preferred Shares). The 8 3 / 8 % Class C Preferred Shares shall have the express terms set forth in this Division as being applicable to all Class C Shares as a class and, in addition, the following express terms applicable to all 8 3 / 8 % Class C Preferred Shares as a series of Class C Shares:
(a) The annual dividend rate of the 8 3 / 8 % Class C Preferred Shares shall be 8 3 / 8 % of the liquidation preference of $250.00 per share.
(b) Dividends on the 8 3 / 8 % Class C Preferred Shares shall be payable, if declared, quarterly on or about the fifteenth day of March, June, September, and December each year, the first quarterly dividend being payable, if declared, on September 15, 1998. The dividends payable for each full quarterly dividend period on each 8 3 / 8 % Class C Preferred Share shall be $5.234375.
Dividends for the initial dividend period on the 8 3 / 8 % Class C Preferred Shares, or for any period shorter or longer than a full dividend period on the 8 3 / 8 % Class C Preferred Shares, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The aggregate dividend payable quarterly to each holder of 8 3 / 8 % Class C Preferred Shares shall be rounded to the nearest one-hundredth of one cent with $.00005 being rounded upward. Each dividend shall be payable to the holders of record on such record date, no less than 10 nor more than 30 days preceding the payment date thereof, as shall be fixed from time to time by the Corporations Board of Directors.
(c) Dividends on 8 3 / 8 % Class C Preferred Shares shall be cumulative as follows:
(1) With respect to shares included in the initial issue of 8 3 / 8 % Class C Preferred Shares and shares issued any time thereafter up to and including the record date for the payment of the first dividend on the initial issue of 8 3 / 8 % Class C Preferred Shares, dividends shall be cumulative from the date of the initial issue of 8 3 / 8 % Class C Preferred Shares; and
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(2) With respect to shares issued any time after the aforesaid record date, dividends shall be cumulative from the dividend payment date next preceding the date of issue of such shares, except that if such shares are issued during the period commencing the day after the record date for the payment of a dividend on 8 3 / 8 % Class C Preferred Shares and ending on the payment date of that dividend, dividends with respect to such shares shall be cumulative from that dividend payment date.
(d) Except as required to preserve the Corporations status as a real estate investment trust under the Internal Revenue Code of 1986, as amended, the 8 3 / 8 % Class C Preferred Shares may not be redeemed prior to July 7, 2003. At any time or from time to time on and after July 7, 2003 the Corporation, at its option upon not less than thirty (30) nor more than sixty (60) days written notice, may redeem all or any part of the 8 3 / 8 % Class C Preferred Shares at a redemption price of $250.00 per share plus, in each case, an amount equal to all dividends accrued and unpaid thereon to the redemption date, without interest. The redemption price (other than the portion thereof consisting of accrued and unpaid dividends) is payable solely out of the sale proceeds of other capital shares of the Corporation, which may include any equity securities (including common shares and preferred shares), shares, interests, participation or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable for equity securities), or options to purchase any of the foregoing.
(e) The amount payable per 8 3 / 8 % Class C Preferred Share in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation shall be $250.00, plus an amount equal to all dividends accrued and unpaid thereon to the date of payment.
(f) All dividend payments made on the 8 3 / 8 % Class C Preferred Shares, at any time during which the Corporation is in default in the payment of dividends on such 8 3 / 8 % Class C Preferred Shares for any dividend period, shall, for the purposes of Section 5(b)(1) of this Division A-III, be deemed to be made in respect of the earliest dividend period with respect to which the Corporation is in default.
IV. The Class D Cumulative Preferred Shares. The Class D Shares shall have the following express terms:
Section 1. Series. The Class D Shares may be issued from time to time in one or more series. All Class D Shares shall be of equal rank and shall be identical, except in respect of the matters that may be fixed by the Board of Directors as hereinafter provided, and each share of a series shall be identical with all other shares of such series, except as to the dates from which dividends shall accrue and be cumulative. All Class D Shares shall rank on a parity with the Class A Shares, Class B Shares, Class C Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares and shall be identical to all Class A Shares,
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Class B Shares, Class C Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares except (1) in respect of the matters that may be fixed by the Board of Directors as provided in clauses (a) through (i), inclusive, of this Section 1 and (2) only dividends on Cumulative Shares shall be cumulative as set forth herein. Subject to the provisions of Sections 2 through 5, both inclusive, and Item XIII of this Division, which provisions shall apply to all Class D Shares, the Board of Directors hereby is authorized to cause such shares to be issued in one or more series and, with respect to each such series to determine and fix prior to the issuance thereof (and thereafter, to the extent provided in clause (b) of this Section), the following:
(a) The designation of the series, which may be by distinguishing number, letter or title;
(b) The authorized number of shares of the series, which number the Board of Directors may (except where otherwise provided in the creation of the series) increase or decrease from time to time before or after the issuance thereof (but not below the number of shares thereof then outstanding);
(c) The dividend rate or rates of the series, including the means by which such rates may be established;
(d) The date or dates from which dividends shall accrue and be cumulative and the dates on which and the period or periods for which dividends, if declared, shall be payable, including the means by which such dates and periods may be established;
(e) The redemption rights and price or prices, if any, for shares of the series;
(f) The terms and amount of the sinking fund, if any, for the purchase or redemption of shares of the series;
(g) The amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation;
(h) Whether the shares of the series shall be convertible into Common Shares or shares of any other class and, if so, the conversion rate or rates or price or prices, any adjustments thereof and all other terms and conditions upon which such conversion may be made; and
(i) Restrictions (in addition to those set forth in Subsection 5(d) or 5(e) of this Item IV) on the issuance of shares of the same series or of any other class or series.
The Board of Directors is authorized to adopt from time to time amendments to the Amended and Restated Articles of Incorporation, as amended, fixing, with respect to each such series, the matters described in clauses (a) through (i), inclusive, of this Section and is authorized to take such actions with respect thereto as may be required by law in order to effect such amendments.
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Section 2. Dividends.
(a) The holders of Class D Shares of each series, in preference to the holders of Common Shares and of any other class of shares ranking junior to the Class D Shares, shall be entitled to receive out of any funds legally available therefor, and when and as declared by the Board of Directors, dividends in cash at the rate or rates for such series fixed in accordance with the provisions of Section 1 above and no more, payable on the dates fixed for such series. Such dividends shall accrue and be cumulative, in the case of shares of each particular series, from and after the date or dates fixed with respect to such series. No dividends shall be paid upon or declared or set apart for any series of the Class D Shares for any dividend period unless at the same time (i) a like proportionate dividend for the dividend periods terminating on the same or any earlier date, ratably in proportion to the respective annual dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Class D Shares of all series then issued and outstanding and entitled to receive such dividend and (ii) the dividends payable for the dividend periods terminating on the same or any earlier date (but, with respect to Noncumulative Shares, only with respect to the then current dividend period), ratably in proportion to the respective dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Class A Shares, Class B Shares, Class C Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares then issued and outstanding and entitled to receive such dividends.
(b) So long as any Class D Shares shall be outstanding no dividend, except a dividend payable in Common Shares or other shares ranking junior to the Class D Shares, shall be paid or declared or any distribution be made, except as aforesaid, in respect of the Common Shares or any other shares ranking junior to the Class D Shares, nor shall any Common Shares or any other shares ranking junior to the Class D Shares be purchased, retired or otherwise acquired by the Corporation, except out of the proceeds of the sale of Common Shares or other shares of the Corporation ranking junior to the Class D Shares received by the Corporation subsequent to the date of first issuance of Class D Shares of any series, unless:
(1) All accrued and unpaid dividends on Cumulative Shares, including the full dividends for all current dividend periods, shall have been declared and paid or a sum sufficient for payment thereof set apart;
(2) All unpaid dividends on Noncumulative Shares for the then current dividend period shall have been declared and paid or a sum sufficient for payment therefor set apart; and
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(3) There shall be no arrearages with respect to the redemption of Cumulative Shares or Noncumulative Shares of any series from any sinking fund provided for shares of such series in accordance with the provisions of Section 1 of this Item IV.
(c) The foregoing restrictions on the payment of dividends or other distributions on, or on the purchase, redemption retirement or other acquisition of, Common Shares or any other shares ranking on a parity with or junior to the Class D Shares shall be inapplicable to (i) any payments in lieu of issuance of fractional shares thereof, whether upon any merger, conversion, stock dividend or otherwise, (ii) the conversion of Cumulative Shares or Noncumulative Shares into Common Shares, or (iii) the exercise by the Corporation of its rights pursuant to Item XIV(d) of this Division A, Section 4(d) of Division B or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation, as amended, with respect to any other class or series of capital stock hereafter created or authorized.
(d) If, for any taxable year, the Corporation elects to designate as capital gain dividends (as defined in Section 857 of the Code) any portion (the Capital Gains Amount) of the dividends paid or made available for the year to holders of all classes of stock (the Total Dividends), then, to the extent permissible under the Code and to the extent it does not cause any dividends to fail to qualify for the dividends paid deduction under Section 561 of the Code, the portion of the Capital Gains Amount that shall be allocable to holders of the Class D Shares shall be the amount that the total dividends paid or made available to the holders of the Class D Shares for the year bears to the Total Dividends.
Section 3. Redemption.
(a) Subject to the express terms of each series, the Corporation:
(1) May, from time to time at the option of the Board of Directors, redeem all or any part of any redeemable series of Class D Shares at the time outstanding at the applicable redemption price for such series fixed in accordance with the provisions of Section 1 of this Item IV; and
(2) Shall, from time to time, make such redemptions of each series of Class D Shares as may be required to fulfill the requirements of any sinking fund provided for shares of such series at the applicable sinking fund redemption price fixed in accordance with the provisions of Section 1 of this Item IV; and shall in each case pay all accrued and unpaid dividends to the redemption date.
(b) (1) Notice of every such redemption shall be mailed, postage prepaid, to the holders of record of the Class D Shares to be redeemed at their respective addresses then appearing on the books of the Corporation, not less than 30 days nor more than 60 days prior to the date fixed for such redemption, or such other time prior thereto as the Board of Directors shall fix for any series
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pursuant to Section 1 of this Item IV prior to the issuance thereof. At any time after notice as provided above has been deposited in the mail, the Corporation may deposit the aggregate redemption price of Class D Shares to be redeemed, together with accrued and unpaid dividends thereon to the redemption date, with any bank or trust company in Cleveland, Ohio, or New York, New York, having capital and surplus of not less than $100,000,000 named in such notice and direct that there be paid to the respective holders of the Class D Shares so to be redeemed amounts equal to the redemption price of the Class D Shares so to be redeemed, together with such accrued and unpaid dividends thereon, on surrender of the share certificate or certificates held by such holders; and upon the deposit of such notice in the mail and the making of such deposit of money with such bank or trust company, such holders shall cease to be shareholders with respect to such shares; and from and after the time such notice shall have been so deposited and such deposit of money shall have been so made, such holders shall have no rights or claim against the Corporation with respect to such shares, except only the right to receive such money from such bank or trust company without interest or to exercise before the redemption date any unexpired privileges of conversion. In the event less than all of the outstanding Class D Shares are to be redeemed, the Corporation shall select by lot the shares so to be redeemed in such manner as shall be prescribed by the Board of Directors.
(2) If the holders of Class D Shares which have been called for redemption shall not within six years after such deposit claim the amount deposited for the redemption thereof, any such bank or trust company shall, upon demand, pay over to the Corporation such unclaimed amounts and thereupon such bank or trust company and the Corporation shall be relieved of all responsibility in respect thereof and to such holders.
(c) Any Class D Shares which are (1) redeemed by the Corporation pursuant to the provisions of this Section, (2) purchased and delivered in satisfaction of any sinking fund requirements provided for shares of such series, (3) converted in accordance with the express terms thereof, or (4) otherwise acquired by the Corporation shall resume the status of authorized but unissued Class D Shares without serial designation.
(d) Except in connection with the exercise of the Corporations rights pursuant to Section (d) of Item XIV of this Division A, Section 4(d) of Division B or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation, as amended, with respect to any other class or series of capital stock hereafter created or authorized, the Corporation may not purchase or redeem (for sinking fund purposes or otherwise) less than all of the Class D Shares then outstanding except in accordance with a stock purchase offer made to all holders of record of Class D Shares, unless all dividends on all Class D Shares then outstanding for all previous and current dividend periods shall have been declared and paid or funds therefor set apart and all accrued sinking fund obligations applicable thereto shall have been complied with.
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Section 4. Liquidation.
(a) (1) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of Class D Shares of any series shall be entitled to receive in full out of the assets of the Corporation, including its capital, before any amount shall be paid or distributed among the holders of the Common Shares or any other shares ranking junior to the Class D Shares, the amounts fixed with respect to shares of such series in accordance with Section 1 of this Item IV, plus an amount equal to all dividends accrued and unpaid thereon to the date of payment of the amount due pursuant to such liquidation, dissolution or winding up of the affairs of the Corporation. In the event the net assets of the Corporation legally available therefor are insufficient to permit the payment upon all outstanding Cumulative Shares and Noncumulative Shares of the full preferential amount to which they are respectively entitled, then such net assets shall be distributed ratably upon all outstanding Cumulative Shares and Noncumulative Shares in proportion to the full preferential amount to which each such share is entitled.
(2) After payment to the holders of Class D Shares of the full preferential amounts as aforesaid, the holders of Class D Shares, as such, shall have no right or claim to any of the remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation into or with any other Corporation, the merger of any other Corporation into it, or the sale, lease or conveyance of all or substantially all the assets of the Corporation shall not be deemed to be a dissolution, liquidation or winding up for the purposes of this Section.
Section 5. Voting.
(a) The holders of Class D Shares shall have no voting rights, except as provided in this Section or required by law.
(b) (1) If, and so often as, the Corporation shall be in default in the payment of dividends on any series of Class D Shares at the time outstanding, whether or not earned or declared, for a number of dividend payment periods, whether consecutive or not, which in the aggregate contain at least 540 days, all holders of such Class D Shares, voting separately as a class, together with all Class A Shares, Class B Shares, Class C Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares upon which like voting rights have been conferred and are exercisable under the circumstances described in Subsection 5(c), shall be entitled to elect, as herein provided, a total of two members of the Board of Directors of the Corporation; provided, however, that the holders of such Class D Shares shall not exercise such special class voting rights except at meetings of such shareholders for the election of directors at which the holders of not less than 50% of such Class D Shares are present in person or by proxy; and provided
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further that the special class voting rights provided for in this paragraph when the same shall have become vested shall remain so vested until all accrued and unpaid dividends on such Class D Shares then outstanding shall have been paid or declared and a sum sufficient for the payment thereof set aside for payment, whereupon the holders of such Class D Shares shall be divested of their special class voting rights in respect of subsequent elections of directors, subject to the revesting of such special class voting rights in the event above specified in this paragraph. All dividend payments made on the Class D Shares, at any time during which the Corporation is in default in the payment of dividends on such Class D Shares for any dividend period, shall be deemed to be made in respect of the earliest dividend period with respect to which the Corporation is in default.
(2) In the event of default entitling holders of Class D Shares to elect two directors as specified in paragraph (1) of this Subsection, a special meeting of such holders for the purpose of electing such directors shall be called by the Secretary of the Corporation upon written request of, or may be called by, the holders of record of at least 10% of the Class D Shares upon which such default in the payment of dividends exists and notice thereof shall be given in the same manner as that required for the annual meeting of shareholders; provided, however, that the Corporation shall not be required to call such special meeting if the annual meeting of shareholders shall be called to be held within 90 days after the date of receipt of the foregoing written request from the holders of Class D Shares. At any meeting at which such holders of Class D Shares shall be entitled to elect directors, holders of 50% of such Class D Shares, present in person or by proxy, shall be sufficient to constitute a quorum, and the vote of the holders of a majority of such shares so present at any such meeting at which there shall be such a quorum shall be sufficient to elect the members of the Board of Directors which such holders of Class D Shares are entitled to elect as herein provided. Notwithstanding any provision of these Amended and Restated Articles of Incorporation, as amended, or the Code of Regulations of the Corporation or any action taken by the holders of any class of shares fixing the number of directors of the Corporation, the two directors who may be elected by such holders of Class D Shares pursuant to this Subsection shall serve in addition to any other directors then in office or proposed to be elected otherwise than pursuant to this Subsection. Nothing in this Subsection shall prevent any change otherwise permitted in the total number of or classifications of directors of the Corporation or require the resignation of any director elected otherwise than pursuant to this Subsection. Notwithstanding any classification of the other directors of the Corporation, the two directors elected by such holders of Class D Shares shall be elected annually for terms expiring at the next succeeding annual meeting of shareholders.
(3) Upon any divesting of the special class voting rights of the holders of the Class D Shares in respect of elections of directors as provided in this Subsection, the terms of office of all directors then in office elected by such holders shall terminate immediately thereupon. If the office of any director elected by such holders voting as a class becomes vacant by reason of death, resignation, removal from office or otherwise, the remaining director elected by such holders voting as a class may elect a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.
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(c) If at any time when the holders of Class D Shares are entitled to elect directors pursuant to the foregoing provisions of this Section the holders of any Class A Shares, Class B Shares, Class C Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares or Noncumulative Shares are entitled to elect directors pursuant hereto by reason of any default in the payment of dividends thereon, then the voting rights of the Cumulative Shares and the Noncumulative Shares then entitled to vote shall be combined (with each class of shares having a number of votes proportional to the aggregate liquidation preference of its outstanding shares). In such case, the holders of Class D Shares and of all such other shares then entitled so to vote, voting as a class, shall elect such directors. If the holders of any such other shares have elected such directors prior to the happening of the default or event permitting the holders of Class D Shares to elect directors, or prior to a written request for the holding of a special meeting being received by the Secretary of the Corporation as required above, then a new election shall be held with all such other shares and the Class D Shares voting together as a single class for such directors, resulting in the termination of the term of such previously elected directors upon the election of such new directors.
(d) The affirmative vote of the holders of at least two-thirds of the Class D Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose, shall be necessary to effect either of the following:
(1) Any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Amended and Restated Articles of Incorporation, as amended, or of the Code of Regulations of the Corporation which affects adversely and materially the preferences or voting or other rights of the holders of Class D Shares which are set forth in these Amended and Restated Articles of Incorporation, as amended; provided, however, neither the amendment of these Amended and Restated Articles of Incorporation, as amended, so as to authorize, create or change the authorized or outstanding number of Class D Shares or of any shares ranking on a parity with or junior to the Class D Shares nor the amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely and materially preferences or voting or other rights of the holders of Class D Shares; or
(2) The authorization, creation or increase in the authorized number of any shares, or any security convertible into shares, in either case ranking prior to such series of Class D Shares.
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(e) In the event, and only to the extent, that (1) Class D Shares are issued in more than one series and (2) Ohio law permits the holders of a series of a class of capital stock to vote separately as a class, the affirmative vote of the holders of at least two-thirds of each series of Class D Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose of voting on such matters, shall be required for any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of these Amended and Restated Articles of Incorporation, as amended, or of the Code of Regulations of the Corporation which affects adversely and materially the preferences or voting or other rights of the holders of such series which are set forth in these Amended and Restated Articles of Incorporation, as amended; provided, however, neither the amendment of these Amended and Restated Articles of Incorporation, as amended, so as to authorize, create or change the authorized or outstanding number of Class D Shares or of any shares ranking on a parity with or junior to the Class D Shares nor the Amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely and materially the preferences or voting or other rights of the holders of such series.
Section 6. 8.68% Class D Cumulative Redeemable Preferred Shares . Of the 750,000 authorized Class D Shares, 230,000 shares are designated as a series entitled 8.68% Class D Cumulative Redeemable Preferred Shares (hereinafter called 8.68% Class D Preferred Shares). The 8.68% Class D Preferred Shares shall have the express terms set forth in this Division as being applicable to all Class D Shares as a class and, in addition, the following express terms applicable to all 8.68% Class D Preferred Shares as a series of Class D Shares:
(a) The annual dividend rate of the 8.68% Class D Preferred Shares shall be 8.68% of the liquidation preference of $250.00 per share.
(b) Dividends on the 8.68% Class D Preferred Shares shall be payable, if declared, quarterly on or about the fifteenth day of March, June, September, and December each year, the first quarterly dividend being payable, if declared, on December 15, 1998. The dividends payable for each full quarterly dividend period on each 8.68% Class D Preferred Share shall be $5.425.
Dividends for the initial dividend period on the 8.68% Class D Preferred Shares, or for any period shorter or longer than a full dividend period on the 8.68% Class D Preferred Shares, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The aggregate dividend payable quarterly to each holder of 8.68% Class D Preferred Shares shall be rounded to the nearest one-hundredth of one cent with $.00005 being rounded upward. Each dividend shall be payable to the holders of record on such record date, no less than 10 nor more than 30 days preceding the payment date thereof, as shall be fixed from time to time by the Corporations Board of Directors.
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(c) Dividends on 8.68% Class D Preferred Shares shall be cumulative as follows:
(1) With respect to shares included in the initial issue of 8.68% Class D Preferred Shares and shares issued any time thereafter up to and including the record date for the payment of the first dividend on the initial issue of 8.68% Class D Preferred Shares, dividends shall be cumulative from the date of the initial issue of 8.68% Class D Preferred Shares; and
(2) With respect to shares issued any time after the aforesaid record date, dividends shall be cumulative from the dividend payment date next preceding the date of issue of such shares, except that if such shares are issued during the period commencing the day after the record date for the payment of a dividend on 8.68 % Class D Preferred Shares and ending on the payment date of that dividend, dividends with respect to such shares shall be cumulative from that dividend payment date.
(d) Except as required to preserve the Corporations status as a real estate investment trust under the Internal Revenue Code of 1986, as amended, the 8.68% Class D Preferred Shares may not be redeemed prior to August 20, 2003. At any time or from time to time on and after August 20, 2003 the Corporation, at its option upon not less than thirty (30) nor more than sixty (60) days written notice, may redeem all or any part of the 8.68% Class D Preferred Shares at a redemption price of $250.00 per share plus, in each case, an amount equal to all dividends accrued and unpaid thereon to the redemption date, without interest. The redemption price (other than the portion thereof consisting of accrued and unpaid dividends) is payable solely out of the sale proceeds of other capital shares of the Corporation, which may include any equity securities (including common shares and preferred shares), shares, interests, participation or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable for equity securities), or options to purchase any of the foregoing.
(e) The amount payable per 8.68% Class D Preferred Share in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation shall be $250.00, plus an amount equal to all dividends accrued and unpaid thereon to the date of payment.
(f) All dividend payments made on the 8.68% Class D Preferred Shares, at any time during which the Corporation is in default in the payment of dividends on such 8.68% Class D Preferred Shares for any dividend period, shall, for the purposes of Section 5(b)(1) of this Division A-IV, be deemed to be made in respect of the earliest dividend period with respect to which the Corporation is in default.
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V. The Class E Cumulative Preferred Shares. The Class E Shares shall have the following express terms:
Section 1. Series. The Class E Shares may be issued from time to time in one or more series. All Class E Shares shall be of equal rank and shall be identical, except in respect of the matters that may be fixed by the Board of Directors as hereinafter provided, and each share of a series shall be identical with all other shares of such series, except as to the dates from which dividends shall accrue and be cumulative. All Class E Shares shall rank on a parity with the Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares and shall be identical to all Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares except (1) in respect of the matters that may be fixed by the Board of Directors as provided in clauses (a) through (i), inclusive, of this Section 1 and (2) only dividends on Cumulative Shares shall be cumulative as set forth herein. Subject to the provisions of Sections 2 through 5, both inclusive, and Item XIII of this Division, which provisions shall apply to all Class E Shares, the Board of Directors hereby is authorized to cause such shares to be issued in one or more series and, with respect to each such series to determine and fix prior to the issuance thereof (and thereafter, to the extent provided in clause (b) of this Section), the following:
(a) The designation of the series, which may be by distinguishing number, letter or title;
(b) The authorized number of shares of the series, which number the Board of Directors may (except where otherwise provided in the creation of the series) increase or decrease from time to time before or after the issuance thereof (but not below the number of shares thereof then outstanding);
(c) The dividend rate or rates of the series, including the means by which such rates may be established;
(d) The date or dates from which dividends shall accrue and be cumulative and the dates on which and the period or periods for which dividends, if declared, shall be payable, including the means by which such dates and periods may be established;
(e) The redemption rights and price or prices, if any, for shares of the series;
(f) The terms and amount of the sinking fund, if any, for the purchase or redemption of shares of the series;
(g) The amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation;
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(h) Whether the shares of the series shall be convertible into Common Shares or shares of any other class and, if so, the conversion rate or rates or price or prices, any adjustments thereof and all other terms and conditions upon which such conversion may be made; and
(i) Restrictions (in addition to those set forth in Subsection 5(d) or 5(e) of this Item V) on the issuance of shares of the same series or of any other class or series.
The Board of Directors is authorized to adopt from time to time amendments to the Amended and Restated Articles of Incorporation, as amended, fixing, with respect to each such series, the matters described in clauses (a) through (i), inclusive, of this Section and is authorized to take such actions with respect thereto as may be required by law in order to effect such amendments.
Section 2. Dividends.
(a) The holders of Class E Shares of each series, in preference to the holders of Common Shares and of any other class of shares ranking junior to the Class E Shares, shall be entitled to receive out of any funds legally available therefor, and when and as declared by the Board of Directors, dividends in cash at the rate or rates for such series fixed in accordance with the provisions of Section 1 above and no more, payable on the dates fixed for such series. Such dividends shall accrue and be cumulative, in the case of shares of each particular series, from and after the date or dates fixed with respect to such series. No dividends shall be paid upon or declared or set apart for any series of the Class E Shares for any dividend period unless at the same time (i) a like proportionate dividend for the dividend periods terminating on the same or any earlier date, ratably in proportion to the respective annual dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Class E Shares of all series then issued and outstanding and entitled to receive such dividend and (ii) the dividends payable for the dividend periods terminating on the same or any earlier date (but, with respect to Noncumulative Shares, only with respect to the then current dividend period), ratably in proportion to the respective dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares then issued and outstanding and entitled to receive such dividends.
(b) So long as any Class E Shares shall be outstanding no dividend, except a dividend payable in Common Shares or other shares ranking junior to the Class E Shares, shall be paid or declared or any distribution be made, except as aforesaid, in respect of the Common Shares or any other shares ranking junior to the Class E Shares, nor shall any Common Shares or any other shares ranking junior to the Class E Shares be purchased, retired or otherwise acquired by the Corporation, except out of the proceeds of the sale of Common Shares or other shares of the Corporation ranking junior to the Class E Shares received by the Corporation subsequent to the date of first issuance of Class E Shares of any series, unless:
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(1) All accrued and unpaid dividends on Cumulative Shares, including the full dividends for all current dividend periods, shall have been declared and paid or a sum sufficient for payment thereof set apart;
(2) All unpaid dividends on Noncumulative Shares for the then current dividend period shall have been declared and paid or a sum sufficient for payment therefor set apart; and
(3) There shall be no arrearages with respect to the redemption of Cumulative Shares or Noncumulative Shares of any series from any sinking fund provided for shares of such series in accordance with the provisions of Section 1 of this Item V.
(c) The foregoing restrictions on the payment of dividends or other distributions on, or on the purchase, redemption retirement or other acquisition of, Common Shares or any other shares ranking on a parity with or junior to the Class E Shares shall be inapplicable to (i) any payments in lieu of issuance of fractional shares thereof, whether upon any merger, conversion, stock dividend or otherwise, (ii) the conversion of Cumulative Shares or Noncumulative Shares into Common Shares, or (iii) the exercise by the Corporation of its rights pursuant to Item XIV(d) of this Division A, Section 4(d) of Division B or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation, as amended, with respect to any other class or series of capital stock hereafter created or authorized.
(d) If, for any taxable year, the Corporation elects to designate as capital gain dividends (as defined in Section 857 of the Code) any portion (the Capital Gains Amount) of the dividends paid or made available for the year to holders of all classes of stock (the Total Dividends), then, to the extent permissible under the Code and to the extent it does not cause any dividends to fail to qualify for the dividends paid deduction under Section 561 of the Code, the portion of the Capital Gains Amount that shall be allocable to holders of the Class E Shares shall be the amount that the total dividends paid or made available to the holders of the Class E Shares for the year bears to the Total Dividends.
Section 3. Redemption.
(a) Subject to the express terms of each series, the Corporation:
(1) May, from time to time at the option of the Board of Directors, redeem all or any part of any redeemable series of Class E Shares at the time outstanding at the applicable redemption price for such series fixed in accordance with the provisions of Section 1 of this Item V; and
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(2) Shall, from time to time, make such redemptions of each series of Class E Shares as may be required to fulfill the requirements of any sinking fund provided for shares of such series at the applicable sinking fund redemption price fixed in accordance with the provisions of Section 1 of this Item V; and shall in each case pay all accrued and unpaid dividends to the redemption date.
(b) (1) Notice of every such redemption shall be mailed, postage prepaid, to the holders of record of the Class E Shares to be redeemed at their respective addresses then appearing on the books of the Corporation, not less than 30 days nor more than 60 days prior to the date fixed for such redemption, or such other time prior thereto as the Board of Directors shall fix for any series pursuant to Section 1 of this Item V prior to the issuance thereof. At any time after notice as provided above has been deposited in the mail, the Corporation may deposit the aggregate redemption price of Class E Shares to be redeemed, together with accrued and unpaid dividends thereon to the redemption date, with any bank or trust company in Cleveland, Ohio, or New York, New York, having capital and surplus of not less than $100,000,000 named in such notice and direct that there be paid to the respective holders of the Class E Shares so to be redeemed amounts equal to the redemption price of the Class E Shares so to be redeemed, together with such accrued and unpaid dividends thereon, on surrender of the share certificate or certificates held by such holders; and upon the deposit of such notice in the mail and the making of such deposit of money with such bank or trust company, such holders shall cease to be shareholders with respect to such shares; and from and after the time such notice shall have been so deposited and such deposit of money shall have been so made, such holders shall have no rights or claim against the Corporation with respect to such shares, except only the right to receive such money from such bank or trust company without interest or to exercise before the redemption date any unexpired privileges of conversion. In the event less than all of the outstanding Class E Shares are to be redeemed, the Corporation shall select by lot the shares so to be redeemed in such manner as shall be prescribed by the Board of Directors.
(2) If the holders of Class E Shares which have been called for redemption shall not within six years after such deposit claim the amount deposited for the redemption thereof, any such bank or trust company shall, upon demand, pay over to the Corporation such unclaimed amounts and thereupon such bank or trust company and the Corporation shall be relieved of all responsibility in respect thereof and to such holders.
(c) Any Class E Shares which are (1) redeemed by the Corporation pursuant to the provisions of this Section, (2) purchased and delivered in satisfaction of any sinking fund requirements provided for shares of such series, (3) converted in accordance with the express terms thereof, or (4) otherwise acquired by the Corporation shall resume the status of authorized but unissued Class E Shares without serial designation.
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(d) Except in connection with the exercise of the Corporations rights pursuant to Section (d) of Item XIV of this Division A, Section 4(d) of Division B or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation, as amended, with respect to any other class or series of capital stock hereafter created or authorized, the Corporation may not purchase or redeem (for sinking fund purposes or otherwise) less than all of the Class E Shares then outstanding except in accordance with a stock purchase offer made to all holders of record of Class E Shares, unless all dividends on all Class E Shares then outstanding for all previous and current dividend periods shall have been declared and paid or funds therefor set apart and all accrued sinking fund obligations applicable thereto shall have been complied with.
Section 4. Liquidation.
(a) (1) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of Class E Shares of any series shall be entitled to receive in full out of the assets of the Corporation, including its capital, before any amount shall be paid or distributed among the holders of the Common Shares or any other shares ranking junior to the Class E Shares, the amounts fixed with respect to shares of such series in accordance with Section 1 of this Item V, plus an amount equal to all dividends accrued and unpaid thereon to the date of payment of the amount due pursuant to such liquidation, dissolution or winding up of the affairs of the Corporation. In the event the net assets of the Corporation legally available therefor are insufficient to permit the payment upon all outstanding Cumulative Shares and Noncumulative Shares of the full preferential amount to which they are respectively entitled, then such net assets shall be distributed ratably upon all outstanding Cumulative Shares and Noncumulative Shares in proportion to the full preferential amount to which each such share is entitled.
(2) After payment to the holders of Class E Shares of the full preferential amounts as aforesaid, the holders of Class E Shares, as such, shall have no right or claim to any of the remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation into or with any other Corporation, the merger of any other Corporation into it, or the sale, lease or conveyance of all or substantially all the assets of the Corporation shall not be deemed to be a dissolution, liquidation or winding up for the purposes of this Section.
Section 5. Voting.
(a) The holders of Class E Shares shall have no voting rights, except as provided in this Section or required by law.
(b) (1) If, and so often as, the Corporation shall be in default in the payment of dividends on any series of Class E Shares at the time outstanding,
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whether or not earned or declared, for a number of dividend payment periods, whether consecutive or not, which in the aggregate contain at least 540 days, all holders of such Class E Shares, voting separately as a class, together with all Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares upon which like voting rights have been conferred and are exercisable under the circumstances described in Subsection 5(c), shall be entitled to elect, as herein provided, a total of two members of the Board of Directors of the Corporation; provided, however, that the holders of such Class E Shares shall not exercise such special class voting rights except at meetings of such shareholders for the election of directors at which the holders of not less than 50% of such Class E Shares are present in person or by proxy; and provided further that the special class voting rights provided for in this paragraph when the same shall have become vested shall remain so vested until all accrued and unpaid dividends on such Class E Shares then outstanding shall have been paid or declared and a sum sufficient for the payment thereof set aside for payment, whereupon the holders of such Class E Shares shall be divested of their special class voting rights in respect of subsequent elections of directors, subject to the revesting of such special class voting rights in the event above specified in this paragraph. All dividend payments made on the Class E Shares, at any time during which the Corporation is in default in the payment of dividends on such Class E Shares for any dividend period, shall be deemed to be made in respect of the earliest dividend period with respect to which the Corporation is in default.
(2) In the event of default entitling holders of Class E Shares to elect two directors as specified in paragraph (1) of this Subsection, a special meeting of such holders for the purpose of electing such directors shall be called by the Secretary of the Corporation upon written request of, or may be called by, the holders of record of at least 10% of the Class E Shares upon which such default in the payment of dividends exists and notice thereof shall be given in the same manner as that required for the annual meeting of shareholders; provided, however, that the Corporation shall not be required to call such special meeting if the annual meeting of shareholders shall be called to be held within 90 days after the date of receipt of the foregoing written request from the holders of Class E Shares. At any meeting at which such holders of Class E Shares shall be entitled to elect directors, holders of 50% of such Class E Shares, present in person or by proxy, shall be sufficient to constitute a quorum, and the vote of the holders of a majority of such shares so present at any such meeting at which there shall be such a quorum shall be sufficient to elect the members of the Board of Directors which such holders of Class E Shares are entitled to elect as herein provided. Notwithstanding any provision of these Amended and Restated Articles of Incorporation, as amended, or the Code of Regulations of the Corporation or any action taken by the holders of any class of shares fixing the number of directors of the Corporation, the two directors who may be elected by such holders of Class E Shares pursuant to this Subsection shall serve in addition to any other directors then in office or proposed to be elected otherwise than pursuant to this Subsection. Nothing in this Subsection shall prevent any change otherwise
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permitted in the total number of or classifications of directors of the Corporation or require the resignation of any director elected otherwise than pursuant to this Subsection. Notwithstanding any classification of the other directors of the Corporation, the two directors elected by such holders of Class E Shares shall be elected annually for terms expiring at the next succeeding annual meeting of shareholders.
(3) Upon any divesting of the special class voting rights of the holders of the Class E Shares in respect of elections of directors as provided in this Subsection, the terms of office of all directors then in office elected by such holders shall terminate immediately thereupon. If the office of any director elected by such holders voting as a class becomes vacant by reason of death, resignation, removal from office or otherwise, the remaining director elected by such holders voting as a class may elect a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.
(c) If at any time when the holders of Class E Shares are entitled to elect directors pursuant to the foregoing provisions of this Section the holders of any Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares or Noncumulative Shares are entitled to elect directors pursuant hereto by reason of any default in the payment of dividends thereon, then the voting rights of the Cumulative Shares and the Noncumulative Shares then entitled to vote shall be combined (with each class of shares having a number of votes proportional to the aggregate liquidation preference of its outstanding shares). In such case, the holders of Class E Shares and of all such other shares then entitled so to vote, voting as a class, shall elect such directors. If the holders of any such other shares have elected such directors prior to the happening of the default or event permitting the holders of Class E Shares to elect directors, or prior to a written request for the holding of a special meeting being received by the Secretary of the Corporation as required above, then a new election shall be held with all such other shares and the Class E Shares voting together as a single class for such directors, resulting in the termination of the term of such previously elected directors upon the election of such new directors.
(d) The affirmative vote of the holders of at least two-thirds of the Class E Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose, shall be necessary to effect either of the following:
(1) Any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Amended and Restated Articles of Incorporation, as amended, or of the Code of Regulations of the Corporation which affects adversely and materially the preferences or voting or other rights of the holders of Class E Shares which are set forth in these Amended and Restated Articles of Incorporation, as amended; provided, however, neither the amendment of these Amended and Restated Articles of Incorporation, as
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amended, so as to authorize, create or change the authorized or outstanding number of Class E Shares or of any shares ranking on a parity with or junior to the Class E Shares nor the amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely and materially preferences or voting or other rights of the holders of Class E Shares; or
(2) The authorization, creation or increase in the authorized number of any shares, or any security convertible into shares, in either case ranking prior to such series of Class E Shares.
(e) In the event, and only to the extent, that (1) Class E Shares are issued in more than one series and (2) Ohio law permits the holders of a series of a class of capital stock to vote separately as a class, the affirmative vote of the holders of at least two-thirds of each series of Class E Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose of voting on such matters, shall be required for any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of these Amended and Restated Articles of Incorporation, as amended, or of the Code of Regulations of the Corporation which affects adversely and materially the preferences or voting or other rights of the holders of such series which are set forth in these Amended and Restated Articles of Incorporation, as amended; provided, however, neither the amendment of these Amended and Restated Articles of Incorporation, as amended, so as to authorize, create or change the authorized or outstanding number of Class E Shares or of any shares ranking on a parity with or junior to the Class E Shares nor the Amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely and materially the preferences or voting or other rights of the holders of such series.
Section 6. Class E Series I Cumulative Preferred Shares .
(a) DESIGNATION AND AMOUNT. Of the 750,000 authorized Class E Cumulative Preferred Shares, without par value, 750,000 are designated as a series designated as Class E Series I Cumulative Preferred Shares (the Series I Preferred Shares). The Series I Preferred Shares have the express terms set forth in this Division as being applicable to all Preferred Shares as a class and, in addition, the following express terms applicable to all Series I Preferred Shares as a series of Preferred Shares. The number of Series I Preferred Shares may be increased or decreased by resolution of the Board of Directors and by the filing of a certificate of amendment pursuant to the provisions of the General Corporation Law of the State of Ohio stating that such increase or reduction has been so authorized; however, no decrease shall reduce the number of Series I Preferred Shares to a number less than that of the Series I Preferred Shares then outstanding plus the number of Series I Preferred Shares issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Company.
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(b) DIVIDENDS AND DISTRIBUTIONS.
(1) (i) Subject to the rights of the holders of any series of preferred shares (or any similar shares) ranking prior to the Series I Preferred Shares with respect to dividends, the holders of Series I Preferred Shares, in preference to the holders of Common Shares and of any other junior shares, will be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the fifteenth day of March, June, September and December in each year (each such date being referred to herein as a Quarterly Dividend Payment Date), commencing on the first Quarterly Dividend Payment Date after the first issuance of a Series I Preferred Share or fraction thereof, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $10.00 or (b) subject to the provisions for adjustment hereinafter set forth, 10,000 times the aggregate per share amount of all cash dividends, and 10,000 times the aggregate per share amount (payable in kind) of all noncash dividends or other distributions other than a dividend payable in Common Shares or a subdivision of the outstanding Common Shares (by reclassification or otherwise), declared on the Common Shares after the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, after the first issuance of any Series I Preferred Share or fraction thereof. The multiple of cash and noncash dividends declared on the Common Shares to which holders of the Series I Preferred Shares are entitled, which is 10,000 initially but which will be adjusted from time to time as hereinafter provided, is hereinafter referred to as the Dividend Multiple. If the Company at any time after May 26, 1999 (the Rights Declaration Date): (i) declares or pays any dividend on the Common Shares payable in Common Shares, or (ii) effects a subdivision or combination or consolidation of the outstanding Common Shares (by reclassification or otherwise than by payment of a dividend in Common Shares) into a greater or lesser number of Common Shares, then in each such case the Dividend Multiple thereafter applicable to the determination of the amount of dividends that holders of Series I Preferred Shares are entitled to receive will be the Dividend Multiple applicable immediately prior to that event multiplied by a fraction, the numerator of which is the number of Common Shares outstanding immediately after that event and the denominator of which is the number of Common Shares that were outstanding immediately prior to that event.
(ii) Notwithstanding anything else contained in this paragraph (1), the Company shall, out of funds legally available for that purpose, declare a dividend or distribution on the Series I Preferred Shares as provided in this paragraph (1) immediately after it declares a dividend or distribution on the Common Shares (other than a dividend payable in Common Shares); but if no dividend or distribution has been declared on the Common Shares
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during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per share on the Series I Preferred Shares shall nevertheless accrue on such subsequent Quarterly Dividend Payment Date.
(2) Dividends will begin to accrue and be cumulative on outstanding Series I Preferred Shares from the Quarterly Dividend Payment Date next preceding the date of issue of such Series I Preferred Shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares will begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of Series I Preferred Shares entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends will begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends will not bear interest. Dividends paid on the Series I Preferred Shares in an amount less than the total amount of such dividends at the time accrued and payable on such shares will be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix in accordance with applicable law a record date for the determination of holders of Series I Preferred Shares entitled to receive payment of a dividend or distribution declared thereon, which record date will be not more than such number of days prior to the date fixed for the payment thereof as may be allowed by applicable law.
(c) REACQUIRED SHARES. Any Series I Preferred Shares purchased or otherwise acquired by the Company in any manner whatsoever will be retired and canceled promptly after the acquisition thereof. All such shares will upon their cancellation become authorized but unissued preferred shares and may be reissued as part of a new series of Preferred Shares to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein.
(d) LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Company, no distribution may be made (x) to the holders of shares ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series I Preferred Shares unless, prior thereto, the holders of Series I Preferred Shares shall have received an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, plus an amount equal to the greater of (1) $10,000.00 per share or (2) an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 10,000 times the aggregate amount to be distributed per share to holders of Common Shares, or (y) to the holders of shares ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series I Preferred Shares, except distributions made ratably on the Series I Preferred
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Shares and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. If the Company at any time after the Rights Declaration Date (i) declares or pays any dividend on Common Shares payable in Common Shares, or (ii) effects a subdivision or combination or consolidation of the outstanding Common Shares (by reclassification or otherwise than by payment of a dividend in Common Shares) into a greater or lesser number of Common Shares, then in each such case the aggregate amount per share to which holders of Series I Preferred Shares were entitled immediately prior to such event under clause (x) of the preceding sentence will be adjusted by multiplying such amount by a fraction, the numerator of which is the number of Common Shares outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event.
Neither the consolidation of nor merging of the Company with or into any other corporation or corporations, nor the sale or other transfer of all or substantially all of the assets of the Company, will be considered to be a liquidation, dissolution or winding up of the Company within the meaning of this paragraph (d).
(e) CONSOLIDATION, MERGER, ETC. If the Company shall enter into any consolidation, merger, combination or other transaction in which the Common Shares are exchanged for or changed into other shares, stock or securities, cash or any other property, then in any such case the Series I Preferred Shares will at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 10,000 times the aggregate amount of shares, stock, securities, or other property, as the case may be, into which or for which each Common Share is changed or exchanged, plus accrued and unpaid dividends, if any, payable with respect to the Series I Preferred Shares. If the Company at any time after the Rights Declaration Date (i) declares or pays any dividend on Common Shares payable in Common Shares, or (ii) effects a subdivision or combination or consolidation of the outstanding Common Shares (by reclassification or otherwise than by payment of a dividend in Common Shares) into a greater or lesser number of Common Shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of Series I Preferred Shares will be adjusted by multiplying such amount by a fraction, the numerator of which is the number of Common Shares outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event.
(f) REDEMPTION. The Series I Preferred Shares are not redeemable, but the foregoing does not limit the ability of the Company to purchase or otherwise deal in the Series I Preferred Shares to the extent otherwise permitted hereby and by law.
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(g) AMENDMENT. The Amended and Restated Articles of Incorporation of the Company, as amended, may not be amended in any manner that would materially alter or change the powers, preferences or special rights of the Series I Preferred Shares so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding Series I Preferred Shares, voting separately as a class.
(h) FRACTIONAL SHARES. Series I Preferred Shares may be issued in whole shares or in any fraction of a share that is one ten-thousandth (1/10,000th) of a share or any integral multiple of such fraction, which will entitle the holder, in proportion to such holders fractional shares, to exercise voting rights, receive dividends, participate in distributions and have the benefit of all other rights of holders of Series I Preferred Shares. In lieu of fractional shares, the Company may elect to make a cash payment as provided in that certain Rights Agreement dated as of May 26, 1999, between the Company and National City Bank, a national banking association, as rights agent, for fractions of a share smaller than one ten-thousandth (1/10,000th) of a share or any integral multiple thereof.
VI. The Class F Cumulative Preferred Shares. The Class F Shares shall have the following express terms:
Section 1. Series. The Class F Shares may be issued from time to time in one or more series. All Class F Shares shall be of equal rank and shall be identical, except in respect of the matters that may be fixed by the Board of Directors as hereinafter provided, and each share of a series shall be identical with all other shares of such series, except as to the dates from which dividends shall accrue and be cumulative. All Class F Shares shall rank on a parity with the Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares and shall be identical to all Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares except (1) in respect of the matters that may be fixed by the Board of Directors as provided in clauses (a) through (i), inclusive, of this Section 1 and (2) only dividends on Cumulative Shares shall be cumulative as set forth herein. Subject to the provisions of Sections 2 through 5, both inclusive, and Item XIII of this Division, which provisions shall apply to all Class F Shares, the Board of Directors hereby is authorized to cause such shares to be issued in one or more series and, with respect to each such series to determine and fix prior to the issuance thereof (and thereafter, to the extent provided in clause (b) of this Section), the following:
(a) The designation of the series, which may be by distinguishing number, letter or title;
(b) The authorized number of shares of the series, which number the Board of Directors may (except where otherwise provided in the creation of the series) increase or decrease from time to time before or after the issuance thereof (but not below the number of shares thereof then outstanding);
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(c) The dividend rate or rates of the series, including the means by which such rates may be established;
(d) The date or dates from which dividends shall accrue and be cumulative and the dates on which and the period or periods for which dividends, if declared, shall be payable, including the means by which such dates and periods may be established;
(e) The redemption rights and price or prices, if any, for shares of the series;
(f) The terms and amount of the sinking fund, if any, for the purchase or redemption of shares of the series;
(g) The amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation;
(h) Whether the shares of the series shall be convertible into Common Shares or shares of any other class and, if so, the conversion rate or rates or price or prices, any adjustments thereof and all other terms and conditions upon which such conversion may be made; and
(i) Restrictions (in addition to those set forth in Subsection 5(d) or 5(e) of this Item VI) on the issuance of shares of the same series or of any other class or series.
The Board of Directors is authorized to adopt from time to time amendments to the Amended and Restated Articles of Incorporation, as amended, fixing, with respect to each such series, the matters described in clauses (a) through (i), inclusive, of this Section and is authorized to take such actions with respect thereto as may be required by law in order to effect such amendments.
Section 2. Dividends.
(a) The holders of Class F Shares of each series, in preference to the holders of Common Shares and of any other class of shares ranking junior to the Class F Shares, shall be entitled to receive out of any funds legally available therefor, and when and as declared by the Board of Directors, dividends in cash at the rate or rates for such series fixed in accordance with the provisions of Section 1 above and no more, payable on the dates fixed for such series. Such dividends shall accrue and be cumulative, in the case of shares of each particular series, from and after the date or dates fixed with respect to such series. No dividends shall be paid upon or declared or set apart for any series of the Class F Shares for any dividend period unless at the same time (i) a like proportionate dividend for the dividend periods terminating on the same or any earlier date, ratably in proportion to the respective annual dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Class F Shares of all series
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then issued and outstanding and entitled to receive such dividend and (ii) the dividends payable for the dividend periods terminating on the same or any earlier date (but, with respect to Noncumulative Shares, only with respect to the then current dividend period), ratably in proportion to the respective dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares then issued and outstanding and entitled to receive such dividends.
(b) So long as any Class F Shares shall be outstanding no dividend, except a dividend payable in Common Shares or other shares ranking junior to the Class F Shares, shall be paid or declared or any distribution be made, except as aforesaid, in respect of the Common Shares or any other shares ranking junior to the Class F Shares, nor shall any Common Shares or any other shares ranking junior to the Class F Shares be purchased, retired or otherwise acquired by the Corporation, except out of the proceeds of the sale of Common Shares or other shares of the Corporation ranking junior to the Class F Shares received by the Corporation subsequent to the date of first issuance of Class F Shares of any series, unless:
(1) All accrued and unpaid dividends on Cumulative Shares, including the full dividends for all current dividend periods, shall have been declared and paid or a sum sufficient for payment thereof set apart;
(2) All unpaid dividends on Noncumulative Shares for the then current dividend period shall have been declared and paid or a sum sufficient for payment therefor set apart; and
(3) There shall be no arrearages with respect to the redemption of Cumulative Shares or Noncumulative Shares of any series from any sinking fund provided for shares of such series in accordance with the provisions of Section 1 of this Item VI.
(c) The foregoing restrictions on the payment of dividends or other distributions on, or on the purchase, redemption retirement or other acquisition of, Common Shares or any other shares ranking on a parity with or junior to the Class F Shares shall be inapplicable to (i) any payments in lieu of issuance of fractional shares thereof, whether upon any merger, conversion, stock dividend or otherwise, (ii) the conversion of Cumulative Shares or Noncumulative Shares into Common Shares, or (iii) the exercise by the Corporation of its rights pursuant to Item XIV(d) of this Division A, Section 4(d) of Division B or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation, as amended, with respect to any other class or series of capital stock hereafter created or authorized.
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(d) If, for any taxable year, the Corporation elects to designate as capital gain dividends (as defined in Section 857 of the Code) any portion (the Capital Gains Amount) of the dividends paid or made available for the year to holders of all classes of stock (the Total Dividends), then, to the extent permissible under the Code and to the extent it does not cause any dividends to fail to qualify for the dividends paid deduction under Section 561 of the Code, the portion of the Capital Gains Amount that shall be allocable to holders of the Class F Shares shall be the amount that the total dividends paid or made available to the holders of the Class F Shares for the year bears to the Total Dividends.
Section 3. Redemption.
(a) Subject to the express terms of each series, the Corporation:
(1) May, from time to time at the option of the Board of Directors, redeem all or any part of any redeemable series of Class F Shares at the time outstanding at the applicable redemption price for such series fixed in accordance with the provisions of Section 1 of this Item VI; and
(2) Shall, from time to time, make such redemptions of each series of Class F Shares as may be required to fulfill the requirements of any sinking fund provided for shares of such series at the applicable sinking fund redemption price fixed in accordance with the provisions of Section 1 of this Item VI; and shall in each case pay all accrued and unpaid dividends to the redemption date.
(b) (1) Notice of every such redemption shall be mailed, postage prepaid, to the holders of record of the Class F Shares to be redeemed at their respective addresses then appearing on the books of the Corporation, not less than 30 days nor more than 60 days prior to the date fixed for such redemption, or such other time prior thereto as the Board of Directors shall fix for any series pursuant to Section 1 of this Item VI prior to the issuance thereof. At any time after notice as provided above has been deposited in the mail, the Corporation may deposit the aggregate redemption price of Class F Shares to be redeemed, together with accrued and unpaid dividends thereon to the redemption date, with any bank or trust company in Cleveland, Ohio, or New York, New York, having capital and surplus of not less than $100,000,000 named in such notice and direct that there be paid to the respective holders of the Class F Shares so to be redeemed amounts equal to the redemption price of the Class F Shares so to be redeemed, together with such accrued and unpaid dividends thereon, on surrender of the share certificate or certificates held by such holders; and upon the deposit of such notice in the mail and the making of such deposit of money with such bank or trust company, such holders shall cease to be shareholders with respect to such shares; and from and after the time such notice shall have been so deposited and such deposit of money shall have been so made, such holders shall have no rights or claim against the Corporation with respect to such shares, except only the right to receive such money from such bank or trust company without interest or to exercise before the redemption date any unexpired privileges of conversion. In the event less than all of the outstanding Class F Shares are to be redeemed, the Corporation shall select by lot the shares so to be redeemed in such manner as shall be prescribed by the Board of Directors.
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(2) If the holders of Class F Shares which have been called for redemption shall not within six years after such deposit claim the amount deposited for the redemption thereof, any such bank or trust company shall, upon demand, pay over to the Corporation such unclaimed amounts and thereupon such bank or trust company and the Corporation shall be relieved of all responsibility in respect thereof and to such holders.
(c) Any Class F Shares which are (1) redeemed by the Corporation pursuant to the provisions of this Section, (2) purchased and delivered in satisfaction of any sinking fund requirements provided for shares of such series, (3) converted in accordance with the express terms thereof, or (4) otherwise acquired by the Corporation shall resume the status of authorized but unissued Class F Shares without serial designation.
(d) Except in connection with the exercise of the Corporations rights pursuant to Section (d) of Item XIV of this Division A, Section 4(d) of Division B or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation, as amended, with respect to any other class or series of capital stock hereafter created or authorized, the Corporation may not purchase or redeem (for sinking fund purposes or otherwise) less than all of the Class F Shares then outstanding except in accordance with a stock purchase offer made to all holders of record of Class F Shares, unless all dividends on all Class F Shares then outstanding for all previous and current dividend periods shall have been declared and paid or funds therefor set apart and all accrued sinking fund obligations applicable thereto shall have been complied with.
Section 4. Liquidation.
(a) (1) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of Class F Shares of any series shall be entitled to receive in full out of the assets of the Corporation, including its capital, before any amount shall be paid or distributed among the holders of the Common Shares or any other shares ranking junior to the Class F Shares, the amounts fixed with respect to shares of such series in accordance with Section 1 of this Item VI, plus an amount equal to all dividends accrued and unpaid thereon to the date of payment of the amount due pursuant to such liquidation, dissolution or winding up of the affairs of the Corporation. In the event the net assets of the Corporation legally available therefor are insufficient to permit the payment upon all outstanding Cumulative Shares and Noncumulative Shares of the full preferential amount to which they are respectively entitled, then such net assets shall be distributed ratably upon all outstanding Cumulative Shares and Noncumulative Shares in proportion to the full preferential amount to which each such share is entitled.
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(2) After payment to the holders of Class F Shares of the full preferential amounts as aforesaid, the holders of Class F Shares, as such, shall have no right or claim to any of the remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation into or with any other Corporation, the merger of any other Corporation into it, or the sale, lease or conveyance of all or substantially all the assets of the Corporation shall not be deemed to be a dissolution, liquidation or winding up for the purposes of this Section.
Section 5. Voting.
(a) The holders of Class F Shares shall have no voting rights, except as provided in this Section or required by law.
(b) (1) If, and so often as, the Corporation shall be in default in the payment of dividends on any series of Class F Shares at the time outstanding, whether or not earned or declared, for a number of dividend payment periods, whether consecutive or not, which in the aggregate contain at least 540 days, all holders of such Class F Shares, voting separately as a class, together with all Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares upon which like voting rights have been conferred and are exercisable under the circumstances described in Subsection 5(c), shall be entitled to elect, as herein provided, a total of two members of the Board of Directors of the Corporation; provided, however, that the holders of such Class F Shares shall not exercise such special class voting rights except at meetings of such shareholders for the election of directors at which the holders of not less than 50% of such Class F Shares are present in person or by proxy; and provided further that the special class voting rights provided for in this paragraph when the same shall have become vested shall remain so vested until all accrued and unpaid dividends on such Class F Shares then outstanding shall have been paid or declared and a sum sufficient for the payment thereof set aside for payment, whereupon the holders of such Class F Shares shall be divested of their special class voting rights in respect of subsequent elections of directors, subject to the revesting of such special class voting rights in the event above specified in this paragraph. All dividend payments made on the Class F Shares, at any time during which the Corporation is in default in the payment of dividends on such Class F Shares for any dividend period, shall be deemed to be made in respect of the earliest dividend period with respect to which the Corporation is in default.
(2) In the event of default entitling holders of Class F Shares to elect two directors as specified in paragraph (1) of this Subsection, a special meeting of such holders for the purpose of electing such directors shall be called by the
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Secretary of the Corporation upon written request of, or may be called by, the holders of record of at least 10% of the Class F Shares upon which such default in the payment of dividends exists and notice thereof shall be given in the same manner as that required for the annual meeting of shareholders; provided, however, that the Corporation shall not be required to call such special meeting if the annual meeting of shareholders shall be called to be held within 90 days after the date of receipt of the foregoing written request from the holders of Class F Shares. At any meeting at which such holders of Class F Shares shall be entitled to elect directors, holders of 50% of such Class F Shares, present in person or by proxy, shall be sufficient to constitute a quorum, and the vote of the holders of a majority of such shares so present at any such meeting at which there shall be such a quorum shall be sufficient to elect the members of the Board of Directors which such holders of Class F Shares are entitled to elect as herein provided. Notwithstanding any provision of these Amended and Restated Articles of Incorporation, as amended, or the Code of Regulations of the Corporation or any action taken by the holders of any class of shares fixing the number of directors of the Corporation, the two directors who may be elected by such holders of Class F Shares pursuant to this Subsection shall serve in addition to any other directors then in office or proposed to be elected otherwise than pursuant to this Subsection. Nothing in this Subsection shall prevent any change otherwise permitted in the total number of or classifications of directors of the Corporation or require the resignation of any director elected otherwise than pursuant to this Subsection. Notwithstanding any classification of the other directors of the Corporation, the two directors elected by such holders of Class F Shares shall be elected annually for terms expiring at the next succeeding annual meeting of shareholders.
(3) Upon any divesting of the special class voting rights of the holders of the Class F Shares in respect of elections of directors as provided in this Subsection, the terms of office of all directors then in office elected by such holders shall terminate immediately thereupon. If the office of any director elected by such holders voting as a class becomes vacant by reason of death, resignation, removal from office or otherwise, the remaining director elected by such holders voting as a class may elect a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.
(c) If at any time when the holders of Class F Shares are entitled to elect directors pursuant to the foregoing provisions of this Section the holders of any Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares or Noncumulative Shares are entitled to elect directors pursuant hereto by reason of any default in the payment of dividends thereon, then the voting rights of the Cumulative Shares and the Noncumulative Shares then entitled to vote shall be combined (with each class of shares having a number of votes proportional to the aggregate liquidation preference of its outstanding shares). In such case, the holders of Class F Shares and of all such other shares then entitled so to vote, voting as a class, shall elect such directors. If the holders of any such other
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shares have elected such directors prior to the happening of the default or event permitting the holders of Class F Shares to elect directors, or prior to a written request for the holding of a special meeting being received by the Secretary of the Corporation as required above, then a new election shall be held with all such other shares and the Class F Shares voting together as a single class for such directors, resulting in the termination of the term of such previously elected directors upon the election of such new directors.
(d) The affirmative vote of the holders of at least two-thirds of the Class F Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose, shall be necessary to effect either of the following:
(1) Any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Amended and Restated Articles of Incorporation, as amended, or of the Code of Regulations of the Corporation which affects adversely and materially the preferences or voting or other rights of the holders of Class F Shares which are set forth in these Amended and Restated Articles of Incorporation, as amended; provided, however, neither the amendment of these Amended and Restated Articles of Incorporation, as amended, so as to authorize, create or change the authorized or outstanding number of Class F Shares or of any shares ranking on a parity with or junior to the Class F Shares nor the amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely and materially preferences or voting or other rights of the holders of Class F Shares; or
(2) The authorization, creation or increase in the authorized number of any shares, or any security convertible into shares, in either case ranking prior to such series of Class F Shares.
(e) In the event, and only to the extent, that (1) Class F Shares are issued in more than one series and (2) Ohio law permits the holders of a series of a class of capital stock to vote separately as a class, the affirmative vote of the holders of at least two-thirds of each series of Class F Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose of voting on such matters, shall be required for any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of these Amended and Restated Articles of Incorporation, as amended, or of the Code of Regulations of the Corporation which affects adversely and materially the preferences or voting or other rights of the holders of such series which are set forth in these Amended and Restated Articles of Incorporation, as amended; provided, however, neither the amendment of these Amended and Restated Articles of Incorporation, as amended, so as to authorize, create or change the authorized or outstanding number of Class F Shares or of any shares ranking on a parity with or junior to the Class F Shares nor the Amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely and materially the preferences or voting or other rights of the holders of such series.
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Section 6. 8.60% Class F Cumulative Redeemable Preferred Shares. Of the 750,000 authorized Class F Shares, 690,000 shares are designated as a series entitled 8.60% Class F Cumulative Redeemable Preferred Shares (hereinafter called 8.60% Class F Preferred Shares). The 8.60% Class F Preferred Shares shall have the express terms set forth in this Division as being applicable to all Class F Shares as a class and, in addition, the following express terms applicable to all 8.60% Class F Preferred Shares as a series of Class F Shares:
(a) The annual dividend rate of the 8.60% Class F Preferred Shares shall be 8.60% of the liquidation preference of $250.00 per share.
(b) Dividends on the 8.60% Class F Preferred Shares shall be payable, if declared, quarterly on or about the fifteenth day of March, June, September, and December each year, the first quarterly dividend being payable, if declared, on June 15, 2002. The dividends payable for each full quarterly dividend period on each 8.60% Class F Preferred Shares shall be $0.5375. Dividends for the initial dividend period on the 8.60% Class F Preferred Shares, or for any period shorter or longer than a full dividend period on the 8.60% Class F Preferred Shares, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The aggregate dividend payable quarterly to each holder of 8.60% Class F Preferred Shares shall be rounded to the nearest one one-hundredth of one cent with $.00005 being rounded upward. Each dividend shall be payable to the holders of record on such record date, no less than 10 nor more than 30 days preceding the payment date thereof, as shall be fixed from time to time by the Corporations Board of Directors.
(c) Dividends on 8.60% Class F Preferred Shares shall be cumulative as follows:
(1) With respect to shares included in the initial issue of 8.60% Class F Preferred Shares and shares issued any time thereafter up to and including the record date for the payment of the first dividend on the initial issue of 8.60% Class F Preferred Shares, dividends shall be cumulative from the date of the initial issue of 8.60% Class F Preferred Shares; and
(2) With respect to shares issued any time after the aforesaid record date, dividends shall be cumulative from the dividend payment date next preceding the date of issue of such shares, except that if such shares are issued during the period commencing the day after the record date for the payment of a dividend on 8.60% Class F Preferred Shares and ending on the payment date of that dividend, dividends with respect to such shares shall be cumulative from that dividend payment date.
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(d) Except as required to preserve the Corporations status as a real estate investment trust under the Internal Revenue Code of 1986, as amended, the 8.60% Class F Preferred Shares may not be redeemed prior to March 27, 2007. At any time or from time to time on and after March 27, 2007 the Corporation, at its option upon not less than thirty (30) nor more than sixty (60) days written notice, may redeem all or any part of the 8.60% Class F Preferred Shares at a redemption price of $250.00 per share plus, in each case, an amount equal to all dividends accrued and unpaid thereon to the redemption date, without interest. The redemption price (other than the portion thereof consisting of accrued and unpaid dividends) is payable solely out of the sale proceeds of other capital shares of the Corporation, which may include any equity securities (including common shares and preferred shares), shares, interests, participation or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable for equity securities), or options to purchase any of the foregoing.
(e) The amount payable per 8.60% Class F Preferred Share in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation shall be $250.00, plus an amount equal to all dividends accrued and unpaid thereon to the date of payment.
(f) All dividend payments made on the 8.60% Class F Preferred Shares, at any time during which the Corporation is in default in the payment of dividends on such 8.60% Class F Preferred Shares for any dividend period, shall, for the purposes of Section 5(b)(1) of this Division A-VI, be deemed to be made in respect of the earliest dividend period with respect to which the Corporation is in default.
VII. The Class G Cumulative Preferred Shares. The Class G Shares shall have the following express terms:
Section 1. Series. The Class G Shares may be issued from time to time in one or more series. All Class G Shares shall be of equal rank and shall be identical, except in respect of the matters that may be fixed by the Board of Directors as hereinafter provided, and each share of a series shall be identical with all other shares of such series, except as to the dates from which dividends shall accrue and be cumulative. All Class G Shares shall rank on a parity with the Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares and shall be identical to all Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares except (1) in respect of the matters that may be fixed by the Board of Directors as provided in clauses (a) through (i), inclusive, of this Section 1 and (2) only dividends on Cumulative Shares shall be cumulative as set forth herein. Subject to the provisions of Sections 2 through 5, both inclusive, and Item XIII of this Division, which provisions shall apply to all Class G Shares, the Board of Directors hereby is authorized to cause such shares to be issued in one or more series and, with respect to each such series to determine and fix prior to the issuance thereof (and thereafter, to the extent provided in clause (b) of this Section) the following:
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(a) The designation of the series, which may be by distinguishing number, letter or title;
(b) The authorized number of shares of the series, which number the Board of Directors may (except where otherwise provided in the creation of the series) increase or decrease from time to time before or after the issuance thereof (but not below the number of shares thereof then outstanding);
(c) The dividend rate or rates of the series, including the means by which such rates may be established;
(d) The date or dates from which dividends shall accrue and be cumulative and the dates on which and the period or periods for which dividends, if declared, shall be payable, including the means by which such dates and periods may be established;
(e) The redemption rights and price or prices, if any, for shares of the series;
(f) The terms and amount of the sinking fund, if any, for the purchase or redemption of shares of the series;
(g) The amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation;
(h) Whether the shares of the series shall be convertible into Common Shares or shares of any other class and, if so, the conversion rate or rates or price or prices, any adjustments thereof and all other terms and conditions upon which such conversion may be made; and
(i) Restrictions (in addition to those set forth in Subsection 5(d) or 5(e) of this Item VII) on the issuance of shares of the same series or of any other class or series.
The Board of Directors is authorized to adopt from time to time amendments to the Amended and Restated Articles of Incorporation, as amended, fixing, with respect to each such series, the matters described in clauses (a) through (i), inclusive, of this Section and is authorized to take such actions with respect thereto as may be required by law in order to effect such amendments.
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Section 2. Dividends.
(a) The holders of Class G Shares of each series, in preference to the holders of Common Shares and of any other class of shares ranking junior to the Class G Shares, shall be entitled to receive out of any funds legally available therefor, and when and as declared by the Board of Directors, dividends in cash at the rate or rates for such series fixed in accordance with the provisions of Section 1 above and no more, payable on the dates fixed for such series. Such dividends shall accrue and be cumulative, in the case of shares of each particular series, from and after the date or dates fixed with respect to such series. No dividends shall be paid upon or declared or set apart for any series of the Class G Shares for any dividend period unless at the same time (i) a like proportionate dividend for the dividend periods terminating on the same or any earlier date, ratably in proportion to the respective annual dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Class G Shares of all series then issued and outstanding and entitled to receive such dividend and (ii) the dividends payable for the dividend periods terminating on the same or any earlier date (but, with respect to Noncumulative Shares, only with respect to the then current dividend period), ratably in proportion to the respective dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares then issued and outstanding and entitled to receive such dividends.
(b) So long as any Class G Shares shall be outstanding no dividend, except a dividend payable in Common Shares or other shares ranking junior to the Class G Shares, shall be paid or declared or any distribution be made, except as aforesaid, in respect of the Common Shares or any other shares ranking junior to the Class G Shares, nor shall any Common Shares or any other shares ranking junior to the Class G Shares be purchased, retired or otherwise acquired by the Corporation, except out of the proceeds of the sale of Common Shares or other shares of the Corporation ranking junior to the Class G Shares received by the Corporation subsequent to the date of first issuance of Class G Shares of any series, unless:
(1) All accrued and unpaid dividends on Cumulative Shares, including the full dividends for all current dividend periods, shall have been declared and paid or a sum sufficient for payment thereof set apart;
(2) All unpaid dividends on Noncumulative Shares for the then current dividend period shall have been declared and paid or a sum sufficient for payment therefor set apart; and
(3) There shall be no arrearages with respect to the redemption of Cumulative Shares or Noncumulative Shares of any series from any sinking fund provided for shares of such series in accordance with the provisions of Section 1 of this Item VII.
(c) The foregoing restrictions on the payment of dividends or other distributions on, or on the purchase, redemption retirement or other acquisition
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of, Common Shares or any other shares ranking on a parity with or junior to the Class G Shares shall be inapplicable to (i) any payments in lieu of issuance of fractional shares thereof, whether upon any merger, conversion, stock dividend or otherwise, (ii) the conversion of Cumulative Shares or Noncumulative Shares into Common Shares, or (iii) the exercise by the Corporation of its rights pursuant to Item XIV(d) of this Division A, Section 4(d) of Division B or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation, as amended, with respect to any other class or series of capital stock hereafter created or authorized.
(d) If, for any taxable year, the Corporation elects to designate as capital gain dividends (as defined in Section 857 of the Code) any portion (the Capital Gains Amount) of the dividends paid or made available for the year to holders of all classes of stock (the Total Dividends), then, to the extent permissible under the Code and to the extent it does not cause any dividends to fail to qualify for the dividends paid deduction under Section 561 of the Code, the portion of the Capital Gains Amount that shall be allocable to holders of the Class G Shares shall be the amount that the total dividends paid or made available to the holders of the Class G Shares for the year bears to the Total Dividends.
Section 3. Redemption.
(a) Subject to the express terms of each series, the Corporation:
(1) May, from time to time at the option of the Board of Directors, redeem all or any part of any redeemable series of Class G Shares at the time outstanding at the applicable redemption price for such series fixed in accordance with the provisions of Section 1 of this Item VII; and
(2) Shall, from time to time, make such redemptions of each series of Class G Shares as may be required to fulfill the requirements of any sinking fund provided for shares of such series at the applicable sinking fund redemption price fixed in accordance with the provisions of Section 1 of this Item VII; and shall in each case pay all accrued and unpaid dividends to the redemption date.
(b) (1) Notice of every such redemption shall be mailed, postage prepaid, to the holders of record of the Class G Shares to be redeemed at their respective addresses then appearing on the books of the Corporation, not less than 30 days nor more than 60 days prior to the date fixed for such redemption, or such other time prior thereto as the Board of Directors shall fix for any series pursuant to Section 1 of this Item VII prior to the issuance thereof. At any time after notice as provided above has been deposited in the mail, the Corporation may deposit the aggregate redemption price of Class G Shares to be redeemed, together with accrued and unpaid dividends thereon to the redemption date, with any bank or trust company in Cleveland, Ohio, or New York, New York, having capital and surplus of not less than $100,000,000 named in such notice and direct that there be paid to the respective holders of the Class G Shares so to be
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redeemed amounts equal to the redemption price of the Class G Shares so to be redeemed, together with such accrued and unpaid dividends thereon, on surrender of the share certificate or certificates held by such holders; and upon the deposit of such notice in the mail and the making of such deposit of money with such bank or trust company, such holders shall cease to be shareholders with respect to such shares; and from and after the time such notice shall have been so deposited and such deposit of money shall have been so made, such holders shall have no rights or claim against the Corporation with respect to such shares, except only the right to receive such money from such bank or trust company without interest or to exercise before the redemption date any unexpired privileges of conversion. In the event less than all of the outstanding Class G Shares are to be redeemed, the Corporation shall select by lot the shares so to be redeemed in such manner as shall be prescribed by the Board of Directors.
(2) If the holders of Class G Shares which have been called for redemption shall not within six years after such deposit claim the amount deposited for the redemption thereof, any such bank or trust company shall, upon demand, pay over to the Corporation such unclaimed amounts and thereupon such bank or trust company and the Corporation shall be relieved of all responsibility in respect thereof and to such holders.
(c) Any Class G Shares which are (1) redeemed by the Corporation pursuant to the provisions of this Section, (2) purchased and delivered in satisfaction of any sinking fund requirements provided for shares of such series, (3) converted in accordance with the express terms thereof, or (4) otherwise acquired by the Corporation shall resume the status of authorized but unissued Class G Shares without serial designation.
(d) Except in connection with the exercise of the Corporations rights pursuant to Section (d) of Item XIV of this Division A, Section 4(d) of Division B or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation, as amended, with respect to any other class or series of capital stock hereafter created or authorized, the Corporation may not purchase or redeem (for sinking fund purposes or otherwise) less than all of the Class G Shares then outstanding except in accordance with a stock purchase offer made to all holders of record of Class G Shares, unless all dividends on all Class G Shares then outstanding for all previous and current dividend periods shall have been declared and paid or funds therefor set apart and all accrued sinking fund obligations applicable thereto shall have been complied with.
Section 4. Liquidation.
(a) (1) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of Class G Shares of any series shall be entitled to receive in full out of the assets of the Corporation, including its capital, before any amount shall be paid or distributed
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among the holders of the Common Shares or any other shares ranking junior to the Class G Shares, the amounts fixed with respect to shares of such series in accordance with Section 1 of this Item VII, plus an amount equal to all dividends accrued and unpaid thereon to the date of payment of the amount due pursuant to such liquidation, dissolution or winding up of the affairs of the Corporation. In the event the net assets of the Corporation legally available therefor are insufficient to permit the payment upon all outstanding Cumulative Shares and Noncumulative Shares of the full preferential amount to which they are respectively entitled, then such net assets shall be distributed ratably upon all outstanding Cumulative Shares and Noncumulative Shares in proportion to the full preferential amount to which each such share is entitled.
(2) After payment to the holders of Class G Shares of the full preferential amounts as aforesaid, the holders of Class G Shares, as such, shall have no right or claim to any of the remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation into or with any other Corporation, the merger of any other Corporation into it, or the sale, lease or conveyance of all or substantially all the assets of the Corporation shall not be deemed to be a dissolution, liquidation or winding up for the purposes of this Section.
Section 5. Voting.
(a) The holders of Class G Shares shall have no voting rights, except as provided in this Section or required by law.
(b) (1) If, and so often as, the Corporation shall be in default in the payment of dividends on any series of Class G Shares at the time outstanding, whether or not earned or declared, for a number of dividend payment periods, whether consecutive or not, which in the aggregate contain at least 540 days, all holders of such Class G Shares, voting separately as a class, together with all Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares upon which like voting rights have been conferred and are exercisable under the circumstances described in Subsection 5(c), shall be entitled to elect, as herein provided, a total of two members of the Board of Directors of the Corporation; provided, however, that the holders of such Class G Shares shall not exercise such special class voting rights except at meetings of such shareholders for the election of directors at which the holders of not less than 50% of such Class G Shares are present in person or by proxy; and provided further that the special class voting rights provided for in this paragraph when the same shall have become vested shall remain so vested until all accrued and unpaid dividends on such Class G Shares then outstanding shall have been paid or declared and a sum sufficient for the payment thereof set aside for payment, whereupon the holders of such Class G Shares shall be divested of their special class voting rights in respect of subsequent elections of directors, subject to the
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revesting of such special class voting rights in the event above specified in this paragraph. All dividend payments made on the Class G Shares, at any time during which the Corporation is in default in the payment of dividends on such Class G Shares for any dividend period, shall be deemed to be made in respect of the earliest dividend period with respect to which the Corporation is in default.
(2) In the event of default entitling holders of Class G Shares to elect two directors as specified in paragraph (1) of this Subsection, a special meeting of such holders for the purpose of electing such directors shall be called by the Secretary of the Corporation upon written request of, or may be called by, the holders of record of at least 10% of the Class G Shares upon which such default in the payment of dividends exists and notice thereof shall be given in the same manner as that required for the annual meeting of shareholders; provided, however, that the Corporation shall not be required to call such special meeting if the annual meeting of shareholders shall be called to be held within 90 days after the date of receipt of the foregoing written request from the holders of Class G Shares. At any meeting at which such holders of Class G Shares shall be entitled to elect directors, holders of 50% of such Class G Shares, present in person or by proxy, shall be sufficient to constitute a quorum, and the vote of the holders of a majority of such shares so present at any such meeting at which there shall be such a quorum shall be sufficient to elect the members of the Board of Directors which such holders of Class G Shares are entitled to elect as herein provided. Notwithstanding any provision of these Amended and Restated Articles of Incorporation, as amended, or the Code of Regulations of the Corporation or any action taken by the holders of any class of shares fixing the number of directors of the Corporation, the two directors who may be elected by such holders of Class G Shares pursuant to this Subsection shall serve in addition to any other directors then in office or proposed to be elected otherwise than pursuant to this Subsection. Nothing in this Subsection shall prevent any change otherwise permitted in the total number of or classifications of directors of the Corporation or require the resignation of any director elected otherwise than pursuant to this Subsection. Notwithstanding any classification of the other directors of the Corporation, the two directors elected by such holders of Class G Shares shall be elected annually for terms expiring at the next succeeding annual meeting of shareholders.
(3) Upon any divesting of the special class voting rights of the holders of the Class G Shares in respect of elections of directors as provided in this Subsection, the terms of office of all directors then in office elected by such holders shall terminate immediately thereupon. If the office of any director elected by such holders voting as a class becomes vacant by reason of death, resignation, removal from office or otherwise, the remaining director elected by such holders voting as a class may elect a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.
(c) If at any time when the holders of Class G Shares are entitled to elect directors pursuant to the foregoing provisions of this Section the holders of any
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Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares or Noncumulative Shares are entitled to elect directors pursuant hereto by reason of any default in the payment of dividends thereon, then the voting rights of the Cumulative Shares and the Noncumulative Shares then entitled to vote shall be combined (with each class of shares having a number of votes proportional to the aggregate liquidation preference of its outstanding shares). In such case, the holders of Class G Shares and of all such other shares then entitled so to vote, voting as a class, shall elect such directors. If the holders of any such other shares have elected such directors prior to the happening of the default or event permitting the holders of Class G Shares to elect directors, or prior to a written request for the holding of a special meeting being received by the Secretary of the Corporation as required above, then a new election shall be held with all such other shares and the Class G Shares voting together as a single class for such directors, resulting in the termination of the term of such previously elected directors upon the election of such new directors.
(d) The affirmative vote of the holders of at least two-thirds of the Class G Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose, shall be necessary to effect either of the following:
(1) Any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Amended and Restated Articles of Incorporation, as amended, or of the Code of Regulations of the Corporation which affects adversely and materially the preferences or voting or other rights of the holders of Class G Shares which are set forth in these Amended and Restated Articles of Incorporation, as amended; provided, however, neither the amendment of these Amended and Restated Articles of Incorporation, as amended, so as to authorize, create or change the authorized or outstanding number of Class G Shares or of any shares ranking on a parity with or junior to the Class G Shares nor the amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely and materially preferences or voting or other rights of the holders of Class G Shares; or
(2) The authorization, creation or increase in the authorized number of any shares, or any security convertible into shares, in either case ranking prior to such series of Class G Shares.
(e) In the event, and only to the extent, that (1) Class G Shares are issued in more than one series and (2) Ohio law permits the holders of a series of a class of capital stock to vote separately as a class, the affirmative vote of the holders of at least two-thirds of each series of Class G Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose of voting on such matters, shall be required for any amendment, alteration or repeal, whether by merger, consolidation or
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otherwise, of any of the provisions of these Amended and Restated Articles of Incorporation, as amended, or of the Code of Regulations of the Corporation which affects adversely and materially the preferences or voting or other rights of the holders of such series which are set forth in these Amended and Restated Articles of Incorporation, as amended; provided, however, neither the amendment of these Amended and Restated Articles of Incorporation, as amended, so as to authorize, create or change the authorized or outstanding number of Class G Shares or of any shares ranking on a parity with or junior to the Class G Shares nor the Amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely and materially the preferences or voting or other rights of the holders of such series.
Section 6. 8% Class G Cumulative Redeemable Preferred Shares . Of the 750,000 authorized Class G Shares, 736,000 shares are designated as a series entitled 8% Class G Cumulative Redeemable Preferred Shares (hereinafter called 8% Class G Preferred Shares). The 8% Class G Preferred Shares shall have the express terms set forth in this Division as being applicable to all Class G Shares as a class and, in addition, the following express terms applicable to all 8% Class G Preferred Shares as a series of Class G Shares:
(a) The annual dividend rate of the 8% Class G Preferred Shares shall be 8% of the liquidation preference of $250.00 per share.
(b) Dividends on the 8% Class G Preferred Shares shall be payable, if declared, quarterly in arrears on or about the fifteenth day of each March, June, September, and December or, if not a business day, the next succeeding business day, the first quarterly dividend being payable, if declared, on June 16, 2003. The dividends payable for each full quarterly dividend period on each 8% Class G Preferred Shares shall be $5.00.
Dividends for the initial dividend period on the 8% Class G Preferred Shares, or for any period shorter or longer than a full dividend period on the 8% Class G Preferred Shares, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The aggregate dividend payable quarterly to each holder of 8% Class G Preferred Shares shall be rounded to the nearest one one-hundredth of one cent with $.00005 being rounded upward. Each dividend shall be payable to the holders of record on such record date, no less than 10 nor more than 30 days preceding the payment date thereof, as shall be fixed from time to time by the Corporations Board of Directors.
(c) Dividends on 8% Class G Preferred Shares shall be cumulative as follows:
(1) With respect to shares included in the initial issue of 8% Class G Preferred Shares and shares issued any time thereafter up to and including the record date for the payment of the first dividend on the initial issue of 8% Class G Preferred Shares, dividends shall be cumulative from the date of the initial issue of 8% Class G Preferred Shares; and
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(2) With respect to shares issued any time after the aforesaid record date, dividends shall be cumulative from the dividend payment date next preceding the date of issue of such shares, except that if such shares are issued during the period commencing the day after the record date for the payment of a dividend on 8% Class G Preferred Shares and ending on the payment date of that dividend, dividends with respect to such shares shall be cumulative from that dividend payment date.
(d) Except as required to preserve the Corporations status as a real estate investment trust under the Internal Revenue Code of 1986, as amended, the 8% Class G Preferred Shares may not be redeemed prior to March 28, 2008. At any time or from time to time on and after March 28, 2008 the Corporation, at its option upon not less than thirty (30) nor more than sixty (60) days written notice, may redeem all or any part of the 8% Class G Preferred Shares at a redemption price of $250.00 per share plus, in each case, an amount equal to all dividends accrued and unpaid thereon to the redemption date, without interest.
(e) The amount payable per 8% Class G Preferred Share in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation shall be $250.00, plus an amount equal to all dividends accrued and unpaid thereon to the date of payment.
(f) All dividend payments made on the 8% Class G Preferred Shares, at any time during which the Corporation is in default in the payment of dividends on such 8% Class G Preferred Shares for any dividend period, shall, for the purposes of Section 5(b)(1) of this Division A-VII, be deemed to be made in respect of the earliest dividend period with respect to which the Corporation is in default.
VIII. The Class H Cumulative Preferred Shares. The Class H Shares shall have the following express terms:
Section 1. Series. The Class H Shares may be issued from time to time in one or more series. All Class H Shares shall be of equal rank and shall be identical, except in respect of the matters that may be fixed by the Board of Directors as hereinafter provided, and each share of a series shall be identical with all other shares of such series, except as to the dates from which dividends shall accrue and be cumulative. All Class H Shares shall rank on a parity with the Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares and shall be identical to all Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares except (1) in respect of the matters that may be fixed by the Board of Directors as provided in clauses (a) through (i), inclusive, of this Section 1 and (2) only dividends on Cumulative
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Shares shall be cumulative as set forth herein. Subject to the provisions of Sections 2 through 5, both inclusive, and Item XIII of this Division, which provisions shall apply to all Class H Shares, the Board of Directors hereby is authorized to cause such shares to be issued in one or more series and, with respect to each such series to determine and fix prior to the issuance thereof (and thereafter, to the extent provided in clause (b) of this Section), the following:
(a) The designation of the series, which may be by distinguishing number, letter or title;
(b) The authorized number of shares of the series, which number the Board of Directors may (except where otherwise provided in the creation of the series) increase or decrease from time to time before or after the issuance thereof (but not below the number of shares thereof then outstanding);
(c) The dividend rate or rates of the series, including the means by which such rates may be established;
(d) The date or dates from which dividends shall accrue and be cumulative and the dates on which and the period or periods for which dividends, if declared, shall be payable, including the means by which such dates and periods may be established;
(e) The redemption rights and price or prices, if any, for shares of the series;
(f) The terms and amount of the sinking fund, if any, for the purchase or redemption of shares of the series;
(g) The amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation;
(h) Whether the shares of the series shall be convertible into Common Shares or shares of any other class and, if so, the conversion rate or rates or price or prices, any adjustments thereof and all other terms and conditions upon which such conversion may be made; and
(i) Restrictions (in addition to those set forth in Subsection 5(d) or 5(e) of this Item VIII) on the issuance of shares of the same series or of any other class or series.
The Board of Directors is authorized to adopt from time to time amendments to the Amended and Restated Articles of Incorporation, as amended, fixing, with respect to each such series, the matters described in clauses (a) through (i), inclusive, of this Section and is authorized to take such actions with respect thereto as may be required by law in order to effect such amendments.
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Section 2. Dividends.
(a) The holders of Class H Shares of each series, in preference to the holders of Common Shares and of any other class of shares ranking junior to the Class H Shares, shall be entitled to receive out of any funds legally available therefor, and when and as declared by the Board of Directors, dividends in cash at the rate or rates for such series fixed in accordance with the provisions of Section 1 above and no more, payable on the dates fixed for such series. Such dividends shall accrue and be cumulative, in the case of shares of each particular series, from and after the date or dates fixed with respect to such series. No dividends shall be paid upon or declared or set apart for any series of the Class H Shares for any dividend period unless at the same time (i) a like proportionate dividend for the dividend periods terminating on the same or any earlier date, ratably in proportion to the respective annual dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Class H Shares of all series then issued and outstanding and entitled to receive such dividend and (ii) the dividends payable for the dividend periods terminating on the same or any earlier date (but, with respect to Noncumulative Shares, only with respect to the then current dividend period), ratably in proportion to the respective dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares then issued and outstanding and entitled to receive such dividends.
(b) So long as any Class H Shares shall be outstanding no dividend, except a dividend payable in Common Shares or other shares ranking junior to the Class H Shares, shall be paid or declared or any distribution be made, except as aforesaid, in respect of the Common Shares or any other shares ranking junior to the Class H Shares, nor shall any Common Shares or any other shares ranking junior to the Class H Shares be purchased, retired or otherwise acquired by the Corporation, except out of the proceeds of the sale of Common Shares or other shares of the Corporation ranking junior to the Class H Shares received by the Corporation subsequent to the date of first issuance of Class H Shares of any series, unless:
(1) All accrued and unpaid dividends on Cumulative Shares, including the full dividends for all current dividend periods, shall have been declared and paid or a sum sufficient for payment thereof set apart;
(2) All unpaid dividends on Noncumulative Shares for the then current dividend period shall have been declared and paid or a sum sufficient for payment therefor set apart; and
(3) There shall be no arrearages with respect to the redemption of Cumulative Shares or Noncumulative Shares of any series from any sinking fund provided for shares of such series in accordance with the provisions of Section 1 of this Item VIII.
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(c) The foregoing restrictions on the payment of dividends or other distributions on, or on the purchase, redemption retirement or other acquisition of, Common Shares or any other shares ranking on a parity with or junior to the Class H Shares shall be inapplicable to (i) any payments in lieu of issuance of fractional shares thereof, whether upon any merger, conversion, stock dividend or otherwise, (ii) the conversion of Cumulative Shares or Noncumulative Shares into Common Shares, or (iii) the exercise by the Corporation of its rights pursuant to Item XIV(d) of this Division A, Section 4(d) of Division B or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation, as amended, with respect to any other class or series of capital stock hereafter created or authorized.
(d) If, for any taxable year, the Corporation elects to designate as capital gain dividends (as defined in Section 857 of the Code) any portion (the Capital Gains Amount) of the dividends paid or made available for the year to holders of all classes of stock (the Total Dividends), then, to the extent permissible under the Code and to the extent it does not cause any dividends to fail to qualify for the dividends paid deduction under Section 561 of the Code, the portion of the Capital Gains Amount that shall be allocable to holders of the Class H Shares shall be the amount that the total dividends paid or made available to the holders of the Class H Shares for the year bears to the Total Dividends.
Section 3. Redemption.
(a) Subject to the express terms of each series, the Corporation:
(1) May, from time to time at the option of the Board of Directors, redeem all or any part of any redeemable series of Class H Shares at the time outstanding at the applicable redemption price for such series fixed in accordance with the provisions of Section 1 of this Item VIII; and
(2) Shall, from time to time, make such redemptions of each series of Class H Shares as may be required to fulfill the requirements of any sinking fund provided for shares of such series at the applicable sinking fund redemption price fixed in accordance with the provisions of Section 1 of this Item VIII; and shall in each case pay all accrued and unpaid dividends to the redemption date.
(b) (1) Notice of every such redemption shall be mailed, postage prepaid, to the holders of record of the Class H Shares to be redeemed at their respective addresses then appearing on the books of the Corporation, not less than 30 days nor more than 60 days prior to the date fixed for such redemption, or such other time prior thereto as the Board of Directors shall fix for any series pursuant to Section 1 of this Item VIII prior to the issuance thereof. At any time after notice as provided above has been deposited in the mail, the Corporation
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may deposit the aggregate redemption price of Class H Shares to be redeemed, together with accrued and unpaid dividends thereon to the redemption date, with any bank or trust company in Cleveland, Ohio, or New York, New York, having capital and surplus of not less than $100,000,000 named in such notice and direct that there be paid to the respective holders of the Class H Shares so to be redeemed amounts equal to the redemption price of the Class H Shares so to be redeemed, together with such accrued and unpaid dividends thereon, on surrender of the share certificate or certificates held by such holders; and upon the deposit of such notice in the mail and the making of such deposit of money with such bank or trust company, such holders shall cease to be shareholders with respect to such shares; and from and after the time such notice shall have been so deposited and such deposit of money shall have been so made, such holders shall have no rights or claim against the Corporation with respect to such shares, except only the right to receive such money from such bank or trust company without interest or to exercise before the redemption date any unexpired privileges of conversion. In the event less than all of the outstanding Class H Shares are to be redeemed, the Corporation shall select by lot the shares so to be redeemed in such manner as shall be prescribed by the Board of Directors.
(2) If the holders of Class H Shares which have been called for redemption shall not within six years after such deposit claim the amount deposited for the redemption thereof, any such bank or trust company shall, upon demand, pay over to the Corporation such unclaimed amounts and thereupon such bank or trust company and the Corporation shall be relieved of all responsibility in respect thereof and to such holders.
(c) Any Class H Shares which are (1) redeemed by the Corporation pursuant to the provisions of this Section, (2) purchased and delivered in satisfaction of any sinking fund requirements provided for shares of such series, (3) converted in accordance with the express terms thereof, or (4) otherwise acquired by the Corporation shall resume the status of authorized but unissued Class H Shares without serial designation.
(d) Except in connection with the exercise of the Corporations rights pursuant to Section (d) of Item XIV of this Division A, Section 4(d) of Division B or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation, as amended, with respect to any other class or series of capital stock hereafter created or authorized, the Corporation may not purchase or redeem (for sinking fund purposes or otherwise) less than all of the Class H Shares then outstanding except in accordance with a stock purchase offer made to all holders of record of Class H Shares, unless all dividends on all Class H Shares then outstanding for all previous and current dividend periods shall have been declared and paid or funds therefor set apart and all accrued sinking fund obligations applicable thereto shall have been complied with.
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Section 4. Liquidation.
(a) (1) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of Class H Shares of any series shall be entitled to receive in full out of the assets of the Corporation, including its capital, before any amount shall be paid or distributed among the holders of the Common Shares or any other shares ranking junior to the Class H Shares, the amounts fixed with respect to shares of such series in accordance with Section 1 of this Item VIII, plus an amount equal to all dividends accrued and unpaid thereon to the date of payment of the amount due pursuant to such liquidation, dissolution or winding up of the affairs of the Corporation. In the event the net assets of the Corporation legally available therefor are insufficient to permit the payment upon all outstanding Cumulative Shares and Noncumulative Shares of the full preferential amount to which they are respectively entitled, then such net assets shall be distributed ratably upon all outstanding Cumulative Shares and Noncumulative Shares in proportion to the full preferential amount to which each such share is entitled.
(2) After payment to the holders of Class H Shares of the full preferential amounts as aforesaid, the holders of Class H Shares, as such, shall have no right or claim to any of the remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation into or with any other Corporation, the merger of any other Corporation into it, or the sale, lease or conveyance of all or substantially all the assets of the Corporation shall not be deemed to be a dissolution, liquidation or winding up for the purposes of this Section.
Section 5. Voting.
(a) The holders of Class H Shares shall have no voting rights, except as provided in this Section or required by law.
(b) (1) If, and so often as, the Corporation shall be in default in the payment of dividends on any series of Class H Shares at the time outstanding, whether or not earned or declared, for a number of dividend payment periods, whether consecutive or not, which in the aggregate contain at least 540 days, all holders of such Class H Shares, voting separately as a class, together with all Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares upon which like voting rights have been conferred and are exercisable under the circumstances described in Subsection 5(c), shall be entitled to elect, as herein provided, a total of two members of the Board of Directors of the Corporation; provided, however, that the holders of such Class H Shares shall not exercise such special class voting rights except at meetings of
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such shareholders for the election of directors at which the holders of not less than 50% of such Class H Shares are present in person or by proxy; and provided further that the special class voting rights provided for in this paragraph when the same shall have become vested shall remain so vested until all accrued and unpaid dividends on such Class H Shares then outstanding shall have been paid or declared and a sum sufficient for the payment thereof set aside for payment, whereupon the holders of such Class H Shares shall be divested of their special class voting rights in respect of subsequent elections of directors, subject to the revesting of such special class voting rights in the event above specified in this paragraph. All dividend payments made on the Class H Shares, at any time during which the Corporation is in default in the payment of dividends on such Class H Shares for any dividend period, shall be deemed to be made in respect of the earliest dividend period with respect to which the Corporation is in default.
(2) In the event of default entitling holders of Class H Shares to elect two directors as specified in paragraph (1) of this Subsection, a special meeting of such holders for the purpose of electing such directors shall be called by the Secretary of the Corporation upon written request of, or may be called by, the holders of record of at least 10% of the Class H Shares upon which such default in the payment of dividends exists and notice thereof shall be given in the same manner as that required for the annual meeting of shareholders; provided, however, that the Corporation shall not be required to call such special meeting if the annual meeting of shareholders shall be called to be held within 90 days after the date of receipt of the foregoing written request from the holders of Class H Shares. At any meeting at which such holders of Class H Shares shall be entitled to elect directors, holders of 50% of such Class H Shares, present in person or by proxy, shall be sufficient to constitute a quorum, and the vote of the holders of a majority of such shares so present at any such meeting at which there shall be such a quorum shall be sufficient to elect the members of the Board of Directors which such holders of Class H Shares are entitled to elect as herein provided. Notwithstanding any provision of these Amended and Restated Articles of Incorporation, as amended, or the Code of Regulations of the Corporation or any action taken by the holders of any class of shares fixing the number of directors of the Corporation, the two directors who may be elected by such holders of Class H Shares pursuant to this Subsection shall serve in addition to any other directors then in office or proposed to be elected otherwise than pursuant to this Subsection. Nothing in this Subsection shall prevent any change otherwise permitted in the total number of or classifications of directors of the Corporation or require the resignation of any director elected otherwise than pursuant to this Subsection. Notwithstanding any classification of the other directors of the Corporation, the two directors elected by such holders of Class H Shares shall be elected annually for terms expiring at the next succeeding annual meeting of shareholders.
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(3) Upon any divesting of the special class voting rights of the holders of the Class H Shares in respect of elections of directors as provided in this Subsection, the terms of office of all directors then in office elected by such
holders shall terminate immediately thereupon. If the office of any director elected by such holders voting as a class becomes vacant by reason of death, resignation, removal from office or otherwise, the remaining director elected by such holders voting as a class may elect a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.
(c) If at any time when the holders of Class H Shares are entitled to elect directors pursuant to the foregoing provisions of this Section the holders of any Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class I Shares, Class J Shares, Class K Shares or Noncumulative Shares are entitled to elect directors pursuant hereto by reason of any default in the payment of dividends thereon, then the voting rights of the Cumulative Shares and the Noncumulative Shares then entitled to vote shall be combined (with each class of shares having a number of votes proportional to the aggregate liquidation preference of its outstanding shares). In such case, the holders of Class H Shares and of all such other shares then entitled so to vote, voting as a class, shall elect such directors. If the holders of any such other shares have elected such directors prior to the happening of the default or event permitting the holders of Class H Shares to elect directors, or prior to a written request for the holding of a special meeting being received by the Secretary of the Corporation as required above, then a new election shall be held with all such other shares and the Class H Shares voting together as a single class for such directors, resulting in the termination of the term of such previously elected directors upon the election of such new directors.
(d) The affirmative vote of the holders of at least two-thirds of the Class H Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose, shall be necessary to effect either of the following:
(1) Any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Amended and Restated Articles of Incorporation, as amended, or of the Code of Regulations of the Corporation which affects adversely and materially the preferences or voting or other rights of the holders of Class H Shares which are set forth in these Amended and Restated Articles of Incorporation, as amended; provided, however, neither the amendment of these Amended and Restated Articles of Incorporation, as amended, so as to authorize, create or change the authorized or outstanding number of Class H Shares or of any shares ranking on a parity with or junior to the Class H Shares nor the amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely and materially preferences or voting or other rights of the holders of Class H Shares; or
(2) The authorization, creation or increase in the authorized number of any shares, or any security convertible into shares, in either case ranking prior to such series of Class H Shares.
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(e) In the event, and only to the extent, that (1) Class H Shares are issued in more than one series and (2) Ohio law permits the holders of a series of a class of capital stock to vote separately as a class, the affirmative vote of the holders of at least two-thirds of each series of Class H Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose of voting on such matters, shall be required for any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of these Amended and Restated Articles of Incorporation, as amended, or of the Code of Regulations of the Corporation which affects adversely and materially the preferences or voting or other rights of the holders of such series which are set forth in these Amended and Restated Articles of Incorporation, as amended; provided, however, neither the amendment of these Amended and Restated Articles of Incorporation, as amended, so as to authorize, create or change the authorized or outstanding number of Class H Shares or of any shares ranking on a parity with or junior to the Class H Shares nor the Amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely and materially the preferences or voting or other rights of the holders of such series.
Section 6. 7 3/8% Class H Cumulative Redeemable Preferred Shares . Of the 750,000 authorized Class H Shares, 410,000 shares are designated as a series entitled 7 3/8% Class H Cumulative Redeemable Preferred Shares (hereinafter called 7 3/8% Class H Preferred Shares). The 7 3/8% Class H Preferred Shares shall have the express terms set forth in this Division as being applicable to all Class H Shares as a class and, in addition, the following express terms applicable to all 7 3/8% Class H Preferred Shares as a series of Class H Shares:
(a) The annual dividend rate of the 7 3/8% Class H Preferred Shares shall be 7 3/8% of the liquidation preference of $500.00 per share.
(b) Dividends on the 7 3/8% Class H Preferred Shares shall be payable, if declared, quarterly in arrears on or about the fifteenth day of each January, April, July, and October or, if not a business day, the next succeeding business day, the first quarterly dividend being payable, if declared, on October 15, 2003. The dividends payable for each full quarterly dividend period on each 7 3/8% Class H Preferred Shares shall be $9.21875.
Dividends for the initial dividend period on the 7 3/8% Class H Preferred Shares, or for any period shorter or longer than a full dividend period on the 7 3/8% Class H Preferred Shares, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The aggregate dividend payable quarterly to each holder of 7 3/8% Class H Preferred Shares shall be rounded to the nearest one one-hundredth of one cent with $.00005 being rounded upward. Each dividend shall be payable to the holders of record on such record date, no less than 10 nor more than 30 days preceding the payment date thereof, as shall be fixed from time to time by the Companys Board of Directors.
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(c) Dividends on 7 3/8% Class H Preferred Shares shall be cumulative as follows:
(1) With respect to shares included in the initial issue of 7 3/8% Class H Preferred Shares and shares issued any time thereafter up to and including the record date for the payment of the first dividend on the initial issue of 7 3/8% Class H Preferred Shares, dividends shall be cumulative from the date of the initial issue of 7 3/8% Class H Preferred Shares; and
(2) With respect to shares issued any time after the aforesaid record date, dividends shall be cumulative from the dividend payment date next preceding the date of issue of such shares, except that if such shares are issued during the period commencing the day after the record date for the payment of a dividend on 7 3/8% Class H Preferred Shares and ending on the payment date of that dividend, dividends with respect to such shares shall be cumulative from that dividend payment date.
(d) Except as required to preserve the Companys status as a real estate investment trust under the Internal Revenue Code of 1986, as amended, the 7 3/8% Class H Preferred Shares may not be redeemed prior to July 28, 2008. At any time or from time to time on and after July 28, 2008 the Company, at its option upon not less than thirty (30) nor more than sixty (60) days written notice, may redeem all or any part of the 7 3/8% Class H Preferred Shares at a redemption price of $500.00 per share plus, in each case, an amount equal to all dividends accrued and unpaid thereon to the redemption date, without interest.
(e) The amount payable per 7 3/8% Class H Preferred Share in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company shall be $500.00, plus an amount equal to all dividends accrued and unpaid thereon to the date of payment.
(f) All dividend payments made on the 7 3/8% Class H Preferred Shares, at any time during which the Company is in default in the payment of dividends on such 7 3/8% Class H Preferred Shares for any dividend period, shall, for the purposes of Section 5(b)(1) of this Division A-VIII, be deemed to be made in respect of the earliest dividend period with respect to which the Company is in default.
IX. The Class I Cumulative Preferred Shares. The Class I Shares shall have the following express terms:
Section 1. Series. The Class I Shares may be issued from time to time in one or more series. All Class I Shares shall be of equal rank and shall be identical, except in respect of the matters that may be fixed by the Board of Directors as hereinafter provided, and each share of a series shall be identical with all other shares of such series, except as to the dates from which dividends shall accrue and be cumulative. All Class I Shares shall rank on a parity with the Class A Shares, Class B Shares, Class C Shares, Class D
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Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class J Shares, Class K Shares and Noncumulative Shares and shall be identical to all Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class J Shares, Class K Shares and Noncumulative Shares except (1) in respect of the matters that may be fixed by the Board of Directors as provided in clauses (a) through (i), inclusive, of this Section 1 and (2) only dividends on Cumulative Shares shall be cumulative as set forth herein. Subject to the provisions of Sections 2 through 5, both inclusive, and Item XIII of this Division, which provisions shall apply to all Class I Shares, the Board of Directors hereby is authorized to cause such shares to be issued in one or more series and, with respect to each such series to determine and fix prior to the issuance thereof (and thereafter, to the extent provided in clause (b) of this Section), the following:
(a) The designation of the series, which may be by distinguishing number, letter or title;
(b) The authorized number of shares of the series, which number the Board of Directors may (except where otherwise provided in the creation of the series) increase or decrease from time to time before or after the issuance thereof (but not below the number of shares thereof then outstanding);
(c) The dividend rate or rates of the series, including the means by which such rates may be established;
(d) The date or dates from which dividends shall accrue and be cumulative and the dates on which and the period or periods for which dividends, if declared, shall be payable, including the means by which such dates and periods may be established;
(e) The redemption rights and price or prices, if any, for shares of the series;
(f) The terms and amount of the sinking fund, if any, for the purchase or redemption of shares of the series;
(g) The amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation;
(h) Whether the shares of the series shall be convertible into Common Shares or shares of any other class and, if so, the conversion rate or rates or price or prices, any adjustments thereof and all other terms and conditions upon which such conversion may be made; and
(i) Restrictions (in addition to those set forth in Subsection 5(d) or 5(e) of this Item IX) on the issuance of shares of the same series or of any other class or series.
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The Board of Directors is authorized to adopt from time to time amendments to the Amended and Restated Articles of Incorporation, as amended, fixing, with respect to each such series, the matters described in clauses (a) through (i), inclusive, of this Section and is authorized to take such actions with respect thereto as may be required by law in order to effect such amendments.
Section 2. Dividends.
(a) The holders of Class I Shares of each series, in preference to the holders of Common Shares and of any other class of shares ranking junior to the Class I Shares, shall be entitled to receive out of any funds legally available therefor, and when and as declared by the Board of Directors, dividends in cash at the rate or rates for such series fixed in accordance with the provisions of Section 1 above and no more, payable on the dates fixed for such series. Such dividends shall accrue and be cumulative, in the case of shares of each particular series, from and after the date or dates fixed with respect to such series. No dividends shall be paid upon or declared or set apart for any series of the Class I Shares for any dividend period unless at the same time (i) a like proportionate dividend for the dividend periods terminating on the same or any earlier date, ratably in proportion to the respective annual dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Class I Shares of all series then issued and outstanding and entitled to receive such dividend and (ii) the dividends payable for the dividend periods terminating on the same or any earlier date (but, with respect to Noncumulative Shares, only with respect to the then current dividend period), ratably in proportion to the respective dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class J Shares, Class K Shares and Noncumulative Shares then issued and outstanding and entitled to receive such dividends.
(b) So long as any Class I Shares shall be outstanding no dividend, except a dividend payable in Common Shares or other shares ranking junior to the Class I Shares, shall be paid or declared or any distribution be made, except as aforesaid, in respect of the Common Shares or any other shares ranking junior to the Class I Shares, nor shall any Common Shares or any other shares ranking junior to the Class I Shares be purchased, retired or otherwise acquired by the Corporation, except out of the proceeds of the sale of Common Shares or other shares of the Corporation ranking junior to the Class I Shares received by the Corporation subsequent to the date of first issuance of Class I Shares of any series, unless:
(1) All accrued and unpaid dividends on Cumulative Shares, including the full dividends for all current dividend periods, shall have been declared and paid or a sum sufficient for payment thereof set apart;
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(2) All unpaid dividends on Noncumulative Shares for the then current dividend period shall have been declared and paid or a sum sufficient for payment therefor set apart; and
(3) There shall be no arrearages with respect to the redemption of Cumulative Shares or Noncumulative Shares of any series from any sinking fund provided for shares of such series in accordance with the provisions of Section 1 of this Item IX.
(c) The foregoing restrictions on the payment of dividends or other distributions on, or on the purchase, redemption retirement or other acquisition of, Common Shares or any other shares ranking on a parity with or junior to the Class I Shares shall be inapplicable to (i) any payments in lieu of issuance of fractional shares thereof, whether upon any merger, conversion, stock dividend or otherwise, (ii) the conversion of Cumulative Shares or Noncumulative Shares into Common Shares, or (iii) the exercise by the Corporation of its rights pursuant to Item XIV(d) of this Division A, Section 4(d) of Division B or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation, as amended, with respect to any other class or series of capital stock hereafter created or authorized.
(d) If, for any taxable year, the Corporation elects to designate as capital gain dividends (as defined in Section 857 of the Code) any portion (the Capital Gains Amount) of the dividends paid or made available for the year to holders of all classes of stock (the Total Dividends), then, to the extent permissible under the Code and to the extent it does not cause any dividends to fail to qualify for the dividends paid deduction under Section 561 of the Code, the portion of the Capital Gains Amount that shall be allocable to holders of the Class I Shares shall be the amount that the total dividends paid or made available to the holders of the Class I Shares for the year bears to the Total Dividends.
Section 3. Redemption.
(a) Subject to the express terms of each series, the Corporation:
(1) May, from time to time at the option of the Board of Directors, redeem all or any part of any redeemable series of Class I Shares at the time outstanding at the applicable redemption price for such series fixed in accordance with the provisions of Section 1 of this Item IX; and
(2) Shall, from time to time, make such redemptions of each series of Class I Shares as may be required to fulfill the requirements of any sinking fund provided for shares of such series at the applicable sinking fund redemption price fixed in accordance with the provisions of Section 1 of this Item IX; and shall in each case pay all accrued and unpaid dividends to the redemption date.
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(b) (1) Notice of every such redemption shall be mailed, postage prepaid, to the holders of record of the Class I Shares to be redeemed at their respective addresses then appearing on the books of the Corporation, not less than 30 days nor more than 60 days prior to the date fixed for such redemption, or such other time prior thereto as the Board of Directors shall fix for any series pursuant to Section 1 of this Item IX prior to the issuance thereof. At any time after notice as provided above has been deposited in the mail, the Corporation may deposit the aggregate redemption price of Class I Shares to be redeemed, together with accrued and unpaid dividends thereon to the redemption date, with any bank or trust company in Cleveland, Ohio, or New York, New York, having capital and surplus of not less than $100,000,000 named in such notice and direct that there be paid to the respective holders of the Class I Shares so to be redeemed amounts equal to the redemption price of the Class I Shares so to be redeemed, together with such accrued and unpaid dividends thereon, on surrender of the share certificate or certificates held by such holders; and upon the deposit of such notice in the mail and the making of such deposit of money with such bank or trust company, such holders shall cease to be shareholders with respect to such shares; and from and after the time such notice shall have been so deposited and such deposit of money shall have been so made, such holders shall have no rights or claim against the Corporation with respect to such shares, except only the right to receive such money from such bank or trust company without interest or to exercise before the redemption date any unexpired privileges of conversion. In the event less than all of the outstanding Class I Shares are to be redeemed, the Corporation shall select by lot the shares so to be redeemed in such manner as shall be prescribed by the Board of Directors.
(2) If the holders of Class I Shares which have been called for redemption shall not within six years after such deposit claim the amount deposited for the redemption thereof, any such bank or trust company shall, upon demand, pay over to the Corporation such unclaimed amounts and thereupon such bank or trust company and the Corporation shall be relieved of all responsibility in respect thereof and to such holders.
(c) Any Class I Shares which are (1) redeemed by the Corporation pursuant to the provisions of this Section, (2) purchased and delivered in satisfaction of any sinking fund requirements provided for shares of such series, (3) converted in accordance with the express terms thereof, or (4) otherwise acquired by the Corporation shall resume the status of authorized but unissued Class I Shares without serial designation.
(d) Except in connection with the exercise of the Corporations rights pursuant to Section (d) of Item XIV of this Division A, Section 4(d) of Division B or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation, as amended, with respect to any other class or series of capital stock hereafter created or authorized, the Corporation may not purchase or redeem (for sinking fund purposes or otherwise) less than all of the Class I Shares then outstanding except in accordance with a stock purchase offer made to all holders of record of Class I Shares, unless all dividends on all Class I Shares then outstanding for all previous and current dividend periods shall have been declared and paid or funds therefor set apart and all accrued sinking fund obligations applicable thereto shall have been complied with.
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Section 4. Liquidation.
(a) (1) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of Class I Shares of any series shall be entitled to receive in full out of the assets of the Corporation, including its capital, before any amount shall be paid or distributed among the holders of the Common Shares or any other shares ranking junior to the Class I Shares, the amounts fixed with respect to shares of such series in accordance with Section 1 of this Item IX, plus an amount equal to all dividends accrued and unpaid thereon to the date of payment of the amount due pursuant to such liquidation, dissolution or winding up of the affairs of the Corporation. In the event the net assets of the Corporation legally available therefor are insufficient to permit the payment upon all outstanding Cumulative Shares and Noncumulative Shares of the full preferential amount to which they are respectively entitled, then such net assets shall be distributed ratably upon all outstanding Cumulative Shares and Noncumulative Shares in proportion to the full preferential amount to which each such share is entitled.
(2) After payment to the holders of Class I Shares of the full preferential amounts as aforesaid, the holders of Class I Shares, as such, shall have no right or claim to any of the remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation into or with any other Corporation, the merger of any other Corporation into it, or the sale, lease or conveyance of all or substantially all the assets of the Corporation shall not be deemed to be a dissolution, liquidation or winding up for the purposes of this Section.
Section 5. Voting.
(a) The holders of Class I Shares shall have no voting rights, except as provided in this Section or required by law.
(b) (1) If, and so often as, the Corporation shall be in default in the payment of dividends on any series of Class I Shares at the time outstanding, whether or not earned or declared, for a number of dividend payment periods, whether consecutive or not, which in the aggregate contain at least 540 days, all holders of such Class I Shares, voting separately as a class, together with all Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class J Shares, Class K Shares and Noncumulative Shares upon which like voting rights have been conferred and are exercisable under the circumstances described in Subsection 5(c), shall be entitled to elect, as herein provided, a total of two members of the Board of
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Directors of the Corporation; provided, however, that the holders of such Class I Shares shall not exercise such special class voting rights except at meetings of such shareholders for the election of directors at which the holders of not less than 50% of such Class I Shares are present in person or by proxy; and provided further that the special class voting rights provided for in this paragraph when the same shall have become vested shall remain so vested until all accrued and unpaid dividends on such Class I Shares then outstanding shall have been paid or declared and a sum sufficient for the payment thereof set aside for payment, whereupon the holders of such Class I Shares shall be divested of their special class voting rights in respect of subsequent elections of directors, subject to the revesting of such special class voting rights in the event above specified in this paragraph. All dividend payments made on the Class I Shares, at any time during which the Corporation is in default in the payment of dividends on such Class I Shares for any dividend period, shall be deemed to be made in respect of the earliest dividend period with respect to which the Corporation is in default.
(2) In the event of default entitling holders of Class I Shares to elect two directors as specified in paragraph (1) of this Subsection, a special meeting of such holders for the purpose of electing such directors shall be called by the Secretary of the Corporation upon written request of, or may be called by, the holders of record of at least 10% of the Class I Shares upon which such default in the payment of dividends exists and notice thereof shall be given in the same manner as that required for the annual meeting of shareholders; provided, however, that the Corporation shall not be required to call such special meeting if the annual meeting of shareholders shall be called to be held within 90 days after the date of receipt of the foregoing written request from the holders of Class I Shares. At any meeting at which such holders of Class I Shares shall be entitled to elect directors, holders of 50% of such Class I Shares, present in person or by proxy, shall be sufficient to constitute a quorum, and the vote of the holders of a majority of such shares so present at any such meeting at which there shall be such a quorum shall be sufficient to elect the members of the Board of Directors which such holders of Class I Shares are entitled to elect as herein provided. Notwithstanding any provision of these Amended and Restated Articles of Incorporation, as amended, or the Code of Regulations of the Corporation or any action taken by the holders of any class of shares fixing the number of directors of the Corporation, the two directors who may be elected by such holders of Class I Shares pursuant to this Subsection shall serve in addition to any other directors then in office or proposed to be elected otherwise than pursuant to this Subsection. Nothing in this Subsection shall prevent any change otherwise permitted in the total number of or classifications of directors of the Corporation or require the resignation of any director elected otherwise than pursuant to this Subsection. Notwithstanding any classification of the other directors of the Corporation, the two directors elected by such holders of Class I Shares shall be elected annually for terms expiring at the next succeeding annual meeting of shareholders.
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(3) Upon any divesting of the special class voting rights of the holders of the Class I Shares in respect of elections of directors as provided in this Subsection, the terms of office of all directors then in office elected by such holders shall terminate immediately thereupon. If the office of any director elected by such holders voting as a class becomes vacant by reason of death, resignation, removal from office or otherwise, the remaining director elected by such holders voting as a class may elect a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.
(c) If at any time when the holders of Class I Shares are entitled to elect directors pursuant to the foregoing provisions of this Section the holders of any Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class J Shares, Class K Shares or Noncumulative Shares are entitled to elect directors pursuant hereto by reason of any default in the payment of dividends thereon, then the voting rights of the Cumulative Shares and the Noncumulative Shares then entitled to vote shall be combined (with each class of shares having a number of votes proportional to the aggregate liquidation preference of its outstanding shares). In such case, the holders of Class I Shares and of all such other shares then entitled so to vote, voting as a class, shall elect such directors. If the holders of any such other shares have elected such directors prior to the happening of the default or event permitting the holders of Class I Shares to elect directors, or prior to a written request for the holding of a special meeting being received by the Secretary of the Corporation as required above, then a new election shall be held with all such other shares and the Class I Shares voting together as a single class for such directors, resulting in the termination of the term of such previously elected directors upon the election of such new directors.
(d) The affirmative vote of the holders of at least two-thirds of the Class I Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose, shall be necessary to effect either of the following:
(1) Any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Amended and Restated Articles of Incorporation, as amended, or of the Code of Regulations of the Corporation which affects adversely and materially the preferences or voting or other rights of the holders of Class I Shares which are set forth in these Amended and Restated Articles of Incorporation, as amended; provided, however, neither the amendment of these Amended and Restated Articles of Incorporation, as amended, so as to authorize, create or change the authorized or outstanding number of Class I Shares or of any shares ranking on a parity with or junior to the Class I Shares nor the amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely and materially preferences or voting or other rights of the holders of Class I Shares; or
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(2) The authorization, creation or increase in the authorized number of any shares, or any security convertible into shares, in either case ranking prior to such series of Class I Shares.
(e) In the event, and only to the extent, that (1) Class I Shares are issued in more than one series and (2) Ohio law permits the holders of a series of a class of capital stock to vote separately as a class, the affirmative vote of the holders of at least two-thirds of each series of Class I Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose of voting on such matters, shall be required for any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of these Amended and Restated Articles of Incorporation, as amended, or of the Code of Regulations of the Corporation which affects adversely and materially the preferences or voting or other rights of the holders of such series which are set forth in these Amended and Restated Articles of Incorporation, as amended; provided, however, neither the amendment of these Amended and Restated Articles of Incorporation, as amended, so as to authorize, create or change the authorized or outstanding number of Class I Shares or of any shares ranking on a parity with or junior to the Class I Shares nor the Amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely and materially the preferences or voting or other rights of the holders of such series.
Section 6. 7.50% Class I Cumulative Redeemable Preferred Shares. Of the 750,000 authorized Class I Shares, 345,000 shares are designated as a series entitled 7.50% Class I Cumulative Redeemable Preferred Shares (hereinafter called 7.50% Class I Preferred Shares). The 7.50% Class I Preferred Shares shall have the express terms set forth in this Division as being applicable to all Class I Shares as a class and, in addition, the following express terms applicable to all 7.50% Class I Preferred Shares as a series of Class I Shares:
(a) The annual dividend rate of the 7.50% Class I Preferred Shares shall be 7.50% of the liquidation preference of $500.00 per share.
(b) Dividends on the 7.50% Class I Preferred Shares shall be payable, if declared, quarterly in arrears on or about the fifteenth day of each January, April, July, and October or, if not a business day, the next succeeding business day, the first quarterly dividend being payable, if declared, on July 15, 2004. The dividends payable for each full quarterly dividend period on each 7.50% Class I Preferred Share shall be $9.375.
Dividends for the initial dividend period on the 7.50% Class I Preferred Shares, or for any period shorter or longer than a full dividend period on the 7.50% Class I Preferred Shares, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The aggregate dividend payable quarterly to each holder of 7.50% Class I Preferred Shares shall be rounded to the nearest one
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one-hundredth of one cent with $.00005 being rounded upward. Each dividend shall be payable to the holders of record on such record date, no less than 10 nor more than 30 days preceding the payment date thereof, as shall be fixed from time to time by the Companys Board of Directors.
(c) Dividends on 7.50% Class I Preferred Shares shall be cumulative as follows:
(1) With respect to shares included in the initial issue of 7.50% Class I Preferred Shares and shares issued any time thereafter up to and including the record date for the payment of the first dividend on the initial issue of 7.50% Class I Preferred Shares, dividends shall be cumulative from the date of the initial issue of 7.50% Class I Preferred Shares; and
(2) With respect to shares issued any time after the aforesaid record date, dividends shall be cumulative from the dividend payment date next preceding the date of issue of such shares, except that if such shares are issued during the period commencing the day after the record date for the payment of a dividend on 7.50% Class I Preferred Shares and ending on the payment date of that dividend, dividends with respect to such shares shall be cumulative from that dividend payment date.
(d) Except as required to preserve the Companys status as a real estate investment trust under the Internal Revenue Code of 1986, as amended, the 7.50% Class I Preferred Shares may not be redeemed prior to May 7, 2009. At any time or from time to time on and after May 7, 2009 the Company, at its option upon not less than thirty (30) nor more than sixty (60) days written notice, may redeem all or any part of the 7.50% Class I Preferred Shares at a redemption price of $500.00 per share plus, in each case, an amount equal to all dividends accrued and unpaid thereon to the redemption date, without interest.
(e) The amount payable per 7.50% Class I Preferred Share in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company shall be $500.00, plus an amount equal to all dividends accrued and unpaid thereon to the date of payment.
(f) All dividend payments made on the 7.50% Class I Preferred Shares, at any time during which the Company is in default in the payment of dividends on such 7.50% Class I Preferred Shares for any dividend period, shall, for the purposes of Section 5(b)(1) of this Division A-IX, be deemed to be made in respect of the earliest dividend period with respect to which the Company is in default.
X. The Class J Cumulative Preferred Shares. The Class J Shares shall have the following express terms:
Section 1. Series. The Class J Shares may be issued from time to time in one or more series. All Class J Shares shall be of equal rank and shall be identical, except in
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respect of the matters that may be fixed by the Board of Directors as hereinafter provided, and each share of a series shall be identical with all other shares of such series, except as to the dates from which dividends shall accrue and be cumulative. All Class J Shares shall rank on a parity with the Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class K Shares and Noncumulative Shares and shall be identical to all Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class K Shares and Noncumulative Shares except (1) in respect of the matters that may be fixed by the Board of Directors as provided in clauses (a) through (i), inclusive, of this Section 1 and (2) only dividends on Cumulative Shares shall be cumulative as set forth herein. Subject to the provisions of Sections 2 through 5, both inclusive, and Item XIII of this Division, which provisions shall apply to all Class J Shares, the Board of Directors hereby is authorized to cause such shares to be issued in one or more series and, with respect to each such series to determine and fix prior to the issuance thereof (and thereafter, to the extent provided in clause (b) of this Section), the following:
(a) The designation of the series, which may be by distinguishing number, letter or title;
(b) The authorized number of shares of the series, which number the Board of Directors may (except where otherwise provided in the creation of the series) increase or decrease from time to time before or after the issuance thereof (but not below the number of shares thereof then outstanding);
(c) The dividend rate or rates of the series, including the means by which such rates may be established;
(d) The date or dates from which dividends shall accrue and be cumulative and the dates on which and the period or periods for which dividends, if declared, shall be payable, including the means by which such dates and periods may be established;
(e) The redemption rights and price or prices, if any, for shares of the series;
(f) The terms and amount of the sinking fund, if any, for the purchase or redemption of shares of the series;
(g) The amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation;
(h) Whether the shares of the series shall be convertible into Common Shares or shares of any other class and, if so, the conversion rate or rates or price or prices, any adjustments thereof and all other terms and conditions upon which such conversion may be made; and
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(i) Restrictions (in addition to those set forth in Subsection 5(d) or 5(e) of this Item X) on the issuance of shares of the same series or of any other class or series.
The Board of Directors is authorized to adopt from time to time amendments to the Amended and Restated Articles of Incorporation, as amended, fixing, with respect to each such series, the matters described in clauses (a) through (i), inclusive, of this Section and is authorized to take such actions with respect thereto as may be required by law in order to effect such amendments.
Section 2. Dividends.
(a) The holders of Class J Shares of each series, in preference to the holders of Common Shares and of any other class of shares ranking junior to the Class J Shares, shall be entitled to receive out of any funds legally available therefor, and when and as declared by the Board of Directors, dividends in cash at the rate or rates for such series fixed in accordance with the provisions of Section 1 above and no more, payable on the dates fixed for such series. Such dividends shall accrue and be cumulative, in the case of shares of each particular series, from and after the date or dates fixed with respect to such series. No dividends shall be paid upon or declared or set apart for any series of the Class J Shares for any dividend period unless at the same time (i) a like proportionate dividend for the dividend periods terminating on the same or any earlier date, ratably in proportion to the respective annual dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Class J Shares of all series then issued and outstanding and entitled to receive such dividend and (ii) the dividends payable for the dividend periods terminating on the same or any earlier date (but, with respect to Noncumulative Shares, only with respect to the then current dividend period), ratably in proportion to the respective dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class K Shares and Noncumulative Shares then issued and outstanding and entitled to receive such dividends.
(b) So long as any Class J Shares shall be outstanding no dividend, except a dividend payable in Common Shares or other shares ranking junior to the Class J Shares, shall be paid or declared or any distribution be made, except as aforesaid, in respect of the Common Shares or any other shares ranking junior to the Class J Shares, nor shall any Common Shares or any other shares ranking junior to the Class J Shares be purchased, retired or otherwise acquired by the Corporation, except out of the proceeds of the sale of Common Shares or other shares of the Corporation ranking junior to the Class J Shares received by the Corporation subsequent to the date of first issuance of Class J Shares of any series, unless:
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(1) All accrued and unpaid dividends on Cumulative Shares, including the full dividends for all current dividend periods, shall have been declared and paid or a sum sufficient for payment thereof set apart;
(2) All unpaid dividends on Noncumulative Shares for the then current dividend period shall have been declared and paid or a sum sufficient for payment therefor set apart; and
(3) There shall be no arrearages with respect to the redemption of Cumulative Shares or Noncumulative Shares of any series from any sinking fund provided for shares of such series in accordance with the provisions of Section 1 of this Item X.
(c) The foregoing restrictions on the payment of dividends or other distributions on, or on the purchase, redemption retirement or other acquisition of, Common Shares or any other shares ranking on a parity with or junior to the Class J Shares shall be inapplicable to (i) any payments in lieu of issuance of fractional shares thereof, whether upon any merger, conversion, stock dividend or otherwise, (ii) the conversion of Cumulative Shares or Noncumulative Shares into Common Shares, or (iii) the exercise by the Corporation of its rights pursuant to Item XIV(d) of this Division A, Section 4(d) of Division B or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation, as amended, with respect to any other class or series of capital stock hereafter created or authorized.
(d) If, for any taxable year, the Corporation elects to designate as capital gain dividends (as defined in Section 857 of the Code) any portion (the Capital Gains Amount) of the dividends paid or made available for the year to holders of all classes of stock (the Total Dividends), then, to the extent permissible under the Code and to the extent it does not cause any dividends to fail to qualify for the dividends paid deduction under Section 561 of the Code, the portion of the Capital Gains Amount that shall be allocable to holders of the Class J Shares shall be the amount that the total dividends paid or made available to the holders of the Class J Shares for the year bears to the Total Dividends.
Section 3. Redemption.
(a) Subject to the express terms of each series, the Corporation:
(1) May, from time to time at the option of the Board of Directors, redeem all or any part of any redeemable series of Class J Shares at the time outstanding at the applicable redemption price for such series fixed in accordance with the provisions of Section 1 of this Item X; and
(2) Shall, from time to time, make such redemptions of each series of Class J Shares as may be required to fulfill the requirements of any sinking fund provided for shares of such series at the applicable sinking fund redemption price fixed in accordance with the provisions of Section 1 of this Item X; and shall in each case pay all accrued and unpaid dividends to the redemption date.
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(b) (1) Notice of every such redemption shall be mailed, postage prepaid, to the holders of record of the Class J Shares to be redeemed at their respective addresses then appearing on the books of the Corporation, not less than 30 days nor more than 60 days prior to the date fixed for such redemption, or such other time prior thereto as the Board of Directors shall fix for any series pursuant to Section 1 of this Item X prior to the issuance thereof. At any time after notice as provided above has been deposited in the mail, the Corporation may deposit the aggregate redemption price of Class J Shares to be redeemed, together with accrued and unpaid dividends thereon to the redemption date, with any bank or trust company in Cleveland, Ohio, or New York, New York, having capital and surplus of not less than $100,000,000 named in such notice and direct that there be paid to the respective holders of the Class J Shares so to be redeemed amounts equal to the redemption price of the Class J Shares so to be redeemed, together with such accrued and unpaid dividends thereon, on surrender of the share certificate or certificates held by such holders; and upon the deposit of such notice in the mail and the making of such deposit of money with such bank or trust company, such holders shall cease to be shareholders with respect to such shares; and from and after the time such notice shall have been so deposited and such deposit of money shall have been so made, such holders shall have no rights or claim against the Corporation with respect to such shares, except only the right to receive such money from such bank or trust company without interest or to exercise before the redemption date any unexpired privileges of conversion. In the event less than all of the outstanding Class J Shares are to be redeemed, the Corporation shall select by lot the shares so to be redeemed in such manner as shall be prescribed by the Board of Directors.
(2) If the holders of Class J Shares which have been called for redemption shall not within six years after such deposit claim the amount deposited for the redemption thereof, any such bank or trust company shall, upon demand, pay over to the Corporation such unclaimed amounts and thereupon such bank or trust company and the Corporation shall be relieved of all responsibility in respect thereof and to such holders.
(c) Any Class J Shares which are (1) redeemed by the Corporation pursuant to the provisions of this Section, (2) purchased and delivered in satisfaction of any sinking fund requirements provided for shares of such series, (3) converted in accordance with the express terms thereof, or (4) otherwise acquired by the Corporation shall resume the status of authorized but unissued Class J Shares without serial designation.
(d) Except in connection with the exercise of the Corporations rights pursuant to Section (d) of Item XIV of this Division A, Section 4(d) of Division B or any similar Section hereafter contained in these Amended and Restated
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Articles of Incorporation, as amended, with respect to any other class or series of capital stock hereafter created or authorized, the Corporation may not purchase or redeem (for sinking fund purposes or otherwise) less than all of the Class J Shares then outstanding except in accordance with a stock purchase offer made to all holders of record of Class J Shares, unless all dividends on all Class J Shares then outstanding for all previous and current dividend periods shall have been declared and paid or funds therefor set apart and all accrued sinking fund obligations applicable thereto shall have been complied with.
Section 4. Liquidation.
(a) (1) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of Class J Shares of any series shall be entitled to receive in full out of the assets of the Corporation, including its capital, before any amount shall be paid or distributed among the holders of the Common Shares or any other shares ranking junior to the Class J Shares, the amounts fixed with respect to shares of such series in accordance with Section 1 of this Item X, plus an amount equal to all dividends accrued and unpaid thereon to the date of payment of the amount due pursuant to such liquidation, dissolution or winding up of the affairs of the Corporation. In the event the net assets of the Corporation legally available therefor are insufficient to permit the payment upon all outstanding Cumulative Shares and Noncumulative Shares of the full preferential amount to which they are respectively entitled, then such net assets shall be distributed ratably upon all outstanding Cumulative Shares and Noncumulative Shares in proportion to the full preferential amount to which each such share is entitled.
(2) After payment to the holders of Class J Shares of the full preferential amounts as aforesaid, the holders of Class J Shares, as such, shall have no right or claim to any of the remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation into or with any other Corporation, the merger of any other Corporation into it, or the sale, lease or conveyance of all or substantially all the assets of the Corporation shall not be deemed to be a dissolution, liquidation or winding up for the purposes of this Section.
Section 5. Voting.
(a) The holders of Class J Shares shall have no voting rights, except as provided in this Section or required by law.
(b) (1) If, and so often as, the Corporation shall be in default in the payment of dividends on any series of Class J Shares at the time outstanding, whether or not earned or declared, for a number of dividend payment periods, whether consecutive or not, which in the aggregate contain at least 540 days, all holders of such Class J Shares, voting separately as a class, together with all
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Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class K Shares and Noncumulative Shares upon which like voting rights have been conferred and are exercisable under the circumstances described in Subsection 5(c), shall be entitled to elect, as herein provided, a total of two members of the Board of Directors of the Corporation; provided, however, that the holders of such Class J Shares shall not exercise such special class voting rights except at meetings of such shareholders for the election of directors at which the holders of not less than 50% of such Class J Shares are present in person or by proxy; and provided further that the special class voting rights provided for in this paragraph when the same shall have become vested shall remain so vested until all accrued and unpaid dividends on such Class J Shares then outstanding shall have been paid or declared and a sum sufficient for the payment thereof set aside for payment, whereupon the holders of such Class J Shares shall be divested of their special class voting rights in respect of subsequent elections of directors, subject to the revesting of such special class voting rights in the event above specified in this paragraph. All dividend payments made on the Class J Shares, at any time during which the Corporation is in default in the payment of dividends on such Class J Shares for any dividend period, shall be deemed to be made in respect of the earliest dividend period with respect to which the Corporation is in default.
(2) In the event of default entitling holders of Class J Shares to elect two directors as specified in paragraph (1) of this Subsection, a special meeting of such holders for the purpose of electing such directors shall be called by the Secretary of the Corporation upon written request of, or may be called by, the holders of record of at least 10% of the Class J Shares upon which such default in the payment of dividends exists and notice thereof shall be given in the same manner as that required for the annual meeting of shareholders; provided, however, that the Corporation shall not be required to call such special meeting if the annual meeting of shareholders shall be called to be held within 90 days after the date of receipt of the foregoing written request from the holders of Class J Shares. At any meeting at which such holders of Class J Shares shall be entitled to elect directors, holders of 50% of such Class J Shares, present in person or by proxy, shall be sufficient to constitute a quorum, and the vote of the holders of a majority of such shares so present at any such meeting at which there shall be such a quorum shall be sufficient to elect the members of the Board of Directors which such holders of Class J Shares are entitled to elect as herein provided. Notwithstanding any provision of these Amended and Restated Articles of Incorporation, as amended, or the Code of Regulations of the Corporation or any action taken by the holders of any class of shares fixing the number of directors of the Corporation, the two directors who may be elected by such holders of Class J Shares pursuant to this Subsection shall serve in addition to any other directors then in office or proposed to be elected otherwise than pursuant to this Subsection. Nothing in this Subsection shall prevent any change otherwise permitted in the total number of or classifications of directors of the Corporation or require the resignation of any director elected otherwise than pursuant to this Subsection. Notwithstanding any classification of the other directors of the Corporation, the two directors elected by such holders of Class J Shares shall be elected annually for terms expiring at the next succeeding annual meeting of shareholders.
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(3) Upon any divesting of the special class voting rights of the holders of the Class J Shares in respect of elections of directors as provided in this Subsection, the terms of office of all directors then in office elected by such holders shall terminate immediately thereupon. If the office of any director elected by such holders voting as a class becomes vacant by reason of death, resignation, removal from office or otherwise, the remaining director elected by such holders voting as a class may elect a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.
(c) If at any time when the holders of Class J Shares are entitled to elect directors pursuant to the foregoing provisions of this Section the holders of any Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class K Shares or Noncumulative Shares are entitled to elect directors pursuant hereto by reason of any default in the payment of dividends thereon, then the voting rights of the Cumulative Shares and the Noncumulative Shares then entitled to vote shall be combined (with each class of shares having a number of votes proportional to the aggregate liquidation preference of its outstanding shares). In such case, the holders of Class J Shares and of all such other shares then entitled so to vote, voting as a class, shall elect such directors. If the holders of any such other shares have elected such directors prior to the happening of the default or event permitting the holders of Class J Shares to elect directors, or prior to a written request for the holding of a special meeting being received by the Secretary of the Corporation as required above, then a new election shall be held with all such other shares and the Class J Shares voting together as a single class for such directors, resulting in the termination of the term of such previously elected directors upon the election of such new directors.
(d) The affirmative vote of the holders of at least two-thirds of the Class J Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose, shall be necessary to effect either of the following:
(1) Any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Amended and Restated Articles of Incorporation, as amended, or of the Code of Regulations of the Corporation which affects adversely and materially the preferences or voting or other rights of the holders of Class J Shares which are set forth in these Amended and Restated Articles of Incorporation, as amended; provided, however, neither the amendment of these Amended and Restated Articles of Incorporation, as amended, so as to authorize, create or change the authorized or outstanding number of Class J Shares or of any shares ranking on a parity with or junior to the Class J Shares nor the amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely and materially preferences or voting or other rights of the holders of Class J Shares; or
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(2) The authorization, creation or increase in the authorized number of any shares, or any security convertible into shares, in either case ranking prior to such series of Class J Shares.
(e) In the event, and only to the extent, that (1) Class J Shares are issued in more than one series and (2) Ohio law permits the holders of a series of a class of capital stock to vote separately as a class, the affirmative vote of the holders of at least two-thirds of each series of Class J Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose of voting on such matters, shall be required for any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of these Amended and Restated Articles of Incorporation, as amended, or of the Code of Regulations of the Corporation which affects adversely and materially the preferences or voting or other rights of the holders of such series which are set forth in these Amended and Restated Articles of Incorporation, as amended; provided, however, neither the amendment of these Amended and Restated Articles of Incorporation, as amended, so as to authorize, create or change the authorized or outstanding number of Class J Shares or of any shares ranking on a parity with or junior to the Class J Shares nor the Amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely and materially the preferences or voting or other rights of the holders of such series.
Section 6. 9% Class J Cumulative Redeemable Preferred Shares . Of the 750,000 authorized Class J Shares, 450,000 shares are designated as a series entitled 9% Class J Cumulative Redeemable Preferred Shares (hereinafter called 9% Class J Preferred Shares). The 9% Class J Preferred Share shall have the express terms set forth in this Division as being applicable to all Class J Preferred Shares as a class and, in addition, the following express terms applicable to all 9% Class J Preferred Shares as a series of Class J Shares:
(a) The annual dividend rate of the 9% Class J Preferred Shares shall be 9% of the liquidation preference of $250.00 per share.
(b) Dividends on the 9% Class J Preferred Shares shall be payable, if declared, quarterly on or about the fifteenth day of January, April, July and October. The dividends payable for each full quarterly dividend period on each 9% Class J Preferred Share shall be $5.625. Dividends for any period shorter or longer than a full dividend period on the 9% Class J Preferred Shares, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The aggregate dividend payable quarterly to each holder of 9% Class J Preferred Shares shall be rounded to the nearest one-hundredth of one cent with $.00005 being rounded upward. Each dividend shall be payable to the holders of record on such record date, no less than 10 nor more than 30 days preceding the payment date thereof, as shall be fixed from time to time by the Corporations Board of Directors.
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(c) Dividends on 9% Class J Preferred Shares shall be cumulative as follows:
(1) With respect to shares included in the initial issue of 9% Class J Preferred Shares and shares issued any time thereafter up to and including the record date for the payment of the first dividend on the initial issue of 9% Class J Preferred Shares, dividends shall be cumulative from the date of the initial issue of 9% Class J Preferred Shares; and
(2) With respect to shares issued any time after the aforesaid record date, dividends shall be cumulative from the dividend payment date next preceding the date of issue of such shares, except that if such shares are issued during the period commencing the day after the record date for the payment of a dividend on 9% Class J Preferred Shares and ending on the payment date of that dividend, dividends with respect to such shares shall be cumulative from that dividend payment date.
(d) The Corporation may, at any time or from time to time on, at its option upon not less than thirty (30) nor more than sixty (60) days written notice, may redeem all or any part of the 9% Class J Preferred Shares at a redemption price of $250.00 per share plus, in each case, an amount equal to all dividends accrued and unpaid thereon to the redemption date, without interest. The redemption price (other than the portion thereof consisting of accrued and unpaid dividends) is payable solely out of the sale proceeds of other capital shares of the Corporation, which may include any equity securities (including common shares and preferred shares), shares, interests, participation or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable for equity securities), or options to purchase any of the foregoing.
(e) The amount payable per 9% Class J Preferred Share in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation shall be $250.00, plus an amount equal to all dividends accrued and unpaid thereon to the date of payment.
(f) The affirmative vote of the holders of at least two-thirds of the Class J Preferred Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose, shall be necessary to effect the authorization, creation, increase in the authorized number of or issuance of any shares, or any security convertible into or exchangeable for shares, in any such case ranking prior to such series of Class J Preferred Shares in dividends, distributions or rights upon liquidation, dissolution or winding up.
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XI. The Class K Cumulative Preferred Shares. The Class K Shares shall have the following express terms:
Section 1. Series. The Class K Shares may be issued from time to time in one or more series. All Class K Shares shall be of equal rank and shall be identical, except in respect of the matters that may be fixed by the Board of Directors as hereinafter provided, and each share of a series shall be identical with all other shares of such series, except as to the dates from which dividends shall accrue and be cumulative. All Class K Shares shall rank on a parity with the Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares and Noncumulative Shares and shall be identical to all Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares and Noncumulative Shares except (1) in respect of the matters that may be fixed by the Board of Directors as provided in clauses (a) through (i), inclusive, of this Section 1 and (2) only dividends on Cumulative Shares shall be cumulative as set forth herein. Subject to the provisions of Sections 2 through 5, both inclusive, and Item XIII of this Division, which provisions shall apply to all Class K Shares, the Board of Directors hereby is authorized to cause such shares to be issued in one or more series and, with respect to each such series to determine and fix prior to the issuance thereof (and thereafter, to the extent provided in clause (b) of this Section), the following:
(a) The designation of the series, which may be by distinguishing number, letter or title;
(b) The authorized number of shares of the series, which number the Board of Directors may (except where otherwise provided in the creation of the series) increase or decrease from time to time before or after the issuance thereof (but not below the number of shares thereof then outstanding);
(c) The dividend rate or rates of the series, including the means by which such rates may be established;
(d) The date or dates from which dividends shall accrue and be cumulative and the dates on which and the period or periods for which dividends, if declared, shall be payable, including the means by which such dates and periods may be established;
(e) The redemption rights and price or prices, if any, for shares of the series;
(f) The terms and amount of the sinking fund, if any, for the purchase or redemption of shares of the series;
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(g) The amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation;
(h) Whether the shares of the series shall be convertible into Common Shares or shares of any other class and, if so, the conversion rate or rates or price or prices, any adjustments thereof and all other terms and conditions upon which such conversion may be made; and
(i) Restrictions (in addition to those set forth in Subsection 5(d) or 5(e) of this Item XI) on the issuance of shares of the same series or of any other class or series.
The Board of Directors is authorized to adopt from time to time amendments to the Amended and Restated Articles of Incorporation, as amended, fixing, with respect to each such series, the matters described in clauses (a) through (i), inclusive, of this Section and is authorized to take such actions with respect thereto as may be required by law in order to effect such amendments.
Section 2. Dividends.
(a) The holders of Class K Shares of each series, in preference to the holders of Common Shares and of any other class of shares ranking junior to the Class K Shares, shall be entitled to receive out of any funds legally available therefor, and when and as declared by the Board of Directors, dividends in cash at the rate or rates for such series fixed in accordance with the provisions of Section 1 above and no more, payable on the dates fixed for such series. Such dividends shall accrue and be cumulative, in the case of shares of each particular series, from and after the date or dates fixed with respect to such series. No dividends shall be paid upon or declared or set apart for any series of the Class K Shares for any dividend period unless at the same time (i) a like proportionate dividend for the dividend periods terminating on the same or any earlier date, ratably in proportion to the respective annual dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Class K Shares of all series then issued and outstanding and entitled to receive such dividend and (ii) the dividends payable for the dividend periods terminating on the same or any earlier date (but, with respect to Noncumulative Shares, only with respect to the then current dividend period), ratably in proportion to the respective dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares and Noncumulative Shares then issued and outstanding and entitled to receive such dividends.
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(b) So long as any Class K Shares shall be outstanding no dividend, except a dividend payable in Common Shares or other shares ranking junior to the Class K Shares, shall be paid or declared or any distribution be made, except
as aforesaid, in respect of the Common Shares or any other shares ranking junior to the Class K Shares, nor shall any Common Shares or any other shares ranking junior to the Class K Shares be purchased, retired or otherwise acquired by the Corporation, except out of the proceeds of the sale of Common Shares or other shares of the Corporation ranking junior to the Class K Shares received by the Corporation subsequent to the date of first issuance of Class K Shares of any series, unless:
(1) All accrued and unpaid dividends on Cumulative Shares, including the full dividends for all current dividend periods, shall have been declared and paid or a sum sufficient for payment thereof set apart;
(2) All unpaid dividends on Noncumulative Shares for the then current dividend period shall have been declared and paid or a sum sufficient for payment therefor set apart; and
(3) There shall be no arrearages with respect to the redemption of Cumulative Shares or Noncumulative Shares of any series from any sinking fund provided for shares of such series in accordance with the provisions of Section 1 of this Item XI.
(c) The foregoing restrictions on the payment of dividends or other distributions on, or on the purchase, redemption retirement or other acquisition of, Common Shares or any other shares ranking on a parity with or junior to the Class K Shares shall be inapplicable to (i) any payments in lieu of issuance of fractional shares thereof, whether upon any merger, conversion, stock dividend or otherwise, (ii) the conversion of Cumulative Shares or Noncumulative Shares into Common Shares, or (iii) the exercise by the Corporation of its rights pursuant to Item XIV(d) of this Division A, Section 4(d) of Division B or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation, as amended, with respect to any other class or series of capital stock hereafter created or authorized.
(d) If, for any taxable year, the Corporation elects to designate as capital gain dividends (as defined in Section 857 of the Code) any portion (the Capital Gains Amount) of the dividends paid or made available for the year to holders of all classes of stock (the Total Dividends), then, to the extent permissible under the Code and to the extent it does not cause any dividends to fail to qualify for the dividends paid deduction under Section 561 of the Code, the portion of the Capital Gains Amount that shall be allocable to holders of the Class K Shares shall be the amount that the total dividends paid or made available to the holders of the Class K Shares for the year bears to the Total Dividends.
Section 3. Redemption.
(a) Subject to the express terms of each series, the Corporation:
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(1) May, from time to time at the option of the Board of Directors, redeem all or any part of any redeemable series of Class K Shares at the time outstanding at the applicable redemption price for such series fixed in accordance with the provisions of Section 1 of this Item XI; and
(2) Shall, from time to time, make such redemptions of each series of Class K Shares as may be required to fulfill the requirements of any sinking fund provided for shares of such series at the applicable sinking fund redemption price fixed in accordance with the provisions of Section 1 of this Item XI; and shall in each case pay all accrued and unpaid dividends to the redemption date.
(b) (1) Notice of every such redemption shall be mailed, postage prepaid, to the holders of record of the Class K Shares to be redeemed at their respective addresses then appearing on the books of the Corporation, not less than 30 days nor more than 60 days prior to the date fixed for such redemption, or such other time prior thereto as the Board of Directors shall fix for any series pursuant to Section 1 of this Item XI prior to the issuance thereof. At any time after notice as provided above has been deposited in the mail, the Corporation may deposit the aggregate redemption price of Class K Shares to be redeemed, together with accrued and unpaid dividends thereon to the redemption date, with any bank or trust company in Cleveland, Ohio, or New York, New York, having capital and surplus of not less than $100,000,000 named in such notice and direct that there be paid to the respective holders of the Class K Shares so to be redeemed amounts equal to the redemption price of the Class K Shares so to be redeemed, together with such accrued and unpaid dividends thereon, on surrender of the share certificate or certificates held by such holders; and upon the deposit of such notice in the mail and the making of such deposit of money with such bank or trust company, such holders shall cease to be shareholders with respect to such shares; and from and after the time such notice shall have been so deposited and such deposit of money shall have been so made, such holders shall have no rights or claim against the Corporation with respect to such shares, except only the right to receive such money from such bank or trust company without interest or to exercise before the redemption date any unexpired privileges of conversion. In the event less than all of the outstanding Class K Shares are to be redeemed, the Corporation shall select by lot the shares so to be redeemed in such manner as shall be prescribed by the Board of Directors.
(2) If the holders of Class K Shares which have been called for redemption shall not within six years after such deposit claim the amount deposited for the redemption thereof, any such bank or trust company shall, upon demand, pay over to the Corporation such unclaimed amounts and thereupon such bank or trust company and the Corporation shall be relieved of all responsibility in respect thereof and to such holders.
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(c) Any Class K Shares which are (1) redeemed by the Corporation pursuant to the provisions of this Section, (2) purchased and delivered in satisfaction of any sinking fund requirements provided for shares of such series, (3) converted in accordance with the express terms thereof, or (4) otherwise acquired by the Corporation shall resume the status of authorized but unissued Class K Shares without serial designation.
(d) Except in connection with the exercise of the Corporations rights pursuant to Section (d) of Item XIV of this Division A, Section 4(d) of Division B or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation, as amended, with respect to any other class or series of capital stock hereafter created or authorized, the Corporation may not purchase or redeem (for sinking fund purposes or otherwise) less than all of the Class K Shares then outstanding except in accordance with a stock purchase offer made to all holders of record of Class K Shares, unless all dividends on all Class K Shares then outstanding for all previous and current dividend periods shall have been declared and paid or funds therefor set apart and all accrued sinking fund obligations applicable thereto shall have been complied with.
Section 4. Liquidation.
(a) (1) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of Class K Shares of any series shall be entitled to receive in full out of the assets of the Corporation, including its capital, before any amount shall be paid or distributed among the holders of the Common Shares or any other shares ranking junior to the Class K Shares, the amounts fixed with respect to shares of such series in accordance with Section 1 of this Item XI, plus an amount equal to all dividends accrued and unpaid thereon to the date of payment of the amount due pursuant to such liquidation, dissolution or winding up of the affairs of the Corporation. In the event the net assets of the Corporation legally available therefor are insufficient to permit the payment upon all outstanding Cumulative Shares and Noncumulative Shares of the full preferential amount to which they are respectively entitled, then such net assets shall be distributed ratably upon all outstanding Cumulative Shares and Noncumulative Shares in proportion to the full preferential amount to which each such share is entitled.
(2) After payment to the holders of Class K Shares of the full preferential amounts as aforesaid, the holders of Class K Shares, as such, shall have no right or claim to any of the remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation into or with any other Corporation, the merger of any other Corporation into it, or the sale, lease or conveyance of all or substantially all the assets of the Corporation shall not be deemed to be a dissolution, liquidation or winding up for the purposes of this Section.
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Section 5. Voting .
(a) The holders of Class K Shares shall have no voting rights, except as provided in this Section or required by law.
(b) (1) If, and so often as, the Corporation shall be in default in the payment of dividends on any series of Class K Shares at the time outstanding, whether or not earned or declared, for a number of dividend payment periods, whether consecutive or not, which in the aggregate contain at least 540 days, all holders of such Class K Shares, voting separately as a class, together with all Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares and Noncumulative Shares upon which like voting rights have been conferred and are exercisable under the circumstances described in Subsection 5(c), shall be entitled to elect, as herein provided, a total of two members of the Board of Directors of the Corporation; provided, however, that the holders of such Class K Shares shall not exercise such special class voting rights except at meetings of such shareholders for the election of directors at which the holders of not less than 50% of such Class K Shares are present in person or by proxy; and provided further that the special class voting rights provided for in this paragraph when the same shall have become vested shall remain so vested until all accrued and unpaid dividends on such Class K Shares then outstanding shall have been paid or declared and a sum sufficient for the payment thereof set aside for payment, whereupon the holders of such Class K Shares shall be divested of their special class voting rights in respect of subsequent elections of directors, subject to the revesting of such special class voting rights in the event above specified in this paragraph. All dividend payments made on the Class K Shares, at any time during which the Corporation is in default in the payment of dividends on such Class K Shares for any dividend period, shall be deemed to be made in respect of the earliest dividend period with respect to which the Corporation is in default.
(2) In the event of default entitling holders of Class K Shares to elect two directors as specified in paragraph (1) of this Subsection, a special meeting of such holders for the purpose of electing such directors shall be called by the Secretary of the Corporation upon written request of, or may be called by, the holders of record of at least 10% of the Class K Shares upon which such default in the payment of dividends exists and notice thereof shall be given in the same manner as that required for the annual meeting of shareholders; provided, however, that the Corporation shall not be required to call such special meeting if the annual meeting of shareholders shall be called to be held within 90 days after the date of receipt of the foregoing written request from the holders of Class K Shares. At any meeting at which such holders of Class K Shares shall be entitled to elect directors, holders of 50% of such Class K Shares, present in person or by proxy, shall be sufficient to constitute a quorum, and the vote of the holders of a majority of such shares so present at any such meeting at which there shall be such a quorum shall be sufficient to elect the members of the Board of Directors which such holders of Class K Shares are entitled to elect as herein provided. Notwithstanding any provision of these Amended and Restated Articles of Incorporation, as amended, or the Code of Regulations of the Corporation or any
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action taken by the holders of any class of shares fixing the number of directors of the Corporation, the two directors who may be elected by such holders of Class K Shares pursuant to this Subsection shall serve in addition to any other directors then in office or proposed to be elected otherwise than pursuant to this Subsection. Nothing in this Subsection shall prevent any change otherwise permitted in the total number of or classifications of directors of the Corporation or require the resignation of any director elected otherwise than pursuant to this Subsection. Notwithstanding any classification of the other directors of the Corporation, the two directors elected by such holders of Class K Shares shall be elected annually for terms expiring at the next succeeding annual meeting of shareholders.
(3) Upon any divesting of the special class voting rights of the holders of the Class K Shares in respect of elections of directors as provided in this Subsection, the terms of office of all directors then in office elected by such holders shall terminate immediately thereupon. If the office of any director elected by such holders voting as a class becomes vacant by reason of death, resignation, removal from office or otherwise, the remaining director elected by such holders voting as a class may elect a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.
(c) If at any time when the holders of Class K Shares are entitled to elect directors pursuant to the foregoing provisions of this Section the holders of any Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares or Noncumulative Shares are entitled to elect directors pursuant hereto by reason of any default in the payment of dividends thereon, then the voting rights of the Cumulative Shares and the Noncumulative Shares then entitled to vote shall be combined (with each class of shares having a number of votes proportional to the aggregate liquidation preference of its outstanding shares). In such case, the holders of Class K Shares and of all such other shares then entitled so to vote, voting as a class, shall elect such directors. If the holders of any such other shares have elected such directors prior to the happening of the default or event permitting the holders of Class K Shares to elect directors, or prior to a written request for the holding of a special meeting being received by the Secretary of the Corporation as required above, then a new election shall be held with all such other shares and the Class K Shares voting together as a single class for such directors, resulting in the termination of the term of such previously elected directors upon the election of such new directors.
(d) The affirmative vote of the holders of at least two-thirds of the Class K Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose, shall be necessary to effect either of the following:
(1) Any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Amended and Restated
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Articles of Incorporation, as amended, or of the Code of Regulations of the Corporation which affects adversely and materially the preferences or voting or other rights of the holders of Class K Shares which are set forth in these Amended and Restated Articles of Incorporation, as amended; provided, however, neither the amendment of these Amended and Restated Articles of Incorporation, as amended, so as to authorize, create or change the authorized or outstanding number of Class K Shares or of any shares ranking on a parity with or junior to the Class K Shares nor the amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely and materially preferences or voting or other rights of the holders of Class K Shares; or
(2) The authorization, creation or increase in the authorized number of any shares, or any security convertible into shares, in either case ranking prior to such series of Class K Shares.
(e) In the event, and only to the extent, that (1) Class K Shares are issued in more than one series and (2) Ohio law permits the holders of a series of a class of capital stock to vote separately as a class, the affirmative vote of the holders of at least two-thirds of each series of Class K Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose of voting on such matters, shall be required for any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of these Amended and Restated Articles of Incorporation, as amended, or of the Code of Regulations of the Corporation which affects adversely and materially the preferences or voting or other rights of the holders of such series which are set forth in these Amended and Restated Articles of Incorporation, as amended; provided, however, neither the amendment of these Amended and Restated Articles of Incorporation, as amended, so as to authorize, create or change the authorized or outstanding number of Class K Shares or of any shares ranking on a parity with or junior to the Class K Shares nor the Amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely and materially the preferences or voting or other rights of the holders of such series.
Section 6. 8 7 / 8 % Class K Cumulative Redeemable Preferred Shares . Of the 750,000 authorized Class K Shares, 350,000 shares are designated as a series entitled 8 7 / 8 % Class K Cumulative Redeemable Preferred Shares (hereinafter called 8 7 / 8 % Class K Preferred Shares). The 87/8% Class K Preferred Shares shall have the express terms set forth in this Division as being applicable to all Class K Preferred Shares as a class and, in addition, the following express terms applicable to all 8 7 / 8 % Class K Preferred Shares as a series of Class K Shares:
(a) The annual dividend rate of the 87/8% Class K Preferred Shares shall be 87/8% of the liquidation preference of $250.00 per share.
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(b) Dividends on the 8 7 / 8 % Class K Preferred Shares shall be payable, if declared, quarterly on or about the fifteenth day of January, April, July and October. The dividends payable for each full quarterly dividend period on each 8 7 / 8 % Class K Preferred Share shall be $5.546875. Dividends for any period shorter or longer than a full dividend period on the 8 7 / 8 % Class K Preferred Shares, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The aggregate dividend payable quarterly to each holder of 8 7 / 8 % Class K Preferred Shares shall be rounded to the nearest one-hundredth of one cent with $.00005 being rounded upward. Each dividend shall be payable to the holders of record on such record date, no less than 10 nor more than 30 days preceding the payment date thereof, as shall be fixed from time to time by the Corporations Board of Directors.
(c) Dividends on 8 7 / 8 % Class K Preferred Shares shall be cumulative as follows:
(1) With respect to shares included in the initial issue of 8 7 / 8 % Class K Preferred Shares and shares issued any time thereafter up to and including the record date for the payment of the first dividend on the initial issue of 8 7 / 8 % Class K Preferred Shares, dividends shall be cumulative from the date of the initial issue of 87/8% Class K Preferred Shares; and
(2) With respect to shares issued any time after the aforesaid record date, dividends shall be cumulative from the dividend payment date next preceding the date of issue of such shares, except that if such shares are issued during the period commencing the day after the record date for the payment of a dividend on 8 7 / 8 % Class K Preferred Shares and ending on the payment date of that dividend, dividends with respect to such shares shall be cumulative from that dividend payment date.
(d) The Corporation may, at any time or from time to time on, at its option upon not less than thirty (30) nor more than sixty (60) days written notice, redeem all or any part of the 8 7 / 8 % Class K Preferred Shares at a redemption price of $250.00 per share plus, in each case, an amount equal to all dividends accrued and unpaid thereon to the redemption date, without interest. The redemption price (other than the portion thereof consisting of accrued and unpaid dividends) is payable solely out of the sale proceeds of other capital shares of the Corporation, which may include any equity securities (including common shares and preferred shares), shares, interests, participation or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable for equity securities), or options to purchase any of the foregoing.
(e) The amount payable per 8 7 / 8 % Class K Preferred Share in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation shall be $250.00, plus an amount equal to all dividends accrued and unpaid thereon to the date of payment.
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(f) The affirmative vote of the holders of at least two-thirds of the Class K Preferred Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose, shall be necessary to effect the authorization, creation, increase in the authorized number of or issuance of any shares, or any security convertible into or exchangeable for shares, in any such case ranking prior to such series of Class K Preferred Shares in dividends, distributions or rights upon liquidation, dissolution or winding up.
XII. The Noncumulative Preferred Shares. The Noncumulative Preferred Shares shall have the following express terms:
Section 1. Series. The Noncumulative Shares may be issued from time to time in one or more series. All Noncumulative Shares shall be of equal rank and shall be identical, except in respect of the matters that may be fixed by the Board of Directors as hereinafter provided, and each share of a series shall be identical with all other shares of such series, except as to the dates on which and the periods for which dividends may be payable. All Noncumulative Shares shall rank on a parity with the Cumulative Shares, and shall be identical to all Cumulative Shares, except (1) in respect of the matters that may be fixed by the Board of Directors as provided in clauses (a) through (i), inclusive, of this Section 1 and (2) only dividends on the Noncumulative Shares are noncumulative as set forth herein. Subject to the provisions of Sections 2 through 5, inclusive, and Item XIII of this Division, which provisions shall apply to all Noncumulative Shares, the Board of Directors hereby is authorized to cause such shares to be issued in one or more series, and with respect to each such series, to determine and fix prior to the issuance thereof (and thereafter, to the extent provided in clause (b) of this Section) the following:
(a) The designation of the series, which may be by distinguishing number, letter or title;
(b) The authorized number of shares of the series, which number the Board of Directors may (except where otherwise provided in the creation of the series) increase or decrease from time to time before or after the issuance thereof (but not below the number of shares thereof then outstanding);
(c) The dividend rate or rates of the series, including the means by which such rates may be established;
(d) The dates on which and the period or periods for which dividends, if declared, shall be payable, including the means by which such dates and periods may be established;
(e) The redemption rights and price or prices, if any, for shares of the series;
(f) The terms and amount of the sinking fund, if any, for the purchase or redemption of shares of the series;
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(g) The amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation;
(h) Whether the shares of the series shall be convertible into Common Shares or shares of any other class and, if so, the conversion rate or rates or price or prices, any adjustments thereof and all other terms and conditions upon which such conversion may be made; and
(i) Restrictions (in addition to those set forth in Subsection 5(d) or 5(e) of this Item XII) on the issuance of shares of the same series or of any other class or series.
The Board of Directors is authorized to adopt from time to time amendments to the Amended and Restated Articles of Incorporation, as amended, fixing, with respect to each such series, the matters described in clauses (a) through (i), both inclusive, of this Section and is authorized to take such actions with respect thereto as may be required by law in order to effect such amendments.
Section 2. Dividends.
(a) The holders of Noncumulative Shares of each series, in preference to the holders of Common Shares and of any other class of shares ranking junior to the Noncumulative Shares, shall be entitled to receive out of any funds legally available therefor, if, when and as declared by the Board of Directors, dividends in cash at the rate or rates for such series fixed in accordance with the provisions of Section 1 above and no more, payable on the dates fixed for such series. Such dividends shall accrue, in the case of shares of each particular series, from and after the date or dates fixed with respect to such series; provided, however, that if the Board of Directors fails to declare a dividend payable on a dividend payment date on any Noncumulative Shares, the holders of the Noncumulative Shares shall have no right to receive a dividend in respect of the dividend period ending on such dividend payment date, and the Corporation shall have no obligation to pay the dividend accrued for such period, whether or not dividends on such Noncumulative Shares are declared payable on any future dividend payment date. No dividends shall be paid upon or declared or set apart for any series of the Noncumulative Shares for any dividend period unless at the same time (i) a like proportionate dividend for the then current dividend period, ratably in proportion to the respective annual dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Noncumulative Shares of all series then issued and outstanding and entitled to receive such dividend and (ii) the dividends payable for the dividend periods terminating on the same or any earlier date, ratably in proportion to the respective dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares and Class K Shares then issued and outstanding and entitled to receive such dividends.
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(b) So long as any Noncumulative Shares shall be outstanding no dividend, except a dividend payable in Common Shares or other shares ranking junior to the Noncumulative Shares, shall be paid or declared or any distribution be made, except as aforesaid, in respect of the Common Shares or any other shares ranking junior to the Noncumulative Shares, nor shall any Common Shares or any other shares ranking junior to the Noncumulative Shares be purchased, retired or otherwise acquired by the Corporation, except out of the proceeds of the sale of Common Shares or other shares of the Corporation ranking junior to the Noncumulative Shares received by the Corporation subsequent to the date of first issuance of Noncumulative Shares of any series, unless:
(1) All accrued and unpaid dividends on Cumulative Shares, including the full dividends for all current dividend periods, shall have been declared and paid or a sum sufficient for payment thereof set apart;
(2) All unpaid dividends on Noncumulative Shares for the then current dividend period shall have been declared and paid or a sum sufficient for payment therefor set apart; and
(3) There shall be no arrearages with respect to the redemption of Cumulative Shares or Noncumulative Shares of any series from any sinking fund provided for shares of such series in accordance with the provisions of Section 1 of this Item XII.
(c) The foregoing restrictions on the payment of dividends or other distributions on, or on the purchase, redemption retirement or other acquisition of, Common Shares or any other shares ranking on a parity with or junior to the Noncumulative Shares shall be inapplicable to (i) any payments in lieu of issuance of fractional shares thereof, whether upon any merger, conversion, stock dividend or otherwise, (ii) the conversion of Cumulative Shares or Noncumulative Shares into Common Shares or (iii) the exercise by the Corporation of its rights pursuant to Item XIV(d) of this Division A, Section 4(d) of Division B or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation with respect to any other class or series of capital stock hereafter created or authorized.
(d) If, for any taxable year, the Corporation elects to designate as capital gain dividends (as defined in Section 857 of the Code) any portion (the Capital Gains Amount) of the dividends paid or made available for the year to holders of all classes of stock (the Total Dividends), then, to the extent permissible under the Code and to the extent it does not cause any dividends to fail to qualify for the dividends paid deduction under Section 561 of the Code, the portion of the Capital Gains Amount that shall be allocable to holders of the Noncumulative Shares shall be the amount that the total dividends paid or made available to the holders of the Noncumulative Shares for the year bears to the Total Dividends.
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Section 3. Redemption.
(a) Subject to the express terms of each series, the Corporation:
(1) May, from time to time at the option of the Board of Directors, redeem all or any part of any redeemable series of Noncumulative Shares at the time outstanding at the applicable redemption price for such series fixed in accordance with the provisions of Section 1 of this Item XII; and
(2) Shall, from time to time, make such redemptions of each series of Noncumulative Shares as may be required to fulfill the requirements of any sinking fund provided for shares of such series at the applicable sinking fund redemption price fixed in accordance with the provisions of Section 1 of this Item XII; and shall, in each case, pay all unpaid dividends for the then current dividend period to the redemption date.
(b) (1) Notice of every such redemption shall be mailed, postage prepaid, to the holders of record of the Noncumulative Shares to be redeemed at their respective addresses then appearing on the books of the Corporation, not less than 30 days nor more than 60 days prior to the date fixed for such redemption, or such other time prior thereto as the Board of Directors shall fix for any series pursuant to Section 1 of this Item XII prior to the issuance thereof. At any time after notice as provided above has been deposited in the mail, the Corporation may deposit the aggregate redemption price of Noncumulative Shares to be redeemed, together with accrued and unpaid dividends thereon for the then current dividend period to the redemption date, with any bank or trust company in Cleveland, Ohio, or New York, New York, having capital and surplus of not less than $100,000,000 named in such notice and direct that there be paid to the respective holders of the Noncumulative Shares so to be redeemed amounts equal to the redemption price of the Noncumulative Shares so to be redeemed together with such accrued and unpaid dividends thereon for the then current dividend period, on surrender of the share certificate or certificates held by such holders; and upon the deposit of such notice in the mail and the making of such deposit of money with such bank or trust company, such holders shall cease to be shareholders with respect to such shares; and from and after the time such notice shall have been so deposited and such deposit of money shall have been so made, such holders shall have no rights or claim against the Corporation with respect to such shares, except only the right to receive such money from such bank or trust company without interest or to exercise before the redemption date any unexpired privileges of conversion. In the event less than all of the outstanding Noncumulative Shares are to be redeemed, the Corporation shall select by lot the shares so to be redeemed in such manner as shall be prescribed by the Board of Directors.
(2) If the holders of Noncumulative Shares which have been called for redemption shall not within six years after such deposit claim the amount deposited for the redemption thereof, any such bank or trust company shall, upon demand, pay over to the Corporation such unclaimed amounts and thereupon such bank or trust company and the Corporation shall be relieved of all responsibility in respect thereof and to such holders.
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(c) Any Noncumulative Shares which are (1) redeemed by the Corporation pursuant to the provisions of this Section, (2) purchased and delivered in satisfaction of any sinking fund requirements provided for shares of such series, (3) converted in accordance with the express terms thereof, or (4) otherwise acquired by the Corporation shall resume the status of authorized but unissued Noncumulative Shares without serial designation.
(d) Except in connection with the exercise of the Corporations rights pursuant to Section (d) of Item XIV of this Division A, Section 4(d) of Division B or any similar Section hereafter contained in these Amended and Restated Articles of Incorporation, as amended, with respect to any other class or series of capital stock hereafter created or authorized, the Corporation may not purchase or redeem (for sinking fund purposes or otherwise) of less than all of the Noncumulative Shares then outstanding except in accordance with a stock purchase offer made to all holders of record of Noncumulative Shares, unless all dividends on all Noncumulative Shares then outstanding for the then current dividend period shall have been declared and paid or funds therefor set apart and all accrued sinking fund obligations applicable thereto shall have been complied with.
Section 4. Liquidation.
(a) (1) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of Noncumulative Shares of any series shall be entitled to receive in full out of the assets of the Corporation, including its capital, before any amount shall be paid or distributed among the holders of the Common Shares or any other shares ranking junior to the Noncumulative Shares, the amounts fixed with respect to shares of such series in accordance with Section 1 of this Item XII, plus an amount equal to all dividends accrued and unpaid thereon for the then current dividend period to the date of payment of the amount due pursuant to such liquidation, dissolution or winding up of the affairs of the Corporation. In the event the net assets of the Corporation legally available therefor are insufficient to permit the payment upon all outstanding Cumulative Shares and Noncumulative Shares of the full preferential amount to which they are respectively entitled, then such net assets shall be distributed ratably upon all outstanding Noncumulative Shares in proportion to the full preferential amount to which each such share is entitled.
(2) After payment to the holders of Noncumulative Shares of the full preferential amounts as aforesaid, the holders of Noncumulative Shares, as such, shall have no right or claim to any of the remaining assets of the Corporation.
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(b) The merger or consolidation of the Corporation into or with any other Corporation, the merger of any other Corporation into it, or the sale, lease or conveyance of all or substantially all the assets of the Corporation shall not be deemed to be a dissolution, liquidation or winding up for the purposes of this Section.
Section 5. Voting.
(a) The holders of Noncumulative Shares shall have no voting rights, except as provided in this Section or required by law.
(b) (1) If, and so often as, the Corporation shall not have fully paid, or shall not have declared and set aside a sum sufficient for the payment of, dividends on any series of Noncumulative Shares at the time outstanding, for a number of dividend payment periods, whether consecutive or not, which in the aggregate contain at least 540 days, the holders of such Noncumulative Shares, voting separately as a class, together with all Cumulative Shares upon which like voting rights have been conferred and are exercisable, shall be entitled to elect, as herein provided, two members of the Board of Directors of the Corporation; provided, however, that the holders of such Noncumulative Shares shall not exercise such special class voting rights except at meetings of such shareholders for the election of directors at which the holders of not less than 50% of such Noncumulative Shares are present in person or by proxy; and provided further, that the special class voting rights provided for in this paragraph when the same shall have become vested shall remain so vested until the Corporation shall have fully paid, or shall have set aside a sum sufficient for the payment of, dividends on such Noncumulative Shares then outstanding for a number of consecutive dividend payment periods which in the aggregate contain at least 360 days, whereupon the holders of such Noncumulative Shares shall be divested of their special class voting rights in respect of subsequent elections of directors, subject to the revesting of such special class voting rights in the event above specified in this paragraph.
(2) In the event of default entitling holders of Noncumulative Shares to elect two directors as specified in paragraph (1) of this Subsection, a special meeting of such holders for the purpose of electing such directors shall be called by the Secretary of the Corporation upon written request of, or may be called by, the holders of record of at least 10% of the Noncumulative Shares upon which such default in the payment of dividends exists and notice thereof shall be given in the same manner as that required for the annual meeting of shareholders; provided, however, that the Corporation shall not be required to call such special meeting if the annual meeting of shareholders shall be called to be held within 90 days after the date of receipt of the foregoing written request from the holders of Noncumulative Shares. At any meeting at which such holders of Noncumulative Shares shall be entitled to elect directors, holders of 50% of such Noncumulative Shares, present in person or by proxy, shall be sufficient to constitute a quorum, and the vote of the holders of a majority of such shares so present at any such
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meeting at which there shall be such a quorum shall be sufficient to elect the members of the Board of Directors which such holders of Noncumulative Shares are entitled to elect as herein provided. Notwithstanding any provision of these Amended and Restated Articles of Incorporation, as amended, or the Code of Regulations of the Corporation or any action taken by the holders of any class of shares fixing the number of directors of the Corporation, the two directors who may be elected by such holders of Noncumulative Shares pursuant to this Subsection shall serve in addition to any other directors then in office or proposed to be elected otherwise than pursuant to this Subsection. Nothing in this Subsection shall prevent any change otherwise permitted in the total number of or classifications of directors of the Corporation nor require the resignation of any director elected otherwise than pursuant to this Subsection. Notwithstanding any classification of the other directors of the Corporation, the two directors elected by such holders of Noncumulative Shares shall be elected annually for terms expiring at the next succeeding annual meeting of shareholders.
(3) Upon any divesting of the special class voting rights of the holders of the Noncumulative Shares in respect of elections of directors as provided in this Subsection, the terms of office of all directors then in office elected by such holders shall terminate immediately thereupon. If the office of any director elected by such holders voting as a class becomes vacant by reason of death, resignation, removal from office or otherwise, the remaining director elected by such holders voting as a class may elect a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.
(c) If at any time when the holders of Noncumulative Shares are entitled to elect directors pursuant to the foregoing provisions of this Section the holders of any Cumulative Shares are entitled to elect directors pursuant hereto by reason of any default in the payment of dividends thereon, then the voting rights of the Cumulative Shares and Noncumulative Shares then entitled to vote shall be combined (with class of shares having a number of votes proportional to the aggregate liquidation preference of its outstanding shares). In such case, the holders of Noncumulative Shares and of all such other shares then entitled so to vote, voting as a class, shall elect such directors. If the holders of any such other shares have elected such directors prior to the happening of the default or event permitting the holders of Noncumulative Shares to elect directors, or prior to a written request for the holding of a special meeting being received by the Secretary of the Corporation as required above, then a new election shall be held with all such other shares and the Noncumulative Shares voting together as a single class for such directors, resulting in the termination of the term of such previously elected directors upon the election of such new directors.
(d) The affirmative vote of the holders of at least two-thirds of the Noncumulative Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose, shall be necessary to effect either of the following:
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(1) Any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Amended and Restated Articles of Incorporation, as amended, or of the Code of Regulations of the Corporation which affects adversely and materially the preferences or voting or other rights of the holders of Noncumulative Shares which are set forth in these Amended and Restated Articles of Incorporation, as amended; provided, however, neither the amendment of these Amended and Restated Articles of Incorporation, as amended, so as to authorize, create or change the authorized or outstanding number of Noncumulative Shares or of any shares ranking on a parity with or junior to the Noncumulative Shares nor the amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely and materially preferences or voting or other rights of the holders of Noncumulative Shares; or
(2) The authorization, creation or increase in the authorized number of any shares, or any security convertible into shares, in either case ranking prior to such Noncumulative Shares.
(e) In the event, and only to the extent, that (1) Noncumulative Shares are issued in more than one series and (2) Ohio law permits the holders of a series of a class of capital stock to vote separately as a class, the affirmative vote of the holders of at least two-thirds of each series of the Noncumulative Shares at the time outstanding, voting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose of voting on such matters, shall be required for any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of these Amended and Restated Articles of Incorporation, as amended, or of the Code of Regulations of the Corporation which affects adversely and materially the preferences or voting or other rights of the holders of such series which are set forth in these Amended and Restated Articles of Incorporation, as amended; provided, however, neither the amendment of these Amended and Restated Articles of Incorporation, as amended, so as to authorize, create or change the authorized or outstanding number of Noncumulative Shares or of any shares remaining on a parity with or junior to the Noncumulative Shares nor the amendment of the provisions of the Code of Regulations so as to change the number or classification of directors of the Corporation shall be deemed to affect adversely and materially preferences or voting or other rights of the holder of such series.
XIII. Definitions. For the purposes of this Division:
(a) Whenever reference is made to shares ranking prior to Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares, Noncumulative Shares or Voting Preferred Shares, such reference shall mean and include all shares of the Corporation in respect of which the rights of the holders thereof as to the payment of dividends or as to distributions in the event of a voluntary or involuntary liquidation, dissolution or winding up of the
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affairs of the Corporation are given preference over the rights of the holders of Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares, Noncumulative Shares or Voting Preferred Shares, as the case may be; and
(b) Whenever reference is made to shares on a parity with Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares, Noncumulative Shares or Voting Preferred Shares, such reference shall mean and include all shares of the Corporation in respect of which the rights of the holders thereof as to the payment of dividends or as to distributions in the event of a voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation rank equally (except as to the amounts fixed therefor) with the rights of the holders of Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares, Noncumulative Shares or Voting Preferred Shares, as the case may be; and
(c) Whenever reference is made to shares ranking junior to Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares, Noncumulative Shares or Voting Preferred Shares, such reference shall mean and include all shares of the Corporation other than those defined under Subsections (a) and (b) of this Section as shares ranking prior to or on a parity with Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares, Noncumulative Shares or Voting Preferred Shares, as the case may be.
XIV. Restrictions on Transfer to Preserve Tax Benefit; Shares Subject to Redemption .
(a) Definitions. For the purposes of this Item XIV of this Division A of this Article FOURTH, the following terms shall have the following meanings:
Beneficial Ownership shall mean ownership of Preferred Shares by a Person who would be treated as an owner of such Preferred Shares either directly or constructively through the application of Section 544 of the Code, as modified by Section 856(h) of the Code. The terms Beneficial Owner, Beneficially Owns and Beneficially Owned shall have the correlative meanings.
Code shall mean the Internal Revenue Code of 1986, as amended from time to time.
Constructive Ownership shall mean ownership of Preferred Shares by a Person who would be treated as an owner of such Preferred Shares either directly or constructively through the application of Section 318 of the Code, as modified by Section 856(d)(5) of the Code. The terms Constructive Owner, Constructively Owns and Constructively Owned shall have the correlative meanings.
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Excess Preferred Shares shall mean any Preferred Shares (i) acquired or proposed to be acquired by any Person pursuant to a Transfer to the extent that, if effective, such Transfer would result in the transferee either Beneficially Owning Preferred Shares or Constructively Owning Preferred Shares in excess of the Ownership Limit, or (ii) which are the subject of a Transfer that, if effective, which would result in the Corporation being closely held within the meaning of Section 856(h) of the Code.
Market Price shall mean, with respect to any series of any class of Preferred Shares, the last reported sales price of such series reported on the New York Stock Exchange on the trading day immediately preceding the relevant date or, if shares of such series are not then traded on the New York Stock Exchange, the last reported sales price of shares of such series on the trading day immediately preceding the relevant date as reported on any exchange or quotation system over which the shares of such series may be traded, or if shares of such series are not then traded over any exchange or quotation system, then the market price of shares of such series on the relevant date as determined in good faith by the Board of Directors of the Corporation.
Ownership Limit shall mean, with respect to each series of each class of Preferred Shares, 9.8% of the outstanding shares of such series.
Person shall mean an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, an association, a private foundation within the meaning of Section 509(a) of the Code, a joint stock company, other entity or a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended; provided, however, that a person does not mean an underwriter which participates in a public offering of Preferred Shares, for a period of 35 days following the purchase by such underwriter of such Preferred Shares.
Preferred Shares shall mean, collectively, Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares, Noncumulative Shares and Voting Preferred Shares.
REIT shall mean a Real Estate Investment Trust under Section 856 of the Code.
Transfer shall mean any sale, transfer, gift, assignment, devise or other disposition of Preferred Shares (including, without limitation, (i) the granting of
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any option or entering into any agreement for the sale, transfer or other disposition of Preferred Shares or (ii) the sale, transfer, assignment or other disposition of any securities or rights convertible into or exchangeable for Preferred Shares), whether voluntary or involuntary, whether of record or beneficially and whether by operation of law or otherwise.
(b) Restrictions on Transfers .
(i) Except as provided in Section (i) of this Item XIV of this Division A of this Article FOURTH, no Person shall Beneficially Own or Constructively Own shares of any series of any class of Preferred Shares in excess of the Ownership Limit applicable to such series.
(ii) Except as provided in Section (i) of this Item XIV of this Division A of this Article FOURTH, any Transfer that, if effective, would result in any Person Beneficially Owning shares of any series of any class of Preferred Shares in excess of the Ownership Limit applicable to such series shall be void ab initio as to the Transfer of such Preferred Shares which would be otherwise Beneficially Owned by such Person in excess of such Ownership Limit, and the intended transferee shall acquire no rights in such Preferred Shares.
(iii) Except as provided in Section (i) of this Item XIV of this Division A of this Article FOURTH, any Transfer that, if effective, would result in any Person Constructively Owning shares of any series of any class of Preferred Shares in excess of the Ownership Limit applicable to such series shall be void ab initio as to the Transfer of such Preferred Shares which would be otherwise Constructively Owned by such Person in excess of such amount, and the intended transferee shall acquire no rights in such Preferred Shares.
(iv) Notwithstanding any other provisions contained in this Item XIV, any Transfer (whether or not such Transfer is the result of a transaction entered into through the facilities of the New York Stock Exchange) or other event that, if effective, would result in the Corporation being closely held within the meaning of Section 856(h) of the Code, or would otherwise result in the Corporation failing to qualify as a REIT (including, but not limited to, a Transfer or other event that would result in the Corporation owning (directly or Constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Corporation from such tenant would cause the Corporation to fail to satisfy any of the gross income requirement of Section 856(c) of the Code) shall be void ab initio as to the
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Transfer of the Preferred Shares or other event which would cause the Corporation to be closely held within the meaning of Section 856(h) of the Code or would otherwise result in the Corporation failing to qualify as a REIT; and the intended transferee or owner or Constructive or Beneficial Owner shall acquire or retain no rights in such Preferred Shares.
(v) For purposes of construing the foregoing provisions, any attempt to transfer Preferred Shares in violation of the Ownership Limit applicable to the series of the class of such Preferred Shares (as such Ownership Limit may be modified by the Board of Directors pursuant to Section (h) of Item XIV) shall be construed as causing such Preferred Shares to be transferred by operation of law to the Corporation as trustee of a trust for the exclusive benefit of the person or persons to whom such Preferred Shares can ultimately be transferred without violating the Ownership Limit and any Excess Preferred Shares while held in such trust shall not have any voting rights, shall not be considered for purposes of any shareholder vote or for determining a quorum for such a vote, and shall not be entitled to any dividends or other distributions.
(c) Remedies for Breach. If the Board of Directors or its designees shall at any time determine in good faith that a Transfer has taken place in violation of Section (b) of this Item XIV of this Division A of this Article FOURTH or that a Person intends to acquire or has attempted to acquire beneficial ownership (determined without reference to any rules of attribution), Beneficial Ownership or Constructive Ownership of any Preferred Shares of the Corporation in violation of Section (b) of this Item XIV of this Division A of this Article FOURTH, or that any such Transfer, intended or attempted acquisition or acquisition would jeopardize the status of the Corporation as a REIT under the Code, the Board of Directors or its designees shall take such actions as it deems advisable to refuse to give effect or to prevent such Transfer, including, but not limited to, refusing to give effect to such Transfer on the books of the Corporation or instituting proceedings to enjoin such Transfer and, in addition, exercising its rights under Section (d) of this Item XIV of this Division A of this Article FOURTH.
(d) Purchase Right in Excess Preferred Shares. Beginning on the date of the occurrence of a Transfer which, if consummated, in the good faith judgment of the Board of Directors of the Corporation, could result in Excess Preferred Shares, the Excess Preferred Shares, subject to such transfer shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that created such Excess Preferred Shares (or, in the case of a devise or gift, the Market Price at the time of such devise or gift) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation shall have the
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right to accept such offer for a period of 90 days after the later of (i) the date of such Transfer and (ii) if the Corporation does not receive a notice of such Transfer pursuant to Section (e) of this Item XIV of this Division A of this Article FOURTH, the date the Board of Directors determines in good faith that such Transfer has occurred. Prompt payment of the purchase price shall be made in such reasonable manner as may be determined by the Corporation. From and after the date fixed for purchase by the Corporation, and so long as payment of the purchase price for the Excess Preferred Shares to be so purchased shall have been made or duly provided for, the holder of any Excess Preferred Shares so called for purchase shall cease to be entitled to dividends, distributions, voting rights and other benefits with respect to such Excess Preferred Shares, excepting only the right to payment of the purchase price fixed as aforesaid. Any dividend or distribution paid to a proposed transferee of Excess Preferred Shares prior to the discovery by the Corporation that the Excess Preferred Shares have been transferred in violation of Section (b) of this Item XIV of this Division A of this Article FOURTH shall be repaid to the Corporation upon demand. If the foregoing provisions are determined to be void or invalid by virtue of any legal decision, statute, rule or regulation, then the intended transferee of such Excess Preferred Shares shall be deemed, at the option of the Corporation, to have acted as agent on behalf of the Corporation in acquiring such Excess Preferred Shares and to hold such Excess Preferred Shares on behalf of the Corporation.
(e) Notice of Restricted Transfer. Any Person who acquires or attempts to acquire Preferred Shares or other securities in violation of subparagraph (b) of this Item XIV, or any Person who owns or will own Excess Preferred Shares as a result of an event under subparagraph (b) of this Item XIV, shall immediately give written notice to the Corporation of such event and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer or attempted Transfer or other event on the Corporations status as a REIT.
(f) Owners Required to Provide Information. From and after the date of the Initial Public Offering:
(i) every Beneficial Owner of more than 5.0% (or such other percentage, between 0.5% and 5.0%, as provided in the regulations promulgated pursuant to the Code) of the outstanding Preferred Shares of the Corporation shall, within 30 days after January 1 of each year, give written notice to the Corporation stating the name and address of such Beneficial Owner, the number of shares Beneficially Owned, and description of how such shares are held. Each such Beneficial Owner shall provide to the Corporation such additional information as the Corporation may request in order to determine the effect, if any, of such Beneficial Ownership on the Corporations status as a REIT.
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(ii) each Person who is a Beneficial Owner or Constructive Owner of Preferred Shares and each Person (including the shareholder of record) who is holding Preferred Shares for a Beneficial Owner or Constructive Owner shall provide to the Corporation such information that the Corporation may request, in good faith, in order to determine the Corporations status as a REIT.
(g) Remedies Not Limited. Nothing contained in this Division A of this Article FOURTH shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable to protect the Corporation and the interests of its shareholders by preservation of the Corporations status as a REIT.
(h) Ambiguity. In the case of an ambiguity in the application of any of the provisions of this Item XIV of this Division A of this Article FOURTH, including any definition contained in Section (a) of this Item XIV, the Board of Directors shall have the power to determine the application of the provisions of this Item XIV with respect to any situation based on the facts known to it.
(1) Exceptions.
(i) Subject to Section (b)(iv) of this Item XIV of this Division A, the Board of Directors may exempt a Person from the Ownership Limit applicable to a series of a class of Preferred Shares if such Person is not an individual (other than pension plans described in Section 856(h)(3)) for purposes of Section 542(a)(2) of the Code if the Board of Directors obtains such representations and undertakings from such Person as are reasonably necessary to ascertain that no individuals Beneficial Ownership of such Preferred Shares will violate the Ownership Limit, and agrees that any violation or attempted violation will result in such Preferred Shares in excess of the Ownership Limit being subject to repurchase by the Corporation as set forth in Section (d) of this Item XIV of this Division A of this Article FOURTH.
(ii) The Board of Directors may exempt a Person from the limitation on such Person Constructively Owning Preferred Shares in excess of the Ownership Limit applicable to a series of a class of such Preferred Shares if such Person does not own and represents that it will not own, directly or constructively (by virtue of the application of Section 318 of the Code, as modified by Section 856(d)(5) of the Code), more than a 9.8% interest (as set forth in Section 856(d)(2)(B)) in a tenant of any real property owned or leased by the Corporation, if the Board of Directors obtains such representations and undertakings from such Person as are reasonably necessary to ascertain this fact and agrees that any
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violation or attempted violation will result in such Preferred Shares in excess of the Ownership Limit being deemed to be Excess Preferred Shares and subject to repurchase by the Corporation as set forth in Section (d) of this Item XIV of this Division A of this Article FOURTH.
XV. Legend. Each certificate for Preferred Shares shall bear the following legend:
The Preferred Shares represented by this certificate are subject to restrictions on transfer for the purpose of the corporations maintenance of its status as a Real Estate Investment Trust under the Internal Revenue Code of 1986, as amended. Subject to certain provisions of the Corporations Articles of Incorporation, no Person may Beneficially Own or Constructively Own shares of any series of any class of Preferred Shares in excess of 9.8% of the outstanding Preferred Shares of such series. Any Person who attempts to Beneficially Own or Constructively Own shares of any series of any class of Preferred Shares in excess of the above limitations must immediately notify the Corporation. All capitalized terms in this legend have the meanings defined in the Corporations Articles of Incorporation, a copy of which, including the restrictions on transfer, will be sent without charge to each shareholder who so requests. If the restrictions on transfer are violated, certain of the Preferred Shares represented hereby may be subject to repurchase by the Corporation on the terms and conditions set forth in the Corporations Articles of Incorporation.
XVI. The Voting Preferred Shares . The Voting Preferred Shares shall have the following express terms:
Section 1. General . The Voting Preferred Shares shall rank on a parity with the Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares and shall be identical to all Class A Shares, Class B Shares, Class C Shares, Class D Shares, Class E Shares, Class F Shares, Class G Shares, Class H Shares, Class I Shares, Class J Shares, Class K Shares and Noncumulative Shares except as set forth in the provisions of Sections 2 through 10, both inclusive, which provisions shall apply to all of the Voting Preferred Shares.
Section 2. Definitions . For purposes of the Voting Preferred Shares, the following terms shall have the meanings indicated:
Board of Directors shall mean the Board of Directors of the Corporation or any committee authorized by such Board of Directors to perform any of its responsibilities with respect to the Voting Preferred Shares; provided that, for purposes of paragraph (a) of Section 8, the term Board of Directors shall not include any such committee.
Business Day shall mean any day other than a Saturday, Sunday or a day on which state or federally chartered banking institutions in New York, New York are not required to be open.
Code shall mean the Internal Revenue Code of 1986, as amended from time to time.
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Dividend Payment Date shall mean March 31, June 30, September 30 and December 31 of each year; provided, that if any Dividend Payment Date falls on any day other than a Business Day, the dividend payment payable on such Dividend Payment Date shall be paid on the Business Day immediately following such Dividend Payment Date and no interest shall accrue on such dividend from such Dividend Payment Date to the date such dividend is paid.
Dividend Periods shall mean each quarterly dividend period commencing on and including March 31, June 30, September 30 and December 31 of each year and ending on and including the day preceding the first day of the next succeeding Dividend Period, other than the Dividend Period during which any Voting Preferred Shares shall be redeemed pursuant to Section 5, which shall end on and include the Redemption Date with respect to the Voting Preferred Shares being redeemed.
Event shall have the meaning set forth in paragraph (b) (i) of Section 8.
Liquidation Preference shall have the meaning set forth in paragraph (a) of Section 4.
REIT shall mean a Real Estate Investment Trust under Section 856 of the Code.
set apart for payment shall be deemed to include, without any action other than the following, the recording by the Corporation in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to a declaration of dividends or other distribution by the Board of Directors, the allocation of funds to be so paid on any series or class of capital stock of the Corporation; provided, however, that if any funds for any class or series of shares ranking junior to the Voting Preferred Shares or any class or series of shares ranking on a parity with the Voting Preferred Shares are placed in a separate account of the Corporation or delivered to a disbursing, paying or other similar agent, then set apart for payment with respect to the Voting Preferred Shares shall mean placing such funds in a separate account or delivering such funds to a disbursing, paying or other similar agent.
Section 3. Dividends . (a) The holders of Voting Preferred Shares shall be entitled to receive, when and as declared by the Board of Directors out of funds legally available for that purpose, cumulative dividends payable in cash in an amount per Voting Preferred Share equal to $2.3438 per annum (equivalent to 9 3/8% of the per share Liquidation Preference per annum). Such dividends shall be cumulative from the first day of the Dividend Period in which the Closing Date (as defined in that certain Agreement and Plan of Merger dated as of October 4, 2002 by and among the Corporation, JDN Realty Corporation and DDR Transitory Sub, Inc.) shall occur, whether or not in any Dividend Period or Periods such dividends shall be declared or there shall be funds of the Corporation legally available for the payment of such dividends, and shall be payable quarterly in arrears on each Dividend Payment Date. Each such dividend shall be payable in arrears to the holders of record of the Voting Preferred Shares, as they appear on the stock records of the Corporation at the close of business on the fifteenth day of the calendar month in which the applicable Dividend Payment Date falls on or such other
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date designated by the Board of Directors for the payment of dividends that is not more than 45 nor less than 10 days prior to such Dividend Payment Date, as the case may be, immediately preceding such Dividend Payment Date. No dividends on the Voting Preferred Shares shall be declared by the Board of Directors or be paid or set apart for payment by the Corporation at such time as any agreement of the Corporation, including any agreement relating to the Corporations indebtedness, prohibits such declaration, payment or setting apart for payment or provides that such declaration, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such declaration, payment or setting apart for payment shall be restricted or prohibited by law. Accumulated, accrued and unpaid dividends for any past Dividend Periods may be declared and paid at any time, without reference to any regular Dividend Payment Date, to holders of record on such date, which date shall not precede by more than 45 days the payment date thereof, as may be fixed by the Board of Directors.
(b) Any dividend payable on the Voting Preferred Shares for any partial dividend period shall be computed ratably on the basis of twelve 30-day months and a 360-day year. Holders of Voting Preferred Shares shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the Voting Preferred Shares. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Voting Preferred Shares that may be in arrears. Any dividend payment made on the Voting Preferred Shares shall first be credited against the earliest accrued but unpaid dividend due with respect to such shares which remains payable.
(c) If, for any taxable year, the Corporation elects to designate as capital gain dividends (as defined in Section 857 of the Code) any portion (the Capital Gains Amount) of the total distributions (as determined for federal income tax purposes) paid or made available for the year to holders of all classes of capital stock (the Total Dividends), then the portion of the Capital Gains Amount that shall be allocable to holders of Voting Preferred Shares shall be in the same proportion that the Total Dividends paid or made available to the holders of Voting Preferred Shares for the year bears to the Total Dividends. If, for any taxable year, the Corporation elects, as provided in Section 857(b)(3)(D) of the Code, to designate as undistributed capital gains any portion of the Corporations total net capital gains for the taxable year, then such undistributed capital gains shall be allocated between the holders of the Voting Preferred Shares and the holders of other classes or series of capital stock of the Corporation in a manner that is consistent with such allocations being considered other than a preferential dividend within the meaning of Section 562(c) of the Code.
(d) So long as any of the Voting Preferred Shares are outstanding, except as described in the immediately following sentence, no dividends shall be declared or paid or set apart for payment by the Corporation and no other distribution of cash or other property shall be declared or made, directly or indirectly, by the Corporation with respect to any shares ranking on a parity unless, in each case, dividends equal to the full amount of accumulated, accrued and unpaid dividends on all outstanding Voting Preferred Shares have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof has been or contemporaneously is set apart for payment of such
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dividends on the Voting Preferred Shares for all Dividend Periods ending on or prior to the date such dividend or distribution is declared, paid, set apart for payment or made, as the case may be, with respect to such shares ranking on a parity. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends declared upon the Voting Preferred Shares and all dividends declared upon any shares ranking on a parity shall be declared ratably in proportion to the respective amounts of dividends accumulated, accrued and unpaid on the Voting Preferred Shares and accumulated, accrued and unpaid on such shares ranking on a parity.
(e) So long as any of the Voting Preferred Shares are outstanding, no dividends (other than dividends or distributions paid in shares, or options, warrants or rights to subscribe for or purchase shares, ranking junior to the Voting Preferred Shares) shall be declared or paid or set apart for payment by the Corporation and no other distribution of cash or other property shall be declared or made, directly or indirectly, by the Corporation with respect to any shares ranking junior to the Voting Preferred Shares, nor shall any shares ranking junior to the Voting Preferred Shares be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Shares made for purposes of an employee incentive, benefit or stock purchase plan of the Corporation or any subsidiary) for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any shares of any such stock), directly or indirectly, by the Corporation (except by conversion into or exchange for shares, or options, warrants or rights to subscribe for or purchase shares, ranking junior to the Voting Preferred Shares), nor shall any other cash or other property otherwise be paid or distributed to or for the benefit of any holder of shares ranking junior to the Voting Preferred Shares in respect thereof, directly or indirectly, by the Corporation unless, in each case, dividends equal to the full amount of all accumulated, accrued and unpaid dividends on all outstanding Voting Preferred Shares have been declared and paid, or such dividends have been declared and a sum sufficient for the payment thereof has been set apart for such payment, on all outstanding Voting Preferred Shares for all Dividend Periods ending on or prior to the date such dividend or distribution is declared, paid, set apart for payment or made with respect to such shares ranking junior to the Voting Preferred Shares, or the date such shares ranking junior to the Voting Preferred Shares are redeemed, purchased or otherwise acquired or monies paid to or made available for any sinking fund for such redemption, or the date any such cash or other property is paid or distributed to or for the benefit of any holders of shares ranking junior to the Voting Preferred Shares in respect thereof, as the case may be.
(f) In determining the extent to which a distribution with respect to the Voting Preferred Shares constitutes a dividend for tax purposes, the earnings and profits of the Corporation will be allocated, on a pro rata basis, in accordance with the ranking of the class of capital stock or series of capital stock, constituting a class within the meaning of Code Section 562(c), of the Corporation, as described in Section 7.
Notwithstanding the provisions of this Section 3, the Corporation shall not be prohibited from (i) declaring or paying or setting apart for payment any dividend or distribution on any shares ranking junior to or on a parity with the Voting Preferred Shares or (ii) redeeming, purchasing or otherwise acquiring any shares ranking junior to or on a parity with the Voting Preferred Shares, in each case, if such declaration, payment, redemption, purchase or other acquisition is necessary in order to assist in maintaining the continued qualification of the Corporation as a REIT under Section 856 of the Code.
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Section 4. Liquidation Preference . (a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution by the Corporation (whether of capital, surplus or otherwise) shall be made to or set apart for the holders of shares ranking junior to the Voting Preferred Shares, the holders of Voting Preferred Shares shall be entitled to receive Twenty-Five Dollars ($25.00) per Voting Preferred Share (the Liquidation Preference), plus an amount equal to all dividends accumulated, accrued and unpaid thereon to the date of final distribution to such holders; but such holders shall not be entitled to any further payment. Until the holders of the Voting Preferred Shares have been paid the Liquidation Preference in full, plus an amount equal to all dividends accumulated, accrued and unpaid thereon to the date of final distribution to such holders, no payment will be made to any holder of shares ranking junior to the Voting Preferred Shares upon the liquidation, dissolution or winding up of the Corporation. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of Voting Preferred Shares shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other shares ranking on a parity with the Voting Preferred Shares, then such assets, or the proceeds thereof, shall be distributed among the holders of Voting Preferred Shares and any such other shares ranking on a parity with the Voting Preferred Shares ratably in the same proportion as the respective amounts that would be payable on such Voting Preferred Shares and any such other shares ranking on a parity with the Voting Preferred Shares if all amounts payable thereon were paid in full. For the purposes of this Section 4, (i) a consolidation or merger of the Corporation with or into one or more other entities, (ii) a sale, lease, transfer or conveyance of all or substantially all of the Corporations assets, or (iii) a statutory share exchange shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Corporation.
(b) Upon any liquidation, dissolution or winding up of the Corporation, after payment shall have been made in full to the holders of Voting Preferred Shares and any shares ranking on a parity with the Voting Preferred Shares, as provided in this Section 4, any other shares ranking junior to the Voting Preferred Shares shall, subject to the respective terms thereof, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Voting Preferred Shares and any shares ranking on a parity with the Voting Preferred Shares shall not be entitled to share therein.
Section 5. Redemption at the Option of the Corporation . (a) Shares of Voting Preferred Shares shall not be redeemable by the Corporation prior to September 15, 2003. On and after September 15, 2003, the Corporation, at its option, may redeem Voting Preferred Shares, in whole or from time to time in part, at a redemption price payable in cash equal to $25.00 per share, plus all accumulated, accrued and unpaid dividends to the date fixed for redemption (the Redemption Date); provided, however, that in the event of a redemption of Voting Preferred Shares, if the Redemption Date occurs after a
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dividend record date and on or prior to the related Dividend Payment Date, the dividend payable on such Dividend Payment Date in respect of such shares called for redemption shall be payable on such Dividend Payment Date to the holders of record at the close of business on such dividend record date, and shall not be payable as part of the redemption price for such shares. In connection with any redemption pursuant to this Section 5(a), the redemption price of the Voting Preferred Shares (other than any portion thereof consisting of accumulated, accrued and unpaid dividends) shall be payable solely with the proceeds from the sale by the Corporation of other capital shares of the Corporation (whether or not such sale occurs concurrently with such redemption). For purposes of the preceding sentence, capital shares means any common shares, preferred shares, depositary shares, participations or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable at the option of the holder for equity securities (unless and to the extent such debt securities are subsequently converted into capital shares)) or options to purchase any of the foregoing of or in the Corporation.
(b) The Redemption Date shall be selected by the Corporation, shall be specified in the notice of redemption and shall be not less than 30 days nor more than 60 days after the date notice of redemption is sent by the Corporation.
(c) If full cumulative dividends on all outstanding Voting Preferred Shares have not been declared and paid, or declared and set apart for payment, no Voting Preferred Shares may be redeemed unless all outstanding Voting Preferred Shares are simultaneously redeemed, and neither the Corporation nor any affiliate of the Corporation may purchase or acquire Voting Preferred Shares other than pursuant to a purchase or exchange offer made on the same terms to all holders of Voting Preferred Shares.
(d) If the Corporation shall redeem Voting Preferred Shares pursuant to paragraph (a) of this Section 5, notice of such redemption shall be given to each holder of record of the shares to be redeemed. Such notice shall be provided by first class mail, postage prepaid, at such holders address as the same appears on the stock records of the Corporation. Neither the failure to mail any notice required by this paragraph (d), nor any defect therein or in the mailing thereof to any particular holder, shall affect the sufficiency of the notice or the validity of the proceedings for redemption with respect to the other holders. Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given on the date mailed whether or not the holder receives the notice. Each such notice shall state, as appropriate: (1) the Redemption Date; (2) the number of Voting Preferred Shares to be redeemed and, if fewer than all such shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the place or places at which certificates for such shares are to be surrendered for cash; and (4) the redemption price payable on such Redemption Date, including, without limitation, a statement as to whether or not accumulated, accrued and unpaid dividends will be (x) payable as part of the redemption price, or (y) payable on the next Dividend Payment Date to the record holder at the close of business on the relevant record date as described in the next succeeding sentence.
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Notice having been mailed as aforesaid, from and after the Redemption Date (unless the Corporation shall fail to make available the amount of cash necessary to effect such redemption), (i) dividends on the Voting Preferred Shares so called for redemption shall cease to accumulate or accrue on the Voting Preferred Shares called for redemption, (ii) said shares shall no longer be deemed to be outstanding, and (iii) all rights of the holders thereof as holders of Voting Preferred Shares of the Corporation shall cease except the rights to receive the cash payable upon such redemption, without interest thereon, upon surrender and endorsement of their certificates if so required; provided, however, that if the Redemption Date for any Voting Preferred Shares occurs after any dividend record date and on or prior to the related Dividend Payment Date, the full dividend payable on such Dividend Payment Date in respect of such Voting Preferred Shares called for redemption shall be payable on such Dividend Payment Date to the holders of record of such shares at the close of business on the corresponding dividend record date notwithstanding the prior redemption of such shares. The Corporations obligation to make available the redemption price in accordance with the preceding sentence shall be deemed fulfilled if, on or before the applicable Redemption Date, the Corporation shall irrevocably deposit in trust with a bank or trust company (which may not be an affiliate of the Corporation) that has, or is an affiliate of a bank or trust company that has, a capital and surplus of at least $50,000,000, such amount of cash as is necessary for such redemption plus, if such Redemption Date occurs after any dividend record date and on or prior to the related Dividend Payment Date, such amount of cash as is necessary to pay the dividend payable on such Dividend Payment Date in respect of such Voting Preferred Shares called for redemption, with irrevocable instructions that such cash be applied to the redemption of the Voting Preferred Shares so called for redemption and, if applicable, the payment of such dividend. No interest shall accrue for the benefit of the holders of Voting Preferred Shares to be redeemed on any cash so set aside by the Corporation. Subject to applicable escheat laws, any such cash unclaimed at the end of two years from the Redemption Date shall revert to the general funds of the Corporation, after which reversion the holders of Voting Preferred Shares so called for redemption shall look only to the general funds of the Corporation for the payment of such cash.
As promptly as practicable after the surrender in accordance with such notice of the certificates for any such Voting Preferred Shares to be so redeemed (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state), such certificates shall be exchanged for cash (without interest thereon) for which such shares have been redeemed in accordance with such notice. If fewer than all the outstanding Voting Preferred Shares are to be redeemed, shares to be redeemed shall be selected by the Corporation from outstanding Voting Preferred Shares not previously called for redemption by lot or, with respect to the number of Voting Preferred Shares held of record by each holder of such shares, pro rata (as nearly as may be) or by any other method as may be determined by the Board of Directors in its discretion to be equitable. If fewer than all the shares of Voting Preferred Shares represented by any certificate are redeemed, then a new certificate representing the unredeemed shares shall be issued without cost to the holders thereof.
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Section 6. Status of Reacquired Shares . All Voting Preferred Shares which shall have been issued and reacquired in any manner by the Corporation shall be deemed retired.
Section 7. Ranking . The Voting Preferred Shares rank prior to, on a parity with, or junior to other shares of capital stock of the Corporation in accordance with Item XIII of this Division A.
Section 8. Voting . (a) If and whenever six quarterly dividends (whether or not consecutive) payable on the Voting Preferred Shares or any series or class of shares ranking on a parity with the Voting Preferred Shares shall be in arrears (which shall, with respect to any such quarterly dividend, mean that any such dividend has not been paid in full), the number of directors then constituting the Board of Directors shall be increased by two (if not already increased by reason of similar types of provisions with respect to shares ranking on a parity with the Voting Preferred Shares of any other class or series which is entitled to similar voting rights (the Arrearage Voting Preferred Shares)) and the holders of Voting Preferred Shares, together with the holders of shares of all other Arrearage Voting Preferred Shares then entitled to exercise similar voting rights, voting as a single class regardless of class or series, shall be entitled to elect the two additional directors to serve on the Board of Directors at any annual meeting of shareholders or special meeting held in place thereof, or at a special meeting of the holders of the Voting Preferred Shares and the Arrearage Voting Preferred Shares called as hereinafter provided. Whenever all arrearages in dividends on the Voting Preferred Shares and the Arrearage Voting Preferred Shares then outstanding shall have been paid and dividends thereon for the current quarterly dividend period shall have been declared and paid, or declared and set apart for payment, then the right of the holders of the Voting Preferred Shares and the Arrearage Voting Preferred Shares to elect such additional two directors shall cease (but subject always to the same provision for the vesting of such voting rights in the case of any similar future arrearages), and the terms of office of all persons elected as directors by the holders of the Voting Preferred Shares and the Arrearage Voting Preferred Shares shall forthwith terminate and the number of directors constituting the Board of Directors shall be reduced accordingly. At any time after such voting power shall have been so vested in the holders of Voting Preferred Shares and the Arrearage Voting Preferred Shares, if applicable, the Secretary of the Corporation may, and upon the written request of any holder of at least ten percent (10%) of Voting Preferred Shares (addressed to the Secretary at the principal office of the Corporation) shall, call a special meeting of the holders of the Voting Preferred Shares and of the Arrearage Voting Preferred Shares for the election of the two directors to be elected by them as herein provided, such call to be made by notice similar to that provided in the Code of Regulations of the Corporation for a special meeting of the shareholders or as required by law. If any such special meeting required to be called as above provided shall not be called by the Secretary within 20 days after receipt of any such request, then any holder of Voting Preferred Shares may call such meeting, upon the notice above provided, and for that purpose shall have access to the stock books of the Corporation. The directors elected at any such special meeting shall hold office until the next annual meeting of the shareholders or special meeting held in lieu thereof if such office shall not have previously terminated as above provided. If any vacancy shall occur among the directors
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elected by the holders of the Voting Preferred Shares and the Arrearage Voting Preferred Shares, a successor shall be elected by the Board of Directors, upon the nomination of the then-remaining director elected by the holders of the Voting Preferred Shares and the Arrearage Voting Preferred Shares or the successor of such remaining director, to serve until the next annual meeting of the shareholders or special meeting held in place thereof if such office shall not have previously terminated as provided above.
(b) So long as any Voting Preferred Shares are outstanding, in addition to any other vote or consent of shareholders required by law or by the Amended and Restated Articles of Incorporation of the Corporation, the affirmative vote of at least 66-2/3% of the votes entitled to be cast by the holders of the Voting Preferred Shares voting as a single class with the holders of all other classes or series of shares ranking on a parity with the Voting Preferred Shares entitled to vote on such matters, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:
(i) Any amendment, alteration or repeal of any of the provisions of, or the addition of any provision to, the Amended and Restated Articles of Incorporation or the Code of Regulations of the Corporation, whether by merger, consolidation or otherwise (an Event), that materially adversely affects the voting powers, rights or preferences of the holders of the Voting Preferred Shares; provided, however, that the amendment of the provisions of the Amended and Restated Articles of Incorporation (A) so as to authorize or create, or to increase the authorized amount of, or issue, any shares ranking junior to the Voting Preferred Shares or any shares of any class or series of shares ranking on a parity with the Voting Preferred Shares or (B) with respect to the occurrence of any Event, so long as the Voting Preferred Shares remains outstanding with the terms thereof materially unchanged, taking into account that upon the occurrence of the Event, the Corporation may not be the surviving entity, shall not in either case be deemed to materially adversely affect the voting powers, rights or preferences of the holders of Voting Preferred Shares; or
(ii) The authorization, creation of, increase in the authorized amount of, or issuance of any shares of any class or series of shares ranking prior to the Voting Preferred Shares or any security convertible into shares of any class or series of shares ranking prior to the Voting Preferred Shares (whether or not such class or series of shares ranking prior to the Voting Preferred Shares is currently authorized); provided, however, that no such vote of the holders of Voting Preferred Shares shall be required if, at or prior to the time when such amendment, alteration or repeal is to take effect, or when the issuance of any such shares ranking prior to the Voting Preferred Shares or convertible or exchangeable security is to be made, as the case may be, provision is made for the redemption of all shares of Voting Preferred Shares at the time outstanding to the extent such redemption is authorized by Section 5.
(c) In addition to the foregoing, the holders of Voting Preferred Shares shall be entitled to vote on all matters (for which holders of Common Shares shall be entitled to vote thereon) at all meetings of the shareholders of the Corporation, and shall be entitled to one vote for each Voting Preferred Share entitled to vote at such meeting.
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Section 9. Record Holders . The Corporation and its transfer agent may deem and treat the record holder of any Voting Preferred Shares as the true and lawful owner thereof for all purposes, and neither the Corporation nor such transfer agent shall be affected by any notice to the contrary.
Section 10. Restrictions on Ownership and Transfers . The Voting Preferred Shares are subject to the provisions of Article XIV of this Division A pertaining to restrictions on ownership and transfers, including without limitation the provisions relative to Excess Preferred Shares (as defined in Item XIV).
DIVISION B
Subject to the terms of the Cumulative Shares and the Noncumulative Preferred Shares, the Common Shares shall have the following express terms:
Section 1. Dividend Rights. The holders of Common Shares shall be entitled to receive, when, as and if declared by the Board of Directors of the Corporation, out of the assets of the Corporation which are by law available therefor, dividends or distributions payable in cash, in property or in securities of the Corporation.
Section 2. Rights Upon Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of, or any distribution of the assets of, the Corporation, each holder of Common Shares shall be entitled to receive, ratably with each other holder of Common Shares, that portion of the assets of the Corporation available for distribution to its shareholders as the number of Common Shares held by such holder bears to the total number of Common Shares then outstanding.
Section 3. Voting Rights. The holders of Common Shares shall be entitled to vote on all matters (for which holders of Common Shares shall be entitled to vote thereon) at all meetings of the shareholders of the Corporation, and shall be entitled to one vote for each Common Share entitled to vote at such meeting.
Section 4. Restrictions on Transfer to Preserve Tax Benefit; Common Shares Subject to Redemption .
(a) Definitions. For the purposes of this Section 4 of this Division B of this Article FOURTH, the following terms shall have the following meanings:
Beneficial Ownership shall mean ownership of Common Shares by a Person who would be treated as an owner of such Common Shares either directly or constructively through the application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The terms Beneficial Owner, Beneficially Owns and Beneficially Owned shall have the correlative meanings.
Code shall mean the Internal Revenue Code of 1986, as amended from time to time.
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Constructive Ownership shall mean ownership of Common Shares by a Person who would be treated as an owner of such Common Shares either directly or Constructively through the application of Section 318 of the Code, as modified by Section 856(d)(5) of the Code. The terms Constructive Owner, Constructively Owns and Constructively Owned shall have the correlative meanings.
Excess Shares shall mean any Common Shares (i) acquired or proposed to be acquired by any Person (other than an Existing Holder) pursuant to a Transfer to the extent that, if effective, such Transfer would result in the transferee either (A) Beneficially Owning Common Shares in excess of the Ownership Limit or (B) Constructively Owning Common Shares in excess of the Related Party Limit, (ii) acquired or proposed to be acquired by an Existing Holder pursuant to a Transfer to the extent that, if effective, such Transfer would result in such Existing Holder Beneficially Owning Common Shares in excess of the Existing Holder Limit for such Existing Holder, or (iii) which are the subject of a Transfer that, if effective, which would result in (A) the Common Shares being owned by fewer than 100 Persons (determined without reference to any rules of attribution), or (B) the Corporation being closely held within the meaning of Section 856(h) of the Code.
Existing Holder shall mean (i) Bert L. Wolstein, (ii) Scott A. Wolstein, (iii) James A. Schoff, and (iv) any Person to whom an Existing Holder Transfers Beneficial Ownership of Common Shares causing such transferee to Beneficially Own Common Shares in excess of the Ownership Limit.
Existing Holder Limit (i) for any Existing Holder who is an Existing Holder by virtue of clause (i), (ii) or (iii) of the definition thereof, shall mean, initially, the percentage of the outstanding Common Shares Beneficially Owned by such Existing Holder upon the consummation of the Initial Public Offering, and after any adjustment pursuant to Section (4)(i) of this Division B of this Article FOURTH, shall mean such percentage of the outstanding Common Shares as so adjusted; and (ii) for any Existing Holder who becomes an Existing Holder by virtue of clause (iv) of the definition thereof, shall mean, initially, the percentage of the outstanding Common Shares Beneficially Owned by such Existing Holder at the time that such Existing Holder becomes an Existing Holder, and after any adjustment pursuant to Section 4(i) of this Division B of this Article FOURTH, shall mean such percentage of the outstanding Common Shares as so adjusted. From and after the date of the Initial Public Offering, the secretary of the Corporation shall maintain and, upon request, make available to each Existing Holder, a schedule which sets forth the then current Existing Holder Limits for each Existing Holder.
Initial Public Offering means the sale of Common Shares pursuant to the Corporations first effective registration statement for such Common Shares filed under the Securities Act of 1933, as amended.
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Market Price shall mean the last reported sales price of Common Shares reported on the New York Stock Exchange on the trading day immediately preceding the relevant date or, if the Common Shares are not then traded on the New York Stock Exchange, the last reported sales price of the Common Shares on the trading day immediately preceding the relevant date as reported on any exchange or quotation system over which the Common Shares may be traded, or if the Common Shares are not then traded over any exchange or quotation system, then the market price of the Common Shares on the relevant date as determined in good faith by the Board of Directors of the Corporation.
Ownership Limit shall mean 5.0% of the outstanding Common Shares of the Corporation.
Person shall mean an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, an association, a private foundation within the meaning of Section 509(a) of the Code, a joint stock company, other entity or a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended; provided, however, that a Person does not mean an underwriter which participates in a public offering of the Common Shares, for a period of 35 days following the purchase by such underwriter of the Common Shares.
REIT shall mean a Real Estate Investment Trust under Section 856 of the Code.
Related Party Limit shall mean 9.8% of the outstanding Common Shares of the Corporation.
Transfer shall mean any sale, transfer, gift, assignment, devise or other disposition of Common Shares (including, without limitation, (i) the granting of any option or entering into any agreement for the sale, transfer or other disposition of Common Shares or (ii) the sale, transfer, assignment or other disposition of any securities or rights convertible into or exchangeable for Common Shares), whether voluntary or involuntary, whether of record or beneficially and whether by operation of law or otherwise.
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(b) Restrictions on Transfers.
(i) Except as provided in Section 4(i) of this Division B of this Article FOURTH, from and after the date of the Initial Public Offering, no Person (other than an Existing Holder) shall Beneficially Own Common Shares in excess of the Ownership Limit and no Existing Holder shall Beneficially Own Common Shares in excess of the Existing Holder Limit for such Existing Holder.
(ii) Except as provided in Section 4(i) of this Division B of this Article FOURTH, from and after the date of the Initial Public Offering, any Transfer that, if effective, would result in any Person (other than an Existing Holder) Beneficially Owning Common Shares in excess of the Ownership Limit shall be void ab initio as to the Transfer of such Common Shares which would be otherwise Beneficially Owned by such Person in excess of the Ownership Limit, and the intended transferee shall acquire no rights in such Common Shares.
(iii) Except as provided in Section 4(i) of this Division B of this Article FOURTH, from and after the date of the Initial Public Offering, any Transfer that, if effective, would result in any Existing Holder Beneficially Owning Common Shares in excess of the applicable Existing Holder Limit shall be void ab initio as to the Transfer of such Common Shares which would be otherwise Beneficially Owned by such Existing Holder in excess of the applicable Existing Holder Limit, and such Existing Holder shall acquire no rights in such Common Shares.
(iv) Except as provided in Section 4(i) of this Division B of this Article FOURTH, from and after the date of the Initial Public Offering, any Transfer that, if effective, would result in any Person Constructively Owning Common Shares in excess of the Related Party Limit shall be void ab initio as to the Transfer of such Common Shares which would be otherwise Constructively Owned by such Person in excess of such amount, and the intended transferee shall acquire no rights in such Common Shares.
(v) Except as provided in Section 4(i) of this Division B of this Article FOURTH, from and after the date of the Initial Public Offering, any Transfer that, if effective, would result in the Common Shares being beneficially owned by less than 100 Persons (determined without reference to any rules of attribution) shall be void ab initio as to the Transfer of such Common Shares which would be otherwise beneficially owned by the transferee, and the intended transferee shall acquire no rights in such Common Shares.
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(vi) From and after the date of the Initial Public Offering, any Transfer that, if effective, would result in the Corporation being closely held within the meaning of Section 856(h) of the Code shall be void ab initio as to the Transfer of the Common Shares which would cause the Corporation to be closely held within the meaning of Section 856(h) of the Code, and the intended transferee shall acquire no rights in such Common Shares.
(c) Remedies for Breach. If the Board of Directors or its designees shall at any time determine in good faith that a Transfer has taken place in violation of Section 4(b) of this Division B of this Article FOURTH or that a Person intends to acquire or has attempted to acquire beneficial ownership (determined without reference to any rules of attribution), Beneficial Ownership or Constructive Ownership of any Common Shares of the Corporation in violation of Section 4(b) of this Division B of this Article FOURTH, or that any such Transfer, intended or attempted acquisition or acquisition would jeopardize the status of the Corporation as a REIT under the Code, the Board of Directors or its designees shall take such actions as it deems advisable to refuse to give effect or to prevent such Transfer, including, but not limited to, refusing to give effect to such Transfer on the books of the Corporation or instituting proceedings to enjoin such Transfer and, in addition, exercising its rights under Section 4(d) of this Division B of this Article FOURTH.
(d) Purchase Right in Excess Shares. Beginning on the date of the occurrence of a Transfer which, if consummated, in the good faith judgment of the Board of Directors of the Corporation, could result in Excess Shares, such Excess Shares shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that created such Excess Shares (or, in the case of a devise or gift, the Market Price at the time of such devise or gift) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation shall have the right to accept such offer for a period of ninety days after the later of (i) the date of such Transfer and (ii) if the Corporation does not receive a notice of such Transfer pursuant to Section 4(e) of this Division B of this Article FOURTH, the date the Board of Directors determines in good faith that such Transfer has occurred. Prompt payment of the purchase price shall be made in such reasonable manner as may be determined by the Corporation. From and after the date fixed for purchase by the Corporation, and so long as payment of the purchase price for the Excess Shares to be so purchased shall have been made or duly provided for, the holder of any Excess Shares so called for purchase shall cease to be entitled to dividends, distributions, voting rights and other benefits with respect to such Excess Shares, excepting only the right to payment of the purchase price fixed as aforesaid. Any dividend or distribution paid to a proposed transferee of Excess Shares prior to the discovery by the Corporation
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that the Excess Shares have been transferred in violation of Section 4(b) of this Division B of this Article FOURTH shall be repaid to the Corporation upon demand. If the foregoing provisions are determined to be void or invalid by virtue of any legal decision, statute, rule or regulation, then the intended transferee of such Excess Shares shall be deemed, at the option of the Corporation, to have acted as agent on behalf of the Corporation in acquiring such Excess Shares and to hold such Excess Shares on behalf of the Corporation.
(e) Notice of Restricted Transfer. Any Person who acquires or intends to acquire shares in violation of Section 4(b) of this Division B of this Article FOURTH or any Person who is a transferee of Excess Shares shall immediately give written notice to the Corporation of such event and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer or intended Transfer on the Corporations status as a REIT.
(f) Owners Required to Provide Information. From and after the date of the Initial Public Offering:
(i) every Beneficial Owner of more than 5.0% (or such other percentage, between 0.5% and 5.0%, as provided in the regulations promulgated pursuant to the Code) of the outstanding Common Shares of the Corporation shall, within 30 days after January 1 of each year, give written notice to the Corporation stating the name and address of such Beneficial Owner, the number of shares Beneficially Owned, and description of how such shares are held. Each such Beneficial Owner shall provide to the Corporation such additional information as the Corporation may request in order to determine the effect, if any, of such Beneficial Ownership on the Corporations status as a REIT.
(ii) each Person who is a Beneficial Owner or Constructive Owner of Common Shares and each Person (including the shareholder of record) who is holding Common Shares for a Beneficial Owner or Constructive Owner shall provide to the Corporation such information that the Corporation may request, in good faith, in order to determine the Corporations status as a REIT.
(g) Remedies Not Limited. Nothing contained in this Division B of this Article FOURTH shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable to protect the Corporation and the interests of its shareholders by preservation of the Corporations status as a REIT.
(h) Ambiguity. In the case of an ambiguity in the application of any of the provisions of Section 4 of this Division B of this Article FOURTH, including any definition contained in Section 4(a), the Board of Directors shall have the power to determine the application of the provisions of this Section 4 with respect to any situation based on the facts known to it.
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(i) Modification of Existing Holder Limits. Subject to the provisions of Section 4(k) of this Division B, the Existing Holder Limits may be modified as follows:
(i) Subject to the limitations provided in Section 4(k), any Existing Holder may Transfer Common Shares to a Person who is already an Existing Holder up to the number of Common Shares Beneficially Owned by such transferor Existing Holder in excess of the Ownership Limit. Any such Transfer will decrease the Existing Holder Limit for such transferor Existing Holder and increase the Existing Holder Limit for such transferee Existing Holder by the percentage of the outstanding Common Shares so Transferred. The transferor Existing Holder shall give the Board of Directors of the Corporation prior written notice of any such Transfer.
(ii) Any grant of a stock option pursuant to a stock option plan approved by the shareholders of the Corporation shall increase the Existing Holder Limit for the affected Existing Holder to the maximum extent possible under Section 4(k) to permit the Beneficial Ownership of the Common Shares issuable upon the exercise of such stock option.
(iii) The Board of Directors may reduce the Existing Holder Limit for any Existing Holder, with the written consent of such Existing Holder, after any Transfer permitted in this Section 4 by such Existing Holder to a Person other than an Existing Holder or after the lapse (without exercise) of a stock option described in Section 4(i)(ii).
(iv) Any Common Shares issued to an Existing Holder pursuant to a dividend reinvestment plan adopted by the Corporation shall increase the Existing Holder Limit for the Existing Holder to the maximum extent possible under Section 4(k) to permit the Beneficial Ownership of such Common Shares.
(j) Modification of Ownership Limit. Subject to the limitations provided in Section 4(k) of this Division B, the Board of Directors may from time to time increase the Ownership Limit.
(k) Limitations on Modifications. Notwithstanding any other provision of this Division B of this Article FOURTH:
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(i) Neither the Ownership Limit nor any Existing Holder Limit may be increased (nor may any additional Existing Holder Limit be created) if, after giving effect to such increase (or creation), five Beneficial Owners of Common Shares (including all of the then Existing Holders) could Beneficially Own, in the aggregate, more than 49.6% of the outstanding Common Shares.
(ii) Prior to the modification of any Existing Holder Limit or Ownership Limit pursuant to Section 4(i) or Section 4(j) of this Division B of this Article FOURTH, the Board of Directors of the Corporation may require such opinions of counsel, affidavits, undertakings or agreements as it may deem necessary or advisable in order to determine or ensure the Corporations status as a REIT.
(iii) No Existing Holder Limit shall be reduced to a percentage which is less than the Ownership Limit.
(iv) The Ownership Limit may not be increased to a percentage which is greater than 9.8%.
(v) The Related Party Limit may not be increased to a percentage which is greater than 9.8%.
(l) Exceptions .
(i) The Board of Directors, with a ruling from the Internal Revenue Service or an opinion of counsel, may exempt a Person from the Ownership Limits or the Existing Holder Limits, as the case may be, if such Person is not an individual for purposes of Section 542(a)(2) of the Code and the Board of Directors obtains such representations and undertakings from such Person as are reasonably necessary to ascertain that no individuals Beneficial Ownership of such Common Shares will violate the Ownership Limit or the applicable Existing Holder Limit, as the case may be, and agrees that any violation or attempted violation will result in such Common Shares in excess of 5.0% of the outstanding Common Shares being deemed to be Excess Shares and subject to repurchase by the Corporation as set forth in Section 4(d) of this Division B of this Article FOURTH.
(ii) The Board of Directors, with a ruling from the Internal Revenue Service or an opinion of counsel, may exempt a Person from the limitation on such Person Constructively Owning Common Shares in excess of the Related Party Limit if such Person does not own and represents that it will not own, directly or constructively (by virtue of the application of Section 318 of the
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Code, as modified by Section 856(d)(5) of the Code), more than a 9.9% interest (as set forth in Section 856(d)(2)(B) in a tenant of any real property owned or leased by the Corporation, and the Corporation obtains such representations and undertakings from such Person as are reasonably necessary to ascertain this fact and agrees that any violation or attempted violation will result in such Common Shares in excess of 9.8% being deemed to be Excess Shares and subject to repurchase by the Corporation as set forth in Section 4(d) of this Division B of this Article FOURTH.
Section 5. Legend. Each certificate for Common Shares shall bear the following legend:
The Common Shares represented by this certificate are subject to restrictions on transfer for the purpose of the Corporations maintenance of its status as a Real Estate Investment Trust under the Internal Revenue Code of 1986, as amended. Subject to certain provisions of the Corporations Articles of Incorporation, no Person may Beneficially Own Common Shares in excess of 5.0% of the outstanding Common Shares of the Corporation (unless such Person is an Existing Holder) and no Person (other than an Existing Holder who Constructively Owns in excess of 9.8% of the Common Shares immediately following the consummation of the Initial Public Offering) may Constructively Own Common Shares in excess of 9.8% of the outstanding Common Shares of the Corporation. Any Person who attempts to Beneficially Own or Constructively Own Common Shares in excess of the above limitations must immediately notify the Corporation. All capitalized items in this legend have the meanings defined in the Corporations Articles of Incorporation, a copy of which, including the restrictions on transfer, will be sent without charge to each shareholder who so requests. If the restrictions on transfer are violated, certain of the Common Shares represented may be subject to repurchase by the Corporation on the terms and conditions set forth in the Corporations Articles of Incorporation.
Section 6. Securities Exchange Transactions. Notwithstanding any provision contained herein to the contrary, nothing in these Amended and Restated Articles of Incorporation shall preclude the settlement of any transaction entered into through the facilities of the New York Stock Exchange.
FIFTH: At all times following the consummation of the Initial Public Offering (as defined in Article FOURTH), at least a majority of the members of the Board of Directors shall, except during the period of a vacancy or vacancies therein, be Independent Directors. An Independent Director shall mean a person who is not (i) employed by the Corporation or (ii) an affiliate (as defined in Rule 405 under the Securities Act of 1933, as amended) of (A) any entity which is part of the Developers Diversified Group, including, without limitation, Developers Diversified Limited Partnership, an Ohio limited partnership, Developers Diversified, Ltd., an Ohio limited partnership, W & M Properties, an Ohio general partnership, W & Z Properties, Ltd., an Ohio limited partnership, and DE Properties Corporation, an Ohio corporation, or (B) any partnership which is an affiliate (as defined above) of any entity listed in clause (A) of this Article FIFTH.
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SIXTH: No holder of shares of the corporation of any class shall be entitled as such, as a matter of right, to subscribe for or purchase shares of any class, now or hereafter authorized, or to subscribe for or purchase securities convertible into or exchangeable for shares of the corporation or to which shall be attached or appertain any warrants or rights entitling the holder thereof to subscribe for or purchase shares, except such rights of subscription or purchase, if any, for such considerations and upon such terms and conditions as its Board of Directors from time to time may determine.
SEVENTH: Notwithstanding any provision of Sections 1701.01 to 1701.98, inclusive, of the Ohio Revised Code, or any successor statutes now or hereafter in force, requiring for the authorization or taking of any action the vote or consent of the holders of shares entitling them to exercise two-thirds or any other proportion of the voting power of the corporation or of any class or classes of shares thereof, such action, unless otherwise expressly required by law or these Articles of Incorporation, may be authorized or taken by the vote or consent of the holders of shares entitling them to exercise a majority of the voting power of the corporation or of such class or classes of shares thereof.
Except as provided in the Companys code of regulations with respect to the election of a director to fill a vacancy in the Board of Directors, each director shall be elected by the vote of the majority of the votes cast with respect to the director at any shareholder meeting held for the election of directors at which a quorum is present; provided, however, that if as of the date that is ten days in advance of the date the Company files its definitive proxy statement (regardless of whether or not thereafter revised or supplemented) with the Securities and Exchange Commission with respect to a shareholder meeting the number of nominees for election as a director is greater than the number of directors to be elected, then the directors shall be elected at the meeting by the vote of a plurality of the shares represented in person or by proxy at that meeting and entitled to vote on the election of directors. For purposes of this Section, a majority of the votes cast means the number of shares voted for a director exceeds the number of votes cast against the director. Broker non-votes and abstentions will not be considered votes cast at the shareholder meeting and will be excluded in determining the number of votes cast at the shareholder meeting.
EIGHTH: To the extent permitted by law, the corporation, by action of its Board of Directors, may purchase or otherwise acquire shares of any class issued by it at such times, for such consideration and upon such terms and conditions as its Board of Directors may determine.
NINTH: The provisions of Chapter 1701.831 of the Ohio Revised Code shall not apply to the Corporation.
TENTH: The provisions of Chapter 1707.043 of the Ohio Revised Code shall not apply to the Corporation.
ELEVENTH: If any provision (or portion thereof) of these Articles of Incorporation shall be found to be invalid, prohibited, or unenforceable for any reason, the
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remaining provisions (or portions thereof) of these Articles of Incorporation shall be deemed to remain in full force and effect, and shall be construed as if such invalid, prohibited, or unenforceable provision had been stricken herefrom or otherwise rendered inapplicable, it being the intent of the Corporation and its shareholders that each such remaining provision (or portion thereof) of these Articles of Incorporation remain, to the fullest extent permitted by law, applicable and enforceable as to all shareholders, notwithstanding any such finding.
TWELFTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in these Articles of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon shareholders herein are granted subject to this reservation.
THIRTEENTH: These Second Amended and Restated Articles of Incorporation shall take the place of and supersede the Corporations existing Amended and Restated Articles of Incorporation, as amended.
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Exhibit 10.2
RESTRICTED SHARES AGREEMENT
DDR Corp., an Ohio corporation (the Company), has granted to (the Holder) ( ) of the Companys Common Shares (the Restricted Shares). The Restricted Shares have been granted pursuant to the Companys (the Plan) and are subject to all provisions of the Plan, which are hereby incorporated herein by reference, and to the following provisions of this Restricted Shares Agreement (the Agreement) (capitalized terms not defined herein are used as defined in the Plan):
§1. Vesting . The Restricted Shares will vest in increments with the first Restricted Shares vesting on (each such date a Vesting Date).
§2. Purchase Price . The purchase price of the Restricted Shares is $ .
§3. Transferability . The Holder may transfer Restricted Shares prior to vesting, during his or her lifetime (a) to one or more members of such Holders family, (b) to one or more trusts for the benefit of one or more of such Holders family, or (c) to a partnership or partnerships of members of such Holders family, provided that no consideration is paid for the transfer and that the transfer would not result in the loss of any exemption under Rule 16b-3 of the Securities Exchange Act of 1934, as amended, with respect to the Restricted Shares. The Restricted Shares are also transferable by will or the laws of descent and distribution or pursuant to a qualified domestic relations order (as defined in the Internal Revenue Code or the Employee Retirement Income Security Act of 1974, as amended). The transferee of any Restricted Shares will be subject to all restrictions, terms, and conditions applicable to the Restricted Shares.
§4. Termination of Employment . Subject to the terms of the Holders employment or similar agreement with the Company or any Subsidiary (an Individual Agreement), if any, if the Holders employment by the Company or any Subsidiary terminates prior to all of the Restricted Shares vesting, the Restricted Shares will vest or be forfeited as follows:
(a) Termination by Death . If the Holders employment with the Company or any Subsidiary terminates by reason of death, all Restricted Shares shall vest and any restriction shall lapse.
(b) Termination by Reason of Disability . If the Holders employment with the Company or any Subsidiary or Affiliate terminates by reason of a permanent and total disability as defined in Section 22(e)(3) of the Code (Disability), all Restricted Shares shall vest and any restriction shall lapse.
(c) Termination Without Cause After a Change in Control . If, within two years following a Change in Control, the Holders employment with the Company or any Subsidiary terminates without Cause, all Restricted Shares shall vest and any restriction shall lapse. For purposes of this Section 4(c), Cause is used as defined in the Holders Individual Agreement,
if any, or if there is no Holders Individual Agreement or if it does not define Cause: (i) conviction of the Holder for committing a felony under federal law or in the law of the state in which such action occurred; (ii) dishonesty in the course of fulfilling the Holders employment duties; (iii) willful and deliberate failure on the part of the Holder to perform the Holders employment duties in any material respect; or (iv) prior to a Change in Control, such other events as shall be determined by the Committee. The Committee shall, unless otherwise provided in the Holders Individual Agreement, have the sole discretion to determine whether Cause exists, and its determination shall be final.
(d) Other Termination . Unless otherwise determined by the Committee, if the Holders employment with the Company or any Subsidiary terminates other than in the circumstances described in paragraphs (a), (b) or (c) of this Section 4, any Restricted Shares which are unvested or subject to restrictions at the time of termination will be forfeited upon termination.
(e) Leave of Absence . If the Holder is granted a leave of absence by the Company or any Subsidiary, his or her employment will not be considered terminated, and he or she will continue to be deemed an employee of the Company or Subsidiary during such leave of absence or any extension thereof granted by the Company or Subsidiary for purposes of the Plan.
§5. Dividends . All dividends payable on the Restricted Shares (whether or not vested) will be payable in the same manner as paid to other shareholders. All cash dividends payable on unvested Restricted Shares shall be paid in unrestricted cash. In the case of dividends payable on unvested Restricted Shares in shares or other property, the shares or other property so payable shall be subject to the same restrictions and other terms and conditions that apply to the Restricted Shares unless otherwise determined by the Committee or the Board at the time the dividend is authorized.
§6. Taxes . The Holder hereby agrees to pay to the Company, in accordance with the terms of the Plan, any federal, state or local taxes of any kind required by law to be withheld and remitted by the Company with respect to the Restricted Shares. The Holder may satisfy such tax obligation, in whole or in part, by (a) electing to have the Company withhold a portion of the Common Shares otherwise to be delivered upon vesting of the Restricted Shares with a fair market value equal to the amount of such taxes, or (b) delivering to the Company other Common Shares with a fair market value equal to the amount of such taxes. The election, if any, must be made on or before the date that the amount of tax to be withheld is determined. If the Holder does not make such payment to the Company, the Company shall have the right to withhold from any payment of any kind otherwise due to the Holder from the Company, any federal, state or local taxes of any kind required by law to be withheld with respect to the award or vesting of the Restricted Shares so long as such withholding does not result in any adverse tax consequences under Section 409A of the Code.
§7. Deferral . The Holder may, in his or her sole discretion, with respect to this award of Restricted Shares, elect to participate in any equity deferred compensation plan established by the Company, in which case such plan shall govern amounts deferred.
§8. Subject to the Plan . This Agreement is made and the Restricted Shares evidenced hereby are granted under and pursuant to, and they are expressly made subject to all of the terms and conditions of, the Plan, notwithstanding anything herein to the contrary. The Holder hereby acknowledges receipt of a copy of the Plan and that the Holder has read and understands the terms and conditions of the Plan.
§9. Securities Law Compliance .
(a) The Holder agrees that the Company may impose such restrictions on the Common Shares as are deemed advisable by the Company, including, without limitation, restrictions relating to listing or trading requirements. The Holder further agrees that certificates representing the Common Shares, if any, may bear such legends and statements as the Company shall deem appropriate or advisable to assure, among other things, compliance with applicable securities laws, rules and regulations.
(b) The Holder agrees that any Common Shares which the Holder may acquire by virtue of this Agreement may not be transferred, sold, assigned, pledged, hypothecated or otherwise disposed of by the Holder unless (i) a registration statement or post-effective amendment to a registration statement under the Securities Act of 1933, as amended, with respect to such Common Shares has become effective so as to permit the sale or other disposition of such Common Shares by the Holder, or (ii) there is presented to the Company an opinion of counsel satisfactory to the Company to the effect that the sale or other proposed disposition of such Common Shares by the Holder may lawfully be made otherwise than pursuant to an effective registration statement or post-effective amendment to a registration statement relating to such Common Shares under the Securities Act of 1933, as amended.
§10. Rights of the Holder . The granting of the Restricted Shares shall in and of itself not confer any right of the Holder to continue in the employ of the Company and shall not interfere in any way with the right of the Company to terminate the Holders employment at any time, subject to the terms of any employment agreement between the Company and the Holder.
§11. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio, except to the extent otherwise governed by Federal law.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK
IN WITNESS WHEREOF, the parties have subscribed their names hereto.
DDR Corp., an Ohio corporation | ||
By: | ||
Name: Title: |
DATE OF GRANT:
ACCEPTANCE OF AGREEMENT
The Holder hereby:
(a) Acknowledges that he/she has received a copy of the Plan and a copy of the Companys most recent Annual Report and other communications routinely distributed to the Companys shareholders;
(b) Accepts this Agreement and the Restricted Shares granted to him/her under this Agreement subject to all provisions of the Plan and this Agreement;
(c) Represents and warrants to the Company that he/she is acquiring the Restricted Shares for his/her own account, for investment, and not with a view to or any present intention of selling or distributing the Restricted Shares either now or at any specific or determinable future time or period or upon the occurrence or nonoccurrence of any predetermined or reasonably foreseeable event; and
(d) Agrees that no transfer of the Restricted Shares will be made unless the Restricted Shares have been duly registered under all applicable Federal and state securities laws pursuant to a then-effective registration which contemplates the proposed transfer or unless the Company has received the written opinion of, or satisfactory to, its legal counsel that the proposed transfer is exempt from such registration.
Holders Signature: |
Exhibit 10.3
STOCK OPTION AGREEMENT
(Non-Qualified Stock Option Grant)
THIS AGREEMENT (the Agreement) is made as of by and between DDR CORP., an Ohio corporation (the Company), and , an individual (the Holder).
W I T N E S S E T H :
WHEREAS, the Company desires to provide the Holder with an Option Right (the Option) to purchase ( ) Common Shares of the Company (Shares), pursuant to the Companys (the Plan); and
WHEREAS, the Holder desires to accept such Option.
NOW, THEREFORE, in consideration of the mutual covenants herein set forth, the parties hereto hereby agree as follows:
1. Grant of Option . The Company does hereby irrevocably grant to the Holder, and the Holder does hereby accept, the Option to purchase, at the option of the Holder, ( ) Shares at the Option Price per Share of and upon and subject to the other terms and conditions hereof and the Plan.
2. Term of the Option; Vesting . The Option is exercisable, in whole or in part, once vested, in accordance with the following schedule. If the Holder is then employed by the Company, the Option shall vest as follows:
Date | No. of Shares Vesting |
Shares for which the Option has become exercisable shall be referred to herein as Vested Shares, and Shares for which the Option has not become exercisable shall be referred to herein as Unvested Shares. The Option shall terminate on the tenth anniversary of the date hereof and must be exercised, if at all and to the extent exercisable, on or before such date and shall not thereafter be exercisable, notwithstanding anything herein to the contrary. Notwithstanding anything contained herein to the contrary, it shall be a condition to the Holders right to exercise the Option with respect to any Vested Shares that there shall have been filed with the Securities and Exchange Commission an effective registration statement on Form S-8 (or such other form as the Company shall deem necessary) with respect to the Shares to be received upon exercise.
3. Exercise . Subject to the other terms and conditions hereof, the Option shall be exercisable from time to time by written notice to the Company (in the form required by the Company) which shall:
(a) |
state that the Option is thereby being exercised, the number of Shares with respect to which the Option is being exercised, each person in whose name any |
certificates or book entry for the Shares should be registered and such persons address and social security number; |
(b) | be signed by the person or persons entitled to exercise the Option and, if the Option is being exercised by anyone other than the Holder, be accompanied by proof satisfactory to counsel for the Company of the right of such person or persons to exercise the Option under the Plan and all applicable laws and regulations; and |
(c) | be accompanied by such representations, warranties or agreements with respect to the investment intent of such person or persons exercising the Option as the Company may reasonably request, in form and substance satisfactory to counsel for the Company. |
As conditions to the exercise of the Option and the obligation of the Company to issue Shares upon the exercise thereof, the proposed recipient of the Shares shall make any representation or warranty to comply with any applicable law or regulation or to confirm any factual matters reasonably requested by the Company or its counsel.
Upon exercise of the Option and the satisfaction of all conditions thereto, the Company shall arrange for the Shares to be held in book entry form or deliver a certificate or certificates for Shares to the specified person or persons at the specified time upon receipt of the aggregate exercise price for such Shares by any method of payment authorized by the Plan.
4. Termination of Employment . Subject to the terms of the Holders employment or similar agreement with the Company or any Subsidiary (an Individual Agreement), if any, upon termination of the Holders employment with the Company, the Option will be governed as follows:
(a) Termination by Death . If the Holders employment with the Company or any Subsidiary terminates by reason of death, the Option shall become immediately and automatically vested and exercisable. If termination of the Holders employment is due to death, then the Option may thereafter be exercised by the estate of the Holder (acting through its fiduciary) for a period of one year. The balance of the Option will be forfeited if not exercised as provided for in this subsection. Notwithstanding the foregoing, in no event will the Option be exercisable after the tenth anniversary of the date hereof.
(b) Termination by Reason of Disability . If the Holders employment with the Company or any Subsidiary terminates by reason of a permanent and total disability as defined in Section 22(e)(3) of the Code (Disability), the Option shall become immediately and automatically vested and exercisable. If termination of the Holders employment is due to Disability, then the Option may thereafter be exercised by the Holder or by the Holders duly authorized legal representative if the Holder is unable to exercise the Option as a result of the Holders Disability for a period of one year. If the Holder dies before the Option is so exercised, any unexercised Option held by the Holder shall thereafter be exercisable by the estate of the Holder (acting through its fiduciary) for the duration of such one-year period. The balance of the Option will be forfeited if not exercised as provided for in this subsection. Notwithstanding the foregoing, in no event will the Option be exercisable after the tenth anniversary of the date hereof.
(c) Termination Without Cause After a Change in Control . If, within two years following a Change in Control, the Holders employment with the Company or any Subsidiary terminates without Cause, the Option shall become immediately and automatically vested and exercisable, and then the Option may thereafter be exercised by the Holder at any time after the date of such termination of
employment. The balance of the Option will be forfeited if not exercised as provided for in this subsection. Notwithstanding the foregoing, in no event will the Option be exercisable after the tenth anniversary of the date hereof. For purposes of this Section 4(c), Cause is used as defined in the Holders Individual Agreement, if any, or if there is no Holders Individual Agreement or if it does not define Cause: (i) conviction of the Holder for committing a felony under federal law or in the law of the state in which such action occurred; (ii) dishonesty in the course of fulfilling the Holders employment duties; (iii) willful and deliberate failure on the part of the Holder to perform the Holders employment duties in any material respect; or (iv) prior to a Change in Control, such other events as shall be determined by the Committee. The Committee shall, unless otherwise provided in the Holders Individual Agreement, have the sole discretion to determine whether Cause exists, and its determination shall be final.
(d) Termination for Cause . If the Holders employment with the Company or any Subsidiary terminates for Cause, any Unvested Shares will be forfeited and terminate immediately upon termination and any Vested Shares shall be forfeited and terminate 30 days after the date employment terminates. The balance of the Option will be forfeited if not exercised as provided for in this subsection. Notwithstanding the foregoing, in no event will the Option be exercisable after the tenth anniversary of the date hereof.
(e) Other Termination . Unless otherwise determined by the Committee, if the Holders employment with the Company or any Subsidiary terminates other than in the circumstances described in paragraphs (a), (b), (c) or (d) of this Section 4, any Vested Shares at the time of termination must be exercised by the Holder within 90 days after the date the Holders employment terminates. The balance of the Option will be forfeited if not exercised as provided for in this subsection. Notwithstanding the foregoing, in no event will the Option be exercisable after the tenth anniversary of the date hereof. Unless otherwise determined by the Committee, any Unvested Shares under the Option shall be forfeited upon termination.
(f) Leave of Absence . If the Holder is granted a leave of absence by the Company or any Subsidiary, his or her employment will not be considered terminated, and he or she will continue to be deemed an employee of the Company or Subsidiary during such leave of absence or any extension thereof granted by the Company or Subsidiary for purposes of the Plan.
5. Transferability . The Holder may transfer the Option, during his or her lifetime (a) to one or more members of such Holders family, (b) to one or more trusts for the benefit of one or more of such Holders family, (c) to a partnership or partnerships of members of such Holders family, or (d) to a charitable organization as defined in Section 501(c)(3) of the Code, provided that no consideration is paid for the transfer and that the transfer would not result in the loss of any exemption under Rule 16b-3 of the Securities Exchange Act of 1934, as amended, with respect to any Option. The Option and the Holders rights therein are also transferable by will or the laws of descent and distribution or pursuant to a qualified domestic relations order (as defined in the Internal Revenue Code or the Employee Retirement Income Security Act of 1974, as amended). The transferee of any Option will be subject to all restrictions, terms and conditions applicable to the Option prior to its transfer.
6. Taxes . The Holder hereby agrees to pay to the Company, in accordance with the terms of the Plan, any federal, state or local taxes of any kind required by law to be withheld and remitted by the Company with respect to an exercise of the Option. The Holder may satisfy such tax obligation, in whole or in part, by (a) electing to have the Company withhold a portion of the Shares otherwise to be delivered upon exercise of (or the lapse of restrictions relating to) the Option with a fair market value equal to the amount of such taxes, or (b) delivering to the Company Common Shares other than Shares issuable upon exercise of (or the lapse of restrictions relating to) the Option with a fair market value equal to the amount of such taxes. The election, if any, must be made on or before the date that the amount of tax to be
withheld is determined. If the Holder does not make such payment to the Company, the Company shall have the right to withhold from any payment of any kind otherwise due to the Holder from the Company, any federal, state or local taxes of any kind required by law to be withheld with respect to an exercise of the Option or the Shares which are the subject of such Option so long as such withholding does not result in any adverse tax consequences under Section 409A of the Code.
7. Subject to the Plan . This Agreement is made and the Option evidenced hereby is granted under and pursuant to, and they are expressly made subject to all of the terms and conditions of, the Plan, notwithstanding anything herein to the contrary. The Holder hereby acknowledges receipt of a copy of the Plan and that the Holder has read and understands the terms and conditions of the Plan. Capitalized terms not defined herein are used as defined in the Plan.
8. Intent . The Option is intended to be treated as a non-qualified stock option and not as an incentive stock option within the meaning of Section 422 of the Internal Revenue Code. The Option shall be construed and exercised consistent with such intention.
9. Securities Law Compliance .
(a) Notwithstanding any provision of this Agreement to the contrary, the Option shall not be exercisable unless, at the time the Holder attempts to exercise the Option, in the opinion of counsel for the Company, all applicable securities laws, rules and regulations have been complied with. The Holder agrees that the Company may impose such restrictions on the Shares as are deemed advisable by the Company, including, without limitation, restrictions relating to listing or trading requirements. The Holder further agrees that certificates representing the Shares, if any, may bear such legends and statements as the Company shall deem appropriate or advisable to assure, among other things, compliance with applicable securities laws, rules and regulations.
(b) The Holder agrees that any Shares which the Holder may acquire by virtue of the Option may not be transferred, sold, assigned, pledged, hypothecated or otherwise disposed of by the Holder unless (i) a registration statement or post-effective amendment to a registration statement under the Securities Act of 1933, as amended, with respect to such Shares has become effective so as to permit the sale or other disposition of such Shares by the Holder, or (ii) there is presented to the Company an opinion of counsel satisfactory to the Company to the effect that the sale or other proposed disposition of such Shares by the Holder may lawfully be made otherwise than pursuant to an effective registration statement or post-effective amendment to a registration statement relating to such Shares under the Securities Act of 1933, as amended.
10. Rights of the Holder . The granting of the Option shall in and of itself not confer any right on the Holder to continue in the employ of the Company and shall not interfere in any way with the right of the Company to terminate the Holders employment at any time, subject to the terms of any employment agreement between the Company and the Holder. The Holder shall have no dividend, voting or other rights of a stockholder with respect to the Shares which are subject to the Option prior to the purchase of such Shares upon exercise of the Option and the execution and delivery of all other documents and instruments deemed necessary or desirable by the Company.
11. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio, except to the extent otherwise governed by Federal law.
IN WITNESS WHEREOF, the parties have subscribed their names hereto as of the date first above written.
DDR Corp., an Ohio corporation | ||
By: | ||
Name: Title: |
Holders Signature: |
Exhibit 10.4
STOCK OPTION AGREEMENT
(Incentive Stock Option Grant)
THIS AGREEMENT (the Agreement) is made as of by and between DDR CORP., an Ohio corporation (the Company), and , an individual (the Holder).
W I T N E S S E T H :
WHEREAS, the Company desires to provide the Holder with an Option Right (the Option) to purchase ( ) Common Shares of the Company (Shares), pursuant to the Companys (the Plan); and
WHEREAS, the Holder desires to accept such Option.
NOW, THEREFORE, in consideration of the mutual covenants herein set forth, the parties hereto hereby agree as follows:
1. Grant of Option . The Company does hereby irrevocably grant to the Holder, and the Holder does hereby accept, the Option to purchase, at the option of the Holder, ( ) Shares at the Option Price per Share of and upon and subject to the other terms and conditions hereof and the Plan.
2. Term of the Option; Vesting . The Option is exercisable, in whole or in part, once vested, in accordance with the following schedule. If the Holder is then employed by the Company, the Option shall vest as follows:
Date | No. of Shares Vesting |
Shares for which the Option has become exercisable shall be referred to herein as Vested Shares, and Shares for which the Option has not become exercisable shall be referred to herein as Unvested Shares. The Option shall terminate on the tenth anniversary of the date hereof and must be exercised, if at all and to the extent exercisable, on or before such date and shall not thereafter be exercisable, notwithstanding anything herein to the contrary. Notwithstanding anything contained herein to the contrary, it shall be a condition to the Holders right to exercise the Option with respect to any Vested Shares that there shall have been filed with the Securities and Exchange Commission an effective registration statement on Form S-8 (or such other form as the Company shall deem necessary) with respect to the Shares to be received upon exercise.
3. Exercise . Subject to the other terms and conditions hereof, the Option shall be exercisable from time to time by written notice to the Company (in the form required by the Company) which shall:
(a) |
state that the Option is thereby being exercised, the number of Shares with respect to which the Option is being exercised, each person in whose name any |
certificates or book entry for the Shares should be registered and such persons address and social security number; |
(b) | be signed by the person or persons entitled to exercise the Option and, if the Option is being exercised by anyone other than the Holder, be accompanied by proof satisfactory to counsel for the Company of the right of such person or persons to exercise the Option under the Plan and all applicable laws and regulations; and |
(c) | be accompanied by such representations, warranties or agreements with respect to the investment intent of such person or persons exercising the Option as the Company may reasonably request, in form and substance satisfactory to counsel for the Company. |
As conditions to the exercise of the Option and the obligation of the Company to issue Shares upon the exercise thereof, the proposed recipient of the Shares shall make any representation or warranty to comply with any applicable law or regulation or to confirm any factual matters reasonably requested by the Company or its counsel.
Upon exercise of the Option and the satisfaction of all conditions thereto, the Company shall arrange for the Shares to be held in book entry form or deliver a certificate or certificates for Shares to the specified person or persons at the specified time upon receipt of the aggregate exercise price for such Shares by any method of payment authorized by the Plan.
4. Termination of Employment . Subject to the terms of the Holders employment or similar agreement with the Company or any Subsidiary (an Individual Agreement), if any, upon termination of the Holders employment with the Company, the Option will be governed as follows:
(a) Termination by Death . If the Holders employment with the Company or any Subsidiary terminates by reason of death, the Option shall become immediately and automatically vested and exercisable. If termination of the Holders employment is due to death, then the Option may thereafter be exercised by the estate of the Holder (acting through its fiduciary) for a period of one year. The balance of the Option will be forfeited if not exercised as provided for in this subsection. Notwithstanding the foregoing, in no event will the Option be exercisable after the tenth anniversary of the date hereof.
(b) Termination by Reason of Disability . If the Holders employment with the Company or any Subsidiary terminates by reason of a permanent and total disability as defined in Section 22(e)(3) of the Code (Disability), the Option shall become immediately and automatically vested and exercisable. If termination of the Holders employment is due to Disability, then the Option may thereafter be exercised by the Holder or by the Holders duly authorized legal representative if the Holder is unable to exercise the Option as a result of the Holders Disability (if, and to the extent, permitted by Section 422 of the Code), for a period of one year. If the Holder dies before the Option is so exercised, any unexercised Option held by the Holder shall thereafter be exercisable by the estate of the Holder (acting through its fiduciary) for the duration of such one-year period. The balance of the Option will be forfeited if not exercised as provided for in this subsection. Notwithstanding the foregoing, in no event will the Option be exercisable after the tenth anniversary of the date hereof.
(c) Termination Without Cause After a Change in Control . If, within two years following a Change in Control, the Holders employment with the Company or any Subsidiary terminates without Cause, the Option shall become immediately and automatically vested and exercisable, and then the Option may thereafter be exercised by the Holder at any time after the date of such termination of
employment. The balance of the Option will be forfeited if not exercised as provided for in this subsection. Notwithstanding the foregoing, in no event will the Option be exercisable after the tenth anniversary of the date hereof. For purposes of this Section 4(c), Cause is used as defined in the Holders Individual Agreement, if any, or if there is no Holders Individual Agreement or if it does not define Cause: (i) conviction of the Holder for committing a felony under federal law or in the law of the state in which such action occurred; (ii) dishonesty in the course of fulfilling the Holders employment duties; (iii) willful and deliberate failure on the part of the Holder to perform the Holders employment duties in any material respect; or (iv) prior to a Change in Control, such other events as shall be determined by the Committee. The Committee shall, unless otherwise provided in the Holders Individual Agreement, have the sole discretion to determine whether Cause exists, and its determination shall be final.
(d) Termination for Cause . If the Holders employment with the Company or any Subsidiary terminates for Cause, any Unvested Shares will be forfeited and terminate immediately upon termination and any Vested Shares shall be forfeited and terminate 30 days after the date employment terminates. The balance of the Option will be forfeited if not exercised as provided for in this subsection. Notwithstanding the foregoing, in no event will the Option be exercisable after the tenth anniversary of the date hereof.
(e) Other Termination . Unless otherwise determined by the Committee, if the Holders employment with the Company or any Subsidiary terminates other than in the circumstances described in paragraphs (a), (b), (c) or (d) of this Section 4, any Vested Shares at the time of termination must be exercised by the Holder within 90 days after the date the Holders employment terminates. The balance of the Option will be forfeited if not exercised as provided for in this subsection. Notwithstanding the foregoing, in no event will the Option be exercisable after the tenth anniversary of the date hereof. Unless otherwise determined by the Committee, any Unvested Shares under the Option shall be forfeited upon termination.
(f) Leave of Absence . If the Holder is granted a leave of absence by the Company or any Subsidiary, his or her employment will not be considered terminated, and he or she will continue to be deemed an employee of the Company or Subsidiary during such leave of absence or any extension thereof granted by the Company or Subsidiary for purposes of the Plan; provided, that in the case of an Incentive Stock Option, but subject to the Plan, a leave of absence of more than 90 days will be viewed as a termination of employment unless continued employment is guaranteed by contract or statute.
5. Transferability . The Option and the Holders rights therein are not transferable by the Holder other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order (as defined in the Internal Revenue Code or the Employee Retirement Income Security Act of 1974, as amended). If, for any reason, the Option is not treated as an Incentive Stock Option, the Holder may transfer the Option, during his or her lifetime (a) to one or more members of such Holders family, (b) to one or more trusts for the benefit of one or more of such Holders family, (c) to a partnership or partnerships of members of such Holders family, or (d) to a charitable organization as defined in Section 501(c)(3) of the Code, provided that no consideration is paid for the transfer and that the transfer would not result in the loss of any exemption under Rule 16b-3 of the Securities Exchange Act of 1934, as amended, with respect to any Option. The transferee of any Option will be subject to all restrictions, terms and conditions applicable to the Option prior to its transfer.
6. Taxes . The Holder hereby agrees to pay to the Company, in accordance with the terms of the Plan, any federal, state or local taxes of any kind required by law to be withheld and remitted by the Company with respect to an exercise of the Option. The Holder may satisfy such tax obligation, in whole or in part, by (a) electing to have the Company withhold a portion of the Shares otherwise to be delivered
upon exercise of (or the lapse of restrictions relating to) the Option with a fair market value equal to the amount of such taxes, or (b) delivering to the Company Common Shares other than Shares issuable upon exercise of (or the lapse of restrictions relating to) the Option with a fair market value equal to the amount of such taxes. The election, if any, must be made on or before the date that the amount of tax to be withheld is determined. If the Holder does not make such payment to the Company, the Company shall have the right to withhold from any payment of any kind otherwise due to the Holder from the Company, any federal, state or local taxes of any kind required by law to be withheld with respect to an exercise of the Option or the Shares which are the subject of such Option so long as such withholding does not result in any adverse tax consequences under Section 409A of the Code.
7. Subject to the Plan . This Agreement is made and the Option evidenced hereby is granted under and pursuant to, and they are expressly made subject to all of the terms and conditions of, the Plan, notwithstanding anything herein to the contrary. The Holder hereby acknowledges receipt of a copy of the Plan and that the Holder has read and understands the terms and conditions of the Plan. Capitalized terms not defined herein are used as defined in the Plan.
8. Intent . The Option is intended to be treated as an Incentive Stock Option within the meaning of Section 422 of the Internal Revenue Code (an Incentive Stock Option). The Option shall be construed and exercised consistent with such intention. It is acknowledged that the United States Treasury Department may amend or modify from time to time its regulations governing Incentive Stock Options. Accordingly, it is understood and agreed by the Holder that the Company may amend or modify the Plan and this Agreement in any respect deemed by the Company to be necessary or desirable to comply with such regulations, as amended or modified from time to time or to meet the requirements for an Incentive Stock Option.
9. Securities Law Compliance .
(a) Notwithstanding any provision of this Agreement to the contrary, the Option shall not be exercisable unless, at the time the Holder attempts to exercise the Option, in the opinion of counsel for the Company, all applicable securities laws, rules and regulations have been complied with. The Holder agrees that the Company may impose such restrictions on the Shares as are deemed advisable by the Company, including, without limitation, restrictions relating to listing or trading requirements. The Holder further agrees that certificates representing the Shares, if any, may bear such legends and statements as the Company shall deem appropriate or advisable to assure, among other things, compliance with applicable securities laws, rules and regulations.
(b) The Holder agrees that any Shares which the Holder may acquire by virtue of the Option may not be transferred, sold, assigned, pledged, hypothecated or otherwise disposed of by the Holder unless (i) a registration statement or post-effective amendment to a registration statement under the Securities Act of 1933, as amended, with respect to such Shares has become effective so as to permit the sale or other disposition of such Shares by the Holder, or (ii) there is presented to the Company an opinion of counsel satisfactory to the Company to the effect that the sale or other proposed disposition of such Shares by the Holder may lawfully be made otherwise than pursuant to an effective registration statement or post-effective amendment to a registration statement relating to such Shares under the Securities Act of 1933, as amended.
10. Rights of the Holder . The granting of the Option shall in and of itself not confer any right on the Holder to continue in the employ of the Company and shall not interfere in any way with the right of the Company to terminate the Holders employment at any time, subject to the terms of any employment agreement between the Company and the Holder. The Holder shall have no dividend, voting or other rights of a stockholder with respect to the Shares which are subject to the Option prior to the
purchase of such Shares upon exercise of the Option and the execution and delivery of all other documents and instruments deemed necessary or desirable by the Company.
11. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio, except to the extent otherwise governed by Federal law.
IN WITNESS WHEREOF, the parties have subscribed their names hereto as of the date first above written.
DDR Corp., an Ohio corporation | ||
By: | ||
Name: Title: |
Holders Signature: |
Exhibit 10.5
2013 VALUE SHARING EQUITY PROGRAM
AWARD AGREEMENT
DDR Corp., an Ohio corporation (the Company), has granted to (the Participant), ( ) Absolute Performance Award Shares [ and ( ) Relative Performance Award Shares] (for purposes of this 2013 Value Sharing Equity Program Award Agreement (the Agreement), these Absolute Performance Award Shares [ and these Relative Performance Award Shares, collectively,] are referred to as the Earned Shares) pursuant to the Companys (the Plan) and the Companys 2013 Value Sharing Equity Program (the Program). The Earned Shares are subject to all provisions of the Plan and the Program, which are hereby incorporated herein by reference, and to the following provisions of this Agreement (capitalized terms not defined herein are used as defined in the Plan or the Program, as applicable):
§1. Vesting . Unless otherwise indicated on Exhibit A to this Agreement, the Earned Shares are subject to the Retention Restrictions as described in this Agreement. The Retention Restrictions will lapse on the Earned Shares in 20% annual increments beginning with respect to the first ( ) Earned Shares [ (consisting of ( ) Absolute Performance Award Shares and ( ) Relative Performance Award Shares)] on the Measurement Date, and continuing on each of the first four anniversaries of such date (the Vesting Schedule and each such date a Vesting Date).
§2. Purchase Price . The purchase price of the Earned Shares is $0.
§3. Termination of Employment . If the Participants employment with the Company terminates during the Vesting Schedule, the Retention Restrictions will lapse on the Earned Shares or the Earned Shares will be forfeited as follows:
(a) Termination by Death . If the Participants employment with the Company terminates by reason of death, any remaining Retention Restrictions will immediately lapse with respect to any Earned Shares that are then held by the Participant.
(b) Termination by Reason of Disability . If the Participants employment with the Company terminates due to the Participant becoming Disabled, any remaining Retention Restrictions will immediately lapse with respect to any Earned Shares that are then held by the Participant.
(c) Termination Without Cause After a Change in Control . Unless otherwise determined by the Committee or as provided for in the Participants Individual Agreement, if any, if, within two years following a Change in Control, the Participants employment with the
Company (or its successor in the Change in Control) is terminated without Cause by the employer, any remaining Retention Restrictions will immediately lapse with respect to any Earned Shares that are then held by the Participant. For purposes of this Section 3(c), Cause is used as defined in the Program. The Committee shall, unless otherwise provided in the Participants Individual Agreement, have the sole discretion to determine whether Cause exists, and its determination shall be final.
(d) Termination Without Cause Other than After a Change in Control . Unless otherwise determined by the Committee or as provided for in the Participants Individual Agreement, if any, if the Participants employment with the Company is terminated without Cause by the Company and Section 3(c) above does not apply, any Earned Shares that are then held by the Participant and remain subject to Retention Restrictions will immediately become nonforfeitable, but the applicable transfer restrictions under the Retention Restrictions shall continue to lapse according to the Vesting Schedule.
(e) Other Termination . Unless otherwise determined by the Committee or as provided for in the Participants Individual Agreement, if the Participants employment with the Company terminates during the Vesting Schedule other than in the circumstances described in paragraphs (a), (b), (c) or (d) of this Section 3, any Earned Shares that are then held by the Participant and remain subject to Retention Restrictions will immediately be forfeited without any further action.
(f) Leave of Absence . If the Participant is granted a leave of absence by the Company or any Subsidiary, his or her employment will not be considered terminated, and he or she will continue to be deemed an employee of the Company or Subsidiary during such leave of absence or any extension thereof granted by the Company or Subsidiary for purposes of the Plan.
§4. Dividends . All dividends payable on the Earned Shares (whether or not such Earned Shares remain subject to Retention Restrictions) will be payable in the same manner as paid to other shareholders. All cash dividends payable on any Earned Shares that remain subject to Retention Restrictions shall be paid in unrestricted cash. In the case of dividends payable on any Earned Shares that remain subject to Retention Restrictions in shares or other property, the shares or other property so payable shall be subject to the same restrictions and other terms and conditions that apply to the Earned Shares unless otherwise determined by the Committee or the Board at the time the dividend is authorized.
§5. Taxes . The Participant hereby agrees to pay to the Company, in accordance with the terms of the Plan and the Program, any federal, state or local taxes of any kind required by law to be withheld and remitted by the Company with respect to the Earned Shares. The Participant may satisfy such tax obligation, in whole or in part, by (a) electing to have the Company withhold a portion of the Common Shares otherwise to be delivered upon vesting of the Earned Shares with a fair market value equal to the amount of such taxes, or (b) delivering to the Company other Common Shares with a fair market value equal to the amount of such taxes. The election, if any, must be made on or before the date that the amount of tax to be withheld is determined. If the Participant does not make such payment to the Company, the Company shall have the right to withhold from any payment of any kind otherwise due to the Participant from
the Company, any federal, state or local taxes of any kind required by law to be withheld with respect to the award or vesting of the Earned Shares so long as such withholding does not result in any adverse tax consequences under Section 409A of the Code.
§6. Deferral . The Participant may, in his or her sole discretion, with respect to this payout of Earned Shares, elect to participate in any equity deferred compensation plan established by the Company, in which case such plan shall govern amounts deferred.
§7. Subject to the Plan . This Agreement is made and the Earned Shares evidenced hereby are granted under and pursuant to, and they are expressly made subject to all of the terms and conditions of, the Plan, notwithstanding anything herein to the contrary. The Participant hereby acknowledges receipt of a copy of the Plan and that the Participant has read and understands the terms and conditions of the Plan.
§8. Securities Law Compliance .
(a) The Participant agrees that the Company may impose such restrictions on the Common Shares as are deemed advisable by the Company, including, without limitation, restrictions relating to listing or trading requirements. The Participant further agrees that certificates representing the Common Shares, if any, may bear such legends and statements as the Company shall deem appropriate or advisable to assure, among other things, compliance with applicable securities laws, rules and regulations.
(b) The Participant agrees that any Common Shares which the Participant may acquire by virtue of this Agreement may not be transferred, sold, assigned, pledged, hypothecated or otherwise disposed of by the Participant unless (i) a registration statement or post-effective amendment to a registration statement under the Securities Act of 1933, as amended, with respect to such Common Shares has become effective so as to permit the sale or other disposition of such Common Shares by the Participant, or (ii) there is presented to the Company an opinion of counsel satisfactory to the Company to the effect that the sale or other proposed disposition of such Common Shares by the Participant may lawfully be made otherwise than pursuant to an effective registration statement or post-effective amendment to a registration statement relating to such Common Shares under the Securities Act of 1933, as amended.
§9. Rights of the Participant . The granting of the Earned Shares shall in and of itself not confer any right of the Participant to continue in the employ of the Company and shall not interfere in any way with the right of the Company to terminate the Participants employment at any time, subject to the terms of any employment agreement between the Company and the Participant.
§10. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio, except to the extent otherwise governed by Federal law.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK
IN WITNESS WHEREOF, the parties have subscribed their names hereto.
DDR Corp., an Ohio corporation | ||
By: | ||
Name: Title: |
DATE:
Participants Signature: |
EXHIBIT A
Exhibit 31.1
CERTIFICATIONS
I, Daniel B. Hurwitz, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of DDR Corp.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
May 10, 2013
Date
/s/ Daniel B. Hurwitz |
Daniel B. Hurwitz |
Chief Executive Officer |
Exhibit 31.2
CERTIFICATIONS
I, David J. Oakes, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of DDR Corp.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
May 10, 2013
Date
/s/ David J. Oakes |
David J. Oakes |
President and Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Daniel B. Hurwitz, Chief Executive Officer of DDR Corp. (the Company), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) The Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2013, as filed with the Securities and Exchange Commission (the Report), which this certification accompanies, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.
/s/ Daniel B. Hurwitz |
Daniel B. Hurwitz |
Chief Executive Officer |
May 10, 2013 |
Exhibit 32.2
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, David J. Oakes, President and Chief Financial Officer of DDR Corp. (the Company), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) The Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2013, as filed with the Securities and Exchange Commission (the Report), which this certification accompanies, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.
/s/ David J. Oakes |
David J. Oakes |
President and Chief Financial Officer |
May 10, 2013 |