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Jo

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

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

 

SITE Centers 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, OH 44122

(Address of principal executive offices)                (Zip Code)

Registrant’s telephone number, including area code: (216) 755-5500

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Shares, Par Value $0.10 Per Share

 

SITC

 

New York Stock Exchange

 

 

 

 

 

Depositary Shares, each representing 1/20 of a share of 6.375% Class A Cumulative Redeemable Preferred Shares without Par Value

 

SITC PRA

 

New York Stock Exchange

 

 

 

 

 

Depositary Shares, each representing 1/20 of a share of 6.5%  Class J Cumulative Redeemable Preferred Shares without Par Value

 

SITC PRJ

 

New York Stock Exchange

 

 

 

 

 

Depositary Shares, each representing 1/20 of a share of 6.25%  Class K Cumulative Redeemable Preferred Shares without Par Value

 

SITC PRK

 

New York Stock Exchange

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  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

     

☒

  

Accelerated filer

 

☐

 

 

 

 

Non-accelerated filer

 

☐  

  

Smaller reporting company

 

☐

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

☐

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of July 29, 2019, the registrant had 180,561,816 shares of common stock, $0.10 par value per share, outstanding.

 

 

 

SITE Centers Corp.

QUARTERLY REPORT ON FORM 10-Q

QUARTER ENDED June 30, 2019

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

Item 1.

Financial Statements - Unaudited

 

 

Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018

2

 

Consolidated Statements of Operations for the Three Months Ended June 30, 2019 and 2018

3

 

Consolidated Statements of Operations for the Six Months Ended June 30, 2019 and 2018

4

 

Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2019 and 2018

5

 

Consolidated Statements of Equity for the Three and Six Months Ended June 30, 2019 and 2018

6

 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018

7

 

Notes to Condensed Consolidated Financial Statements

8

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

40

Item 4.

Controls and Procedures

41

 

 

 

PART II. OTHER INFORMATION

 

Item 1.

Legal Proceedings

42

Item 1A.

Risk Factors

42

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

42

Item 3.

Defaults Upon Senior Securities

42

Item 4.

Mine Safety Disclosures

42

Item 5.

Other Information

42

Item 6.

Exhibits

43

 

 

 

SIGNATURES

44

 

 

1

SITE Centers Corp.

CONSOLIDATED BALANCE SHEETS

(unaudited; in thousands, except share amounts)

 

 

June 30, 2019

 

 

December 31, 2018

 

Assets

 

 

 

 

 

 

 

Land

$

861,438

 

 

$

873,548

 

Buildings

 

3,217,382

 

 

 

3,251,030

 

Fixtures and tenant improvements

 

461,187

 

 

 

448,371

 

 

 

4,540,007

 

 

 

4,572,949

 

Less: Accumulated depreciation

 

(1,231,448

)

 

 

(1,172,357

)

 

 

3,308,559

 

 

 

3,400,592

 

Construction in progress and land

 

72,124

 

 

 

54,917

 

Total real estate assets, net

 

3,380,683

 

 

 

3,455,509

 

Investments in and advances to joint ventures, net

 

340,881

 

 

 

329,623

 

Investment in and advances to affiliate

 

223,759

 

 

 

223,985

 

Cash and cash equivalents

 

9,421

 

 

 

11,087

 

Restricted cash

 

1,744

 

 

 

2,563

 

Accounts receivable

 

63,935

 

 

 

67,335

 

Other assets, net

 

122,319

 

 

 

116,229

 

 

$

4,142,742

 

 

$

4,206,331

 

Liabilities and Equity

 

 

 

 

 

 

 

Unsecured indebtedness:

 

 

 

 

 

 

 

Senior notes, net

$

1,646,985

 

 

$

1,646,007

 

Term loan, net

 

49,698

 

 

 

49,655

 

Revolving credit facilities

 

75,000

 

 

 

100,000

 

 

 

1,771,683

 

 

 

1,795,662

 

Mortgage indebtedness, net

 

87,192

 

 

 

88,743

 

Total indebtedness

 

1,858,875

 

 

 

1,884,405

 

Accounts payable and other liabilities

 

211,975

 

 

 

203,662

 

Dividends payable

 

44,641

 

 

 

45,262

 

Total liabilities

 

2,115,491

 

 

 

2,133,329

 

Commitments and contingencies

 

 

 

 

 

 

 

SITE Centers Equity

 

 

 

 

 

 

 

Class A—6.375% cumulative redeemable preferred shares, without par value, $500 liquidation value;

   750,000 shares authorized; 350,000 shares issued and outstanding at June 30, 2019 and

   December 31, 2018

 

175,000

 

 

 

175,000

 

Class J—6.5% cumulative redeemable preferred shares, without par value, $500 liquidation value;

   750,000 shares authorized; 400,000 shares issued and outstanding at June 30, 2019 and

   December 31, 2018

 

200,000

 

 

 

200,000

 

Class K—6.25% cumulative redeemable preferred shares, without par value, $500 liquidation value;

   750,000 shares authorized; 300,000 shares issued and outstanding at June 30, 2019 and

   December 31, 2018

 

150,000

 

 

 

150,000

 

Common shares, with par value, $0.10 stated value; 300,000,000 shares authorized; 184,717,977 and

   184,711,545 shares issued at June 30, 2019 and December 31, 2018, respectively

 

18,472

 

 

 

18,471

 

Additional paid-in capital

 

5,546,407

 

 

 

5,544,220

 

Accumulated distributions in excess of net income

 

(4,016,360

)

 

 

(3,980,151

)

Deferred compensation obligation

 

8,046

 

 

 

8,193

 

Accumulated other comprehensive loss

 

(769

)

 

 

(1,381

)

Less: Common shares in treasury at cost: 4,481,766 and 3,373,114 shares at June 30, 2019 and

   December 31, 2018, respectively

 

(56,659

)

 

 

(44,278

)

Total SITE Centers shareholders' equity

 

2,024,137

 

 

 

2,070,074

 

Non-controlling interests

 

3,114

 

 

 

2,928

 

Total equity

 

2,027,251

 

 

 

2,073,002

 

 

$

4,142,742

 

 

$

4,206,331

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.  

 

2

SITE Centers Corp.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited; in thousands, except per share amounts)

 

Three Months

 

 

Ended June 30,

 

 

2019

 

 

2018

 

Revenues from operations:

 

 

 

 

 

 

 

Rental income

$

112,274

 

 

$

200,002

 

Fee and other income

 

16,383

 

 

 

8,414

 

Business interruption income

 

—

 

 

 

3,100

 

 

 

128,657

 

 

 

211,516

 

Rental operation expenses:

 

 

 

 

 

 

 

Operating and maintenance

 

18,743

 

 

 

34,060

 

Real estate taxes

 

17,798

 

 

 

30,478

 

Impairment charges

 

—

 

 

 

18,060

 

Hurricane property loss

 

—

 

 

 

224

 

General and administrative

 

14,932

 

 

 

17,276

 

Depreciation and amortization

 

40,060

 

 

 

72,462

 

 

 

91,533

 

 

 

172,560

 

Other income (expense):

 

 

 

 

 

 

 

Interest income

 

4,521

 

 

 

5,016

 

Interest expense

 

(21,087

)

 

 

(44,913

)

Other income (expense), net

 

(85

)

 

 

(36,255

)

 

 

(16,651

)

 

 

(76,152

)

Income (loss) before earnings from equity method investments and other items

 

20,473

 

 

 

(37,196

)

Equity in net income of joint ventures

 

1,791

 

 

 

3,821

 

(Reserve) adjustment of preferred equity interests, net

 

(4,634

)

 

 

1,625

 

Gain on disposition of real estate, net

 

213

 

 

 

29,508

 

Income (loss) before tax expense

 

17,843

 

 

 

(2,242

)

Tax expense of taxable REIT subsidiaries and state franchise and income taxes

 

(306

)

 

 

(391

)

Net income (loss)

$

17,537

 

 

$

(2,633

)

Income attributable to non-controlling interests, net

 

(260

)

 

 

(696

)

Net income (loss) attributable to SITE Centers

$

17,277

 

 

$

(3,329

)

Preferred dividends

 

(8,383

)

 

 

(8,383

)

Net income (loss) attributable to common shareholders

$

8,894

 

 

$

(11,712

)

 

 

 

 

 

 

 

 

Per share data:

 

 

 

 

 

 

 

Basic

$

0.05

 

 

$

(0.07

)

Diluted

$

0.05

 

 

$

(0.07

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

SITE Centers Corp.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited; in thousands, except per share amounts)

 

Six Months

 

 

Ended June 30,

 

 

2019

 

 

2018

 

Revenues from operations:

 

 

 

 

 

 

 

Rental income

$

224,495

 

 

$

403,768

 

Fee and other income

 

35,184

 

 

 

17,716

 

Business interruption income

 

—

 

 

 

5,100

 

 

 

259,679

 

 

 

426,584

 

Rental operation expenses:

 

 

 

 

 

 

 

Operating and maintenance

 

37,584

 

 

 

67,087

 

Real estate taxes

 

35,541

 

 

 

62,501

 

Impairment charges

 

620

 

 

 

48,504

 

Hurricane property loss

 

—

 

 

 

974

 

General and administrative

 

29,044

 

 

 

30,121

 

Depreciation and amortization

 

82,668

 

 

 

146,886

 

 

 

185,457

 

 

 

356,073

 

Other income (expense):

 

 

 

 

 

 

 

Interest income

 

9,042

 

 

 

10,357

 

Interest expense

 

(42,813

)

 

 

(88,953

)

Other income (expense), net

 

68

 

 

 

(97,862

)

 

 

(33,703

)

 

 

(176,458

)

Income (loss) before earnings from equity method investments and other items

 

40,519

 

 

 

(105,947

)

Equity in net income of joint ventures

 

2,834

 

 

 

12,607

 

Reserve of preferred equity interests, net

 

(5,733

)

 

 

(2,336

)

Gain on disposition of real estate, net

 

16,590

 

 

 

39,519

 

Income (loss) before tax expense

 

54,210

 

 

 

(56,157

)

Tax expense of taxable REIT subsidiaries and state franchise and income taxes

 

(578

)

 

 

(373

)

Net income (loss)

$

53,632

 

 

$

(56,530

)

Income attributable to non-controlling interests, net

 

(565

)

 

 

(952

)

Net income (loss) attributable to SITE Centers

$

53,067

 

 

$

(57,482

)

Preferred dividends

 

(16,766

)

 

 

(16,766

)

Net income (loss) attributable to common shareholders

$

36,301

 

 

$

(74,248

)

 

 

 

 

 

 

 

 

Per share data:

 

 

 

 

 

 

 

Basic

$

0.20

 

 

$

(0.41

)

Diluted

$

0.20

 

 

$

(0.41

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

SITE Centers Corp.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)  

(unaudited; in thousands)

 

 

Three Months

 

 

Six Months

 

 

Ended June 30,

 

 

Ended June 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income (loss)

$

17,537

 

 

$

(2,633

)

 

$

53,632

 

 

$

(56,530

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation, net

 

191

 

 

 

(314

)

 

 

378

 

 

 

(713

)

Change in fair value of interest-rate contracts

 

—

 

 

 

(4

)

 

 

—

 

 

 

(1

)

Change in cash flow hedges reclassed to earnings

 

117

 

 

 

117

 

 

 

234

 

 

 

234

 

Total other comprehensive income (loss)

 

308

 

 

 

(201

)

 

 

612

 

 

 

(480

)

Comprehensive income (loss)

$

17,845

 

 

$

(2,834

)

 

$

54,244

 

 

$

(57,010

)

Total comprehensive income attributable to non-controlling interests

 

(260

)

 

 

(641

)

 

 

(565

)

 

 

(823

)

Total comprehensive income (loss) attributable to SITE Centers

$

17,585

 

 

$

(3,475

)

 

$

53,679

 

 

$

(57,833

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.  

 

5

SITE Centers Corp.

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited; in thousands)

 

 

SITE Centers Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Shares

 

 

Common

Shares

 

 

Additional

Paid-in

Capital

 

 

Accumulated Distributions

in Excess of

Net Income

 

 

Deferred Compensation Obligation

 

 

Accumulated Other Comprehensive Loss

 

 

Treasury

Stock at

Cost

 

 

Non-

Controlling

Interests

 

 

Total

 

Balance, December 31, 2018

$

525,000

 

 

$

18,471

 

 

$

5,544,220

 

 

$

(3,980,151

)

 

$

8,193

 

 

$

(1,381

)

 

$

(44,278

)

 

$

2,928

 

 

$

2,073,002

 

Issuance of common shares related

   to stock plans

 

—

 

 

 

1

 

 

 

31

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

32

 

Repurchase of common shares

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(14,069

)

 

 

—

 

 

 

(14,069

)

Stock-based compensation, net

 

—

 

 

 

—

 

 

 

1,044

 

 

 

—

 

 

 

(239

)

 

 

—

 

 

 

1,644

 

 

 

—

 

 

 

2,449

 

Distributions to non-controlling

   interests

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(212

)

 

 

(212

)

Dividends declared-common shares

 

—

 

 

 

—

 

 

 

—

 

 

 

(36,252

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(36,252

)

Dividends declared-preferred shares

 

—

 

 

 

—

 

 

 

—

 

 

 

(8,383

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(8,383

)

Comprehensive income

 

—

 

 

 

—

 

 

 

—

 

 

 

35,790

 

 

 

—

 

 

 

304

 

 

 

—

 

 

 

305

 

 

 

36,399

 

Balance, March 31, 2019

 

525,000

 

 

 

18,472

 

 

 

5,545,295

 

 

 

(3,988,996

)

 

 

7,954

 

 

 

(1,077

)

 

 

(56,703

)

 

 

3,021

 

 

 

2,052,966

 

Issuance of common shares related

   to stock plans

 

—

 

 

 

—

 

 

 

(32

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(32

)

Stock-based compensation, net

 

—

 

 

 

—

 

 

 

1,144

 

 

 

—

 

 

 

92

 

 

 

—

 

 

 

44

 

 

 

—

 

 

 

1,280

 

Distributions to non-controlling

   interests

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(167

)

 

 

(167

)

Dividends declared-common shares

 

—

 

 

 

—

 

 

 

—

 

 

 

(36,258

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(36,258

)

Dividends declared-preferred shares

 

—

 

 

 

—

 

 

 

—

 

 

 

(8,383

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(8,383

)

Comprehensive income

 

—

 

 

 

—

 

 

 

—

 

 

 

17,277

 

 

 

—

 

 

 

308

 

 

 

—

 

 

 

260

 

 

 

17,845

 

Balance, June 30, 2019

$

525,000

 

 

$

18,472

 

 

$

5,546,407

 

 

$

(4,016,360

)

 

$

8,046

 

 

$

(769

)

 

$

(56,659

)

 

$

3,114

 

 

$

2,027,251

 

 

 

SITE Centers Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Shares

 

 

Common

Shares

 

 

Additional

Paid-in

Capital

 

 

Accumulated Distributions

in Excess of

Net Income

 

 

Deferred Compensation Obligation

 

 

Accumulated Other Comprehensive Loss

 

 

Treasury

Stock at

Cost

 

 

Non-

Controlling

Interests

 

 

Total

 

Balance, December 31, 2017

$

525,000

 

 

$

18,426

 

 

$

5,531,249

 

 

$

(3,183,134

)

 

$

8,777

 

 

$

(1,106

)

 

$

(8,280

)

 

$

6,506

 

 

$

2,897,438

 

Issuance of common shares related

   to stock plans

 

—

 

 

 

41

 

 

 

5,824

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

5,865

 

Stock-based compensation, net

 

—

 

 

 

—

 

 

 

3,015

 

 

 

—

 

 

 

(1,109

)

 

 

—

 

 

 

879

 

 

 

—

 

 

 

2,785

 

Distributions to non-controlling

   interests

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(193

)

 

 

(193

)

Redemption of OP Units

 

—

 

 

 

—

 

 

 

880

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,589

)

 

 

(709

)

Dividends declared-common shares

 

—

 

 

 

—

 

 

 

—

 

 

 

(70,304

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(70,304

)

Dividends declared-preferred shares

 

—

 

 

 

—

 

 

 

—

 

 

 

(8,383

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(8,383

)

Comprehensive (loss) income

 

—

 

 

 

—

 

 

 

—

 

 

 

(54,153

)

 

 

—

 

 

 

(205

)

 

 

—

 

 

 

182

 

 

 

(54,176

)

Balance, March 31, 2018

 

525,000

 

 

 

18,467

 

 

 

5,540,968

 

 

 

(3,315,974

)

 

 

7,668

 

 

 

(1,311

)

 

 

(7,401

)

 

 

4,906

 

 

 

2,772,323

 

Issuance of common shares related

   to stock plans

 

—

 

 

 

(2

)

 

 

67

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

65

 

Stock-based compensation, net

 

—

 

 

 

—

 

 

 

1,971

 

 

 

—

 

 

 

50

 

 

 

—

 

 

 

97

 

 

 

—

 

 

 

2,118

 

Distributions to non-controlling

   interests

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(644

)

 

 

(644

)

Dividends declared-common shares

 

—

 

 

 

—

 

 

 

—

 

 

 

(70,307

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(70,307

)

Dividends declared-preferred shares

 

—

 

 

 

—

 

 

 

—

 

 

 

(8,383

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(8,383

)

Comprehensive (loss) income

 

—

 

 

 

—

 

 

 

—

 

 

 

(3,329

)

 

 

—

 

 

 

(146

)

 

 

—

 

 

 

641

 

 

 

(2,834

)

Balance, June 30, 2018

$

525,000

 

 

$

18,465

 

 

$

5,543,006

 

 

$

(3,397,993

)

 

$

7,718

 

 

$

(1,457

)

 

$

(7,304

)

 

$

4,903

 

 

$

2,692,338

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

SITE Centers Corp.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; in thousands)

 

 

Six Months

 

 

Ended June 30,

 

 

2019

 

 

2018

 

Cash flow from operating activities:

 

 

 

 

 

 

 

Net income (loss)

$

53,632

 

 

$

(56,530

)

Adjustments to reconcile net income (loss) to net cash flow provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

82,668

 

 

 

146,886

 

Stock-based compensation

 

5,792

 

 

 

4,722

 

Amortization and write-off of debt issuance costs and fair market value of debt adjustments

 

1,873

 

 

 

14,235

 

Loss on extinguishment of debt

 

—

 

 

 

49,016

 

Equity in net income of joint ventures

 

(2,834

)

 

 

(12,607

)

Reserve of preferred equity interests, net

 

5,733

 

 

 

2,336

 

Operating cash distributions from joint ventures

 

4,510

 

 

 

3,768

 

Gain on disposition of real estate, net

 

(16,590

)

 

 

(39,519

)

Impairment charges

 

620

 

 

 

48,504

 

Cash paid for interest rate hedging activities

 

—

 

 

 

(4,538

)

Assumption of building due to ground lease termination

 

—

 

 

 

(2,150

)

Change in notes receivable accrued interest

 

251

 

 

 

968

 

Net change in accounts receivable

 

833

 

 

 

(1,747

)

Net change in accounts payable and accrued expenses

 

(7,309

)

 

 

13,805

 

Net change in other operating assets and liabilities

 

(8,970

)

 

 

(5,394

)

Total adjustments

 

66,577

 

 

 

218,285

 

Net cash flow provided by operating activities

 

120,209

 

 

 

161,755

 

Cash flow from investing activities:

 

 

 

 

 

 

 

Real estate developed and improvements to operating real estate

 

(44,348

)

 

 

(68,108

)

Proceeds from disposition of real estate

 

71,145

 

 

 

301,545

 

Hurricane property insurance advance proceeds

—

 

 

 

20,193

 

Equity contributions to joint ventures

 

(46,983

)

 

 

(108

)

Distributions from unconsolidated joint ventures

 

14,552

 

 

 

25,141

 

Repayment of joint venture advances

 

14,066

 

 

 

46,400

 

Net cash flow provided by investing activities

 

8,432

 

 

 

325,063

 

Cash flow from financing activities:

 

 

 

 

 

 

 

(Repayment of) proceeds from revolving credit facilities, net

 

(25,000

)

 

 

45,000

 

Repayment of senior notes

—

 

 

 

(924,751

)

Repayment of term loan and mortgage debt

 

(1,093

)

 

 

(758,937

)

Payment of debt issuance costs

—

 

 

 

(32,825

)

Proceeds from mortgage payable

 

—

 

 

 

1,350,000

 

(Repurchase) issuance of common shares in conjunction with equity award plans and dividend reinvestment plan

 

(685

)

 

 

5,148

 

Repurchase of common shares

 

(14,069

)

 

 

—

 

Redemption of operating partnership units

—

 

 

 

(736

)

Distributions to non-controlling interests and redeemable operating partnership units

 

(380

)

 

 

(406

)

Dividends paid

 

(89,898

)

 

 

(157,236

)

Net cash flow used for financing activities

 

(131,125

)

 

 

(474,743

)

 

 

 

 

 

 

 

 

Effect of foreign exchange rate changes on cash and cash equivalents

 

(1

)

 

 

(2

)

Net (decrease) increase in cash, cash equivalents and restricted cash

 

(2,484

)

 

 

12,075

 

Cash, cash equivalents and restricted cash, beginning of period

 

13,650

 

 

 

94,724

 

Cash, cash equivalents and restricted cash, end of period

$

11,165

 

 

$

106,797

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

7

Notes to Condensed Consolidated Financial Statements

1.

Nature of Business and Financial Statement Presentation

Nature of Business

SITE Centers Corp. and its related consolidated real estate subsidiaries (collectively, the “Company” or “SITE Centers”) and unconsolidated joint ventures are primarily engaged in the business of acquiring, owning, developing, redeveloping, expanding, leasing, financing and managing shopping centers.  Unless otherwise provided, references herein to the Company or SITE Centers include SITE Centers Corp. and its wholly-owned subsidiaries and consolidated joint ventures.  The Company’s tenant base primarily includes national and regional retail chains and local tenants.  Consequently, the Company’s 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 (“GAAP”) 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 GAAP 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 GAAP 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 and six months ended June 30, 2019 and 2018, 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 Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Principles of Consolidation

The 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”).  All significant inter-company balances and transactions have been eliminated in consolidation.  Investments in real estate joint ventures in which the Company has the ability to exercise significant influence, but does not have financial or operating control, are accounted for using the equity method of accounting.  Accordingly, the Company’s share of the earnings (or loss) of these joint ventures is included in consolidated net income (loss).  

The Company has two unconsolidated joint ventures included in the Company’s joint venture investments that are considered VIEs for which the Company is not the primary beneficiary.  The Company’s maximum exposure to losses associated with these VIEs is limited to its aggregate investment, which was $172.0 million and $192.2 million as of June 30, 2019 and December 31, 2018, respectively.  

Reclassifications

Certain amounts in prior periods have been reclassified in order to conform with the current period’s presentation.  The Company reclassified $2.9 million and $6.2 million of costs for the three and six months ended June 30, 2018, respectively, on its consolidated statements of operations related to property management and services of the Company’s operating properties from General and Administrative to Operating and Maintenance.  In addition, the Company also reclassified $6.3 million and $10.0 million of contractual lease payments from Fee and Other Income to Rental Income within total revenues on its consolidated statements of operations for the three and six months ended June 30, 2018, respectively, in connection with the adoption of Accounting Standards Update (“ASU”) No. 2016-02—Leases, as amended (“Topic 842”), as discussed below.

8

Statements of Cash Flows and Supplemental Disclosure of Non-Cash Investing and Financing Information

Non-cash investing and financing activities are summarized as follows (in millions):

 

Six Months

 

 

Ended June 30,

 

 

2019

 

 

2018

 

Dividends declared, but not paid

$

44.6

 

 

$

78.7

 

Accounts payable related to construction in progress

14.3

 

 

 

16.7

 

Assumption of building due to ground lease termination

 

—

 

 

 

2.2

 

Receivable and reduction of real estate assets, net - related to hurricane

 

—

 

 

 

7.8

 

Conversion of Operating Partnership Units

 

—

 

 

 

0.9

 

 Common Shares

The Company declared common share dividends of $0.20 per share and $0.38 per share for the three months ended June 30, 2019 and 2018, respectively, and $0.40 per share and $0.76 per share for the six months ended June 30, 2019 and 2018, respectively.

New Accounting Standard Adopted

Accounting for Leases

The Company adopted Topic 842, as of January 1, 2019, using the modified retrospective approach by applying the transition provisions at the beginning of the period of adoption.  The Company elected the following practical expedients permitted under the transition guidance within the new standard:

 

•

The package of practical expedients, which among other things, allowed the Company to carry forward the historical lease classification;

 

•

Land easements, allowing the Company to carry forward the accounting treatment for land easements on existing agreements and

 

•

To not separate lease and non-lease components for all leases and recording the combined component based on its predominant characteristics as rental income or expense.

The Company did not adopt the practical expedient to use hindsight in determining the lease term.

The Company made the following accounting policy elections in connection with the adoption:

 

•

As a lessee — the short-term lease exception for the Company’s office leases;

 

•

As a lessor — to include operating lease liabilities in the asset group and include the associated operating lease payments in the undiscounted cash flows when considering recoverability of a long-lived asset group and

 

•

As a lessor — to exclude from lease payments taxes assessed by a governmental authority that are both imposed on and concurrent with lease revenue producing activity and collected by the lessor from the lessee (i.e., sales tax).

Upon adoption of the standard, the Company’s consolidated financial statements were impacted as follows:

 

•

The Company had ground lease agreements in which the Company is the lessee for land beneath all or a portion of the buildings at three shopping centers and three additional leases where the Company is the lessee (Note 6), where the Company has recorded its rights and obligations under these leases as a right-of-use (“ROU”) asset and lease liability, which is included in Other Assets and Accounts Payable and Other Liabilities, respectively, in the consolidated balance sheet.  Previously, the Company accounted for these arrangements as operating leases.  These leases will continue to be classified as operating leases due to the election of the package practical expedients.  The Company recorded ROU assets and lease liabilities of approximately $22.0 million and $40.3 million, respectively, as of January 1, 2019.  The difference between the ROU asset and lease liability was primarily due to the straight-line rent balance that existed as of the date of the application of the standard.

 

•

Previously, the Company included real estate taxes paid by a lessee directly to a third party in recoveries from tenants and real estate tax expense, on a gross basis.  Upon adoption of the standard, the Company no longer records these amounts in revenue or expense as the standard precludes the Company from recording payments made directly by the lessee. In addition, on January 1, 2019, the Company reversed $1.7 million of real estate taxes paid by certain major tenants previously reflected in Accounts Receivable and Accounts Payable and Other Liabilities on the Company’s consolidated balance sheet as of December 31, 2018.  

9

 

•

Upon adoption of the practical expedient with regards to not separating lease and non-lease components, where applicable, the Company has prospectively recorded, on a straight-line basis, lease payments associated with fixed expense reimbursements.

 

•

The adoption of this standard did not materially impact the Company’s consolidated net income or consolidated cash flows.  

 

The adoption of the new standard also resulted in various presentation changes in the Company’s consolidated statements of operations.  The Company aggregated the following components of contractual lease payments into one line item referred to as Rental Income which includes Minimum Rents, Percentage and Overage Rents, Recoveries from Tenants, Ancillary Income and Lease Termination Fees.  The prior period presentation was conformed to the current period presentation for comparability related to these revenue components.  In addition, effective January 1, 2019, the Company presents bad debt as a component of Rental Income within Revenues.  For prior periods, bad debt is included in Operating and Maintenance Expenses.  In addition, effective January 1, 2019, the Company no longer records real estate taxes paid by major tenants directly to the applicable governmental authority.  For prior periods, these amounts are included in Recoveries from Tenants and Real Estate Taxes.

New Accounting Standard to Be Adopted

Accounting for Credit Losses

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued an amendment on measurement of credit losses on financial assets held by a reporting entity at each reporting date (ASU 2016-13, Financial Instruments – Credit Losses). The guidance requires the use of a new current expected credit loss ("CECL") model in estimating allowances for doubtful accounts with respect to accounts receivable, straight-line rents receivable and notes receivable. The CECL model requires that the Company estimate its lifetime expected credit loss with respect to these receivables and record allowances that, when deducted from the balance of the receivables, represent the estimated net amounts expected to be collected. This guidance is effective for fiscal years, and for interim reporting periods within those fiscal years, beginning after December 15, 2019.  In November 2018, the FASB issued ASU 2018-19, to clarify that operating lease receivables recorded by lessors are explicitly excluded from the scope of Topic 326.  The Company is in the process of evaluating the impact of this guidance.

2.

Revenue Recognition

Rental Income

Rental Income on the consolidated statements of operations includes contractual lease payments that generally include the following:

 

•

Fixed lease payments, which include fixed payments associated with expense reimbursements from tenants for common area maintenance, taxes and insurance from tenants in shopping centers, are recognized on a straight-line basis over the non-cancelable term of the lease, which generally ranges from one month to 30 years, and include the effects of applicable rent steps and abatements.  

 

 

•

Variable lease payments, which include percentage and overage income, which are recognized after a tenant’s reported sales have exceeded the applicable sales breakpoint set forth in the applicable lease.  

 

 

•

Variable lease payments associated with expense reimbursements from tenants for common area maintenance, taxes, insurance and other property operating expenses, based upon the tenant’s lease provisions, which are recognized in the period the related expenses are incurred.

 

 

•

Lease termination payments, which are recognized upon the effective termination of a tenant’s lease when the Company has no further obligations under the lease.  

 

 

•

Ancillary and other property-related rental payments, primarily composed of leasing vacant space to temporary tenants, kiosk income, and parking income, which are recognized in the period earned.

 

Upon adoption of Topic 842, Rental Income for the periods beginning on or after January 1, 2019, has been reduced for amounts the Company believes are not probable of being collected.

 

10

Fee and Other Income

Fee and Other Income on the consolidated statements of operations includes revenue from contracts with customers and other property-related income, primarily composed of theater income, is recognized in the period earned as follows (in thousands):

 

Three Months

 

 

Six Months

 

 

Ended June 30,

 

 

Ended June 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue from contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset and property management fees

$

11,110

 

 

$

4,886

 

 

$

22,641

 

 

$

10,482

 

Leasing commissions

 

1,381

 

 

 

1,312

 

 

 

2,880

 

 

 

2,934

 

Development fees

 

392

 

 

 

303

 

 

 

945

 

 

 

628

 

Disposition fees

 

1,515

 

 

 

—

 

 

 

2,717

 

 

 

—

 

Credit facility guaranty and refinancing fees

 

—

 

 

 

—

 

 

 

1,800

 

 

 

—

 

Total revenue from contracts with customers

 

14,398

 

 

 

6,501

 

 

 

30,983

 

 

 

14,044

 

Other property income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

1,985

 

 

 

1,913

 

 

 

4,201

 

 

 

3,672

 

Total fee and other income

$

16,383

 

 

$

8,414

 

 

$

35,184

 

 

$

17,716

 

 

3.

Investments in and Advances to Joint Ventures

At June 30, 2019 and December 31, 2018, the Company had ownership interests in various unconsolidated joint ventures that had an investment in 102 and 106 shopping center properties, respectively.  Condensed combined financial information of the Company’s unconsolidated joint venture investments is as follows (in thousands):

 

June 30, 2019

 

 

December 31, 2018

 

Condensed Combined Balance Sheets

 

 

 

 

 

 

 

Land

$

958,904

 

 

$

1,004,289

 

Buildings

 

2,705,984

 

 

 

2,804,027

 

Fixtures and tenant improvements

 

227,616

 

 

 

221,412

 

 

 

3,892,504

 

 

 

4,029,728

 

Less: Accumulated depreciation

 

(943,915

)

 

 

(935,921

)

 

 

2,948,589

 

 

 

3,093,807

 

Construction in progress and land

 

52,375

 

 

 

56,498

 

Real estate, net

 

3,000,964

 

 

 

3,150,305

 

Cash and restricted cash

 

84,623

 

 

 

94,111

 

Receivables, net

 

38,091

 

 

 

44,702

 

Other assets, net

 

175,882

 

 

 

186,693

 

 

$

3,299,560

 

 

$

3,475,811

 

 

 

 

 

 

 

 

 

Mortgage debt

$

1,844,589

 

 

$

2,212,503

 

Notes and accrued interest payable to the Company

 

6,216

 

 

 

5,182

 

Other liabilities

 

152,840

 

 

 

161,372

 

 

 

2,003,645

 

 

 

2,379,057

 

Redeemable preferred equity – SITE Centers (A)

 

263,222

 

 

 

274,493

 

Accumulated equity

 

1,032,693

 

 

 

822,261

 

 

$

3,299,560

 

 

$

3,475,811

 

 

 

 

 

 

 

 

 

Company's share of accumulated equity

$

176,261

 

 

$

145,786

 

Redeemable preferred equity, net (B)

 

170,313

 

 

 

189,891

 

Basis differentials

 

(9,484

)

 

 

(8,536

)

Deferred development fees, net of portion related to the Company's interest

 

(2,425

)

 

 

(2,700

)

Amounts payable to the Company

 

6,216

 

 

 

5,182

 

Investments in and Advances to Joint Ventures, net

$

340,881

 

 

$

329,623

 

 

(A)

Includes PIK that has accrued since March 2017 of $14.8 million and $12.2 million, which was fully reserved by the Company at June 30, 2019 and December 31, 2018, respectively.  

(B)

Amount is net of the valuation allowance of $78.2 million and $72.4 million and the fully reserved PIK of $14.8 million and $12.2 million at June 30, 2019 and December 31, 2018, respectively.  

11

 

Three Months

 

 

Six Months

 

 

Ended June 30,

 

 

Ended June 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Condensed Combined Statements of Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from operations(A)

$

105,580

 

 

$

107,759

 

 

$

214,683

 

 

$

222,284

 

Expenses from operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

30,482

 

 

 

32,314

 

 

 

60,543

 

 

 

66,695

 

Impairment charges

 

—

 

 

 

—

 

 

 

12,267

 

 

 

16,910

 

Depreciation and amortization

 

36,969

 

 

 

37,299

 

 

 

76,473

 

 

 

76,976

 

Interest expense

 

25,286

 

 

 

24,946

 

 

 

50,942

 

 

 

49,189

 

Preferred share expense

 

5,484

 

 

 

6,317

 

 

 

10,943

 

 

 

12,825

 

Other (income) expense, net

 

5,885

 

 

 

6,616

 

 

 

11,341

 

 

 

14,037

 

 

 

104,106

 

 

 

107,492

 

 

 

222,509

 

 

 

236,632

 

Income (loss) before gain on disposition of real estate

 

1,474

 

 

 

267

 

 

 

(7,826

)

 

 

(14,348

)

(Loss) gain on disposition of real estate, net

 

(321

)

 

 

12,356

 

 

 

15,645

 

 

 

50,376

 

Net income attributable to unconsolidated joint ventures

$

1,153

 

 

$

12,623

 

 

$

7,819

 

 

$

36,028

 

Company's share of equity in net income of joint ventures

$

1,602

 

 

$

3,506

 

 

$

2,447

 

 

$

11,979

 

Basis differential adjustments(B)

 

189

 

 

 

315

 

 

 

387

 

 

 

628

 

Equity in net income of joint ventures

$

1,791

 

 

$

3,821

 

 

$

2,834

 

 

$

12,607

 

(A)

Revenue from operations is subject to leasing or other standards.

(B)

The difference between the Company’s share of net income, as reported above, and the amounts included in the Company’s consolidated statements of operations is attributable to the amortization of basis differentials, unrecognized preferred PIK, the recognition of deferred gains, differences in gain (loss) on sale of certain assets recognized due to the basis differentials and other than temporary impairment charges.

Revenues earned by the Company related to all of the Company’s unconsolidated joint ventures and interest income on its preferred interests in the BRE DDR Retail Holdings Joint Ventures (as defined below) are as follows (in millions):

 

 

Three Months

 

 

Six Months

 

 

Ended June 30,

 

 

Ended June 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue from contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset and property management fees

$

4.8

 

 

$

4.9

 

 

$

10.1

 

 

$

10.5

 

Development fees, leasing commissions and other

 

1.1

 

 

 

1.6

 

 

 

2.5

 

 

 

3.5

 

Total revenue from contracts with customers

 

5.9

 

 

 

6.5

 

 

 

12.6

 

 

 

14.0

 

Other:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

4.2

 

 

 

4.8

 

 

 

8.4

 

 

 

9.8

 

Other

 

0.8

 

 

 

0.7

 

 

 

1.5

 

 

 

1.2

 

Total fee and other income

$

10.9

 

 

$

12.0

 

 

$

22.5

 

 

$

25.0

 

 

The Company’s joint venture agreements generally include provisions whereby each partner has the right to trigger a purchase or sale of its interest in the joint venture or to initiate a purchase or sale of the properties after a certain number of years or if either party is in default of the joint venture agreements.  The Company is not obligated to purchase the interests of its outside joint venture partners under these provisions.  

BRE DDR Retail Holdings Joint Ventures

 

The Company’s two unconsolidated investments with The Blackstone Group L.P. (“Blackstone”), BRE DDR Retail Holdings III (“BRE DDR III”) and BRE DDR Retail Holdings IV (“BRE DDR IV” and, together with BRE DDR III, the “BRE DDR Joint Ventures”), have substantially similar terms.

 

An affiliate of Blackstone is the managing member and effectively owns 95% of the common equity of each of the two BRE DDR Joint Ventures, and consolidated affiliates of SITE Centers effectively own the remaining 5%.  The Company provides leasing and property management services to all of the joint venture properties.  The Company cannot be removed as the property and leasing manager until the preferred equity, as discussed below, is redeemed in full (except for certain specified events).

The Company’s preferred interests are entitled to certain preferential cumulative distributions payable out of operating cash flows and certain capital proceeds pursuant to the terms and conditions of the preferred investments.  The preferred distributions are recognized as Interest Income within the Company’s consolidated statements of operations and are classified as a note receivable in

12

Investments in and Advances to Joint Ventures on the Company’s consolidated balance sheets.  The preferred investments have an annual distribution rate of 8.5% including any deferred and unpaid preferred distributions.  Blackstone has the right to defer up to 2.0% of the 8.5% preferred fixed distributions as a payment in kind (“PIK”) distribution.  Blackstone has made this PIK deferral election since the formation of both joint ventures.  The cash portion of the preferred fixed distributions is generally payable first out of operating cash flows and is current for both BRE DDR Joint Ventures.  The Company has no expectation that the cash portion of the preferred fixed distribution will become impaired.  As a result of the valuation allowances recorded, the Company no longer recognizes as interest income the 2.0% PIK.  Although Blackstone has the right to change its payment election, the Company expects future preferred distributions to continue to include the PIK component.  The recognition of the PIK interest income will be reevaluated based upon any future adjustments to the aggregate valuation allowance, as appropriate.

The Preferred investments are summarized as follows (in millions, except properties owned):

 

 

 

 

Preferred Investment (Principal)

 

 

Properties Owned

 

 

Formation

 

Initial

 

 

June 30, 2019

 

 

Valuation

Allowance

 

 

Net of Reserve

 

 

Inception

 

 

June 30, 2019

 

BRE DDR III

2014

 

$

300.0

 

 

$

180.2

 

 

$

(71.5

)

 

$

108.7

 

 

 

70

 

 

 

14

 

BRE DDR IV

2015

 

 

82.6

 

 

 

64.1

 

 

 

(6.7

)

 

 

57.4

 

 

 

6

 

 

 

5

 

 

 

 

$

382.6

 

 

$

244.3

 

 

$

(78.2

)

 

$

166.1

 

 

 

 

 

 

 

 

 

The Company reassessed the aggregate valuation allowance at June 30, 2019, with respect to its preferred investments in the BRE DDR Joint Ventures.  Based upon actual timing and values of recent property sales, as well as current market assumptions, the Company adjusted the aggregate valuation allowance by an increase of $4.6 million and $5.7 million for the three and six months ended June 30, 2019, respectively, resulting in a net valuation allowance of $78.2 million.  The valuation allowance is recorded as Reserve of Preferred Equity Interests on the Company’s consolidated statements of operations.  The Company will continue to monitor the investments and related valuation allowance, which could be increased or decreased in future periods, as appropriate.

Disposition of Shopping Centers

From January 1, 2019 to June 30, 2019, the Company’s joint ventures sold four shopping centers for $128.2 million, of which the Company’s share of the gain on sale was $1.5 million.

4.

Investment in and Advances to Affiliate

The Company has a preferred investment in Retail Value Inc. (“RVI”) of $190.0 million and receivables from RVI of $33.8 million at June 30, 2019, primarily consisting of restricted cash and insurance premiums owed by RVI pursuant to the terms of the agreement governing the separation of RVI from the Company, which occurred on July 1, 2018.  

Revenue from contracts with RVI is included in Fee and Other Income on the consolidated statements of operations and was composed of the following (in millions):

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30, 2019

 

 

June 30, 2019

 

 

 

 

 

 

 

 

 

Asset and property management fees

$

5.8

 

 

$

11.6

 

Leasing commissions

 

0.7

 

 

 

1.4

 

Disposition fees

 

1.5

 

 

 

2.6

 

Credit facility guaranty and refinancing fees

 

—

 

 

 

1.8

 

Total revenue from contracts with RVI

$

8.0

 

 

$

17.4

 

 

13

5.

Other Assets, net

Other Assets, Net on the Company’s consolidated balance sheets consists of the following (in thousands):  

 

 

June 30, 2019

 

 

December 31, 2018

 

Intangible assets:

 

 

 

 

 

 

 

In-place leases, net

$

24,411

 

 

$

30,703

 

Above-market leases, net

 

4,178

 

 

 

6,833

 

Lease origination costs

 

3,328

 

 

 

4,045

 

Tenant relations, net

 

30,215

 

 

 

35,838

 

Total intangible assets, net(A)

 

62,132

 

 

 

77,419

 

Operating lease ROU assets(B)

 

21,961

 

 

 

—

 

Notes receivable

 

19,670

 

 

 

19,675

 

Other assets:

 

 

 

 

 

 

 

Prepaid expenses

 

6,731

 

 

 

5,372

 

Other assets

 

3,023

 

 

 

3,612

 

Deposits

 

4,102

 

 

 

4,384

 

Deferred charges, net

 

4,700

 

 

 

5,767

 

Total other assets, net

$

122,319

 

 

$

116,229

 

 

(A)

The Company recorded amortization expense related to its intangibles, excluding above- and below-market leases, of $4.3 million and $10.1 million for the three months ended June 30, 2019 and 2018, respectively, and $9.3 million and $22.0 million for the six months ended June 30, 2019 and 2018, respectively.

 

(B)

Operating lease ROU assets are discussed further in Notes 1 and 6.

6.

Leases

Lessee

The Company is engaged in the operation of shopping centers that are either owned or, with respect to certain shopping centers, operated under long-term ground leases that expire at various dates through 2070.  The Company also leases office space in the ordinary course of business under lease agreements that expire at various dates through 2029.  Certain of the lease agreements include variable payments for reimbursement of common area expenses.  The Company determines if an arrangement is a lease at inception.  

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.  Operating lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.  As most of the Company’s leases do not include an implicit rate, the Company used its incremental borrowing rate based on the information available at the commencement date of the standard in determining the present value of lease payments.  For each lease, the Company utilized a market-based approach to estimate the incremental borrowing rate (“IBRs”), which required significant judgment. The Company estimated base IBRs based on an analysis of (i) yields on the Company’s outstanding public debt, as well as comparable companies, (ii) observable mortgage rates and (iii) unlevered property yields and discount rates.  The Company applied adjustments to the base IBRs to account for full collateralization and lease term. Operating lease ROU assets also include any lease payments made.  The Company has options to extend certain of the ground and office leases; however, these options were not considered as part of the lease term when calculating the lease liability, as they were not reasonably certain to be exercised.  Lease expense for lease payments is recognized on a straight-line basis over the lease term.  

Operating lease ROU assets and operating lease liabilities are in the Company’s consolidated balance sheet as follows (in thousands):

 

 

Classification

 

June 30, 2019

 

Operating Lease ROU Assets

 

Other Assets, Net

 

$

21,961

 

 

 

 

 

 

 

 

Operating Lease Liabilities

 

Accounts Payable and Other Liabilities

 

$

40,691

 

 

14

Operating lease expenses, including straight-line expense, are included in Operating and Maintenance Expense for the Company’s ground leases and General and Administrative for its office leases are as follows (in thousands):

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

Classification

 

 

 

June 30, 2019

 

 

June 30, 2019

 

Operating and Maintenance

 

 

 

$

1,017

 

 

$

2,035

 

General and Administrative(A)

 

 

 

 

501

 

 

 

1,213

 

   Total lease costs

 

 

 

$

1,518

 

 

$

3,248

 

(A)

Includes short-term leases and variable lease costs, which are immaterial.

Supplemental balance sheet information related to leases was as follows:

 

 

June 30, 2019

 

Weighted-Average Remaining Lease Term

 

35.8 years

 

Weighted-Average Discount Rate

 

 

7.32

%

Cash paid for amounts included in the measurement —

   operating cash flows from lease liabilities (in thousands)

 

$

1,338

 

As determined under FASB Accounting Standards Codification (“ASC”) 840, Leases, the scheduled future minimum rental revenues from rental properties under the terms of all non-cancelable tenant leases, assuming no new or renegotiated leases or option extensions for such premises and the scheduled minimum rental payments under the terms of all non-cancelable operating leases, principally ground leases, in which the Company was the lessee as of December 31, 2018, were as follows (in thousands):

 

Year

 

Minimum

Rental

Revenues

 

 

Minimum

Rental

Payments

 

2019

 

$

306,740

 

 

$

3,253

 

2020

 

 

279,374

 

 

 

4,070

 

2021

 

 

243,379

 

 

 

4,080

 

2022

 

 

202,371

 

 

 

3,928

 

2023

 

 

150,909

 

 

 

3,417

 

Thereafter

 

 

417,296

 

 

 

120,825

 

 

 

$

1,600,069

 

 

$

139,573

 

As determined under Topic 842, maturities of lease liabilities were as follows for the 12-month periods ending June 30, (in thousands):

Year

 

June 30,

 

2020

 

$

4,019

 

2021

 

 

4,146

 

2022

 

 

4,159

 

2023

 

 

3,657

 

2024

 

 

3,519

 

Thereafter

 

 

119,092

 

   Total lease payments

 

 

138,592

 

Less imputed interest

 

 

(97,901

)

   Total

 

$

40,691

 

Lessor

Space in the shopping centers is leased to tenants pursuant to agreements that provide for terms generally ranging from one month to 30 years and for rents which, in some cases, are subject to upward adjustments based on operating expense levels, sales volume or contractual increases as defined in the lease agreements.

15

The scheduled future minimum rental income from rental properties under the terms of all non-cancelable tenant leases, assuming no new or renegotiated leases or option extensions as determined under Topic 842 for such premises for the 12-month periods ending June 30, were as follows (in thousands):

Year Ending

 

June 30,

 

2020

 

$

311,098

 

2021

 

 

284,858

 

2022

 

 

246,452

 

2023

 

 

198,268

 

2024

 

 

149,083

 

Thereafter

 

 

425,779

 

   Total

 

$

1,615,538

 

 

7.

Revolving Credit Facilities

The following table discloses certain information regarding the Company’s Revolving Credit Facilities (as defined below) (in millions):

 

 

Carrying Amount at

June 30, 2019

 

 

Weighted-Average

Interest Rate (A) at

June 30, 2019

 

 

Maturity Date

Unsecured Credit Facility

 

$

75.0

 

 

3.6%

 

 

September 2021

PNC Facility

 

—

 

 

N/A

 

 

September 2021

 

(A)

Interest rate on variable-rate debt was calculated using the base rate and spreads effective at June 30, 2019.

The Company maintains an unsecured revolving credit facility with a syndicate of financial institutions, arranged by J.P. Morgan Chase Bank, N.A., Wells Fargo Securities, LLC, Citizens Bank, N.A., RBC Capital Markets and U.S. Bank National Association (the “Unsecured Credit Facility”).  The Unsecured Credit Facility provides for borrowings up to $950 million if certain financial covenants are maintained and an accordion feature for expansion of availability up to $1.45 billion, provided that new or existing lenders agree to the existing terms of the facility and increase their commitment level.  Prior to its extension in July 2019 (as described below), the Unsecured Credit Facility was scheduled to mature in September 2021 with two six-month extension options subject to the Company’s satisfaction of certain conditions.  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 25 basis points on the entire facility at June 30, 2019.

The Company also maintains a $20 million unsecured revolving credit facility with PNC Bank, National Association (“PNC”, the “PNC Facility” and, together with the Unsecured Credit Facility, the “Revolving Credit Facilities”).  The PNC Facility terms are substantially consistent with those contained in the Unsecured Credit Facility.  Additionally, the Company has provided an unconditional guaranty to PNC with respect to any obligations of RVI outstanding from time to time under a $30 million revolving credit agreement entered into by RVI with PNC.  RVI has agreed to reimburse the Company for any amounts paid to PNC pursuant to the guaranty plus interest at a contracted rate and to pay an annual commitment fee to the Company on account of the guaranty.  

The Company’s borrowings under the Revolving Credit Facilities bear interest at variable rates at the Company’s election, based on either LIBOR, plus a specified spread (1.2% at June 30, 2019) or the Alternative Base Rate, plus a specified spread (0.20% at June 30, 2019), as defined in the respective facility.  The specified spreads vary depending on the Company’s long-term senior unsecured debt rating from Moody’s Investors Service, Inc., S&P Global Ratings and their successors.  The Company is required to comply with certain covenants under the Revolving Credit Facilities relating to total outstanding indebtedness, secured indebtedness, value of unencumbered real estate assets and fixed charge coverage.  The Company was in compliance with these financial covenants at June 30, 2019.  

In July 2019, the Company amended the Unsecured Credit Facility to extend its maturity date to January 2024 and reduce its overall interest rate (Note 13).

8.

Fair Value Measurements

The Company utilized the methods and assumptions described below in estimating fair value disclosures of debt.  The fair market value of senior notes is determined using the trading price of the Company’s 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 Company’s non-performance risk

16

and loan to value.  The Company’s senior notes and all other debt 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 are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments.  

The carrying values and the estimated fair values are summarized as follows (in thousands):

 

 

June 30, 2019

 

 

December 31, 2018

 

 

Carrying

Amount

 

 

Fair

Value

 

 

Carrying

Amount

 

 

Fair

Value

 

Senior Notes

$

1,646,985

 

 

$

1,727,047

 

 

$

1,646,007

 

 

$

1,639,827

 

Revolving Credit Facilities and term loans

 

124,698

 

 

 

126,167

 

 

 

149,655

 

 

 

150,533

 

Mortgage Indebtedness

 

87,192

 

 

 

89,087

 

 

 

88,743

 

 

 

89,228

 

 

$

1,858,875

 

 

$

1,942,301

 

 

$

1,884,405

 

 

$

1,879,588

 

  

9.

Other Comprehensive Loss

The changes in Accumulated Other Comprehensive Loss by component are as follows (in thousands):

 

 

Gains and Losses

on Cash Flow

Hedges

 

 

Foreign

Currency

Items

 

 

Total

 

Balance, December 31, 2018

$

(1,641

)

 

$

260

 

 

$

(1,381

)

Other comprehensive income before reclassifications

 

—

 

 

 

378

 

 

 

378

 

Change in cash flow hedges reclassed to earnings(A)

 

234

 

 

 

—

 

 

 

234

 

Net current-period other comprehensive income

 

234

 

 

 

378

 

 

 

612

 

Balance, June 30, 2019

$

(1,407

)

 

$

638

 

 

$

(769

)

(A)

Amortization classified in Interest Expense in the Company’s consolidated statement of operations for the six months ended June 30, 2019, which was previously recognized in Accumulated Other Comprehensive Loss.

10.

Impairment Charges and Reserves

The Company recorded impairment charges and reserves based on the difference between the carrying value of the assets or investments and the estimated fair market value as follows (in millions):  

 

 

Three Months

 

 

Six Months

 

 

Ended June 30,

 

 

Ended June 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Assets marketed for sale(A)

$

—

 

 

$

—

 

 

$

0.6

 

 

$

—

 

Assets included in the spin-off of RVI(B)

 

—

 

 

 

18.1

 

 

 

—

 

 

 

48.5

 

Reserve (adjustment) of preferred equity interests(C)

 

4.6

 

 

 

(1.6

)

 

 

5.7

 

 

 

2.3

 

Total impairment charges

$

4.6

 

 

$

16.5

 

 

$

6.3

 

 

$

50.8

 

 

(A)

The impairment recorded during the six months ended June 30, 2019, was triggered by an indicative bid received.

(B)

In 2018, charges were triggered by indicative bids received and changes in market assumptions due to the disposition process beginning in 2017.

(C)

As a result of an aggregate valuation allowance on its preferred equity interests in the BRE DDR Joint Ventures (Note 3).  

Items Measured at Fair Value on a Non-Recurring Basis

The Company is required to assess the fair value of certain impaired consolidated and unconsolidated joint venture investments.  The valuation of impaired real estate assets and investments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each asset, as well as the income capitalization approach considering prevailing market capitalization rates, analysis of recent comparable sales transactions, actual sales negotiations and bona fide purchase offers received from third parties and/or consideration of the amount that currently would be required to replace the asset, as adjusted for obsolescence.  In general, the Company considers multiple valuation techniques when measuring fair value of an investment.  However, in certain circumstances, a single valuation technique may be appropriate.  

For operational real estate assets, the significant valuation assumptions included the capitalization rate used in the income capitalization valuation, as well as the projected property net operating income.  For projects under development or not at stabilization,

17

the significant valuation assumptions included the discount rate, the timing and the estimated costs for the construction completion and project stabilization, projected net operating income and the exit capitalization rate.  For the valuation of the preferred equity interests, the significant assumptions used in the discounted cash flow analysis included the discount rate, projected net operating income, the timing of the expected redemption and the exit capitalization rates.  For investments in unconsolidated joint ventures, the Company also considered the valuation of any underlying joint venture debt.  These valuations were calculated based on market conditions and assumptions made by management at the time the valuation adjustments and impairments were recorded, which may differ materially from actual results if market conditions or the underlying assumptions change.  

The following table presents information about the Company’s impairment charges and reserves on both financial and nonfinancial assets that were measured on a fair value basis for the six months ended June 30, 2019.  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

Impairment

Charges

 

June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-lived assets held and used

 

$

—

 

 

$

—

 

 

$

0.8

 

 

$

0.8

 

 

$

0.6

 

Preferred equity interests

 

 

—

 

 

 

—

 

 

 

166.1

 

 

 

166.1

 

 

 

5.7

 

 

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):

 

 

 

Quantitative Information about Level 3 Fair Value Measurements

 

 

 

Fair Value at

 

 

 

 

 

 

 

 

 

Description

 

June 30, 2019

 

 

Valuation Technique

 

Unobservable Inputs

 

Range

 

Impairment of consolidated assets

 

$

0.8

 

 

Indicative Bid(A)

 

Indicative Bid(A)

 

N/A

 

Reserve of preferred equity interests

 

 

166.1

 

 

Discounted Cash Flow

 

Discount Rate

 

8.7%-8.8%

 

 

 

 

 

 

 

 

 

Terminal Capitalization

Rate

 

8.2%-8.6%

 

 

 

 

 

 

 

 

 

NOI Growth Rate

 

1%

 

 

(A)

Fair value measurements based upon indicative bids were developed by third-party sources (including offers and comparable sales values), subject to the Company’s corroboration for reasonableness.  The Company does not have access to certain unobservable inputs used by these third parties to determine these estimated fair values.

11.

Earnings Per Share

The following table provides a reconciliation of net income (loss) and the number of common shares used in the computations of “basic” earnings per share (“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 Months

 

 

Six Months

 

 

Ended June 30,

 

 

Ended June 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Numerators – Basic and Diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

17,537

 

 

$

(2,633

)

 

$

53,632

 

 

$

(56,530

)

Plus: Income attributable to non-controlling interests

 

(260

)

 

 

(696

)

 

 

(565

)

 

 

(952

)

Less: Preferred dividends

 

(8,383

)

 

 

(8,383

)

 

 

(16,766

)

 

 

(16,766

)

Less: Earnings attributable to unvested shares and operating

   partnership units

 

(175

)

 

 

(650

)

 

 

(346

)

 

 

(852

)

Net income (loss) attributable to common shareholders after

   allocation to participating securities

$

8,719

 

 

$

(12,362

)

 

$

35,955

 

 

$

(75,100

)

Denominators – Number of Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic—Average shares outstanding

 

180,551

 

 

 

184,634

 

 

 

180,548

 

 

 

184,595

 

Assumed conversion of diluted securities

 

658

 

 

 

—

 

 

 

826

 

 

 

—

 

Diluted—Average shares outstanding

 

181,209

 

 

 

184,634

 

 

 

181,374

 

 

 

184,595

 

Earnings (Loss) Per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.05

 

 

$

(0.07

)

 

$

0.20

 

 

$

(0.41

)

Diluted

$

0.05

 

 

$

(0.07

)

 

$

0.20

 

 

$

(0.41

)

18

Performance Restricted Stock Units (“PRSUs”) issued in March 2019 and March 2018 were dilutive and the PRSUs issued in March 2017 were anti-dilutive in the computation of EPS for the three and six months ended June 30, 2019.  PRSUs issued in March 2018 and March 2017 were not considered in the computation of diluted EPS for the three and six months ended June 30, 2018, as the calculation was anti-dilutive.  For the three and six months ended June 30, 2019, the Company recorded a mark-to-market adjustment of $0.5 million and $1.4 million, respectively, in connection with the PRSUs issued in March 2017 and March 2018.  

Stock Repurchase Program

In 2018, the Company’s Board of Directors authorized a $100 million common share repurchase program.  In 2019, the Company repurchased 1.2 million shares at a cost of $14.1 million.  These shares are recorded as Treasury Shares on the Company’s consolidated balance sheet.  

12.

Segment Information

The tables below present information about the Company’s reportable operating segments (in thousands):

 

Three Months Ended June 30, 2019

 

 

Shopping

Centers

 

 

Loan

Investments

 

 

Other

 

 

Total

 

Rental income

$

112,274

 

 

$

—

 

 

 

 

 

 

$

112,274

 

Other income

 

16,383

 

 

 

—

 

 

 

 

 

 

 

16,383

 

Total revenues

 

128,657

 

 

 

—

 

 

 

 

 

 

 

128,657

 

Rental operation expenses

 

(36,534

)

 

 

(7

)

 

 

 

 

 

 

(36,541

)

Net operating income (loss)

 

92,123

 

 

 

(7

)

 

 

 

 

 

 

92,116

 

Depreciation and amortization

 

(40,060

)

 

 

 

 

 

 

 

 

 

 

(40,060

)

Interest income

 

 

 

 

 

4,521

 

 

 

 

 

 

 

4,521

 

Other income (expense), net

 

 

 

 

 

 

 

 

$

(85

)

 

 

(85

)

Unallocated expenses(A)

 

 

 

 

 

 

 

 

 

(36,019

)

 

 

(36,019

)

Equity in net income of joint ventures

 

1,791

 

 

 

 

 

 

 

 

 

 

 

1,791

 

Reserve of preferred equity interests, net

 

 

 

 

 

(4,634

)

 

 

 

 

 

 

(4,634

)

Gain on disposition of real estate, net

 

213

 

 

 

 

 

 

 

 

 

 

 

213

 

Income before tax expense

 

 

 

 

 

 

 

 

 

 

 

 

$

17,843

 

 

 

Three Months Ended June 30, 2018

 

 

Shopping

Centers

 

 

Loan

Investments

 

 

Other

 

 

Total

 

Rental income

$

199,988

 

 

$

14

 

 

 

 

 

 

$

200,002

 

Other income

 

11,514

 

 

 

—

 

 

 

 

 

 

 

11,514

 

Total revenues

 

211,502

 

 

 

14

 

 

 

 

 

 

 

211,516

 

Rental operation expenses

 

(64,538

)

 

 

—

 

 

 

 

 

 

 

(64,538

)

Net operating income

 

146,964

 

 

 

14

 

 

 

 

 

 

 

146,978

 

Impairment charges

 

(18,060

)

 

 

 

 

 

 

 

 

 

 

(18,060

)

Depreciation and amortization

 

(72,462

)

 

 

 

 

 

 

 

 

 

 

(72,462

)

Interest income

 

 

 

 

 

5,016

 

 

 

 

 

 

 

5,016

 

Other income (expense), net

 

 

 

 

 

 

 

 

$

(36,255

)

 

 

(36,255

)

Unallocated expenses(A)

 

 

 

 

 

 

 

 

 

(62,189

)

 

 

(62,189

)

Hurricane property loss

 

(224

)

 

 

 

 

 

 

 

 

 

 

(224

)

Equity in net income of joint ventures

 

3,821

 

 

 

 

 

 

 

 

 

 

 

3,821

 

Adjustment of preferred equity interests

 

 

 

 

 

1,625

 

 

 

 

 

 

 

1,625

 

Gain on disposition of real estate, net

 

29,508

 

 

 

 

 

 

 

 

 

 

 

29,508

 

Loss before tax expense

 

 

 

 

 

 

 

 

 

 

 

 

$

(2,242

)

19

 

 

Six Months Ended June 30, 2019

 

 

Shopping

Centers

 

 

Loan

Investments

 

 

Other

 

 

Total

 

Rental income

$

224,495

 

 

$

—

 

 

 

 

 

 

$

224,495

 

Other income

 

35,155

 

 

 

29

 

 

 

 

 

 

 

35,184

 

Total revenues

 

259,650

 

 

 

29

 

 

 

 

 

 

 

259,679

 

Rental operation expenses

 

(73,118

)

 

 

(7

)

 

 

 

 

 

 

(73,125

)

Net operating income

 

186,532

 

 

 

22

 

 

 

 

 

 

 

186,554

 

Impairment charges

 

(620

)

 

 

 

 

 

 

 

 

 

 

(620

)

Depreciation and amortization

 

(82,668

)

 

 

 

 

 

 

 

 

 

 

(82,668

)

Interest income

 

 

 

 

 

9,042

 

 

 

 

 

 

 

9,042

 

Other income (expense), net

 

 

 

 

 

 

 

 

$

68

 

 

 

68

 

Unallocated expenses(A)

 

 

 

 

 

 

 

 

 

(71,857

)

 

 

(71,857

)

Equity in net income of joint ventures

 

2,834

 

 

 

 

 

 

 

 

 

 

 

2,834

 

Reserve of preferred equity interests, net

 

 

 

 

 

(5,733

)

 

 

 

 

 

 

(5,733

)

Gain on disposition of real estate, net

 

16,590

 

 

 

 

 

 

 

 

 

 

 

16,590

 

Income before tax expense

 

 

 

 

 

 

 

 

 

 

 

 

$

54,210

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total gross real estate assets

$

4,612,131

 

 

 

 

 

 

 

 

 

 

$

4,612,131

 

Notes receivable, net(B)

 

 

 

 

$

189,983

 

 

$

(170,313

)

 

$

19,670

 

 

 

Six Months Ended June 30, 2018

 

 

Shopping

Centers

 

 

Loan

Investments

 

 

Other

 

 

Total

 

Rental income

$

403,739

 

 

$

29

 

 

 

 

 

 

$

403,768

 

Other income

 

22,816

 

 

 

—

 

 

 

 

 

 

 

22,816

 

Total revenues

 

426,555

 

 

 

29

 

 

 

 

 

 

 

426,584

 

Rental operation expenses

 

(129,588

)

 

 

—

 

 

 

 

 

 

 

(129,588

)

Net operating income

 

296,967

 

 

 

29

 

 

 

 

 

 

 

296,996

 

Impairment charges

 

(48,504

)

 

 

 

 

 

 

 

 

 

 

(48,504

)

Depreciation and amortization

 

(146,886

)

 

 

 

 

 

 

 

 

 

 

(146,886

)

Interest income

 

 

 

 

 

10,357

 

 

 

 

 

 

 

10,357

 

Other income (expense), net

 

 

 

 

 

 

 

 

$

(97,862

)

 

 

(97,862

)

Unallocated expenses(A)

 

 

 

 

 

 

 

 

 

(119,074

)

 

 

(119,074

)

Hurricane property loss

 

(974

)

 

 

 

 

 

 

 

 

 

 

(974

)

Equity in net income of joint ventures

 

12,607

 

 

 

 

 

 

 

 

 

 

 

12,607

 

Reserve of preferred equity interests, net

 

 

 

 

 

(2,336

)

 

 

 

 

 

 

(2,336

)

Gain on disposition of real estate, net

 

39,519

 

 

 

 

 

 

 

 

 

 

 

39,519

 

Loss before tax expense

 

 

 

 

 

 

 

 

 

 

 

 

$

(56,157

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total gross real estate assets

$

7,891,867

 

 

 

 

 

 

 

 

 

 

$

7,891,867

 

Notes receivable, net(B)

 

 

 

 

$

247,747

 

 

$

(228,077

)

 

$

19,670

 

 

(A)

Unallocated expenses consist of General and Administrative Expenses and Interest Expense as listed in the Company’s consolidated statements of operations.  

 

(B)

Amount includes loans to affiliates classified in Investments in and Advances to Joint Ventures on the Company’s consolidated balance sheets.  

13.

Subsequent Events

In July 2019, the Company amended and restated its Unsecured Credit Facility to extend its maturity date to January 2024 and reduce its overall interest rate (Note 7).  The Company also upsized the unsecured term loan to $100 million from $50 million and amended the interest rate applicable thereto.   

20

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides readers with a perspective from management on the financial condition, results of operations and liquidity of SITE Centers Corp. and its related consolidated real estate subsidiaries (collectively, the “Company” or “SITE Centers”) and other factors that may affect the Company’s 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, 2018, 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, financing and managing shopping centers.  As of June 30, 2019, the Company’s portfolio consisted of 171 shopping centers (including 103 shopping centers owned through joint ventures).  At June 30, 2019, the Company owned approximately 43.3 million total square feet of gross leasable area (“GLA”) through all its properties (wholly-owned and joint venture) and managed approximately 14.3 million total square feet of GLA for Retail Value Inc. (“RVI”).  At June 30, 2019, the aggregate occupancy of the Company’s operating shopping center portfolio was 89.8%, and the average annualized base rent per occupied square foot was $17.98, both on a pro rata basis.

The following provides an overview of the Company’s key financial metrics (see Non-GAAP Financial Measures described later in this section) (in thousands, except per share amounts):

 

Three Months

 

 

Six Months

 

 

Ended June 30,

 

 

Ended June 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income (loss) attributable to common shareholders

$

8,894

 

 

$

(11,712

)

 

$

36,301

 

 

$

(74,248

)

FFO attributable to common shareholders

$

57,886

 

 

$

49,436

 

 

$

118,552

 

 

$

82,591

 

Operating FFO attributable to common shareholders

$

57,003

 

 

$

90,492

 

 

$

115,705

 

 

$

188,242

 

Earnings (loss) per share – Diluted

$

0.05

 

 

$

(0.07

)

 

$

0.20

 

 

$

(0.41

)

For the six months ended June 30, 2019, net income attributable to common shareholders increased compared to the same period in the prior year, primarily due to lower debt extinguishment charges, transaction costs, impairment charges, interest expense, partially offset by the dilutive impact of asset sales and the spin-off of RVI.

Company Activity

Growth opportunities within the Company’s core property operations include rental rate increases, continued lease-up of the portfolio, and the adaption of existing square footage to generate higher blended rental rates and operating cash flows.  Additional growth opportunities include a renewed focus on redevelopment and opportunistic investments.  Management intends to use proceeds from the sale of lower growth assets and other investments to fund opportunistic investing and redevelopment activity.  During the first six months of 2019, the Company sold six shopping centers for $208.8 million (including four shopping centers held in joint ventures), or $97.1 million at the Company’s share, and repurchased 1.2 million common shares for $14.1 million under the Company’s share repurchase program.

Company Highlights (Prior periods were restated to reflect the impact of asset sales and the spin-off of RVI)

During the six months ended June 30, 2019, the Company completed the following operational activities:

 

•

Leased approximately 1.6 million square feet including 113 new leases and 210 renewals for a total of 323 leases.  The remaining 2019 lease expirations as of June 30, 2019, aggregated approximately 1.1 million square feet of GLA, as compared to 3.0 million square feet of GLA as of December 31, 2018.  The remaining 1.1 million square feet represents approximately 38.5% of total annualized base rent of 2019 expiring leases as of December 31, 2018;

 

•

The Company continued to execute both new leases and renewals at positive rental spreads, which contributed to the increase in the average annualized base rent per square foot.  At December 31, 2018, the Company had 398 leases expiring in 2019, with an average base rent per square foot of $15.54.  For the comparable leases executed in the six months ended June 30, 2019, the Company generated positive leasing spreads on a pro rata basis of 13.7% for new leases and 6.2% for renewals.  The Company’s leasing spread calculation only includes deals that were executed within one year of the date the prior tenant vacated and for assets not under redevelopment;

21

 

•

The Company’s total portfolio average annualized base rent per square foot increased to $17.98 at June 30, 2019, on a pro rata basis, as compared to $17.86 at December 31, 2018, and $16.61 at June 30, 2018;

 

•

The aggregate occupancy of the Company’s operating shopping center portfolio was 89.8% at June 30, 2019, on a pro rata basis, as compared to 89.9% at December 31, 2018, and 90.5% at June 30, 2018 and  

 

•

For new leases executed during the six months ended June 30, 2019, the Company expended a weighted-average cost of $6.85 per rentable square foot for tenant improvements and lease commissions over the lease term.  The Company generally does not expend a significant amount of capital on lease renewals.

RESULTS OF OPERATIONS

Consolidated shopping center properties owned as of January 1, 2018, but excluding properties under development or redevelopment and those sold by the Company or included in the spin-off of RVI, are referred to herein as the “Comparable Portfolio Properties.”

Revenues from Operations (in thousands)

 

Three Months

 

 

 

 

 

 

Ended June 30,

 

 

 

 

 

 

2019

 

 

2018

 

 

$ Change

 

Rental income

$

112,274

 

 

$

200,002

 

 

$

(87,728

)

Fee and other income

 

16,383

 

 

 

8,414

 

 

 

7,969

 

Business interruption income

 

—

 

 

 

3,100

 

 

 

(3,100

)

Total revenues

$

128,657

 

 

$

211,516

 

 

$

(82,859

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months

 

 

 

 

 

 

Ended June 30,

 

 

 

 

 

 

2019

 

 

2018

 

 

$ Change

 

Rental income(A)

$

224,495

 

 

$

403,768

 

 

$

(179,273

)

Fee and other income(B)

 

35,184

 

 

 

17,716

 

 

 

17,468

 

Business interruption income(C)

 

—

 

 

 

5,100

 

 

 

(5,100

)

Total revenues

$

259,679

 

 

$

426,584

 

 

$

(166,905

)

(A)

The Company adopted Accounting Standards Update No. 2016-02—Leases, as amended (“Topic 842”) using the modified retrospective approach as of January 1, 2019, and elected to apply the transition provisions of the standard at the beginning of the period of adoption.  As the Company adopted the practical expedient with regards to not separating lease and non-lease components, all rental income earned pursuant to tenant leases, including the provision for uncollectible amounts, is reflected as one line item, “Rental Income” in the consolidated statements of operations for the three and six months ended June 30, 2019.  See further discussion of 2018 reclassification impact in Note 1, “Nature of Business and Financial Statement Presentation,” to the Company’s consolidated financial statements included herein.  

The following table summarizes the key components of the 2019 rental income as compared to 2018:

 

 

Three Months

 

 

 

 

 

 

Ended June 30,

 

 

 

 

 

Contractual Lease Payments

2019

 

 

2018

 

 

$ Change

 

Base and percentage rental income

$

80,810

 

 

$

143,131

 

 

$

(62,321

)

Recoveries from tenants

 

27,987

 

 

 

50,558

 

 

 

(22,571

)

Lease termination fees, ancillary and other rental income

 

2,709

 

 

 

6,313

 

 

 

(3,604

)

Bad debt

 

768

 

 

N/A

 

 

 

768

 

Total contractual lease payments

$

112,274

 

 

$

200,002

 

 

$

(87,728

)

 

22

 

Six Months

 

 

 

 

 

 

Ended June 30,

 

 

 

 

 

Contractual Lease Payments

2019

 

 

2018

 

 

$ Change

 

Base and percentage rental income(1)

$

162,165

 

 

$

291,826

 

 

$

(129,661

)

Recoveries from tenants(2)

 

55,448

 

 

 

101,912

 

 

 

(46,464

)

Lease termination fees, ancillary and other rental income

 

6,555

 

 

 

10,030

 

 

 

(3,475

)

Bad debt(3)

 

327

 

 

N/A

 

 

 

327

 

Total contractual lease payments

$

224,495

 

 

$

403,768

 

 

$

(179,273

)

 

(1)

The changes were due to the following (in millions):

 

 

 

Increase (Decrease)

 

Comparable Portfolio Properties

 

$

2.8

 

Acquisition of shopping centers

 

 

1.7

 

Development or redevelopment properties

 

 

—

 

Transfers to unconsolidated joint ventures in 2018

 

 

(22.6

)

Shopping centers sold or included in RVI spin-off

 

 

(112.4

)

Straight-line rents

 

 

0.8

 

Total

 

$

(129.7

)

The following tables present the statistics for the Company’s assets affecting base and percentage rental income summarized by the following portfolios:  pro-rata combined shopping center portfolio, wholly-owned shopping center portfolio and joint venture shopping center portfolio.

 

Pro-Rata Combined

Shopping Center Portfolio

June 30,

 

 

2019

 

 

2018

 

Centers owned

 

171

 

 

 

241

 

Aggregate occupancy rate

 

89.8

%

 

 

90.5

%

Average annualized base rent per occupied square foot

$

17.98

 

 

$

16.61

 

 

 

Wholly-Owned Shopping Centers

June 30,

 

 

2019

 

 

2018

 

Centers owned

 

68

 

 

 

126

 

Aggregate occupancy rate

 

89.5

%

 

 

90.5

%

Average annualized base rent per occupied square foot

$

18.53

 

 

$

16.76

 

 

 

Joint Venture Shopping Centers

June 30,

 

 

2019

 

 

2018

 

Centers owned

 

103

 

 

 

115

 

Aggregate occupancy rate

 

91.0

%

 

 

91.4

%

Average annualized base rent per occupied square foot

$

14.91

 

 

$

14.63

 

 

At June 30, 2019 and 2018, the wholly-owned Comparable Portfolio Properties’ aggregate occupancy rate was 91.9% and 92.0%, respectively, and the average annualized base rent per occupied square foot was $18.31 and $18.01, respectively.

 

(2)

The decrease primarily was driven by the RVI spin-off and disposition activity.  Recoveries were also impacted by major tenant bankruptcies and related occupancy loss.  Recoveries from tenants for the Comparable Portfolio Properties were approximately 90.5% and 90.6% of reimbursable operating expenses and real estate taxes for the six months ended June 30, 2019 and 2018, respectively.  The percentage of recoveries from tenants was impacted by the adoption of Topic 842, which resulted in certain financial statement presentation changes that reduced Rental Income but had no impact on net income.  

 

(3)

Classified in Operating and Maintenance Expense for the three and six months ended June 30, 2018.

(B)

Includes fees from joint ventures and RVI, which increased primarily due to fees earned from RVI of $17.4 million during the six months ended June 30, 2019, primarily offset by lower fee income received from joint ventures as a result of the sale of joint

23

venture assets.  Included in the fees earned during the six months ended June 30, 2019, the Company recorded $2.6 million for RVI disposition fees and $1.8 million for the RVI refinancing fee.    

The components of Fee and Other Income are presented in Note 2, “Revenue Recognition,” to the Company’s consolidated financial statements included herein.  Changes in the number of assets under management, including the number of assets owned by RVI, or the fee structures applicable to such arrangements will impact the amount of revenue recorded in future periods.  Such changes could occur because the Company’s property management agreements contain termination provisions, and RVI and the Company’s joint venture partners could dispose of shopping centers under the Company’s management.

(C)

Represents payments received in the first six months of 2018 from the Company’s insurance company related to its claims for business interruption losses incurred at its Puerto Rico properties, which were included in the RVI spin-off.

Expenses from Operations (in thousands)

 

Three Months

 

 

 

 

 

 

Ended June 30,

 

 

 

 

 

 

2019

 

 

2018

 

 

$ Change

 

Operating and maintenance

$

18,743

 

 

$

34,060

 

 

$

(15,317

)

Real estate taxes

 

17,798

 

 

 

30,478

 

 

 

(12,680

)

Impairment charges

 

—

 

 

 

18,060

 

 

 

(18,060

)

Hurricane property loss

 

—

 

 

 

224

 

 

 

(224

)

General and administrative

 

14,932

 

 

 

17,276

 

 

 

(2,344

)

Depreciation and amortization

 

40,060

 

 

 

72,462

 

 

 

(32,402

)

 

$

91,533

 

 

$

172,560

 

 

$

(81,027

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months

 

 

 

 

 

 

Ended June 30,

 

 

 

 

 

 

2019

 

 

2018

 

 

$ Change

 

Operating and maintenance(A)

$

37,584

 

 

$

67,087

 

 

$

(29,503

)

Real estate taxes(A)

 

35,541

 

 

 

62,501

 

 

 

(26,960

)

Impairment charges(B)

 

620

 

 

 

48,504

 

 

 

(47,884

)

Hurricane property loss

 

—

 

 

 

974

 

 

 

(974

)

General and administrative(C)

 

29,044

 

 

 

30,121

 

 

 

(1,077

)

Depreciation and amortization(A)

 

82,668

 

 

 

146,886

 

 

 

(64,218

)

 

$

185,457

 

 

$

356,073

 

 

$

(170,616

)

(A)

The changes were due to the following (in millions):

 

 

 

Operating

and

Maintenance

 

 

Real Estate

Taxes

 

 

Depreciation

and

Amortization

 

Comparable Portfolio Properties

 

$

(0.1

)

 

$

(1.6

)

 

$

(3.3

)

Acquisition of shopping centers

 

 

0.5

 

 

 

0.2

 

 

 

1.4

 

Development or redevelopment properties

 

 

(0.1

)

 

 

(0.8

)

 

 

1.9

 

Transfers to unconsolidated joint ventures in 2018

 

 

(3.9

)

 

 

(3.9

)

 

 

(12.1

)

Shopping centers sold or included in RVI spin-off

 

 

(25.9

)

 

 

(20.9

)

 

 

(52.1

)

 

 

$

(29.5

)

 

$

(27.0

)

 

$

(64.2

)

(B)

The Company recorded an impairment charge in the six months ended June 30, 2019 related to one operating shopping center marketed for sale.  Changes in (i) an asset’s expected future undiscounted cash flows due to changes in market conditions, (ii) various courses of action that may occur or (iii) holding periods each could result in the recognition of additional impairment charges.  Impairment charges are presented in Note 10, “Impairment Charges and Reserves,” to the Company’s consolidated financial statements included herein.  

24

(C)

General and administrative expenses were approximately 4.8% and 4.6% of total revenues, for the six months ended June 30, 2019 and 2018, respectively, including total revenues of unconsolidated joint ventures and managed properties for the comparable periods.  The increase in the percentage is a result of the adoption of Topic 842, which resulted in certain financial statement presentation changes that reduced total revenue but had no impact on net income.

Certain amounts in prior periods have been reclassified in order to conform with the current period’s presentation.  The Company reclassified $2.9 million and $6.2 million of costs on the Company’s consolidated statements of operations for the three and six months ended June 30, 2018, respectively, related to property management and services of the Company’s operating properties from General and Administrative to Operating and Maintenance.

Other Income and Expenses (in thousands)

 

 

Three Months

 

 

 

 

 

 

Ended June 30,

 

 

 

 

 

 

2019

 

 

2018

 

 

$ Change

 

Interest income

$

4,521

 

 

$

5,016

 

 

$

(495

)

Interest expense

 

(21,087

)

 

 

(44,913

)

 

 

23,826

 

Other income (expense), net

 

(85

)

 

 

(36,255

)

 

 

36,170

 

 

$

(16,651

)

 

$

(76,152

)

 

$

59,501

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months

 

 

 

 

 

 

Ended June 30,

 

 

 

 

 

 

2019

 

 

2018

 

 

$ Change

 

Interest income(A)

$

9,042

 

 

$

10,357

 

 

$

(1,315

)

Interest expense(B)

 

(42,813

)

 

 

(88,953

)

 

 

46,140

 

Other income (expense), net(C)

 

68

 

 

 

(97,862

)

 

 

97,930

 

 

$

(33,703

)

 

$

(176,458

)

 

$

142,755

 

(A)

The decrease in the amount of interest income recognized primarily is due to the decrease in the face amount of the preferred equity investments in the unconsolidated joint ventures with The Blackstone Group L.P. (“Blackstone”) as a result of repayments by the joint ventures from asset sale proceeds (see “Sources and Uses of Capital” below).  The Company had a gross preferred investment including accrued interest of $248.5 million and $291.4 million at June 30, 2019 and June 30, 2018, respectively.  For the six months ended June 30, 2019, the Company received $13.6 million in preferred equity repayments.  A portion of the proceeds generated from assets sold by the Blackstone joint ventures in the future are expected to be used to repay the preferred equity.  Any repayment of this preferred interest would impact the amount of interest income recorded by the Company in future periods.  See Note 3, “Investments in and Advances to Joint Ventures,” in the Company’s consolidated financial statements included herein.

The weighted-average loan receivable outstanding and weighted-average interest rate, including loans to affiliates, are as follows:

 

 

Six Months

 

 

 

Ended June 30,

 

 

 

2019

 

 

2018

 

Weighted-average loan receivable outstanding (in millions)

 

$

266.2

 

 

$

316.4

 

Weighted-average interest rate

 

 

6.9

%

 

 

6.7

%

 

(B)

The weighted-average debt outstanding and related weighted-average interest rate are as follows:

 

 

Six Months

 

 

 

Ended June 30,

 

 

 

2019

 

 

2018

 

Weighted-average debt outstanding (in billions)

 

$

1.9

 

 

$

3.7

 

Weighted-average interest rate

 

 

4.4

%

 

 

4.6

%

The reduction in the weighted-average debt outstanding from the prior-year period is a result of the RVI spin-off and the Company’s overall strategy to reduce leverage.  The weighted-average interest rate (based on contractual rates and excluding fair market value of adjustments and debt issuance costs) was 4.2% and 4.6% at June 30, 2019 and June 30, 2018, respectively.  

25

Interest costs capitalized in conjunction with redevelopment projects were $0.3 million and $0.6 million for the three and six months ended June 30, 2019, respectively, and $0.3 million and $0.7 million for the three and six months ended June 30, 2018, respectively.  

(C)

For the six months ended June 30, 2018, the Company recorded $58.4 million of debt extinguishment costs and $36.5 million in transaction costs in anticipation of the spin-off of RVI on July 1, 2018.

Other Items (in thousands)

 

 

Three Months

 

 

 

 

 

 

Ended June 30,

 

 

 

 

 

 

2019

 

 

2018

 

 

$ Change

 

Equity in net income of joint ventures

$

1,791

 

 

$

3,821

 

 

$

(2,030

)

(Reserve) adjustment to preferred equity interests, net

 

(4,634

)

 

 

1,625

 

 

 

(6,259

)

Gain on disposition of real estate, net

 

213

 

 

 

29,508

 

 

 

(29,295

)

Tax expense of taxable REIT subsidiaries and state franchise and

   income taxes

 

(306

)

 

 

(391

)

 

 

85

 

Income attributable to non-controlling interests, net

 

(260

)

 

 

(696

)

 

 

436

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months

 

 

 

 

 

 

Ended June 30,

 

 

 

 

 

 

2019

 

 

2018

 

 

$ Change

 

Equity in net income of joint ventures(A)

$

2,834

 

 

$

12,607

 

 

$

(9,773

)

Reserve of preferred equity interests, net(B)

 

(5,733

)

 

 

(2,336

)

 

 

(3,397

)

Gain on disposition of real estate, net(C)

 

16,590

 

 

 

39,519

 

 

 

(22,929

)

Tax expense of taxable REIT subsidiaries and state franchise and

   income taxes

 

(578

)

 

 

(373

)

 

 

(205

)

Income attributable to non-controlling interests, net

 

(565

)

 

 

(952

)

 

 

387

 

(A)

The decrease primarily was the result of lower gain on sale and the dilutive impact from the sale of joint venture assets in 2018 and 2019 offset by income of a newly formed joint venture in the fourth quarter of 2018.  Joint venture property sales could significantly impact the amount of income or loss recognized in future periods.

(B)

The valuation allowance is more fully described in Note 3, “Investments in and Advances to Joint Ventures,” to the Company’s consolidated financial statements included herein.

(C)

The Company sold two shopping centers for a gross sales price of $67.0 million during the six months ended June 30, 2019.  

Net Income (Loss) (in thousands)

 

 

Three Months

 

 

 

 

 

 

Ended June 30,

 

 

 

 

 

 

2019

 

 

2018

 

 

$ Change

 

Net income (loss) attributable to SITE Centers

 

17,277

 

 

 

(3,329

)

 

 

20,606

 

 

 

Six Months

 

 

 

 

 

 

Ended June 30,

 

 

 

 

 

 

2019

 

 

2018

 

 

$ Change

 

Net income (loss) attributable to SITE Centers

 

53,067

 

 

 

(57,482

)

 

 

110,549

 

The increase in net income primarily is attributable to lower debt extinguishment charges, transaction costs, impairment charges and interest expense in 2019, partially offset by the dilutive impact of asset sales and the spin-off of RVI.

26

NON-GAAP FINANCIAL MEASURES

Funds from Operations and Operating Funds from Operations

Definition and Basis of Presentation

The Company believes that Funds from Operations (“FFO”) and Operating FFO, both non-GAAP financial measures, provide additional and useful means to assess the financial performance of REITs.  FFO and Operating FFO are frequently used by the real estate industry, as well as securities analysts, investors and other interested parties, to evaluate the performance of REITs.  The Company also believes that FFO and Operating FFO more appropriately measure the core operations of the Company and provide benchmarks to its peer group.  

In December 2018, the National Association of Real Estate Investment Trusts (“NAREIT”) issued NAREIT Funds From Operations White Paper - 2018 Restatement (the “2018 FFO White Paper”).  The purpose of the 2018 FFO White Paper was not to change the fundamental definition of FFO, but to clarify existing guidance and to consolidate into a single document, alerts and policy bulletins issued by NAREIT since the last FFO white paper was issued in 2002.  The 2018 FFO White Paper was effective starting with first quarter 2019 reporting.  The changes to the Company’s calculation of FFO resulting from the adoption of the 2018 FFO White Paper relate to the exclusion of gains or losses on the sale of land, as well as related impairments, gains or losses from changes in control and the reserve adjustment of preferred equity interests. The Company adopted changes in its calculation of FFO in 2019 on a retrospective basis.

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 and gains and losses from property dispositions, 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, interest costs and acquisition, disposition and development activities.  This provides a perspective of the Company’s 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) (computed in accordance with GAAP), adjusted to exclude (i) preferred share dividends, (ii) gains and losses from disposition of real estate property and related investments, which are presented net of taxes, (iii) impairment charges on real estate property and related investments, including reserve adjustments of preferred equity interests, (iv) gains and losses from changes in control 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 adding the Company’s proportionate share of FFO from its unconsolidated joint ventures and non-controlling interests, determined on a consistent basis.  The Company’s calculation of FFO is consistent with the definition of FFO provided by NAREIT.

The Company believes that certain charges, income and gains recorded in its operating results are not comparable or reflective of its core operating performance.  Operating FFO is useful to investors as the Company removes non-comparable charges, income and gains to analyze the results of its operations and assess performance of the core operating real estate portfolio.  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 and FFO.  Operating FFO is generally defined and calculated by the Company as FFO excluding certain charges, income and gains that management believes are not comparable and indicative of the results of the Company’s operating real estate portfolio.  Such adjustments include gains/losses on the early extinguishment of debt, hurricane-related activity, certain transaction fee income, transaction costs and other restructuring type costs.  The disclosure of these adjustments is regularly requested by users of the Company’s financial statements.  

The adjustment for these charges, income and gains may not be comparable to how other REITs or real estate companies calculate their results of operations, and the Company’s calculation of Operating FFO differs from NAREIT’s definition of FFO.  Additionally, the Company provides no assurances that these charges, income and gains are non-recurring.  These charges, income 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 disclosure to improve the understanding of the Company’s operating results among the investing public, (ii) as a measure of a real estate asset company’s performance, (iii) to influence acquisition, disposition and capital investment strategies and (iv) to compare the Company’s 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 Company’s operating performance.  They provide recognized measures of performance other than GAAP

27

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 GAAP’s net income.  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 Company’s 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.  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 Company’s operating performance.  The Company believes that to further understand its performance, FFO and Operating FFO should be compared with the Company’s reported net income (loss) and considered in addition to cash flows determined in accordance with GAAP, as presented in its consolidated financial statements.  Reconciliations of these measures to their most directly comparable GAAP measure of net income (loss) have been provided below.

Reconciliation Presentation

FFO and Operating FFO attributable to common shareholders were as follows (in thousands):

 

Three Months

 

 

 

 

 

 

Ended June 30,

 

 

 

 

 

 

2019

 

 

2018

 

 

$ Change

 

FFO attributable to common shareholders

$

57,886

 

 

$

49,436

 

 

$

8,450

 

Operating FFO attributable to common shareholders

 

57,003

 

 

 

90,492

 

 

 

(33,489

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months

 

 

 

 

 

 

Ended June 30,

 

 

 

 

 

 

2019

 

 

2018

 

 

$ Change

 

FFO attributable to common shareholders

$

118,552

 

 

$

82,591

 

 

$

35,961

 

Operating FFO attributable to common shareholders

 

115,705

 

 

 

188,242

 

 

 

(72,537

)

The increase in FFO primarily was attributable to higher debt extinguishment and transaction costs in 2018 and the impact of the RVI spin-off in 2018.  The decrease in Operating FFO primarily was attributable to the dilutive impact of asset sales and the RVI spin-off partially offset by lower interest expense and higher fee income.  

28

The Company’s reconciliation of net income (loss) attributable to common shareholders computed in accordance with GAAP to FFO attributable to common shareholders and Operating FFO attributable to common shareholders is as follows (in thousands).  The Company provides no assurances that these charges and gains are non-recurring.  These charges and gains could reasonably be expected to recur in future results of operations.

 

Three Months

 

 

Six Months

 

 

Ended June 30,

 

 

Ended June 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income (loss) attributable to common shareholders

$

8,894

 

 

$

(11,712

)

 

$

36,301

 

 

$

(74,248

)

Depreciation and amortization of real estate investments

 

38,638

 

 

 

70,895

 

 

 

79,595

 

 

 

143,755

 

Equity in net income of joint ventures

 

(1,791

)

 

 

(3,821

)

 

 

(2,834

)

 

 

(12,607

)

Joint ventures' FFO(A)

 

7,696

 

 

 

6,641

 

 

 

15,671

 

 

 

13,811

 

Non-controlling interests (OP Units)

 

28

 

 

 

506

 

 

 

56

 

 

 

559

 

Impairment of real estate

 

—

 

 

 

18,060

 

 

 

620

 

 

 

48,504

 

Reserve (adjustment) of preferred equity interests

 

4,634

 

 

 

(1,625

)

 

 

5,733

 

 

 

2,336

 

Gain on disposition of real estate, net

 

(213

)

 

 

(29,508

)

 

 

(16,590

)

 

 

(39,519

)

FFO attributable to common shareholders

 

57,886

 

 

 

49,436

 

 

 

118,552

 

 

 

82,591

 

RVI disposition and refinancing fees

 

(1,515

)

 

 

—

 

 

 

(4,414

)

 

 

—

 

Mark-to-market adjustment (PRSUs)

 

501

 

 

 

—

 

 

 

1,400

 

 

 

—

 

Hurricane property loss, net(B)

 

—

 

 

 

(89

)

 

 

—

 

 

 

2,445

 

Debt extinguishment, transaction, other, net(C)

 

99

 

 

 

36,255

 

 

 

121

 

 

 

97,862

 

Separation charges

—

 

 

 

4,641

 

 

—

 

 

 

4,641

 

Joint ventures – debt extinguishment and other

 

32

 

 

 

249

 

 

 

46

 

 

 

703

 

Non-operating items, net

 

(883

)

 

 

41,056

 

 

 

(2,847

)

 

 

105,651

 

Operating FFO attributable to common shareholders

$

57,003

 

 

$

90,492

 

 

$

115,705

 

 

$

188,242

 

 

 

(A)

At June 30, 2019 and 2018, the Company had an economic investment in unconsolidated joint venture interests related to 102 and 114 shopping center properties, respectively.  These joint ventures represent the investments in which the Company recorded its share of equity in net income or loss and, accordingly, FFO and Operating FFO.

 

Joint ventures’ FFO and Operating FFO are summarized as follows (in thousands):

 

Three Months

 

 

Six Months

 

 

Ended June 30,

 

 

Ended June 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income attributable to unconsolidated joint

   ventures

$

1,153

 

 

$

12,623

 

 

$

7,819

 

 

$

36,028

 

Depreciation and amortization of real estate investments

 

36,969

 

 

 

37,299

 

 

 

76,473

 

 

 

76,976

 

Impairment of real estate

 

—

 

 

 

—

 

 

 

12,267

 

 

 

16,910

 

Loss (gain) on disposition of real estate, net

 

321

 

 

 

(12,356

)

 

 

(15,645

)

 

 

(50,376

)

FFO

$

38,443

 

 

$

37,566

 

 

$

80,914

 

 

$

79,538

 

FFO at SITE Centers' ownership interests

$

7,696

 

 

$

6,641

 

 

$

15,671

 

 

$

13,811

 

Operating FFO at SITE Centers' ownership interests

$

7,728

 

 

$

6,890

 

 

$

15,717

 

 

$

14,515

 

 

 

(B)

The hurricane property loss is summarized as follows (in thousands):

 

Three Months

 

 

Six Months

 

 

Ended June 30,

 

 

Ended June 30,

 

 

2018

 

 

2018

 

Lost tenant revenue

$

2,787

 

 

$

6,570

 

Clean up costs and other uninsured expenses

 

224

 

 

 

975

 

Business interruption income

 

(3,100

)

 

 

(5,100

)

 

$

(89

)

 

$

2,445

 

 

29

 

(C)

Amounts included in other income/expense are as follows (in thousands):

 

Three Months

 

 

Six Months

 

 

Ended June 30,

 

 

Ended June 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Debt extinguishment costs, net

$

87

 

 

$

1,968

 

 

$

96

 

 

$

58,400

 

Transaction costs - RVI spin-off

—

 

 

 

31,431

 

 

—

 

 

 

36,516

 

Transaction and other (income) expense, net

 

12

 

 

 

2,856

 

 

 

25

 

 

 

2,946

 

 

$

99

 

 

$

36,255

 

 

$

121

 

 

$

97,862

 

Net Operating Income and Same Store Net Operating Income

Definition and Basis of Presentation

The Company uses Net Operating Income (“NOI”), which is a non-GAAP financial measure, as a supplemental performance measure.  NOI is calculated as property revenues less property-related expenses.  The Company believes NOI provides useful information to investors regarding the Company’s financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level and, when compared across periods, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and disposition activity on an unleveraged basis.  

The Company also presents NOI information on a same store basis, or Same Store Net Operating Income (“SSNOI”).  The Company defines SSNOI as property revenues less property-related expenses, which exclude straight-line rental income (including reimbursements) and expenses, lease termination income in excess of lost rent, management fee expense, fair market value of leases and expense recovery adjustments.  SSNOI also excludes activity associated with development and major redevelopment and includes assets owned in comparable periods (15 months for quarter comparisons).  In addition, SSNOI excludes all non-property and corporate level revenue and expenses.  Other real estate companies may calculate NOI and SSNOI in a different manner.  The Company believes SSNOI provides investors with additional information regarding the operating performances of comparable assets because it excludes certain non-cash and non-comparable items as noted above.  SSNOI is frequently used by the real estate industry, as well as securities analysts, investors and other interested parties, to evaluate the performance of REITs.

The Company believes that SSNOI is not, and is not intended to be, a presentation in accordance with GAAP.  SSNOI information has its limitations as it excludes any capital expenditures associated with the re-leasing of tenant space or as needed to operate the assets.  SSNOI does not represent amounts available for dividends, capital replacement or expansion, debt service obligations or other commitments and uncertainties.  Management does not use SSNOI as an indicator of the Company’s cash obligations and funding requirements for future commitments, acquisitions or development activities.  SSNOI does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs.  SSNOI should not be considered as an alternative to net income (computed in accordance with GAAP) or as an alternative to cash flow as a measure of liquidity.  A reconciliation of NOI and SSNOI to their most directly comparable GAAP measure of net income (loss) has been provided:

30

Reconciliation Presentation

The Company’s reconciliation of net income (loss) computed in accordance with GAAP to NOI and SSNOI for the Company at 100% and at its effective ownership interest of the assets is as follows (in thousands):  

 

At 100%

 

 

At the Company's Interest

 

 

For the Six Months Ended June 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income (loss) attributable to SITE Centers

$

53,067

 

 

$

(57,482

)

 

$

53,067

 

 

$

(57,482

)

Fee income

 

(32,538

)

 

 

(15,306

)

 

 

(32,538

)

 

 

(15,306

)

Interest income

 

(9,042

)

 

 

(10,357

)

 

 

(9,042

)

 

 

(10,357

)

Interest expense

 

42,813

 

 

 

88,953

 

 

 

42,813

 

 

 

88,953

 

Depreciation and amortization

 

82,668

 

 

 

146,886

 

 

 

82,668

 

 

 

146,886

 

General and administrative

 

29,044

 

 

 

30,121

 

 

 

29,044

 

 

 

30,121

 

Other (income) expense, net

 

(68

)

 

 

97,862

 

 

 

(68

)

 

 

97,862

 

Impairment charges

 

620

 

 

 

48,504

 

 

 

620

 

 

 

48,504

 

Hurricane property loss

 

—

 

 

 

974

 

 

 

—

 

 

 

974

 

Equity in net income of joint ventures

 

(2,834

)

 

 

(12,607

)

 

 

(2,834

)

 

 

(12,607

)

Reserve of preferred equity interests

 

5,733

 

 

 

2,336

 

 

 

5,733

 

 

 

2,336

 

Tax expense

 

578

 

 

 

373

 

 

 

578

 

 

 

373

 

Gain on disposition of real estate

 

(16,590

)

 

 

(39,519

)

 

 

(16,590

)

 

 

(39,519

)

Income from non-controlling interests

 

565

 

 

 

952

 

 

 

565

 

 

 

952

 

Consolidated NOI

$

154,016

 

 

$

281,690

 

 

$

154,016

 

 

$

281,690

 

SITE Centers' consolidated joint venture

 

—

 

 

 

—

 

 

 

(878

)

 

 

(782

)

Consolidated NOI, net of non-controlling interests

$

154,016

 

 

$

281,690

 

 

$

153,138

 

 

$

280,908

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income from unconsolidated joint ventures

$

7,819

 

 

$

36,028

 

 

$

2,345

 

 

$

11,981

 

Interest expense

 

50,942

 

 

 

49,189

 

 

 

8,824

 

 

 

7,555

 

Depreciation and amortization

 

76,473

 

 

 

76,976

 

 

 

12,171

 

 

 

10,138

 

Impairment charges

 

12,267

 

 

 

16,910

 

 

 

2,453

 

 

 

846

 

Preferred share expense

 

10,943

 

 

 

12,825

 

 

 

547

 

 

 

641

 

Other expense, net

 

11,341

 

 

 

14,037

 

 

 

2,022

 

 

 

2,333

 

Gain on disposition of real estate, net

 

(15,645

)

 

 

(50,376

)

 

 

(1,525

)

 

 

(9,325

)

Unconsolidated NOI

$

154,140

 

 

$

155,589

 

 

$

26,837

 

 

$

24,169

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Consolidated + Unconsolidated NOI

$

308,156

 

 

$

437,279

 

 

$

179,975

 

 

$

305,077

 

Less:  Non-Same Store NOI adjustments

 

(19,158

)

 

 

(154,835

)

 

 

(13,746

)

 

 

(144,916

)

Total SSNOI

$

288,998

 

 

$

282,444

 

 

$

166,229

 

 

$

160,161

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SSNOI % Change

 

2.3

%

 

 

 

 

 

 

3.8

%

 

 

 

 

The increase in SSNOI for the six months ended June 30, 2019 as compared to 2018 primarily is due to increases in the base rent per occupied square foot through lease renewal activity, rent commencement with respect to new leases, a one-time bankruptcy settlement with a tenant and bad debt favorability.

31

LIQUIDITY, CAPITAL RESOURCES AND FINANCING ACTIVITIES

The Company periodically evaluates opportunities to issue and sell additional debt or equity securities, obtain credit facilities from lenders or repurchase or refinance long-term debt as part of its overall strategy to further strengthen its financial position.  The Company remains committed to monitoring liquidity and maintaining low leverage in an effort to lower its overall risk profile.  

The Company’s 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 it has several viable sources to obtain capital and fund its business, including capacity under its credit facilities described below, no assurance can be provided that these obligations will be refinanced or repaid as currently anticipated.  

The Company has historically accessed capital sources through both the public and private markets.  Acquisitions and redevelopments are generally financed through cash provided from operating activities, Revolving Credit Facilities (as defined below), mortgages assumed, secured debt, unsecured debt, common and preferred equity offerings, joint venture capital and asset sales.  Total consolidated debt outstanding was $1.9 billion at June 30, 2019 and December 31, 2018.  

Revolving Credit Facilities

In July 2019, the Company amended and restated its unsecured revolving credit facility with a syndicate of financial institutions, arranged by Wells Fargo Securities, LLC, J.P. Morgan Chase Bank, N.A., Citizens Bank, N.A., RBC Capital Markets and U.S. Bank National Association (the “Unsecured Credit Facility.”)  The Unsecured Credit Facility continues to provide for borrowings of up to $950 million (which may be increased to $1.45 billion provided that the new or existing lenders agree to provide the incremental commitments) and was amended to extend the maturity date to January 2024, subject to two six-month options to extend the maturity to January 2025 upon the Company’s request (subject to satisfaction of certain conditions), and to reduce the interest rate margins applicable to drawn amounts.  The Company intends to amend its existing unsecured revolving credit facility with PNC Bank, National Association, which provides for borrowings of up to $20 million (the “PNC Facility,” and together with the Unsecured Credit Facility, the “Revolving Credit Facilities”), to reflect substantially the same terms as those contained in the amended and restated Unsecured Credit Facility.  The Company’s borrowings under the Revolving Credit Facilities bear interest at variable rates at the Company’s election, based on either LIBOR plus a specified spread (1.2% at June 30, 2019), or the Alternate Base Rate, as defined in the respective facility, plus a specified spread (0.20% at June 30, 2019).  The Company also pays an annual facility fee (0.25% at June 30, 2019) on the aggregate commitments applicable to each Revolving Credit Facility.  As a result of the July 2019 amendment, borrowings under the Unsecured Credit Facility as of August 1, 2019, bear interest at LIBOR plus 0.90% per annum or at the Alternative Base Rate, and the annual facility fee is 0.20% per annum on aggregate commitments.  The specified spreads and commitment fees vary depending on the Company’s long-term senior unsecured debt ratings from Moody’s Investors Service, Inc. (“Moody’s”), S&P Global Ratings (“S&P”), Fitch Ratings Inc. (“Fitch”) and their successors.

The Revolving Credit Facilities and the indentures under which the Company’s senior and subordinated unsecured indebtedness are, 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 Company’s ability to incur secured and unsecured indebtedness, sell all or substantially all of the Company’s 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 Company’s financial and operating covenants 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 Company’s 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 June 30, 2019, 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 operate in compliance with these covenants in 2019.

Consolidated Indebtedness – as of June 30, 2019

The Company expects to fund its maturing indebtedness obligations from available cash, asset sales and joint venture activity, 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 Company intends to continue to maintain a long-term financing strategy with limited reliance on short-term debt.  The Company believes its Revolving Credit Facilities are sufficient for its liquidity strategy and longer-term capital structure needs.  The Company has addressed all of its 2019 consolidated debt maturities.  In 2020, the Company has $40.6 million of consolidated mortgage debt maturing.  The Company had cash and cash equivalents of $9.4 million at June 30, 2019, as well as $895.0 million of borrowing capacity available on the Revolving Credit Facilities at June 30, 2019.  

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As discussed above, the Company is committed to maintaining low leverage and may utilize proceeds from asset sales to repay additional debt.  No assurance can be provided that these obligations will be refinanced or repaid as currently anticipated.  These sources of funds could be affected by various risks and uncertainties (see Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018).

The Company continually evaluates its debt maturities and, based on management’s assessment, believes it has viable financing and refinancing alternatives.  The Company has sought to manage its debt maturities through executing a strategy to extend debt duration, increase liquidity, maintain low leverage and improve the Company’s credit profile with a focus of lowering the Company's balance sheet risk and cost of capital.  

Unconsolidated Joint Ventures Mortgage Indebtedness – as of June 30, 2019

The outstanding indebtedness of the Company’s unconsolidated joint ventures at June 30, 2019, which matures in the subsequent 13-month period (July 2020), is as follows (in millions):

 

Outstanding

at June 30, 2019

 

 

At SITE Centers' Share

 

DDR Domestic Retail Fund I(A)

$

293.7

 

 

$

58.7

 

DDRTC Core Retail Fund, LLC(B)

 

113.6

 

 

 

17.0

 

BRE DDR Retail Holdings IV(A)

 

93.0

 

 

 

4.7

 

DDR SAU Retail Fund LLC(C)

 

21.2

 

 

 

4.3

 

Total debt maturities through July 2020

$

521.5

 

 

$

84.7

 

 

(A)

Expected to be extended at the joint venture’s option in accordance with the loan agreement.  

 

(B)

Expected to be repaid or refinanced.  

 

(C)

Expected to be refinanced.

It is expected that the joint ventures will fund these obligations from refinancing opportunities, including extension options or possible asset sales.  No assurance can be provided that these obligations will be refinanced or repaid as currently anticipated.

Cash Flow Activity

The Company’s core business of leasing space to well-capitalized tenants continues to generate consistent and predictable cash flow after expenses, interest payments and preferred share dividends.  This capital is available for use at the Company’s discretion for investment, debt repayment and the payment of dividends on common and preferred shares.

The Company’s cash flow activities are summarized as follows (in thousands):

 

Six Months

 

 

Ended June 30,

 

 

2019

 

 

2018

 

Cash flow provided by operating activities

$

120,209

 

 

$

161,755

 

Cash flow provided by investing activities

 

8,432

 

 

 

325,063

 

Cash flow used for financing activities

 

(131,125

)

 

 

(474,743

)

Changes in cash flow for the six months ended June 30, 2019, compared to the prior comparable period are as follows:

Operating Activities:  Cash provided by operating activities decreased $41.5 million primarily due to the following:

 

•

Impact of asset sales and the spin-off of assets to RVI;

 

•

Reduction in interest expense and

 

•

Reduction in general and administrative expenses.

Investing Activities:  Cash provided by investing activities decreased $316.6 million primarily due to the following:

 

•

Decrease in proceeds of $230.4 million from disposition of real estate;

 

•

Increase in contributions, net to joint ventures of $57.5 million and

 

•

Reduction in repayment of joint venture advances of $32.3 million.

Financing Activities:  Cash used for financing activities decreased $343.6 million primarily due to the following:

 

•

Decrease in net debt repayments of $295.4 million;

 

•

Decrease of dividends paid of $67.3 million and

 

•

Increase in common share repurchases of $14.1 million.

33

RVI Preferred Shares

In 2018, RVI issued 1,000 shares of its series A preferred stock (the “RVI Preferred Shares”) to the Company, which are noncumulative and have no mandatory dividend rate.  The RVI Preferred Shares rank, with respect to dividend rights and rights upon liquidation, dissolution or winding up of RVI, senior in preference and priority to RVI’s common shares and any other class or series of RVI capital stock.  Subject to the requirement that RVI distribute to its common shareholders the minimum amount required to be distributed with respect to any taxable year in order for RVI to maintain its status as a REIT and to avoid U.S. federal income taxes, the RVI Preferred Shares will be entitled to a dividend preference for all dividends declared on RVI’s capital stock at any time up to a “preference amount” equal to $190 million in the aggregate, which amount may increase by up to an additional $10 million if the aggregate gross proceeds of RVI asset sales subsequent to July 1, 2018, exceeds $2.0 billion. Notwithstanding the foregoing, the RVI Preferred Shares are entitled to receive dividends only when, as and if declared by the Board of Directors of RVI, and RVI’s ability to pay dividends is subject to any restrictions set forth in the terms of its indebtedness.  

In addition, the Company has receivables from RVI of $33.8 million at June 30, 2019, primarily consisting of restricted cash and insurance premiums owed by RVI pursuant to the terms of the agreement governing the separation of RVI from the Company on July 1, 2018, and provided a guaranty, see discussion in “Contractual Obligations and Other Commitments,” included elsewhere herein.

Dividend Distribution

The Company satisfied its REIT requirement of distributing at least 90% of ordinary taxable income with declared common and preferred share cash dividends of $89.3 million and $157.4 million for the six months ended June 30, 2019 and 2018, respectively.  Because actual distributions were greater than 100% of taxable income, federal income taxes were not incurred by the Company for the six months ended June 30, 2019.

The Company declared a quarterly cash dividend of $0.20 per common share for each of the first two quarters of 2019.  The Board of Directors of the Company intends to monitor the dividend policy in order to maximize the Company’s free cash flow while still adhering to REIT payout requirements.  

Common Shares and Common Share Repurchase Program

The Company has a $250 million continuous equity program.  At July 29, 2019, the Company had all $250 million available for the future issuance of common shares under that program.

In November 2018, the Company’s Board of Directors authorized a common share repurchase program. Under the terms of the program, the Company may purchase up to a maximum value of $100 million of its common shares. Through June 30, 2019, the Company had repurchased under this program 4.3 million of its common shares in open market transactions at an aggregate cost of approximately $50.4 million.

SOURCES AND USES OF CAPITAL

Strategic Transaction Activity

The Company remains committed to monitoring liquidity and maintaining low leverage in an effort to lower its overall risk profile.  Asset sales and proceeds from the repayment of other investments continue to represent a potential source of proceeds to be used to achieve these objectives.

Dispositions

During the six months ended June 30, 2019, the Company sold two consolidated shopping center properties, aggregating 0.3 million square feet, which generated proceeds totaling $67.0 million.  The Company recorded a net gain of $16.6 million.  In addition, the Company’s unconsolidated joint ventures sold four shopping center assets, aggregating 1.0 million square feet, which generated proceeds totaling $128.2 million, of which the Company’s proportionate share of the proceeds was $16.6 million.  The Company’s pro rata share of proceeds is before giving effect to the repayment of indebtedness and transaction costs.  The asset sales from the joint ventures with Blackstone resulted in preferred equity repayments received by the Company of $13.6 million.

Changes in investment strategies for assets may impact the Company’s hold-period assumptions for those properties.  The disposition of certain assets could result in a loss or impairment recorded in future periods.  The Company evaluates all potential sale opportunities taking into account the long-term growth prospects of the assets, the use of proceeds and the impact to the Company’s balance sheet, in addition to the impact on operating results.

34

Redevelopment Opportunities

A key component to the Company’s strategic plan will be the evaluation of additional redevelopment potential within the portfolio, particularly as it relates to the efficient use of the real estate.  The Company will generally commence construction on various redevelopments only after substantial tenant leasing has occurred.  The Company will continue to closely monitor its expected spending in 2019 for redevelopments, as the Company considers this funding to be discretionary spending.  The Company does not anticipate expending significant funds on joint venture redevelopment projects in 2019.

The Company’s consolidated land holdings are classified in two separate line items on the Company’s consolidated balance sheets included herein, (i) Land and (ii) Construction in Progress and Land.  At June 30, 2019, the $861.4 million of Land primarily consisted of land that is part of the Company’s shopping center portfolio.  However, this amount also includes a small portion of vacant land composed primarily of outlots or expansion pads adjacent to the shopping center properties.  Approximately 130 acres of this land, which has a recorded cost basis of approximately $15 million, is available for future development.

Included in Construction in Progress and Land at June 30, 2019, was approximately $14 million of recorded costs related to undeveloped land being marketed for sale for which active construction never commenced or was previously ceased.  The Company evaluates 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 asset’s carrying value.  

Redevelopment Projects

As part of its strategy to expand, improve and re-tenant various properties, at June 30, 2019, the Company has invested approximately $71 million in various consolidated active redevelopment projects.  

The Company’s major redevelopment projects are typically substantially complete within two years of the construction commencement date.  At June 30, 2019, the Company’s significant consolidated redevelopment projects were as follows (in thousands):

Location

 

Estimated

Stabilized

Quarter

 

Estimated

Gross Cost

 

 

Cost Incurred at

June 30, 2019

 

Nassau Park Pavilion (Princeton, New Jersey)

 

1Q20

 

$

12,199

 

 

$

8,291

 

The Collection at Brandon Boulevard (Tampa, Florida)

 

4Q20

 

 

27,732

 

 

 

8,246

 

1000 Van Ness (San Francisco, California)

 

2Q20

 

 

4,810

 

 

 

—

 

West Bay Plaza (Phase II) (Cleveland, Ohio)

 

2Q22

 

 

12,000

 

 

 

137

 

Shoppers World (Boston, Massachusetts)

 

TBD

 

 

20,426

 

 

 

1,929

 

Sandy Plains Village (Atlanta, Georgia)

 

TBD

 

 

8,556

 

 

 

1,166

 

Perimeter Pointe (Atlanta, Georgia)

 

TBD

 

 

9,833

 

 

 

765

 

Total

 

 

 

$

95,556

 

 

$

20,534

 

 

For redevelopment assets completed in 2019, the assets placed in service were completed at a cost of approximately $144 per square foot.

OFF-BALANCE SHEET ARRANGEMENTS

The Company has a number of off-balance sheet joint ventures with varying economic structures.  Through these interests, the Company has investments in operating properties and one development project.  Such arrangements are generally with institutional investors.  

The Company’s unconsolidated joint ventures had aggregate outstanding indebtedness to third parties of $1.9 billion and $2.2 billion at June 30, 2019 and 2018, 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.

CAPITALIZATION

At June 30, 2019, the Company’s capitalization consisted of $1.9 billion of debt, $525.0 million of preferred shares and $2.4 billion of market equity (market equity is defined as common shares and OP Units outstanding multiplied by $13.24, the closing price of the Company’s common shares on the New York Stock Exchange on June 28, 2019, the last trading day of June), resulting in a debt to total market capitalization ratio of 0.39 to 1.0, as compared to the ratio of 0.53 to 1.0 at June 30, 2018.  The closing price of the Company’s common shares on the New York Stock Exchange was $14.78 at June 29, 2018, the last trading day of June.  At

35

June  30, 2019 and 2018, the Company’s total debt consisted of $1.8 billion and $2.1 billion of fixed-rate debt, respectively, and $0.1 billion and $1.5 billion of variable-rate debt, respectively.  

It is management’s strategy to have access to the capital resources necessary to manage the Company’s balance sheet and to repay upcoming maturities.  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 Company’s cost of capital by maintaining an investment grade rating with Moody’s, S&P and Fitch.  A 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 Company’s credit facilities and the indentures under which the Company’s senior and subordinated unsecured indebtedness are, 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 Company’s ability to incur secured and unsecured indebtedness, sell all or substantially all of the Company’s assets, engage in mergers and certain acquisitions and make distribution to its shareholders.  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.  In addition, certain of the Company’s credit facilities and indentures 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 Company’s financial condition and results of operations.

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

The Company has no consolidated debt maturing until April 2020.  The Company expects to fund future maturities from utilization of its Revolving Credit Facilities, proceeds from asset sales and other investments, cash flow from operations and/or additional debt or equity financings.  No assurance can be provided that these obligations will be repaid as currently anticipated or refinanced.

RVI Guaranty

In 2018, the Company provided an unconditional guaranty to PNC Bank with respect to any obligations of RVI outstanding from time to time under a $30 million revolving credit agreement entered into by RVI with PNC Bank.  RVI has agreed to reimburse the Company for any amounts paid by it to PNC Bank pursuant to the guaranty plus interest at a contracted rate and to pay an annual commitment fee to the Company on account of the guaranty. 

Other Guaranties

In conjunction with the redevelopment of shopping centers, the Company had entered into commitments with general contractors aggregating approximately $28.3 million for its consolidated properties at June 30, 2019.  These obligations, composed principally of construction contracts, are generally due within 12 to 24 months, as the related construction costs are incurred, and are expected to be financed through operating cash flow, new construction loans, asset sales or borrowings under the Revolving Credit Facilities.  These contracts typically can be changed or terminated without penalty.  

The Company routinely enters into contracts for the maintenance of its properties.  These contracts typically can be canceled upon 30 to 60 days’ notice without penalty.  At June 30, 2019, the Company had purchase order obligations, typically payable within one year, aggregating approximately $0.2 million related to the maintenance of its properties and general and administrative expenses.

INFLATION

Most of the Company’s long-term leases contain provisions designed to mitigate the adverse impact of inflation.  Such provisions include clauses enabling the Company to receive 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 Company’s leases are for terms of less than 10 years, permitting the Company to seek increased rents at market rates upon renewal.  Most of the Company’s leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes, insurance and utilities, thereby reducing the Company’s exposure to increases in costs and operating expenses resulting from inflation.

ECONOMIC CONDITIONS

Despite recent tenant bankruptcies and increasing e-commerce distribution, the Company continues to believe there is healthy tenant demand for quality locations within well-positioned shopping centers.  Further, the Company continues to see demand from a

36

broad range of tenants for its space, particularly in the off-price sector, which the Company believes is a reflection of increasingly value-oriented consumers.  This is evidenced by the continued stable leasing volumes, as new leases and renewals aggregating approximately two million square feet of space for the six months ended June 30, 2019, as well as approximately four million square feet of space for new leases and renewals for the year ended December 31, 2018, on a pro-rata basis.  The Company also benefits from a diversified tenant base, with only two tenants whose annualized rental revenue equals or exceeds 3% of the Company’s annualized consolidated revenues plus the Company’s proportionate share of unconsolidated joint venture revenues (TJX Companies at 5.7% and Bed Bath & Beyond at 3.4%).  Other significant tenants include Best Buy, Ross Stores, GAP, Nordstrom Rack, Kroger, Whole Foods, Home Depot and Lowe’s, all of which have relatively strong credit ratings, remain well-capitalized and have outperformed other retail categories.  The Company expects these tenants to continue to provide a stable revenue base given the long-term nature of these leases.  Moreover, the majority of the tenants in the Company’s shopping centers provide day-to-day consumer necessities with a focus toward value and convenience, versus discretionary items, which the Company believes will enable many of its tenants to outperform even in a challenging economic environment.

The retail sector continues to be affected by increasing competition, including the impact of e-commerce.  These dynamics are expected to continue to lead to store downsizing, closures and tenant bankruptcies.  In many cases, the loss of a weaker tenant or downsizing of space creates a value-add opportunity such as re-leasing space at higher rents to stronger retailers or redevelopment.  The loss of a tenant or downsizing of space can adversely affect the Company (see Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018).

The Company believes that its shopping center portfolio is strong, as evidenced by the historical occupancy rates and consistent growth in the average annualized base rent per occupied square foot.  Historical occupancy has generally ranged from 89% to 96% since the Company’s initial public offering in 1993.  At June 30, 2019, the shopping center portfolio occupancy was 89.8% and total portfolio average annualized base rent per occupied square foot was $17.98, on a pro rata basis.  The shopping center portfolio occupancy was 89.9% and the total portfolio average annualized base rent per occupied square foot was $17.86 at December 31, 2018, on a pro rata basis. At June 30, 2018, on a pro rata basis and restated to reflect the assets owned at December 31, 2018, the shopping center portfolio occupancy was 90.9% and the total portfolio average annualized base rent per occupied square foot was $17.65.  The decrease in occupancy rates primarily was attributable to anchor tenant bankruptcies and lease expirations.  Due largely to a number of recent anchor tenant bankruptcies, the Company has had to invest capital to re-lease those units; however, the per square foot cost to do so has been predominantly consistent with the Company’s historical trends.  The weighted-average cost of tenant improvements and lease commissions estimated to be incurred over the expected lease term for new and renewal leases executed during the six months ended June 30, 2019 was $2.68 per rentable square foot on a pro rata basis as compared to $2.34 per rentable square foot on a pro rata basis in 2018, reflecting a higher proportion of new leases executed with anchor tenants in 2019.  The Company generally does not expend a significant amount of capital on lease renewals.  The quality of the property revenue stream is high and consistent, as it is generally derived from tenants with good credit profiles under long-term leases, with very little reliance on overage rents generated by tenant sales performance.  The Company recognizes the risks posed by the economy, but believes that the position of its transformed portfolio and the general diversity and credit quality of its tenant base should enable it to successfully navigate through a potentially challenging retail environment.

NEW ACCOUNTING STANDARDS

New Accounting Standards are more fully described in Note 1, “Nature of Business and Financial Statement Presentation,” to the Company’s consolidated financial statements included herein.

FORWARD-LOOKING STATEMENTS

MD&A should be read in conjunction with the Company’s consolidated financial statements and the notes thereto appearing elsewhere in this report.  Historical results and percentage relationships set forth in the Company’s 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 Company’s 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 Company’s 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 Company’s actual results, performance or achievements.  For additional factors that

37

could cause the results of the Company to differ materially from those indicated in the forward-looking statements see Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

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 any economic downturn may adversely affect the ability of the Company’s tenants, or new tenants, to enter into new leases or the ability of the Company’s 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, especially in regions experiencing deteriorating economic conditions.  In addition, real estate investments can be illiquid, particularly as prospective buyers may experience increased costs of financing or difficulties obtaining financing due to local or global conditions, and could limit the Company’s ability to promptly make changes to its portfolio to respond to economic and other conditions;

 

•

The Company may abandon a development or redevelopment 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 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 or redevelopment projects on schedule as a result of various factors, many of which are beyond the Company’s 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 Company’s 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 Company’s 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 Company’s business or financial condition;

 

•

Changes in interest rates could adversely affect the market price of the Company’s common shares, as well as its performance and cash flow;

38

 

•

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 Company’s ability to obtain financing on reasonable terms and have other adverse effects on the Company and the market price of the Company’s 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 Company’s instructions, requests, policies or objectives, including the Company’s 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 Company’s control.  Furthermore, the Company could be required to reduce the carrying value of its equity investments, including preferred investments, if a loss in the carrying value of the investment is realized;

 

•

The Company’s decision to dispose of real estate assets, including undeveloped land 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 Company’s financial results;

 

•

The outcome of pending or future litigation, including litigation with tenants or joint venture partners, may adversely affect the Company’s results of operations and financial condition;

 

•

Property damage, expenses related thereto, and other business and economic consequences (including the potential loss of revenue) resulting from extreme weather conditions in locations where the Company owns properties;

 

•

Sufficiency and timing of any insurance recovery payments related to damages and lost revenues from extreme weather conditions;

 

•

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;

 

•

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;

 

•

The Company’s Board of Directors, which regularly reviews the Company’s business strategy and objectives, may change the Company’s strategic plan based on a variety of factors and conditions, including in response to changing market conditions and

 

•

The Company and its vendors could sustain a disruption, failure or breach of their respective networks and systems, including as a result of cyber-attacks, which could disrupt the Company’s business operations, compromise the confidentiality of sensitive information and result in fines or penalties.

 

39

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s primary market risk exposure is interest rate risk.  The Company’s debt, excluding unconsolidated joint venture debt, is summarized as follows:

 

June 30, 2019

 

 

December 31, 2018

 

 

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

$

1,734.2

 

 

 

5.9

 

 

 

4.3

%

 

 

93.3

%

 

$

1,734.7

 

 

 

6.3

 

 

 

4.3

%

 

 

92.1

%

Variable-Rate Debt

$

124.7

 

 

 

2.7

 

 

 

3.7

%

 

 

6.7

%

 

$

149.7

 

 

 

3.1

 

 

 

3.8

%

 

 

7.9

%

 

The Company’s unconsolidated joint ventures’ indebtedness at its carrying value is summarized as follows:

 

June 30, 2019

 

 

December 31, 2018

 

 

Joint

Venture

Debt

(Millions)

 

 

Company's

Proportionate

Share

(Millions)

 

 

Weighted-

Average

Maturity

(Years)

 

 

Weighted-

Average

Interest

Rate

 

 

Joint

Venture

Debt

(Millions)

 

 

Company's

Proportionate

Share

(Millions)

 

 

Weighted-

Average

Maturity

(Years)

 

 

Weighted-

Average

Interest

Rate

 

Fixed-Rate Debt

$

1,126.8

 

 

$

216.7

 

 

 

4.6

 

 

 

4.3

%

 

$

1,156.0

 

 

$

218.6

 

 

 

5.1

 

 

 

4.3

%

Variable-Rate Debt

$

717.8

 

 

$

90.6

 

 

 

1.0

 

 

 

4.2

%

 

$

1,056.5

 

 

$

141.3

 

 

 

0.6

 

 

 

4.2

%

 

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 at the Company’s 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 Company’s distributable cash flow.  

The carrying value and the fair value of the Company’s fixed-rate debt are adjusted to include the Company’s proportionate share of the joint venture fixed-rate debt.  An estimate of the effect of a 100 basis-point increase at June 30, 2019 and December 31, 2018, is summarized as follows (in millions):

 

June 30, 2019

 

 

 

December 31, 2018

 

 

Carrying

Value

 

 

Fair

Value

 

 

100 Basis-Point

Increase in

Market Interest

Rate

 

 

 

Carrying

Value

 

 

Fair

Value

 

 

100 Basis-Point

Increase in

Market Interest

Rate

 

Company's fixed-rate debt

$

1,734.2

 

 

$

1,816.1

 

 

$

1,726.3

 

 

 

$

1,734.7

 

 

$

1,729.1

 

 

$

1,638.7

 

Company's proportionate share of

   joint venture fixed-rate debt

$

216.7

 

 

$

219.7

 

 

$

211.3

 

 

 

$

218.6

 

 

$

214.9

 

 

$

206.1

 

 

The sensitivity to changes in interest rates of the Company’s 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.

A 100 basis-point increase in short-term market interest rates on variable-rate debt at June 30, 2019, would result in an increase in interest expense of approximately $0.6 million for the Company and $0.5 million representing the Company’s proportionate share of the joint ventures’ interest expense relating to variable-rate debt outstanding for the six months ended June 30, 2019.  The estimated increase in interest expense for the year does not give effect to possible changes in the daily balance of the Company’s 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 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 versus the Company’s 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 June 30, 2019, the Company had no other material exposure to market risk.

 

40

Item 4.

CONTROLS AND PROCEDURES

The Company’s management, with the participation of the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), conducted an evaluation, pursuant to Securities Exchange Act of 1934 Rules 13a-15(b) and 15d-15(b), of the effectiveness of our disclosure controls and procedures.  Based on their evaluation as required, the CEO and CFO have concluded that the Company’s 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 Company’s management, including its CEO and CFO, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

During the three months ended June 30, 2019, there were no changes in the Company’s internal control over financial reporting that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

41

PART II

OTHER INFORMATION

 

Item 1.

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 Company’s liquidity, financial position or results of operations.

 

Item 1A.

RISK FACTORS

None.

 

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ISSUER PURCHASES OF EQUITY SECURITIES

 

 

(a)

 

 

(b)

 

 

(c)

 

 

(d)

 

 

 

 

 

Total

Number of

Shares

Purchased(1)

 

 

Average

Price Paid

per Share

 

 

Total Number

of Shares Purchased

as Part of

Publicly Announced

Plans or Programs

 

 

Maximum Number

(or Approximate

Dollar Value) of

Shares that May Yet

Be Purchased Under

the Plans or Programs

 

 

 

 

April 1–30, 2019

 

674

 

 

$

13.67

 

 

 

—

 

 

 

—

 

 

 

 

May 1–31, 2019

 

28

 

 

 

13.25

 

 

 

 

 

 

 

 

 

 

 

 

June 1–30, 2019

 

28

 

 

 

12.79

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

730

 

 

$

13.62

 

 

 

—

 

 

$

49.6

 

 

(2

)

 

(1)

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 Company’s equity-based compensation plans.

(2)

On November 29, 2018, the Company announced that its Board of Directors authorized a common share repurchase program.  Under the terms of the program authorized by the Board, the Company may purchase up to a maximum value of $100 million of its common shares and the program has no expiration date.  As of July 29, 2019, the Company had repurchased 4.3 million of its common shares in the aggregate at a cost of $50.4 million and a weighted-average cost of $11.74 per share under the program.

 

Item 3.

DEFAULTS UPON SENIOR SECURITIES

None.

 

Item 4.

MINE SAFETY DISCLOSURES

Not applicable.

 

Item 5.

OTHER INFORMATION

None.

 

42

Item 6.

EXHIBITS

 

4.1

 

Third Amended and Restated Credit Agreement, dated as of July 26, 2019, among SITE Centers Corp., the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on July 29, 2019 (File No. 001-11690))

 

 

 

10.1

 

Instrument of Termination of the Directors Deferred Compensation Plan 2

 

 

 

10.2

 

2005 Directors’ Deferred Compensation Plan (May 9, 2019 Restatement) 2

 

 

 

10.3

 

Elective Deferred Compensation Plan (May 9, 2019 Restatement) 2

 

 

 

10.4

 

Adoption Agreement 2005 Elective Deferred Compensation Plan (May 9, 2019 Restatement) 2

 

 

 

10.5

 

2005 Equity Deferred Compensation Plan (May 9, 2019 Restatement) 2

 

 

 

10.6

 

2019 Equity and Incentive Compensation Plan (incorporated by reference to Registration Statement on Form S-8 (File No. 333-231319) filed with the SEC on May 9, 2019)

 

 

 

10.7

 

Form of 2019 Plan Restricted Share Units Award Memorandum 2

 

 

 

10.8

 

Form of 2019 Plan Performance-Based Restricted Share Units Award Memorandum – CEO & CFO 2

 

 

 

10.9

 

Form of 2019 Plan Performance-Based Restricted Share Units Award Memorandum – COO 2

 

 

 

31.1

 

Certification of principal executive officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 2

 

 

 

31.2

 

Certification of principal financial officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 2

 

 

 

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 1,2

 

 

 

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 1,2

 

 

 

101.INS

 

XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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

 

 

 

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 iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018, (ii) Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2019 and 2018, (iii) Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2019 and 2018, (iv) Consolidated Statements of Equity for the Three and Six Months Ended June 30, 2019 and 2018, (v) Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018 and (vi) Notes to Condensed Consolidated Financial Statements.

 

43

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.

 

 

 

SITE CENTERS CORP.

 

 

 

 

 

 

By:

 

/s/ Christa A. Vesy

 

 

 

 

Name:

 

Christa A. Vesy

 

 

 

 

Title:

 

Executive Vice President
and Chief Accounting Officer
(Authorized Officer)

Date:  August 5, 2019

 

 

 

 

 

 

 

 

44

 

Exhibit 10.1

 

INSTRUMENT OF TERMINATION

OF THE

DEVELOPERS DIVERSIFIED REALTY CORPORATION

DIRECTORS’ DEFERRED COMPENSATION PLAN

SITE Centers Corp. (the “Company”) sponsors the Developers Diversified Realty Corporation Directors’ Deferred Compensation Plan, as amended and restated on November 8, 2000 (the “Plan”).  Pursuant to Section 8 of the Plan, the Board of Directors of the Company (the “Board”) has the authority to terminate the Plan at any time.  Thus, pursuant to Section 8 of the Plan and the resolutions adopted by the Board on May 9, 2019, the Company terminates the Plan effective as of August 1, 2020 (the “Termination Date”), and all amounts owed under the Plan as of the Termination Date will be paid to applicable participants under the Plan within 90 days of the Termination Date.

EXECUTED, as an authorized officer of the Company, this 13th day of June, 2019.

 

/s/ Aaron M. Kitlowski

Aaron M. Kitlowski

Executive Vice President

 

 

 

Exhibit 10.2

 

SITE CENTERS CORP.

2005 DIRECTORS’ DEFERRED COMPENSATION PLAN

(May 9, 2019 Restatement)

SITE Centers Corp. (the “Company”) previously established the Developers Diversified Realty Corporation Directors’ Deferred Compensation Plan (the “Original Plan”) to assist it in attracting and retaining persons of competence and stature to serve as outside directors by giving them the option of deferring receipt of the fees payable to them by the Company for their services as directors. As a result of the new rules provided under the American Jobs Creation Act of 2004 (the “Act”) and Section 409A of the Internal Revenue Code (the “Code”), the Company froze deferrals under the Original Plan effective December 31, 2004, and established a new plan to accept deferrals of the fees paid for directors’ services rendered on or after January 1, 2005 (the “Plan”). The Company amended and restated the Plan generally effective as of November 1, 2007 (the “November 1, 2007 Restatement”), for the purpose of reflecting Final Treasury Regulations published under Section 409A of the Code and for other purposes. The Company subsequently adopted the First Amendment (dated December 1, 2011) to the November 1, 2007 Restatement (the “2007 Amendment”). The Company amended and restated the Plan generally effective as of January 1, 2012 (the “January 1, 2012 Restatement”), and subsequently adopted the First Amendment (dated November 30, 2012) to the January 1, 2012 Restatement (the “First Amendment”). The Company now desires to amend and restate the Plan for the purpose of incorporating the changes made to the Plan by the First Amendment, and to make other desired changes.

The Plan, which is intended to be a “nonqualified deferred compensation plan” that satisfies the requirements of the Act and Section 409A of the Code, or any successor provision, shall be interpreted and administered by the Administrators to the extent possible in a manner consistent with that intent. The provisions of the SITE Centers Corp. 2005 Directors’ Deferred Compensation Plan (May 9, 2019 Restatement) are effective generally as of May 9, 2019, except as otherwise provided herein, and are hereinafter set forth. For the period prior to November 1, 2007, the Plan shall operate based upon IRS Notice 2005-1, additional notices published by the Treasury Department and the Internal Revenue Service providing transition guidance, and a good faith, reasonable interpretation of Section 409A of the Code, and for the period after October 31, 2007, and prior to January 1, 2012, the Plan shall operate based on the November 1, 2007 Restatement, as amended by the 2007 Amendment. For the period after December 31, 2011, and prior to November 30, 2012, the Plan shall operate based on the January 1, 2012 Restatement, and for the period after November 29, 2012, and prior to May 9, 2019, the Plan will operate based on the January 1, 2012 Restatement, as amended by the First Amendment.

1.Effective Date. The Plan shall apply to the directors’ fees payable with respect to periods commencing with the Company’s fiscal quarter beginning January 1, 2005.

2.Participation. Each director of the Company who is duly elected to the Company’s Board of Directors and who receives fees for services as a director may elect to defer receipt of all or part of the fees otherwise payable to him, as provided for in the Plan. Each such

 

 

director who elects to defer fees shall be a “Participant” in the Plan. No employee of the Company shall be eligible to make an election under the Plan.

3.Administration. The Executive Vice Presidents of the Company shall act as the Administrators of the Plan (the “Administrators”). The Administrators shall serve at the pleasure of the Board of Directors and shall administer, construe, and interpret the Plan. The Administrators shall not be liable for any act done or determination made in good faith. The Board of Directors shall have the power to designate additional or replacement Administrators at its discretion.

4.Deferrals.

(a)Deferral Election. Any eligible director may file with the Company, and/or the Administrators of the Plan, an election in writing to participate in the Plan with respect to all or any portion of the fees for services (regardless of the manner or medium in which such fees are paid) to be rendered after the date of such election. Any such election must be made no later than December 31 prior to the year in which the services attributable to such fees are rendered. When a deferral election is filed, only the portion of fees not deferred will be paid to the Participant for services for the year (or portion thereof). Moreover, in the case of the first year in which an eligible director becomes eligible to participate in the Plan, such individual may file with the Company, and/or the Administrators of the Plan, an election in writing to participate in the Plan, within 30 days after the date he becomes eligible to participate in the Plan, with respect to all or any portion of the fees for services to be rendered after the date of such election. No election made prior to November 1, 2007, with respect to a year beginning prior to that date shall continue to be effective after December 31, 2007; a new deferral election shall be required prior to the beginning of each year with respect to fees for services otherwise payable in that year which are to be deferred. Notwithstanding the foregoing, in accordance with Q&A-20 of IRS Notice 2005-1, until December 31, 2005, a Participant may elect to terminate participation in the Plan or reduce the amount of or revoke a deferral election for 2005 directors’ fees without causing the Plan to fail to conform to the requirements of Section 409A of the Code. Moreover, after January 1, 2007, and on or before December 31, 2007, and to the extent permitted by the Company, a Participant may make a change in a payment election as described in IRS Notice 2006-79, provided that with respect to an election to change a time and form of payment made after January 1, 2007 and on or before December 31, 2007, the election may apply only to amounts that would not otherwise be payable in 2007 and may not cause an amount to be paid in 2007 that would not otherwise be payable in 2007. Moreover, after January 1, 2008, and on or before December 31, 2008, and to the extent permitted by the Company, a Participant may make a change in a payment election as described in IRS Notice 2007-86, provided that with respect to an election to change a time and form of payment made after January 1, 2008 and on or before December 31, 2008, the election may apply only to amounts that would not otherwise be payable in 2008 and may not cause an amount to be paid in 2008 that would not otherwise be payable in 2008.

(b)Accounting. Appropriate records shall be maintained by the Company (the “Deferral Accounts”), which shall list and reflect each Participant’s credits and valuations. The Company shall credit to each Participant’s Deferral Account an amount equivalent to the fees that would have been paid to such Participant if he/she had not made a deferral election

 

 

under the Plan. The credit shall be made on the date on which the fee would have been paid absent a deferral election. No funds shall be segregated into the Deferral Accounts of Participants; said Accounts shall represent general unsecured obligations of the Company.

(c)Valuation. Until distributed to a Participant, amounts credited to a Deferral Account of such Participant shall be increased or decreased as measured by the market value of the Company’s Common Shares plus the value of dividends or other distributions on the Company’s Common Shares. Each amount credited to a Deferral Account shall be assigned a number of Share Units (including fractions of a Share) determined by dividing the amount credited to the Deferral Account, whether in lieu of payment of fees for service as a director or as a dividend or other distribution attributable to such Share Units, by the fair market value of shares of the Company’s Common Shares on the date of credit. Fair market value shall be the closing price of a share of the Company’s Common Shares on the New York Stock Exchange on the day preceding the concerned date or, if no sales occurred on such preceding date, on the most recent preceding date on which sales occurred. Each Share Unit shall have the value of a Common Share of the Company. The number of Share Units shall be adjusted to reflect stock splits, stock dividends, or other capital adjustments effected without receipt of consideration by the Company.

5.Distribution.

(a)A Participant shall elect in writing, at the time such Participant makes each deferral election under subparagraph 4(a), the date on which distribution of the credits to his/her Deferral Account to which the deferral election relates shall commence (the “Commencement Date”) and the method of distribution, as permitted hereunder. Such election shall specify one of the following Commencement Dates:

(i)the first day of the seventh month after a Termination of Service; or

(ii)a specified date that is no later than January 1 following the year in which the Participant attains age 75; or

(iii)the earlier of the two dates specified in clauses (i) and (ii) above.

A “Termination of Service” shall mean a “separation from service” as defined in Treasury Regulation Section 1.409A-1(h). In the event a Deferral Account balance is to be paid in installments, the number of Share Units to be distributed in each installment shall equal the quotient obtained by dividing the number of Share Units represented by the Deferral Account balance as of the day immediately preceding the distribution date by the number of installment payments remaining to be paid at the time of the calculation, provided that each installment after the first shall also include any additional Share Units credited to the Deferral Account balance during the period preceding payment of that installment (such as by reason of additional Share Units being credited for the purpose of reflecting dividends paid on the Company’s Common Shares subsequent to payment of the most recent prior installment). The time of and method of distribution of benefits may vary with each separate election, but each election shall be irrevocable. However, the Participant may elect as the medium of payment Common Shares,

 

 

cash, or a combination thereof, as permitted by the Administrators. If a payment is to be made in the form of the Company’s Common Shares, each related Share Unit shall be payable by delivery of a Common Share, with any fractional Share Unit being payable in cash.

(b)In the event a Participant is continuing to serve as a director of the Company on the date one year prior to the date distributions are to commence, such Participant may elect on or before such date in writing to defer further the commencement of distributions hereunder. Any such election shall become irrevocable on the date one year prior to the date distribution is otherwise to commence. Any election to further defer the commencement of distributions hereunder must: (i) be made at least 12 months prior to the scheduled distribution date; (ii) not take effect until it has been in place for at least 12 months; and (iii) defer the scheduled distribution date for at least five years.

(c)Notwithstanding any Plan provision to the contrary and the restrictions contained in paragraph (b) above, in accordance with Q&A-19(c) of IRS Notice 2005-1, until December 31, 2005, a Participant may elect to modify the form and timing of payment of amounts deferred in 2005 without causing the Plan to fail to conform to the requirements of Section 409A of the Code.

(d)Notwithstanding any provisions of the Plan to the contrary, if a Participant’s total balance in all of his or her Deferral Accounts under the Plan, in addition to the Participant’s balances and accounts under any other agreements, methods, programs or other arrangements with respect to which deferrals of compensation are treated as having been deferred under a single nonqualified deferred compensation plan with the Plan under Treasury Regulation Section 1.409A-1(c)(2) (the “Director Aggregate Account Balance”), is less than the applicable dollar amount under Section 402(g)(1)(B) of the Code ($19,000 for 2019), then the Company may, in the discretion of the Compensation Committee of the Company or any Executive Vice President acting on behalf of the Company, pay Participant’s entire Director Aggregate Account Balance in an immediate lump sum in accordance with Section 409A of the Code.  The present value of Participant’s total account balance for purposes of this Section 5(d) will be determined by using the closing price of a share of the Company’s common stock on the fifth trading day immediately preceding the date of the applicable distribution. Any such exercise of discretion shall be evidenced in writing not later than the date of payment. In no event will a Participant have discretion to determine whether his or her Director Aggregate Account Balance will be paid in an immediate lump sum pursuant to this Section 5(d).

6.Death or Disability.

(a)In the event a Participant dies or incurs a disability prior to the distribution of any portion of such Participant’s benefits, the Company shall, within ninety days of the date of such occurrence, commence distribution of benefits to the Participant (or the beneficiary or beneficiaries in the event of death). For purposes of the Plan, a Participant will be considered to have a “disability” if the participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months. Distribution shall be made in accordance with the method of distribution elected by the Participant pursuant to paragraph 5 hereof. In the event a Participant’s death or disability occurs

 

 

after distribution of benefits hereunder has begun, the Company shall continue to make distributions to the Participant (or to the beneficiary or beneficiaries in the event of death) in accordance with the methods of distribution elected by the Participant pursuant to paragraph 5 hereof.

(b)Each Participant shall have the right to designate one or more beneficiaries to receive distributions in the event of the Participant’s death by filing with the Company a beneficiary designation on a form provided. The designated beneficiary or beneficiaries may be changed by a Participant at any time prior to his death by the delivery to the Company of a new beneficiary designation form. If no beneficiary shall have been designated, or if no designated beneficiary shall survive the Participant, distribution pursuant to this provision shall be made to the Participant’s estate.

7.Assignment and Alienation of Benefits. The right of each Participant to any account, benefit, or payment hereunder shall not, to the extent permitted by law, be subject in any manner to attachment or other legal process for the debts of such Participant; and no account, benefit, or payment shall be subject to anticipation, alienation, sale, transfer, assignment, or encumbrance.

8.Amendment or Termination. The Board of Directors of the Company may amend or terminate this Plan at any time and time to time. Any amendment or termination of this Plan shall not affect the rights of a Participant accrued prior thereto without his/her written consent; provided, however, that the Company may make any Plan amendments necessary to conform the Plan with the requirements of Section 409A of the Code.

9.Taxes. The Company shall not be responsible for the tax consequences under federal, state, or local law of any election made by any Participant under the Plan. All payments under the Plan shall be subject to withholding and reporting requirements to the extent required by applicable law. The Company shall have the right to deduct from any payment to be made pursuant to this Plan payment by the Participant of any federal, state, or local taxes required by law to be withheld with respect to any such payment or distribution to the Participant.

10.Unsecured Interest. No Participant or party claiming an interest in amounts deferred by or on behalf of a Participant shall have any interest whatsoever in any specific asset of the Company. To the extent that any party acquires a right to receive payments under the Plan, such right shall be equivalent to that of an unsecured general creditor of the Company.

11.Authorization for Trust. The Company may, but shall not be required to, establish one or more trusts, with such trustee as the Administrators may approve, for the purpose of providing for the payment of deferred amounts. Such trust or trusts may be irrevocable, but the assets thereof shall be subject to the claims of the creditors of the Company. To the extent any amounts deferred under the Plan are actually paid from any such trust, the Company shall have no further obligation with respect thereto, but to the extent not so paid, such deferred amounts shall remain the obligation of, and shall be paid by, the Company. Any trust established under this Plan will not include provisions of the type described in Code Section 409A(b)(l) (relating to non-U.S. trusts) or Code Section 409A(b)(2) (relating to a change in the Company’s financial health). This Plan is intended to be an unfunded nonqualified deferred

 

 

compensation plan which is neither an “employee welfare benefit plan” nor an “employee pension benefit plan” within the meaning of Section 3(1) or (2) of the Employee Retirement Income Security Act of 1974, as amended, and shall be interpreted and administered to the extent possible in a manner consistent with that intent.

12.Term. This Plan was adopted by the Company’s Board of Directors effective as of January 1, 2005, and shall remain in effect until terminated pursuant to paragraph 8.

13.Applicable Law. This Plan shall be interpreted under the laws of the State of Ohio.

14.Code Section 409A. Notwithstanding any provision of this Plan to the contrary, if a Participant is a “specified employee” (within the meaning of Section 409A of the Code and determined pursuant to policies adopted by the Company) on the date of the Participant’s “separation from service” (within the meaning of Treasury Regulation section 1.409A-1(h)) and if any portion of the payments or benefits to be received by the Participant upon his separation from service would constitute a “deferral of compensation” subject to Section 409A of the Code, then to the extent necessary to comply with Section 409A of the Code, amounts that would otherwise be payable to the Participant pursuant to this Plan during the six-month period immediately following the Participant’s separation from service will instead be paid or made available on the first day of the seventh month after the date of the Participant’s separation from service.

 

[Signature page follows.]


 

 

IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its duly authorized officer as of this 13th day of June, 2019.

 

SITE CENTERS CORP.

 

By:

/s/ Aaron M. Kitlowski

Name:

Aaron M. Kitlowski

Title:

Executive Vice President

 

 

Exhibit 10.3

 

 

 

 

 

 

 

 

 

 

 

 

SITE Centers Corp. Elective Deferred Compensation Plan

 

 

Effective May 9, 2019

 

Basic Plan Document

 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

PREAMBLE

 

ARTICLE 1 – GENERAL

 

1.1

Plan

 

1.2

Effective Dates

 

1.3

Amounts Not Subject to Code Section 409A

 

 

 

 

ARTICLE 2 – DEFINITIONS

 

2.1

Account

 

2.2

Administrator

 

2.3

Adoption Agreement

 

2.4

Beneficiary

 

2.5

Board or Board of Directors

 

2.6

Bonus

 

2.7

409A Change in Control

 

2.8

Code

 

2.9

Compensation

 

2.10

Director

 

2.11

Disability

 

2.12

Eligible Employee

 

2.13

Employer

 

2.14

ERISA

 

2.15

Identification Date

 

2.16

Key Employee

 

2.17

Participant

 

2.18

Plan

 

2.19

Plan Sponsor

 

2.20

Plan Year

 

2.21

Related Employer

 

2.22

Retirement

 

2.23

Separation from Service

 

2.24

Unforeseeable Emergency

 

2.25

Valuation Date

 

2.26

Years of Service

 

 

 

 

ARTICLE 3 – PARTICIPATION

 

3.1

Participation

 

3.2

Termination of Participation

 

 

 

 

ARTICLE 4 – PARTICIPANT ELECTIONS

 

4.1

Deferral Agreement

 

4.2

Amount of Deferral

 

i

 

 

4.3

Timing of Election to Defer

 

4.4

Election of Payment Schedule and Form of Payment

 

 

 

 

ARTICLE 5 – EMPLOYER CONTRIBUTIONS

 

5.1

Matching Contributions

 

5.2

Other Contributions

 

 

 

 

ARTICLE 6 – ACCOUNTS AND CREDITS

 

6.1

Establishment of Account

 

6.2

Credits to Account

 

 

 

 

ARTICLE 7 – INVESTMENT OF CONTRIBUTIONS

 

7.1

Investment Options

 

7.2

Adjustment of Accounts

 

 

 

 

ARTICLE 8 – RIGHT TO BENEFITS

 

8.1

Vesting

 

8.2

Death

 

8.3

Disability

 

8.4

Termination for Cause

 

 

 

 

ARTICLE 9 – DISTRIBUTION OF BENEFITS

 

9.1

Amount of Benefits

 

9.2

Method and Timing of Distributions

 

9.3

Unforeseeable Emergency

 

9.4

Payment Election Overrides

 

9.5

Cashouts of Amounts Not Exceeding Stated Limit

 

9.6

Required Delay in Payment to Key Employees

 

9.7

409A Change in Control

 

9.8

Permissible Delays in Payment

 

9.9

Permitted Acceleration of Payment

 

 

 

 

ARTICLE 10 – AMENDMENT AND TERMINATION

 

10.1

Amendment by Plan Sponsor

 

10.2

Plan Termination Following 409A Change in Control or Corporate Dissolution

 

10.3

Other Plan Terminations

 

 

 

 

ARTICLE 11 – THE TRUST

 

11.1

Establishment of Trust

 

11.2

Rabbi Trust

 

11.3

Investment of Trust Funds

 

 

 

 

ii

 

 

ARTICLE 12 – PLAN ADMINISTRATION

 

12.1

Powers and Responsibilities of the Administrator

 

12.2

Claims and Review Procedures

 

12.3

Plan Administrative Costs

 

 

 

 

ARTICLE 13 – MISCELLANEOUS

 

13.1

Unsecured General Creditor of the Employer

 

13.2

Employer’s Liability

 

13.3

Limitation of Rights

 

13.4

Anti-Assignment

 

13.5

Facility of Payment

 

13.6

Notices

 

13.7

Tax Withholding

 

13.8

Indemnification

 

13.9

Successors

 

13.10

Disclaimer

 

13.11

Governing Law

 

 

 

iii

 

 

PREAMBLE

 

 

The Plan is intended to be a “plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees” within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended, or an “excess benefit plan” within the meaning of Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended, or a combination of both.  The Plan is further intended to conform with the requirements of Internal Revenue Code Section 409A and the final regulations issued thereunder and shall be interpreted, implemented and administered in a manner consistent therewith.  

 

 

 

 

 

ARTICLE 1 – GENERAL

 

 

1.1

Plan.  The Plan will be referred to by the name specified in the Adoption Agreement.

 

The Plan document is comprised of this Basic Plan Document and the Adoption Agreement.

 

1.2

Effective Dates.

 

 

(a)

Original Effective Date.  The Original Effective Date is the date as of which the Plan was initially adopted.

 

 

(b)

Amendment Effective Date.  The Amendment Effective Date is the date specified in the Adoption Agreement as of which the Plan is amended and restated.  Except to the extent otherwise provided herein or in the Adoption Agreement, the Plan shall apply to amounts deferred and benefit payments made on or after the Amendment Effective Date.

 

 

(c)

Special Effective Date.  A Special Effective Date may apply to any given provision if so specified in Appendix A of the Adoption Agreement.  A Special Effective Date will control over the Original Effective Date or Amendment Effective Date, whichever is applicable, with respect to such provision of the Plan.

 

1.3

Amounts Not Subject to Code Section 409A

 

Except as otherwise indicated by the Plan Sponsor in Section 1.01 of the Adoption Agreement, amounts deferred before January 1, 2005 that are earned and vested on December 31, 2004 will be separately accounted for and administered in accordance with the terms of the Plan as in effect on December 31, 2004.

 

 

 

 

ARTICLE 2 – DEFINITIONS

 

 

Pronouns used in the Plan are in the masculine gender but include the feminine gender unless the context clearly indicates otherwise.  Wherever used herein, the following terms have the meanings set forth below, unless a different meaning is clearly required by the context:

 

2.1

“Account” means an account established for the purpose of recording amounts credited on behalf of a Participant and any income, expenses, gains, losses or distributions included thereon.  The Account shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant or to the Participant’s Beneficiary pursuant to the Plan.  

 

2.2

“Administrator” means the person or persons designated by the Plan Sponsor in Section 1.05 of the Adoption Agreement to be responsible for the administration of the Plan.  If no Administrator is designated in the Adoption Agreement, the Administrator is the Plan Sponsor.

 

2.3

“Adoption Agreement” means the agreement adopted by the Plan Sponsor that establishes the Plan.

 

2.4

“Beneficiary” means the persons, trusts, estates or other entities entitled under Section 8.2 to receive benefits under the Plan upon the death of a Participant.

 

2.5

“Board” or “Board of Directors” means the Board of Directors of the Plan Sponsor.

 

2.6

“Bonus” means an amount of incentive remuneration payable by the Employer to a Participant.

 

2.7

“409A Change in Control” means the occurrence of an event involving the Plan Sponsor that is described in Section 9.7.

 

2.8

“Code” means the Internal Revenue Code of 1986, as amended.

 

2.9

“Compensation” means, wages as defined in Code section 3401(a) and all other payments of compensation to an Employee by the Employer (in the course of the Employer’s trade or business) for which the Employer is required to furnish the Employee a written statement under Code sections 6041(d) and 6051(a)(3), excluding any items elected by the Employer in Section 3.01(a), reimbursements or other expense allowances, fringe benefits (cash and non-cash), moving expenses, and welfare benefits, but including amounts that are not includable in the gross income of the Employee under a salary reduction agreement by reason of the application of Code section 125, 132(f)(4), 402(e)(3), 402(h) or 403(b).

 

 

Compensation shall be determined without regard to any rules under Code section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code section 3401(a)(2).

 

2.10

“Director” means a non-employee member of the Board who has been designated by the Employer as eligible to participate in the Plan.

 

2.11

“Disability” means a determination by the Administrator that the Participant is either (a) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (b) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or last for a continuous period of not less than twelve months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer.  A Participant will be considered to have incurred a Disability if he is determined to be totally disabled by the Social Security Administration or the Railroad Retirement Board.

 

2.12

“Eligible Employee” means an employee of the Employer who satisfies the requirements in Section 2.01 of the Adoption Agreement.

 

2.13

“Employer” means the Plan Sponsor and any other entity which is authorized by the Plan Sponsor to participate in and, in fact, does adopt the Plan.

2.14

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

2.15

“Identification Date” means the date as of which Key Employees are determined which is specified in Section 1.06 of the Adoption Agreement.

2.16

“Key Employee” means an employee who satisfies the conditions set forth in Section 9.6.

2.17

“Participant” means an Eligible Employee or Director who commences participation in the Plan in accordance with Article 3.

2.18

“Plan” means the unfunded plan of deferred compensation set forth herein, including the Adoption Agreement and any trust agreement, as adopted by the Plan Sponsor and as amended from time to time.

2.19

“Plan Sponsor” means the entity identified in Section 1.03 of the Adoption Agreement or any successor by merger, consolidation or otherwise.

2.20

“Plan Year” means the period identified in Section 1.02 of the Adoption Agreement.

 

 

2.21

“Related Employer” means the Employer and (a) any corporation that is a member of a controlled group of corporations as defined in Code Section 414(b) that includes the Employer and (b) any trade or business that is under common control as defined in Code Section 414(c) that includes the Employer.  For purposes of Section 2.23, “Related Employer” shall be modified consistent with the modifications made to the terms “service recipient” and “employer” under Reg. Sec. 1.409A-1(h)(3).

2.22

“Retirement” has the meaning specified in 6.01(f) of the Adoption Agreement.

2.23

“Separation from Service” means the date that the Participant dies, retires or otherwise has a termination of employment with respect to all entities comprising the Related Employer.  A Separation from Service does not occur if the Participant is on military leave, sick leave or other bona fide leave of absence if the period of leave does not exceed six months or such longer period during which the Participant’s right to re-employment is provided by statute or contract.  If the period of leave exceeds six months and the Participant’s right to re-employment is not provided either by statute or contract, a Separation from Service will be deemed to have occurred on the first day following the six-month period.  If the period of leave is due to any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six months, where the impairment causes the Participant to be unable to perform the duties of his or her position of employment or any substantially similar position of employment, a 29 month period of absence may be substituted for the six month period.

Whether a termination of employment has occurred is based on whether the facts and circumstances indicate that the Related Employer and the Participant reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the Participant would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than 20 percent of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding 36 month period (or the full period of services to the Related Employer if the employee has been providing services to the Related Employer for less than 36 months).  

An independent contractor is considered to have experienced a Separation from Service with the Related Employer upon the expiration of the contract (or, in the case of more than one contract, all contracts) under which services are performed for the Related Employer if the expiration constitutes a good-faith and complete termination of the contractual relationship.

If a Participant provides services as both an employee and an independent contractor of the Related Employer, the Participant must separate from service both as an employee and as an independent contractor to be treated as having incurred a Separation from Service.  If a Participant ceases providing services as

 

 

an independent contractor and begins providing services as an employee, or ceases providing services as an employee and begins providing services as an independent contractor, the Participant will not be considered to have experienced a Separation from Service until the Participant has ceased providing services in both capacities.

If a Participant provides services both as an employee and as a member of the board of directors of a corporate Related Employer (or an analogous position with respect to a noncorporate Related Employer), the services provided as a director are not taken into account in determining whether the Participant has incurred a Separation from Service as an employee for purposes of a nonqualified deferred compensation plan in which the Participant participates as an employee that is not aggregated under Code Section 409A with any plan in which the Participant participates as a director.

If a Participant provides services both as an employee and as a member of the board of directors of a corporate related Employer (or an analogous position with respect to a noncorporate Related Employer), the services provided as an employee are not taken into account in determining whether the Participant has experienced a Separation from Service as a director for purposes of a nonqualified deferred compensation plan in which the Participant participates as a director that is not aggregated under Code Section 409A with any plan in which the Participant participates as an employee.  

All determinations of whether a Separation from Service has occurred will be made in a manner consistent with Code Section 409A and the final regulations thereunder.  

2.24

“Unforeseeable Emergency” means a severe financial hardship of the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, the Participant’s Beneficiary, or the Participant’s dependent (as defined in Code Section 152, without regard to Code section 152(b)(1), (b)(2) and (d)(1)(B); loss of the Participant’s property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.  

2.25

“Valuation Date” means each business day of the Plan Year that the New York Stock Exchange is open.

2.26

“Years of Service” means each one year period for which the Participant receives service credit in accordance with the provisions of Section 7.01(d) of the Adoption Agreement.

 

 

 

 

ARTICLE 3 – PARTICIPATION

 

 

3.1

Participation.  The Participants in the Plan shall be those Directors and employees of the Employer who satisfy the requirements of Section 2.01 of the Adoption Agreement.

3.2

Termination of Participation.  The Administrator may terminate a Participant’s participation in the Plan in a manner consistent with Code Section 409A.  If the Employer terminates a Participant’s participation before the Participant experiences a Separation from Service the Participant’s vested Accounts shall be paid in accordance with the provisions of Article 9.

 

 

 

 

ARTICLE 4 – PARTICIPANT ELECTIONS

 

 

4.1

Deferral Agreement.  If permitted by the Plan Sponsor in accordance with Section 4.01 of the Adoption Agreement, each Eligible Employee and Director may elect to defer his Compensation within the meaning of Section 3.01 of the Adoption Agreement by executing in writing or electronically, a deferral agreement in accordance with rules and procedures established by the Administrator and the provisions of this Article 4.

 

A new deferral agreement must be timely executed for each Plan Year during which the Eligible Employee or Director desires to defer Compensation.  An Eligible Employee or Director who does not timely execute a deferral agreement shall be deemed to have elected zero deferrals of Compensation for such Plan Year.  

 

A deferral agreement may be changed or revoked during the period specified by the Administrator.  Except as provided in Section 9.3 or in Section 4.01(c) of the Adoption Agreement, a deferral agreement becomes irrevocable at the close of the specified period.

 

4.2

Amount of Deferral.  An Eligible Employee or Director may elect to defer Compensation in any amount permitted by Section 4.01(a) of the Adoption Agreement.

 

4.3

Timing of Election to Defer.  Each Eligible Employee or Director who desires to defer Compensation otherwise payable during a Plan Year must execute a deferral agreement within the period preceding the Plan Year specified by the Administrator.  Each Eligible Employee who desires to defer Compensation that is a Bonus must execute a deferral agreement within the period preceding the Plan Year during which the Bonus is earned that is specified by the Administrator, except that if the Bonus can be treated as performance based compensation as described in Code Section 409A(a)(4)(B)(iii), the deferral agreement may be executed within the period specified by the Administrator, which period, in no event, shall end after the date which is six months prior to the end of the period during which the Bonus is earned, provided the Participant has performed services continuously from the later of the beginning of the performance period or the date the performance criteria are established through the date the Participant executed the deferral agreement and provided further that the compensation has not yet become ‘readily ascertainable’ within the meaning of Reg. Sec 1.409A-2(a)(8).  In addition, if the Compensation qualifies as ‘fiscal year compensation’ within the meaning of Reg. Sec. 1.409A-2(a)(6), the deferral agreement may be made not later than the end of the Employer’s taxable year immediately preceding the first taxable year of the Employer in which any services are performed for which such Compensation is payable.

 

 

 

Except as otherwise provided below, an employee who is classified or designated as an Eligible Employee during a Plan Year or a Director who is designated as eligible to participate during a Plan Year may elect to defer Compensation otherwise payable during the remainder of such Plan Year in accordance with the rules of this Section 4.3 by executing a deferral agreement within the thirty (30) day period beginning on the date the employee is classified or designated as an Eligible Employee or the date the Director is designated as eligible, whichever is applicable, if permitted by Section 4.01(b)(ii) of the Adoption Agreement.  If Compensation is based on a specified performance period that begins before the Eligible Employee or Director executes his deferral agreement, the election will be deemed to apply to the portion of such Compensation equal to the total amount of Compensation for the performance period multiplied by the ratio of the number of days remaining in the performance period after the election becomes irrevocable and effective over the total number of days in the performance period.  The rules of this paragraph shall not apply unless the Eligible Employee or Director can be treated as initially eligible in accordance with Reg. Sec. 1.409A-2(a)(7).

 

4.4

Election of Payment Schedule and Form of Payment.

All elections of a payment schedule and a form of payment will be made in accordance with rules and procedures established by the Administrator and the provisions of this Section 4.4.

 

(a)If the Plan Sponsor has elected to permit annual distribution elections in accordance with Section 6.01(h) of the Adoption Agreement the following rules apply.  At the time an Eligible Employee or Director completes a deferral agreement, the Eligible Employee or Director must elect a distribution event (which includes a specified time) and a form of payment for the Compensation subject to the deferral agreement from among the options the Plan Sponsor has made available for this purpose and which are specified in 6.01(b) of the Adoption Agreement.  Prior to the time required by Reg. Sec. 1.409A-2, the Eligible Employee or Director shall elect a distribution event (which includes a specified time) and a form of payment for any Employer contributions that may be credited to the Participant’s Account during the Plan Year. If an Eligible Employee or Director fails to elect a distribution event, he shall be deemed to have elected Separation from Service as the distribution event.  If he fails to elect a form of payment, he shall be deemed to have elected a lump sum form of payment.

 

 

 

(b)If the Plan Sponsor has elected not to permit annual distribution elections in accordance with Section 6.01(h) of the Adoption Agreement the following rules apply.  At the time an Eligible Employee or Director first completes a deferral agreement but in no event later than the time required by Reg. Sec. 1.409A-2, the Eligible Employee or Director must elect a distribution event (which includes a specified time) and a form of payment for amounts credited to his Account from among the options the Plan Sponsor has made available for this purpose and which are specified in Section 6.01(b) of the Adoption Agreement.  If an Eligible Employee or Director fails to elect a distribution event, he shall be deemed to have elected Separation from Service in the distribution event.  If the fails to elect a form of payment, he shall be deemed to have elected a lump sum form of payment.

 

 

 

 

ARTICLE 5 – EMPLOYER CONTRIBUTIONS

 

 

5.1

Matching Contributions.  If elected by the Plan Sponsor in Section 5.01(a) of the Adoption Agreement, the Employer will credit the Participant’s Account with a matching contribution determined in accordance with the formula specified in Section 5.01(a) of the Adoption Agreement provided, however, that the Matching Contributions credited to the Account of a Participant pursuant to Section 5.01(a)(i)(D) or Section 5.01(a)(ii)(D) shall be limited pursuant to (a) and (b) below to the extent the Matching Contributions result from such Participant’s action or inaction under a qualified plan with respect to elective deferrals and other employee pre-tax contributions subject to the contribution restrictions under Code section 401(a)(30) or 402(g) and employee after-tax contributions to a qualified plan:

 

(a)The sum of Matching Contributions made on behalf of a Participant pursuant to Section 5.01(a)(i)(D) or Section 5.01(a)(ii)(D) for any calendar year and any other benefits the Participant accrues pursuant to another plan subject to Code section 409A shall not result in an increase in the amounts deferred under all plans subject to Code section 409A in which the Participant participates in excess of the limit with respect to elective deferrals under Code section 402(g)(1)(A), (B) and (C) in effect for the calendar year in which such action or inaction occurs; and

 

(b)The Matching Contributions made on behalf of a Participant pursuant to Section 5.01(a)(i)(D) or Section 5.01(a)(ii)(D) shall never exceed 100% of the matching amounts that would be provided under the qualified employer plan identified in Section 5.01(a)(i)(D) or 5.01(a)(ii)(D) absent any plan-based restrictions that reflect limits on qualified plan contributions under the Code.  

 

The matching contribution will be treated as allocated to the Participant’s Account at the time specified in Section 5.01(a)(iv) of the Adoption Agreement.

5.2

Other Contributions.  If elected by the Plan Sponsor in Section 5.01(b) of the Adoption Agreement, the Employer will credit the Participant’s Account with a contribution determined in accordance with the formula or method specified in Section 5.01(b) of the Adoption Agreement.  The contribution will be treated as allocated to the Participant’s Account at the time specified in Section 5.01(b)(iii) of the Adoption Agreement.

 

 

 

 

ARTICLE 6 – ACCOUNTS AND CREDITS

 

 

6.1

Establishment of Account.  For accounting and computational purposes only, the Administrator will establish and maintain an Account on behalf of each Participant which will reflect the credits made pursuant to Section 6.2, distributions or withdrawals, along with the earnings, expenses, gains and losses allocated thereto, attributable to the hypothetical investments made with the amounts in the Account as provided in Article 7.  The Administrator will establish and maintain such other records and accounts, as it decides in its discretion to be reasonably required or appropriate to discharge its duties under the Plan.

 

6.2

Credits to Account.  A Participant’s Account will be credited for each Plan Year with the amount of his elective deferrals under Section 4.1 at the time the amount subject to the deferral election would otherwise have been payable to the Participant and the amount of Employer contributions treated as allocated on his behalf under Article 5.  

 

 

 

 

ARTICLE 7 – INVESTMENT OF CONTRIBUTIONS

 

 

7.1

Investment Options.  The amount credited to each Account shall be treated as invested in the investment options designated for this purpose by the Administrator.

 

7.2

Adjustment of Accounts.  The amount credited to each Account shall be adjusted for hypothetical investment earnings, expenses, gains or losses in an amount equal to the earnings, expenses, gains or losses attributable to the investment options selected by the party designated in Section 9.01 of the Adoption Agreement from among the investment options provided in Section 7.1.  If permitted by Section 9.01 of the Adoption Agreement, a Participant (or the Participant’s Beneficiary after the death of the Participant) may, in accordance with rules and procedures established by the Administrator, select the investments from among the options provided in Section 7.1 to be used for the purpose of calculating future hypothetical investment adjustments to the Account or to future credits to the Account under Section 6.2 effective as of the Valuation Date coincident with or next following notice to the Administrator.  Each Account shall be adjusted as of each Valuation Date to reflect: (a) the hypothetical earnings, expenses, gains and losses described above; (b) amounts credited pursuant to Section 6.2; and (c) distributions or withdrawals.  In addition, each Account may be adjusted for its allocable share of the hypothetical costs and expenses associated with the maintenance of the hypothetical investments provided in Section 7.1.

 

 

 

 

ARTICLE 8 – RIGHT TO BENEFITS

 

 

8.1

Vesting.  A Participant, at all times, has a 100% nonforfeitable interest in the amounts credited to his Account attributable to his elective deferrals made in accordance with Section 4.1.

 

A Participant’s right to the amounts credited to his Account attributable to Employer contributions made in accordance with Article 5 shall be determined in accordance with the relevant schedule and provisions in Section 7.01 of the Adoption Agreement. Upon the date a portion of a Participant’s Account is to commence and after application of the provisions of Section 7.01 of the Adoption Agreement, the Participant shall forfeit the nonvested portion of such portion of his Account.

 

8.2

Death.  The Plan Sponsor may elect to accelerate vesting upon the death of the Participant in accordance with Section 7.01(c) of the Adoption Agreement and/or to accelerate distributions upon Death in accordance with Section 6.01(b) or Section 6.01(d) of the Adoption Agreement.  If the Plan Sponsor does not elect to accelerate distributions upon death in accordance with Section 6.01(b) or Section 6.01(d) of the Adoption Agreement, the vested amount credited to the Participant’s Account will be paid in accordance with the provisions of Article 9.

 

A Participant may designate a Beneficiary or Beneficiaries, or change any prior designation of Beneficiary or Beneficiaries in accordance with rules and procedures established by the Administrator.

 

A copy of the death notice or other sufficient documentation must be filed with and approved by the Administrator.  If upon the death of the Participant there is, in the opinion of the Administrator, no designated Beneficiary for part or all of the Participant’s vested Account, such amount will be paid to his estate (such estate shall be deemed to be the Beneficiary for purposes of the Plan) in accordance with the provisions of Article 9.

 

8.3

Disability.  If the Plan Sponsor has elected to accelerate vesting upon the occurrence of a Disability in accordance with Section 7.01(c) of the Adoption Agreement and/or to permit distributions upon Disability in accordance with Section 6.01(b) or Section 6.01(d) of the Adoption Agreement, the determination of whether a Participant has incurred a Disability shall be made by the Administrator in its sole discretion in a manner consistent with the requirements of Code Section 409A.

 

8.4

Termination for Cause. Anything else contained herein to the contrary notwithstanding, a Participant who is terminated by an Employer for cause, as determined by the Employer, shall forfeit all Matching and Other Contributions credited to his Account, as adjusted for income, expense, gain, or loss, regardless of how many Years of Service the Participant has completed (or whether a 409A Change in Control has occurred or a Vesting Change in Control (as defined in Section 11.03) has occurred).  If the Employer discovers that cause existed for terminating the Participant after the Participant’s Separation from Service, but before his entire Account balance has been distributed, the undistributed Matching and Other Contributions credited to his Account, as adjusted for income, expense, gain, or loss, shall be forfeited.

 

 

 

 

ARTICLE 9 – DISTRIBUTION OF BENEFITS

 

 

9.1

Amount of Benefits.  The vested amount credited to a Participant’s Account as determined under Articles 6, 7 and 8 shall determine and constitute the basis for the value of benefits payable to the Participant under the Plan.

 

9.2

Method and Timing of Distributions.  Except as otherwise provided in this Article 9, distributions under the Plan shall be made in accordance with the elections made or deemed made by the Participant under Article 4.  Subject to the provisions of Section 9.6 requiring a six month delay for certain distributions to Key Employees, distributions following a payment event shall commence at the time specified in Section 6.01(a) of the Adoption Agreement.  If permitted by Section 6.01(g) of the Adoption Agreement, a Participant may elect, at least twelve months before a scheduled distribution event, to delay the payment date for a minimum period of sixty months from the originally scheduled date of payment, provided the election does not take effect for at least twelve months from the date on which the election is made.  The distribution election change must be made in accordance with procedures and rules established by the Administrator.  The Participant may, at the same time the date of payment is deferred, change the form of payment but such change in the form of payment may not effect an acceleration of payment in violation of Code Section 409A or the provisions of Reg. Sec. 1.409A-2(b).  For purposes of this Section 9.2, a series of installment payments is always treated as a single payment and not as a series of separate payments.  

 

9.3

Unforeseeable Emergency.  A Participant may request a distribution due to an Unforeseeable Emergency if the Plan Sponsor has elected to permit Unforeseeable Emergency withdrawals under Section 8.01(a) of the Adoption Agreement.  The request must be in writing and must be submitted to the Administrator along with evidence that the circumstances constitute an Unforeseeable Emergency. The Administrator has the discretion to require whatever evidence it deems necessary to determine whether a distribution is warranted, and may require the Participant to certify that the need cannot be met from other sources reasonably available to the Participant.   Whether a Participant has incurred an Unforeseeable Emergency will be determined by the Administrator on the basis of the relevant facts and circumstances in its sole discretion, but, in no event, will an Unforeseeable Emergency be deemed to exist if the hardship can be relieved:  (a) through reimbursement or compensation by insurance or otherwise, (b) by liquidation of the Participant’s assets to the extent such liquidation would not itself cause severe financial hardship, or (c) by cessation of deferrals under the Plan.  A distribution due to an Unforeseeable Emergency must be limited to the amount reasonably necessary to satisfy the emergency need and may include any amounts necessary to pay any federal, state, foreign or local income taxes and penalties reasonably anticipated to result from the distribution.  The distribution will be made in the form of a single lump sum cash payment.  If permitted by Section 8.01(b) of the Adoption Agreement, a

 

 

Participant’s deferral elections for the remainder of the Plan Year will be cancelled upon a withdrawal due to an Unforeseeable Emergency.  If the payment of all or any portion of the Participant’s vested Account is being delayed in accordance with Section 9.6 at the time he experiences an Unforeseeable Emergency, the amount being delayed shall not be subject to the provisions of this Section 9.3 until the expiration of the six month period of delay required by section 9.6.  All determinations made under this Section 9.3 will be made in accordance with Reg. Sec. 1.409A-3(i)(3).

 

9.4

Payment Election Overrides.  If the Plan Sponsor has elected one or more payment election overrides in accordance with Section 6.01(d) of the Adoption Agreement, the following provisions apply.  Upon the occurrence  of the first event selected by the Plan Sponsor, the remaining vested amount credited to the Participant’s Account shall be paid in the form designated to the Participant or his Beneficiary regardless of whether the Participant had made different elections of time and /or form of payment or whether the Participant was receiving installment payments at the time of the event.

 

9.5

Cashouts Of Amounts Not Exceeding Stated Limit.  If the vested amount credited to the Participant’s Account does not exceed the limit established for this purpose by the Plan Sponsor in Section 6.01(e) of the Adoption Agreement at the time his Account becomes payable, the Employer shall distribute such amount to the Participant at the time specified in Section 6.01 of the Adoption Agreement in a single lump sum cash payment regardless of whether the Participant had made different elections of form of payment as to the vested amount credited to his Account.  A Participant’s Account, for purposes of this Section 9.5, shall treat amounts described in Section 1.3 as a separate Account.  For the avoidance of doubt, the limit established in Section 6.01(e) of the Adoption Agreement shall apply independently to pre and post 409A Accounts.

 

9.6

Required Delay in Payment to Key Employees.  Except as otherwise provided in this Section 9.6, a distribution made on account of Separation from Service to a Participant who is a Key Employee as of the date of his Separation from Service shall not be made before the date which is six months after the Separation from Service (or Retirement, if applicable).  If payments to a Key Employee are delayed in accordance with this Section 9.6, the payments to which the Key Employee would otherwise have been entitled during the six month period shall be accumulated and paid in a single lump sum at the time specified in Section 6.01(a) of the Adoption Agreement after the six month period elapses.

 

(a)A Participant is treated as a Key Employee if (i) he is employed by a Related Employer any of whose stock is publicly traded on an established securities market, and (ii) he satisfies the requirements of Code Section 416(i)(1)(A)(i), (ii) or (iii), determined without regard to Code Section 416(i)(5), at any time during the twelve month period ending on the Identification Date.

 

 

 

(b)A Participant who is a Key Employee on an Identification Date shall be treated as a Key Employee for purposes of the six month delay in distributions for the twelve month period beginning on the first day of a month no later than the fourth month following the Identification Date.  The Identification Date and the effective date of the delay in distributions shall be determined in accordance with Section 1.06 of the Adoption Agreement.

 

(c)The Plan Sponsor may elect to apply an alternative method to identify Participants who will be treated as Key Employees for purposes of the six month delay in distributions if the method satisfies each of the following requirements.  The alternative method is reasonably designed to include all Key Employees, is an objectively determinable standard providing no direct or indirect election to any Participant regarding its application, and results in either all Key Employees or no more than 200 Key Employees being identified in the class as of any date.  Use of an alternative method that satisfies the requirements of this Section 9.6(c ) will not be treated as a change in the time and form of payment for purposes of Reg. Sec. 1.409A-2(b).

 

(d)The six month delay does not apply to payments described in Section 9.9(a),(b) or (d) or to payments that occur after the death of the Participant.  If the payment of all or any portion of the Participant’s vested Account is being delayed in accordance with this Section 9.6 at the time he incurs a Disability which would otherwise require a distribution under the terms of the Plan, no amount shall be paid until the expiration of the six month period of delay required by this Section 9.6.

 

9.7

409A Change in Control.  If the Plan Sponsor has elected to permit distributions upon a 409A Change in Control, the following provisions shall apply.  A distribution made upon a 409A Change in Control will be made at the time specified in Section 6.01(a) of the Adoption Agreement in the form elected by the Participant in accordance with the procedures described in Article 4.  Alternatively, if the Plan Sponsor has elected in accordance with Section 11.02 of the Adoption Agreement to require distributions upon a 409A Change in Control, the Participant’s remaining vested Account shall be paid to the Participant or the Participant’s Beneficiary at the time specified in Section 6.01(a) of the Adoption Agreement as a single lump sum payment.  A 409A Change in Control, for purposes of the Plan, will occur upon a change in the ownership of the Plan Sponsor, a change in the effective control of the Plan Sponsor or a change in the ownership of a substantial portion of the assets of the Plan Sponsor, but only if elected by the Plan Sponsor in Section 11.03 of the Adoption Agreement.  The Plan Sponsor, for this purpose, includes any corporation identified in this Section 9.7.  All distributions made in accordance with this Section 9.7 are subject to the provisions of Section 9.6.

 

 

If a Participant continues to make deferrals in accordance with Article 4 after he has received a distribution due to a 409A Change in Control, the residual amount payable to the Participant shall be paid at the time and in the form specified in the elections he makes in accordance with Article 4 or upon his death or Disability as provided in Article 8.

Whether a 409A Change in Control has occurred will be determined by the Administrator in accordance with the rules and definitions set forth in this Section 9.7 and consistent with Reg. Sec. 1.409A-3(i)(5).  A distribution to the Participant will be treated as occurring upon a 409A Change in Control if the Plan Sponsor terminates the Plan in accordance with Section 10.2 and distributes the Participant’s benefits within twelve months of a 409A Change in Control as provided in Section 10.3.

 

(a)

Relevant Corporations.  To constitute a 409A Change in Control for purposes of the Plan, the event must relate to (i) the corporation for whom the Participant is performing services at the time of the 409A Change in Control, (ii) the corporation that is liable for the payment of the Participant’s benefits under the Plan (or all corporations liable if more than one corporation is liable) but only if either the deferred compensation is attributable to the performance of services by the Participant for such corporation (or corporations) or there is a bona fide business purpose for such corporation (or corporations) to be liable for such payment and, in either case, no significant purpose of making such corporation (or corporations) liable for such payment is the avoidance of federal income tax, or (iii) a corporation that is a majority shareholder of a corporation identified in (i) or (ii), or any corporation in a chain of corporations in which each corporation is a majority shareholder of another corporation in the chain, ending in a corporation identified in (i) or (ii).  A majority shareholder is defined as a shareholder owning more than fifty percent (50%) of the total fair market value and voting power of such corporation.

 

 

(b)

Stock Ownership.  Code Section 318(a) applies for purposes of determining stock ownership.  Stock underlying a vested option is considered owned by the individual who owns the vested option (and the stock underlying an unvested option is not considered owned by the individual who holds the unvested option).  If, however, a vested option is exercisable for stock that is not substantially vested (as defined by Treasury Regulation Section 1.83-3(b) and (j)) the stock underlying the option is not treated as owned by the individual who holds the option.

 

 

 

 

(c)

Change in the Ownership of a Corporation.  A change in the ownership of a corporation occurs on the date that any one person or more than one person acting as a group, acquires ownership of stock of the corporation that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of such corporation.  If any one person or more than one person acting as a group is considered to own more than fifty percent (50%) of the total fair market value or total voting power of the stock of a corporation, the acquisition of additional stock by the same person or persons is not considered to cause a change in the ownership of the corporation (or to cause a change in the effective control of the corporation as discussed below in Section 9.7(d)).  An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which the corporation acquires its stock in exchange for property will be treated as an acquisition of stock.  Section 9.7(c) applies only when there is a transfer of stock of a corporation (or issuance of stock of a corporation) and stock in such corporation remains outstanding after the transaction.  For purposes of this Section 9.7(c), persons will not be considered to be acting as a group solely because they purchase or own stock of the same corporation at the same time or as a result of a public offering.  Persons will, however, be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the corporation.  If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only with respect to ownership in that corporation prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

 

 

(d)

Change in the effective control of a corporation.  A change in the effective control of a corporation occurs on the date that either (i) any one person, or more than one person acting as a group, acquires (or has acquired during the twelve month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the corporation possessing thirty percent (30%) or more of the total voting power of the stock of such corporation, or (ii) a majority of members of the corporation’s board of directors is replaced during any twelve month period by directors whose appointment or election is not endorsed by a majority of the members of the corporation’s board of directors prior to the date of the appointment or election, provided that for purposes of this paragraph (ii), the term corporation refers solely to the relevant corporation identified in Section 9.7(a) for which no other corporation is a majority shareholder for purposes of Section 9.7(a).  In the absence of an event described in Section 9.7(d)(i) or (ii), a change in the effective control of a corporation will not have occurred.  A change in effective control may

 

 

 

also occur in any transaction in which either of the two corporations involved in the transaction has a change in the ownership of such corporation as described in Section 9.7(c) or a change in the ownership of a substantial portion of the assets of such corporation as described in Section 9.7(e).  If any one person, or more than one person acting as a group, is considered to effectively control a corporation within the meaning of this Section 9.7(d), the acquisition of additional control of the corporation by the same person or persons is not considered to cause a change in the effective control of the corporation or to cause a change in the ownership of the corporation within the meaning of Section 9.7(c).  For purposes of this Section 9.7(d), persons will or will not be considered to be acting as a group in accordance with rules similar to those set forth in Section 9.7(c) with the following exception.  If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only with respect to the ownership in that corporation prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

 

 

(e)

Change in the ownership of a substantial portion of a corporation’s assets.  A change in the ownership of a substantial portion of a corporation’s assets occurs on the date that any one person, or more than one person acting as a group (as determined in accordance with rules similar to those set forth in Section 9.7(c)), acquires (or has acquired during the twelve month period ending on the date of the most recent acquisition by such person or persons) assets from the corporation that have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of all of the assets of the corporation immediately prior to such acquisition or acquisitions.  For this purpose, gross fair market value means the value of the assets of the corporation or the value of the assets being disposed of determined without regard to any liabilities associated with such assets.  There is no 409A Change in Control event under this Section 9.7(e) when there is a transfer to an entity that is controlled by the shareholders of the transferring corporation immediately after the transfer.  A transfer of assets by a corporation is not treated as a change in ownership of such assets if the assets are transferred to (i) a shareholder of the corporation (immediately before the asset transfer) in exchange for or with respect to its stock, (ii) an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the corporation, (iii) a person, or more than one person acting as a group, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding stock of the corporation, or (iv) an entity, at least fifty (50%) of the total value or voting power of which is owned, directly or indirectly, by a person described in Section 9.7(e)(iii).  For purposes of the foregoing, and except as otherwise provided, a person’s status is determined immediately after the transfer of assets.

 

 

 

9.8

Permissible Delays in Payment.  Distributions may be delayed beyond the date payment would otherwise occur in accordance with the provisions of Articles 8 and 9 in any of the following circumstances as long as the Employer treats all payments to similarly situated Participants on a reasonably consistent basis and otherwise complies with Reg. Sec. 1.409A-2(b)(7).  

 

 

(a)

The Employer may delay payment if it reasonably anticipates that if the payment were made as scheduled its deduction with respect to such payment would not be permitted due to the application of Code Section 162(m).  Any such payment must be made during the Participant’s first taxable year in which the Employer reasonably anticipates, or should reasonably anticipate, that if the payment is made during such year the deduction of such payment will not be barred by the application of Code Section 162(m) or during the period beginning with the Participant’s Separation from Service and ending on the later of the last day of the Employer’s taxable year in which the Participant separates from service or the 15th day of the third month following the Participant’s Separation from Service.  If a scheduled payment to a Participant is delayed in accordance with this Section 9.8(a), all scheduled payments to the Participant that could be delayed in accordance with this Section 9.8(a) will also be delayed.

 

 

(b)

The Employer may also delay payment if it reasonably anticipates that the making of the payment will violate federal securities laws or other applicable laws provided payment is made at the earliest date on which the Employer reasonably anticipates that the making of the payment will not cause such violation.  

 

 

(c)

The Employer reserves the right to amend the Plan to provide for a delay in payment upon such other events and conditions as the Secretary of the Treasury may prescribe in generally applicable guidance published in the Internal Revenue Bulletin.  

 

9.9

Permitted Acceleration of Payment.  The Employer may permit acceleration of the time or schedule of any payment or amount scheduled to be paid pursuant to a payment under the Plan provided such acceleration would be permitted by the provisions of Reg. Sec. 1.409A-3(j)(4), including the following events:

 

(a)

Domestic Relations Order.  A payment may be accelerated if such payment is made to an alternate payee pursuant to and following the receipt and qualification of a domestic relations order as defined in Code Section 414(p).

 

(b)

Compliance with Ethics Agreements and Legal Requirements.  A payment may be accelerated as may be necessary to comply with ethics agreements with the Federal government or as may be reasonably necessary to avoid the violation of Federal, state, local or foreign ethics law or conflicts of laws, in accordance with the requirements of Code Section 409A.

 

 

 

(c)

De Minimis Amounts.  A payment will be accelerated if (i) the amount of the payment is not greater than the applicable dollar amount under Code Section 402(g)(1)(B), (ii) at the time the payment is made the amount constitutes the Participant’s entire interest under the Plan and all other plans that are aggregated with the Plan under Reg. Sec. 1.409A-1(c)(2).

 

(d)

FICA Tax.  A payment may be accelerated to the extent required to pay the Federal Insurance Contributions Act tax imposed under Code Sections 3101, 3121(a) and 3121(v)(2) of the Code with respect to compensation deferred under the Plan (the “FICA Amount”).  Additionally, a payment may be accelerated to pay the income tax on wages imposed under Code Section 3401 of the Code on the FICA Amount and to pay the additional income tax at source on wages attributable to the pyramiding Code Section 3401 wages and taxes.  The total payment under this subsection (d) may not exceed the aggregate of the FICA Amount and the income tax withholding related to the FICA Amount.

 

(e)

Section 409A Additional Tax.  A payment may be accelerated if the Plan fails to meet the requirements of Code Section 409A; provided that such payment may not exceed the amount required to be included in income as a result of the failure to comply with the requirements of Code Section 409A.  

 

(f)

Offset.  A payment may be accelerated in the Employer’s discretion as satisfaction of a debt of the Participant to the Employer, where such debt is incurred in the ordinary course of the service relationship between the Participant and the Employer, the entire amount of the reduction in any of the Employer’s taxable years does not exceed $5,000, and the reduction is made at the same time and in the same amount as the debt otherwise would have been due and collected from the Participant.

 

(g)

Other Events.  A payment may be accelerated in the Administrator’s discretion in connection with such other events and conditions as permitted by Code Section 409A.  

 

 

 

 

ARTICLE 10 – AMENDMENT AND TERMINATION

 

 

10.1

Amendment by Plan Sponsor.  The Plan Sponsor reserves the right to amend the Plan (for itself and each Employer) through action of its Board of Directors.  No amendment can directly or indirectly deprive any current or former Participant or Beneficiary of all or any portion of his Account which had accrued and vested prior to the amendment.

 

10.2

Plan Termination Following 409A Change in Control or Corporate Dissolution.  If so elected by the Plan Sponsor in 11.01 of the Adoption Agreement, the Plan Sponsor reserves the right to terminate the Plan and distribute all amounts credited to all Participant Accounts within the 30 days preceding or the twelve months following a 409A Change in Control as determined in accordance with the rules set forth in Section 9.7. For this purpose, the Plan will be treated as terminated only if all agreements, methods, programs and other arrangements sponsored by the Related Employer immediately after the 409A Change in Control which are treated as a single plan under Reg. Sec. 1.409A-1(c)(2) are also terminated and liquidated with respect to each participant that experienced a 409A Change in Control so that all such participants under the Plan and all similar arrangements are required to receive all amounts deferred under the terminated arrangements within twelve months of the date the Plan Sponsor irrevocably takes all necessary action to terminate the arrangements. In addition, the Plan Sponsor reserves the right to terminate and liquidate the Plan within twelve months of a corporate dissolution taxed under Code Section 331 or with the approval of a bankruptcy court pursuant to 11 U. S. C. Section 503(b)(1)(A) provided that amounts deferred under the Plan are included in the gross incomes of Participants in the latest of (or, if earlier, the taxable year in which the amount is actually or constructively received) (a) the calendar year in which the termination and liquidation occurs, (b) the first calendar year in which the amount is no longer subject to a substantial risk of forfeiture, or (c) the first calendar year in which payment is administratively practicable.

 

10.3

Other Plan Terminations.  The Plan Sponsor retains the discretion to terminate the Plan if (a) all arrangements sponsored by the Plan Sponsor that would be aggregated with any terminated arrangement under  Code Section 409A and Reg. Sec. 1.409A-1(c)(2) are terminated, (b) no payments other than payments that would be payable under the terms of the arrangements if the termination had not occurred are made within twelve months of the termination of the arrangements, (c) all payments are made within twenty-four months of the date the Plan Sponsor takes all necessary action to irrevocably terminate and liquidate the arrangements, (d) the Plan Sponsor does not adopt a new arrangement that would be aggregated with any terminated arrangement under Code Section 409A and the regulations thereunder at any time within the three year period following the date of termination of the arrangement, and (e) the termination does not occur proximate to a downturn in the financial health of the Plan sponsor.  The Plan Sponsor also reserves the right to amend the Plan to provide that termination of the Plan will occur under such conditions and events as may be prescribed by the Secretary of the Treasury in generally applicable guidance published in the Internal Revenue Bulletin.

 

 

 

 

ARTICLE 11 – THE TRUST

 

 

11.1

Establishment of Trust.  The Plan Sponsor may but is not required to establish a trust to hold amounts which the Plan Sponsor may contribute from time to time to correspond to some or all amounts credited to Participants under Section 6.2.  In the event that the Plan Sponsor wishes to establish a trust to provide a source of funds for the payment of Plan benefits, any such trust shall be constructed to constitute an unfunded arrangement that does not affect the status of the Plan as an unfunded plan for purposes of Title I of ERISA and the Code.  If the Plan Sponsor elects to establish a trust in accordance with Section 10.01 of the Adoption Agreement, the provisions of Sections 11.2 and 11.3 shall become operative.

11.2

Rabbi Trust.  Any trust established by the Plan Sponsor shall be between the Plan Sponsor and a trustee pursuant to a separate written agreement under which assets are held, administered and managed, subject to the claims of the Plan Sponsor’s creditors in the event of the Plan Sponsor’s insolvency.  The trust is intended to be treated as a rabbi trust in accordance with existing guidance of the Internal Revenue Service, and the establishment of the trust shall not cause the Participant to realize current income on amounts contributed thereto.  The Plan Sponsor must notify the trustee in the event of a bankruptcy or insolvency.  Notwithstanding any provision of this Plan to the contrary, no amounts shall be transferred to a trust as described in this Article 11 if, pursuant to Section 409A(b)(3)(A) of the Code, such amount would, for purposes of Section 83 of the Code, be treated as property transferred in connection with the performance of services.

11.3

Investment of Trust Funds.  Any amounts contributed to the trust by the Plan Sponsor shall be invested by the trustee in accordance with the provisions of the trust and the instructions of the Administrator.  Trust investments need not reflect the hypothetical investments selected by Participants under Section 7.1 for the purpose of adjusting Accounts and the earnings or investment results of the trust need not affect the hypothetical investment adjustments to Participant Accounts under the Plan.

 

 

 

 

ARTICLE 12 – PLAN ADMINISTRATION

 

12.1

Powers and Responsibilities of the Administrator.  The Administrator has the full power and the full responsibility and discretion to administer the Plan in all of its details, subject, however, to the applicable requirements of ERISA.  The Administrator’s powers and responsibilities include, but are not limited to, the following:

 

(a)

To make and enforce such rules and procedures as it deems necessary or proper for the efficient administration of the Plan;

 

(b)

To interpret the Plan, its interpretation thereof to be final, except as provided in Section 12.2, on all persons claiming benefits under the Plan;

 

(c)

To decide all questions concerning the Plan and the eligibility of any person to participate in the Plan;

 

(d)

To administer the claims and review procedures specified in Section 12.2;

 

(e)

To compute the amount of benefits which will be payable to any Participant, former Participant or Beneficiary in accordance with the provisions of the Plan;

 

(f)

To determine the person or persons to whom such benefits will be paid;

 

(g)

To authorize the payment of benefits;

 

(h)

To comply with the reporting and disclosure requirements of Part 1 of Subtitle B of Title I of ERISA;

 

(i)

To appoint such agents, counsel, accountants, and consultants as may be required to assist in administering the Plan;

 

(j)

By written instrument, to allocate and delegate its responsibilities, including the formation of an Administrative Committee to administer the Plan.


 

 

12.2

Claims and Review Procedures.

 

(a)

Claims Procedure.  

 

If any person believes he is being denied any rights or benefits under the Plan, such person may file a claim in writing with the Administrator.  If any such claim is wholly or partially denied, the Administrator will notify such person of its decision in writing.  Such notification will contain (i) specific reasons for the denial, (ii) specific reference to pertinent Plan provisions, (iii) a description of any additional material or information necessary for such person to perfect such claim and an explanation of why such material or information is necessary, and (iv) a description of the Plan’s review procedures and the time limits applicable to such procedures, including a statement of the person’s right to bring a civil action  following an adverse decision on review.  Such notification will be given within 90 days (45 days in the case of a claim regarding Disability) after the claim is received by the Administrator.  The Administrator may extend the period for providing the notification by 90 days (30 days in the case of a claim regarding Disability) if special circumstances require an extension of time for processing the claim and if written notice of such extension and circumstance is given to such person within the initial 90 day period (45 day period in the case of a claim regarding Disability).  If such notification is not given within such period, the claim will be considered denied as of the last day of such period and such person may request a review of his claim.

 

(b)

Review Procedure.  

 

Within 60 days (180 days in the case of a claim regarding Disability) after the date on which a person receives a written notification of denial of claim (or, if written notification is not provided, within 60 days (180 days in the case of a claim regarding Disability) of the date denial is considered to have occurred), such person (or his duly authorized representative) may (i) file a written request with the Administrator for a review of his denied claim and of pertinent documents and (ii) submit written issues and comments to the Administrator.  The Administrator will notify such person of its decision in writing.  Such notification will be written in a manner calculated to be understood by such person and will contain specific reasons for the decision as well as specific references to pertinent Plan provisions.  The notification will explain that the person is entitled to receive, upon request and free of charge, reasonable access to and copies of all pertinent documents and has the right to bring a civil action following an adverse decision on review.  The decision on review will be made within 60 days (45 days in the case of a claim regarding Disability).  

 

 

The Administrator may extend the period for making the decision on review by 60 days (45 days in the case of a claim regarding Disability) if special circumstances require an extension of time for processing the request such as an election by the Administrator to hold a hearing, and if written notice of such extension and circumstances is given to such person within the initial 60-day period (45 days in the case of a claim regarding Disability).  If the decision on review is not made within such period, the claim will be considered denied.

 

 

(c)

Exhaustion of Claims Procedures and Right to Bring Legal Claim

No action at law or equity shall be brought more than one (1) year after the Administrator’s affirmation of a denial of a claim, or, if earlier, more than four (4) years after the facts or events giving rising to the claimant’s allegation(s) or claim(s) first occurred.

 

12.3

Plan Administrative Costs.  All reasonable costs and expenses (including legal, accounting, and employee communication fees) incurred by the Administrator in administering the Plan shall be paid by the Plan to the extent not paid by the Employer.

 

 

 

 

 

 

ARTICLE 13 – MISCELLANEOUS

 

 

13.1

Unsecured General Creditor of the Employer.  Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of the Employer.  For purposes of the payment of benefits under the Plan, any and all of the Employer’s assets shall be, and shall remain, the general, unpledged, unrestricted assets of the Employer.  Each Employer's obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future.

13.2

Employer’s Liability.  Each Employer’s liability for the payment of benefits under the Plan shall be defined only by the Plan and by the deferral agreements entered into between a Participant and the Employer.  An Employer shall have no obligation or liability to a Participant under the Plan except as provided by the Plan and a deferral agreement or agreements.  An Employer shall have no liability to Participants employed by other Employers.

13.3

Limitation of Rights.  Neither the establishment of the Plan, nor any amendment thereof, nor the creation of any fund or account, nor the payment of any benefits, will be construed as giving to the Participant or any other person any legal or equitable right against the Employer, the Plan or the Administrator, except as provided herein; and in no event will the terms of employment or service of the Participant be modified or in any way affected hereby.

13.4

Anti-Assignment.  Except as may be necessary to fulfill a domestic relations order within the meaning of Code Section 414(p) in accordance with Section 9.9(a), none of the benefits or rights of a Participant or any Beneficiary of a Participant shall be subject to the claim of any creditor.  In particular, to the fullest extent permitted by law, all such benefits and rights shall be free from attachment, garnishment, or any other legal or equitable process available to any creditor of the Participant and his or her Beneficiary.  Neither the Participant nor his or her Beneficiary shall have the right to alienate, anticipate, commute, pledge, encumber, or assign any of the payments which he or she may expect to receive, contingently or otherwise, under the Plan, except the right to designate a Beneficiary to receive death benefits provided hereunder.  Notwithstanding the preceding, the benefit payable from a Participant’s Account may be reduced, at the discretion of the administrator, to satisfy any debt or liability to the Employer but only in compliance with Section 9.9(f).

13.5

Facility of Payment.  If the Administrator determines, on the basis of medical reports or other evidence satisfactory to the Administrator, that the recipient of any benefit payments under the Plan is incapable of handling his affairs by reason of minority, illness, infirmity or other incapacity, the Administrator may direct the Employer to disburse such payments to a person or institution

 

 

designated by a court which has jurisdiction over such recipient or a person or institution otherwise having the legal authority under State law for the care and control of such recipient. The receipt by such person or institution of any such payments therefore, and any such payment to the extent thereof, shall discharge the liability of the Employer, the Plan and the Administrator for the payment of benefits hereunder to such recipient.

13.6

Notices.  Any notice or other communication to the Employer or Administrator in connection with the Plan shall be deemed delivered in writing if addressed to the Plan Sponsor at the address specified in Section 1.03 of the Adoption Agreement and if either actually delivered at said address or, in the case or a letter, 5 business days shall have elapsed after the same shall have been deposited in the United States mails, first-class postage prepaid and registered or certified.

13.7

Tax Withholding. If the Employer concludes that tax is owing with respect to any deferral or payment hereunder, the Employer shall withhold such amounts from any payments due the Participant or from amounts deferred, as permitted by law, or otherwise make appropriate arrangements with the Participant or his Beneficiary for satisfaction of such obligation.  Tax, for purposes of this Section 13.7 means any federal, state, local or any other governmental income tax, employment or payroll tax, excise tax, or any other tax or assessment owing with respect to amounts deferred, any earnings thereon, and any payments made to Participants under the Plan.

13.8

Indemnification.  (a) Each Indemnitee (as defined in Section 13.8(e)) shall be indemnified and held harmless by the Employer for all actions taken by him and for all failures to take action (regardless of the date of any such action or failure to take action), to the fullest extent permitted by the law of the jurisdiction in which the Employer is incorporated, against all expense, liability, and loss (including, without limitation, attorneys' fees, judgments, fines, taxes, penalties, and amounts paid or to be paid in settlement) reasonably incurred or suffered by the Indemnitee in connection with any Proceeding (as defined in Subsection (e)).  No indemnification pursuant to this Section shall be made, however, in any case where (1) the act or failure to act giving rise to the claim for indemnification is determined by a court to have constituted willful misconduct or recklessness or (2) there is a settlement to which the Employer does not consent.

(b)   The right to indemnification provided in this Section shall include the right to have the expenses incurred by the Indemnitee in defending any Proceeding paid by the Employer in advance of the final disposition of the Proceeding, to the fullest extent permitted by the law of the jurisdiction in which the Employer is incorporated; provided that, if such law requires, the payment of such expenses incurred by the Indemnitee in advance of the final disposition of a Proceeding shall be made only on delivery to the Employer of an undertaking, by or on behalf of the Indemnitee, to repay all amounts so advanced without interest if it shall ultimately be determined that the Indemnitee is not entitled to be indemnified under this Section or otherwise.

 

 

(c)  Indemnification pursuant to this Section shall continue as to an Indemnitee who has ceased to be such and shall inure to the benefit of his heirs, executors, and administrators.  The Employer agrees that the undertakings made in this Section shall be binding on its successors or assigns and shall survive the termination, amendment or restatement of the Plan.

(d)  The foregoing right to indemnification shall be in addition to such other rights as the Indemnitee may enjoy as a matter of law or by reason of insurance coverage of any kind and is in addition to and not in lieu of any rights to indemnification to which the Indemnitee may be entitled pursuant to the by-laws of the Employer.

(e)  For the purposes of this Section, the following definitions shall apply:

(1)  "Indemnitee" shall mean each person serving as an Administrator (or any other person who is an employee, director, or officer of the Employer) who was or is a party to, or is threatened to be made a party to, or is otherwise involved in, any Proceeding, by reason of the fact that he is or was performing administrative functions under the Plan.

(2)  "Proceeding" shall mean any threatened, pending, or completed action, suit, or proceeding (including, without limitation, an action, suit, or proceeding by or in the right of the Employer), whether civil, criminal, administrative, investigative, or through arbitration.

13.9

Successors.  The provisions of the Plan shall bind and inure to the benefit of the Plan Sponsor, the Employer and their successors and assigns and the Participant and the Participant’s designated Beneficiaries.

13.10

Disclaimer. It is the Plan Sponsor’s intention that the Plan comply with the requirements of Code Section 409A.  Neither the Plan Sponsor nor the Employer shall have any liability to any Participant should any provision of the Plan fail to satisfy the requirements of Code Section 409A.

13.11

Governing Law.  The Plan will be construed, administered and enforced according to the laws of the State specified by the Plan Sponsor in Section 12.01 of the Adoption Agreement.

 

 

 

Exhibit 10.4

 

ADOPTION AGREEMENT

 

 

1.01

PREAMBLE

 

By the execution of this Adoption Agreement the Plan Sponsor hereby [complete (a) or (b)]

 

 

(a)   ☐

adopts a new plan as of                [month, day, year]

 

 

(b)   ☒

amends and restates its existing plan as of 5/9/2019          [month, day, year] which is the Amendment Restatement Date.  Except as otherwise provided in Appendix A, all amounts deferred under the Plan prior to the Amendment Restatement Date shall be governed by the terms of the Plan as in effect on the day before the Amendment Restatement Date.

 

Original Effective Date:  10/15/1994               [month, day, year]

 

Pre-409A Grandfathering:   ☒  Yes   ☐  No

 

 

1.02

PLAN

 

Plan Name: SITE Centers Corp. Elective Deferred Compensation Plan (the “Plan”)          

 

Plan Year:  Calendar year                                                    

 

The Plan document is comprised of this Adoption Agreement and the Basic Plan Document.

 

 

1.03

Plan Sponsor

 

Name:

SITE Centers Corp.

Address:

3300 Enterprise Parkway, Beachwood, Ohio 44122

Phone # :

877-225-5337

EIN:

34-1723097

Fiscal Yr:

Calendar year

 

Is stock of the Plan Sponsor, any Employer or any Related Employer publicly traded on an established securities market?

 

☒ Yes

☐ No

 


- 1 -

DRAFT

 

 

1.04

Employer

 

The following entities have been authorized by the Plan Sponsor to participate in and have adopted the Plan (insert “Not Applicable” if none have been authorized):

 

Entity

Publicly Traded on Est. Securities Market

 

 

 

 

 

 

 

 

 

 

 

Yes

 

No

 

 

 

 

Not applicable

 

☐

 

☐

 

 

 

 

 

 

☐

 

☐

 

 

 

 

 

 

☐

 

☐

 

 

 

 

 

 

☐

 

☐

 

 

 

 

 

 

☐

 

☐

 

 

 

 

 

 

☐

 

☐

 

 

 

 

 

1.05

Administrator

 

The Plan Sponsor has designated the following party or parties to be responsible for the administration of the Plan:

 

Name:

SITE Centers Corp.

Address:

3300 Enterprise Parkway, Beachwood, Ohio 44122

 

 

Note:

The Administrator is the person or persons designated by the Plan Sponsor to be responsible for the administration of the Plan.  Neither Fidelity Employer Services Company nor any other Fidelity affiliate can be the Administrator.

 

1.06

key employee determination DATEs

 

The Identification Date for purposes of determining Key Employees will be designated in accordance with the policy adopted by the Plan Sponsor for such purpose.

 

In the absence of a designation as described in the preceding sentence, the Identification Date is December 31.

 

The effective date for purposes of applying the six month delay in distributions to Key Employees will be designated in accordance with the policy adopted by the Plan Sponsor for such purpose.

 

In the absence of a designation described in the preceding sentence, the effective date is the first day of the fourth month following the Identification Date.

 


- 2 -

DRAFT

 

 

2.01

Participation

 

 

(a)   ☒

Employees [complete (i), (ii) or (iii)]

 

 

(i)   ☐

Eligible Employees are selected by the Employer.

 

 

(ii)  ☒

Eligible Employees are those employees of the Employer who satisfy the following criteria:

 

Executive Officers and members of the management team of

SITE Centers Corp. who are selected to participate in the plan by the

Administrator. Moreover, the Administrator may from time to time

establish criteria for eligibility, and employees meeting those criteria

shall be eligible to participate.

 

 

(iii)  ☐

Employees are not eligible to participate.

 

 

(b)   ☒

Directors [complete (i), (ii) or (iii)]

 

 

(i)    ☐

All Directors are eligible to participate.

 

 

(ii)   ☐

Only Directors selected by the Employer are eligible to participate.

 

 

(iii)  ☒

Directors are not eligible to participate.

 


- 3 -

DRAFT

 

 

3.01Compensation

 

For purposes of determining Participant contributions under Article 4 and Employer contributions under Article 5, Compensation shall be defined in the following manner [complete (a) or (b) and select (c) and/or (d), if applicable]:

 

 

(a)

☒

Compensation is defined as:

 

 

 

in Section 2.9, but

 

 

 

excluding all compensation other than base salary and

 

 

 

amounts provided pursuant to the SITE Centers Cash

 

 

 

Incentive Plan or other cash based incentive payments as

 

 

 

determined by the administrator prior to the start of the

 

 

 

calendar year and prior to the deadline for the deferral

 

 

 

election to which such cash based incentives relate.

 

(b)

☐

Compensation as defined in      [insert name of qualified plan] without regard to the limitation in Section 401(a)(17) of the Code for such Plan Year.

 

(c)

☐

Director Compensation is defined as:

 

 

 

    

 

 

 

    

 

 

 

    

 

 

 

 

 

(d)

☐

Compensation shall, for all Plan purposes, be limited to $     .

 

(e)

☐

Not Applicable.

 

3.02

BonusES

 

Compensation, as defined in Section 3.01 of the Adoption Agreement, includes the following type of bonuses that will be the subject of a separate deferral election:

 

Type

Will be treated as Performance

Based Compensation

 

 

 

 

Yes

 

No

 

SITE Centers Cash Incentive Plan or other cash based incentive payments as determined by the administrator prior to the start of the calendar year and prior to the deadline for the deferral election to which such cash based incentives relate

 

☐

 

☒

 

    

 

☐

 

☐

 

    

 

☐

 

☐

 

    

 

☐

 

☐

 

    

 

☐

 

☐

 

 

 

 

 

 

 

☐

Not Applicable.

 

 

 

 

 

 


- 4 -

DRAFT

 

 

4.01Participant Contributions

 

If Participant contributions are permitted, complete (a), (b), and (c).  Otherwise
complete (d).

 

 

(a)

Amount of Deferrals

 

A Participant may elect within the period specified in Section 4.01(b) of the Adoption Agreement to defer the following amounts of remuneration.  For each type of remuneration listed, complete “dollar amount” and / or “percentage amount”.

 

 

(i)

Compensation Other than Bonuses [do not complete if you complete (iii)]

 

 

Type of Remuneration

Dollar Amount

% Amount

Increment

 

Min

Max

Min

Max

 

(a)      Base Salary

1

5,000,000

 

 

$100

 

(b)      

 

 

 

 

 

 

(c)      

 

 

 

 

 

 

Note:  The increment is required to determine the permissible deferral amounts.  For example, a minimum of 0% and maximum of 20% with a 5% increment would allow an individual to defer 0%, 5%, 10%, 15% or 20%.

 

 

(ii)

Bonuses [do not complete if you complete (iii)]

 

 

Type of Bonus

Dollar Amount

% Amount

Increment

 

Min

Max

Min

Max

 

(a)      SITE Centers Cash Incentive Plan or other cash based incentive payments

1

5,000,000

1

100

1% or

$100

 

(b)      

 

 

 

 

 

 

(c)      

 

 

 

 

 

 

 

(iii)

Compensation [do not complete if you completed (i) and (ii)]

 

 

Dollar Amount

% Amount

Increment

 

 

Min

Max

Min

Max

 

 

 

 

 

 

 

 

 

 

(iv)

Director Compensation

 

Type of

Compensation

Dollar Amount

% Amount

Increment

Min

Max

Min

Max

Annual Retainer

 

 

 

 

 

Meeting Fees

 

 

 

 

 

Other:

 

 

 

 

 

Other:

 

 

 

 

 

 

- 5 -

DRAFT

 

 

 

(b)

Election Period

 

 

(i)

Performance Based Compensation

 

A special election period

 

☐

Does

 

☒

Does Not

 

apply to each eligible type of performance based compensation referenced in Section 3.02 of the Adoption Agreement.

 

The special election period, if applicable, will be determined by the Employer.

 

 

(ii)

Newly Eligible Participants

 

An employee who is classified or designated as an Eligible Employee during a Plan Year

 

☒

May

 

☐

May Not

 

elect to defer Compensation earned during the remainder of the Plan Year by completing a deferral agreement within the 30 day period beginning on the date he is eligible to participate in the Plan in accordance with Section 4.3.

 

 

(c)

Revocation of Deferral Agreement

 

A Participant’s deferral agreement

 

☐

Will

☒

Will Not

 

be cancelled for the remainder of any Plan Year during which he receives a hardship distribution of elective deferrals from a qualified cash or deferred arrangement maintained by the Employer to the extent necessary to satisfy the requirements of Reg. Sec. 1.401(k)-1(d)(3).  If cancellation occurs, the Participant may resume participation in accordance with Article 4 of the Plan.

 

 

(d)

No Participant Contributions

 

☐

Participant contributions are not permitted under the Plan.

 


- 6 -

DRAFT

 

 

5.01

Employer Contributions

 

If Employer contributions are permitted, complete (a) and/or (b).  Otherwise
complete (c).

 

 

(a)

Matching Contributions

 

 

(i)

Amount for Plan Years Prior to January 1, 2020

 

For each Plan Year prior to January 1, 2020, the Employer shall make a Matching Contribution on behalf of each Participant who defers Compensation for the Plan Year and satisfies the requirements of Section 5.01(a)(iii) of the Adoption Agreement equal to [complete the ones that are applicable]:

 

 

(A)      ☐

     [insert percentage] of the Compensation the Participant has elected to defer for the Plan Year

 

 

(B)      ☐

An amount determined by the Employer in its sole discretion

 

 

(C)      ☐

Matching Contributions for each Participant shall be limited to $     and/or      % of Compensation.

 

 

(D)      ☒

Other: For each Participant who has made elective contributions (as defined in 26 CFR section 1.401(k)-6 (“QP Deferrals”)) of the maximum permitted under Code section 402(g), or the maximum permitted under the terms of the SITE Centers Corp. 401(k) Plan and Trust (the “QP”), to the QP, the Employer shall make a Matching Contribution in an amount equal to (1) minus (2) below:

 

 

(1)

The matching contributions (as defined in 26 CFR section 1.401(m)-1(a)(2) (“QP Match”)) that the Participant would have received under the QP on the sum of the Deferral Contributions and the Participant’s QP Deferrals, determined as though –

 

 

•

No limits otherwise imposed by the tax law applied to such QP Match; and

 

•

The Participant’s Deferrals Contributions had been made to the QP.

 

 

(2)

The QP Match actually made to such Participant under the QP for the applicable plan year.

 

Provided, however, that the Matching Contributions made on behalf on any Participant pursuant to this Section 5.01(a)(i)(D) shall be limited as provided in Section 5.1 hereof.

 

(E)      ☐      Not Applicable [Proceed to Section 5.01(b)]

 

 


- 7 -

DRAFT

 

 

 

(ii)

Amount for Plan Years On and After January 1, 2020

 

For each Plan Year beginning on and after January 1, 2020, the Employer shall make a Matching Contribution on behalf of each Participant who defers Compensation for the Plan Year and satisfies the requirements of Section 5.01(a)(iii) of the Adoption Agreement equal to [complete the ones that are applicable]:

 

 

(A)      ☐

     [insert percentage] of the Compensation the Participant has elected to defer for the Plan Year

 

 

(B)      ☐

An amount determined by the Employer in its sole discretion

 

 

(C)      ☐

Matching Contributions for each Participant shall be limited to $     and/or      % of Compensation.

 

 

(D)      ☒

Other: For each Participant who has made contributions pursuant to Section 4.01 hereof (“Deferral Contributions”), the Employer shall make a Matching Contribution in an amount equal to (1) minus (2) below:

 

 

(1)

The matching contributions (as defined in 26 CFR section 1.401(m)-1(a)(2) (“QP Match”)) that the Participant would have received under the SITE Centers Corp. 401(k) Plan and Trust (the “QP”) on the sum of (i) the Deferral Contributions and (ii) the maximum elective contributions (as defined in 26 CFR section 1.401(i)-(6)) permitted under Code section 402(g) or, if lesser, permitted under the terms of the QP that the Participant could have made for the Plan Year under the QP (the “Deemed QP Contributions”), determined as though –

 

 

•

No limits otherwise imposed by the tax law applied to such QP Match; and

 

•

The Participant’s Deferrals Contributions had been made to the QP.

 

 

(2)

The QP Match that would have been made to such Participant’s account under the QP if the Participant had made the Deemed QP Contributions to the QP for the Plan Year.

 

Provided, however, that the Matching Contributions made on behalf on any Participant pursuant to this Section 5.01(a)(ii)(D) shall be limited as provided in Section 5.1 hereof, to the extent applicable.

 

(E)      ☐      Not Applicable [Proceed to Section 5.01(b)]

 

- 8 -

DRAFT

 

 

 

(iii)

Eligibility for Matching Contribution

 

A Participant who defers Compensation for the Plan Year shall receive an allocation of Matching Contributions determined in accordance with Section 5.01(a)(i) provided he satisfies the following requirements [complete the ones that are applicable]:

 

(A)   ☒

Describe requirements:

 

Employed on November 30 of the applicable plan year

 

 

(B)   ☐

Is selected by the Employer in its sole discretion to receive an allocation of Matching Contributions

 

 

(C)   ☐

No requirements

 

 

(iv)

Time of Allocation

 

Matching Contributions, if made, shall be treated as allocated [select one]:

 

(A)   ☐

As of the last day of the Plan Year

 

 

(B)   ☒

At such times as the Employer shall determine in its sole discretion

 

 

(C)   ☐

At the time the Compensation on account of which the Matching Contribution is being made would otherwise have been paid to the Participant

 

 

(D)   ☐

Other:

 

 

 

 

 

 

 

 

(b)

Other Contributions

 

 

(i)

Amount

 

The Employer shall make a contribution on behalf of each Participant who satisfies the requirements of Section 5.01(b)(ii) equal to [complete the ones that are applicable]:

 

(A)   ☐

An amount equal to      [insert number] % of the Participant’s Compensation

 

 

(B)   ☒

An amount determined by the Employer in its sole discretion

 

 

(C)   ☐

Contributions for each Participant shall be limited to $            

 

 

(D)   ☐

Other:

 

 

 

 

 

 

 

 

 

 

 

 

(E)   ☐

Not Applicable [Proceed to Section 6.01]


- 9 -

DRAFT

 

 

 

(ii)

Eligibility for Other Contributions

 

A Participant shall receive an allocation of other Employer contributions determined in accordance with Section 5.01(b)(i) for the Plan Year if he satisfies the following requirements [complete the one that is applicable]:

 

(A)   ☐

Describe requirements:

 

    

 

 

    

 

 

 

(B)   ☒

Is selected by the Employer in its sole discretion to receive an allocation of other Employer contributions

 

 

(C)   ☐

No requirements

 

 

(iii)

Time of Allocation

 

Employer contributions, if made, shall be treated as allocated [select one]:

 

(A)   ☐

As of the last day of the Plan Year

 

 

(B)   ☒

At such time or times as the Employer shall determine in its sole discretion

 

 

(C)   ☐

Other:

 

    

 

 

    

 

 

    

 

 

 

(c)

No Employer Contributions

 

 

☐

Employer contributions are not permitted under the Plan.

 


- 10 -

DRAFT

 

 

6.01

DIStributions

 

The timing and form of payment of distributions made from the Participant’s vested Account shall be made in accordance with the elections made in this Section 6.01 of the Adoption Agreement except when Section 9.6 of the Plan requires a six month delay for certain distributions to Key Employees of publicly traded companies.  

 

 

(a)

Timing of Distributions

 

 

(i)

All distributions shall commence in accordance with the following [choose one]:

 

 

(A)    ☐

As soon as administratively feasible following the distribution event but in no event later than the time prescribed by Treas. Reg. Sec. 1.409A-3(d).

 

(B)    ☒

Monthly on specified day 15th [insert day]

 

(C)    ☐

Annually on specified month and day      [insert month and day]

 

(D)    ☐

Calendar quarter on specified month and day [     month of quarter (insert 1,2 or 3);    __  day (insert day)]

 

(ii)

The timing of distributions as determined in Section 6.01(a)(i) shall be modified by the adoption of:

 

 

(A)    ☐

Event Delay – Distribution events other than those based on Specified Date or Specified Age will be treated as not having occurred for       months [insert number of months].

 

 

(B)    ☐

Hold Until Next Year – Distribution events other than those based on Specified Date or Specified Age will be treated as not having occurred for twelve months from the date of the event if payment pursuant to Section 6.01(a)(i) will thereby occur in the next calendar year or on the first payment date in the next calendar year in all other cases.

 

 

(C)    ☐

Immediate Processing – The timing method selected by the Plan Sponsor under Section 6.01(a)(i) shall be overridden for the following distribution events [insert events]:

 

 

                                              .

 

                                              .

 

 

 

 

(D)    ☒

Not applicable.

 

 


- 11 -

DRAFT

 

 

 

(b)

Distribution Events

 

Participants may elect the following payment events and the associated form or forms of payment. If multiple events are selected, the earliest to occur will trigger payment. For installments, insert the range of available periods (e.g., 5-15) or insert the periods available (e.g., 5,7,9).

 

 

 

Lump Sum

Installments

 

 

 

 

(i)    ☐

Specified Date

    

     years

 

 

(ii)   ☒

Specified Age

✓

1-10 years

 

 

(iii)  ☐

Separation from Service

    

     years

 

 

(iv)  ☒

Earlier of Separation from Service plus 6 months or Age

✓

1-10 years

 

 

(v)   ☒

Separation from Service plus 6 months

✓

1-10 years

 

 

(vi)  ☐

Retirement

    

     years

 

 

(vii) ☐

Retirement plus 6 months

    

     years

 

 

(viii) ☐

Retirement plus      months [not to exceed      months]

    

     years

 

 

(ix)  ☐

Disability

    

     years

 

 

(x)   ☐

Death

    

     years

 

 

(xi)  ☐

409A Change in Control

    

     years

 

If a Participant elects a Specified Date or a Specified Age as a payment event, the Specified Date or the date on which the Specified Age will occur can be no earlier than January 1 of the third calendar year following the calendar year to which the Compensation being deferred relates.  For example, if a Participant is deferring Compensation that will relate to services performed in 2015, that Participant cannot elect a Specified Date or a Specified Age that will occur prior to January 1, 2018.

 

Installments may be paid [select each that applies]

 

☒

Monthly

☐

Quarterly

☒

Annually

 

 

(c)

Specified Date and Specified Age elections may not extend beyond age

 

70


- 12 -

DRAFT

 

 

 

(d)

Payment Election Override

 

Payment of the remaining vested balance of the Participant’s Account will automatically occur at the time specified in Section 6.01(a) of the Adoption Agreement in the form indicated upon the earliest to occur of the following events [check each event that applies and for each event include only a single form of payment]:

 

 

EVENTS

FORM OF PAYMENT

☐

Separation from Service

 

Lump sum

 

Installments

☐

Separation from

Service before Retirement

 

Lump sum

 

Installments

☒

Death

✓

Lump sum

 

Installments

☒

Disability

✓

Lump sum

 

Installments

☐

Not Applicable

 

 

 

 

 

 

(e)

Involuntary Cashouts

 

☒

If the Participant’s vested Account at the time his Account becomes payable does not exceed $50,000 distribution of the vested Account shall automatically be made in the form of a single lump sum at the time the first payment of such Account would have otherwise been paid in accordance with Section 9.5 of the Plan.

 

☒

If the Participant’s total balance in his Account, in addition to the Participant’s balances and accounts under any other agreements, methods, programs or other arrangements with respect to which deferrals of compensation are treated as having been deferred under a single nonqualified deferred compensation plan with the Plan under Treasury Regulation Section 1.409A-1(c)(2) (the “Aggregate Account Balance”), is less than the applicable dollar amount under Section 402(g)(1)(B) of the Internal Revenue Code, then SITE Centers Corp. may, in the discretion of the Compensation Committee of the Board of Directors of SITE Centers Corp. or any Executive Vice President acting on behalf of SITE Centers Corp., pay the Participant’s entire Aggregate Account Balance in an immediate lump sum in accordance with Section 409A of the Internal Revenue Code.  Any such exercise of discretion shall be evidenced in writing not later than the date of payment.  In no event will a Participant have discretion to determine whether his or her Aggregate Account Balance will be paid in an immediate lump sum pursuant to this Section 6.01(e).

 

☐

There are no involuntary cashouts.

 


- 13 -

DRAFT

 

 

 

 

(f)

Retirement

 

☐

Retirement shall be defined as a Separation from Service that occurs on or after the Participant [insert description of requirements]:

 

 

 

 

 

 

 

 

☒

No special definition of Retirement applies.

 

 

(g)

Distribution Election Change

 

A Participant

 

☒

Shall

☐

Shall Not

 

be permitted to modify a scheduled distribution date and/or payment option in accordance with Section 9.2 of the Plan, however, a Participant may not make such an election change if it would result in a distribution commencing after the date the Participant attains age 70.

 

A Participant shall generally be permitted to elect such modification an unlimited number of times.

 

Administratively, allowable distribution events will be modified to reflect all options necessary to fulfill the distribution change election provision.

 

 

(h)

Frequency of Elections

 

The Plan Sponsor

 

☒

Has

☐

Has Not

 

Elected to permit annual elections of a time and form of payment for amounts deferred under the Plan.  If a single election of a time and/or form of payment is required, the Participant will make such election at the time he first completes a deferral agreement which, in all cases, will be no later than the time required by Reg. Sec. 1.409A-2.

 


- 14 -

DRAFT

 

 

7.01

VESTING

 

 

(a)

Matching Contributions

 

The Participant’s vested interest in the amount credited to his Account attributable to Matching Contributions shall be based on the following schedule:

 

☒

Years of Service

Vesting %

 

 

0

0                 (insert ‘100’ if there is immediate vesting)

 

1

20

 

 

2

40

 

 

3

60

 

 

4

80

 

 

5

100

 

 

 

 

☐

Other:

 

 

 

 

 

 

 

 

☐

Class year vesting applies.

 

 

 

 

☐

Not applicable.

 

 

 

(b)

Other Employer Contributions

 

The Participant’s vested interest in the amount credited to his Account attributable to Employer contributions other than Matching Contributions shall be based on the following schedule:

 

☒

Years of Service

Vesting %

 

 

0

0

(insert ‘100’ if there is immediate vesting)

 

1

33

 

 

2

67

 

 

3

100

 

 

4

    

 

 

5

    

 

 

6

    

 

 

7

    

 

 

8

    

 

 

9

    

 

 

 

 

☐

Other:

 

 

 

 

 

 

 

 

☐

Class year vesting applies.

 

 

 

 

☐

Not applicable.

 

 

 


- 15 -

DRAFT

 

 

 

(c)

Acceleration of Vesting

 

A Participant’s vested interest in his Account will automatically be 100% upon the occurrence of the following events [while the Participant is an employee of the Employer]: [select the ones that are applicable]:

 

(i)    ☒

Death

 

 

(ii)   ☒

Disability

 

 

(iii)   ☒

Vesting Change in Control (as defined in Section 11.03)

 

 

(iv)  ☐

Eligibility for Retirement

 

 

(v)   ☐

Other:                                                             

 

 

                                                            

 

 

 

(vi)  ☐

Not applicable.

 

 

(d)

Years of Service

 

 

(i)

A Participant’s Years of Service shall include all service performed for the Employer and

 

☐

Shall

☒

Shall Not

 

include service performed for the Related Employer.

 

 

(ii)

Years of Service shall also include service performed for the following entities:

 

    

    

    

    

    

 

 

(iii)

Years of Service shall be determined in accordance with (select one)

 

(A)  ☒

The elapsed time method in Treas. Reg. Sec.  1.410(a)-7

 

 

(B)  ☐

The general method in DOL Reg. Sec.  2530.200b-1 through b-4

 

 

(C)  ☐

The Participant’s Years of Service credited under [insert name of plan]                                                    

 

 

 

(D)  ☐

Other:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(iv)

☐ Not applicable.

- 16 -

DRAFT

 

 

 

8.01

UNFORESEEABLE EMERGENCY

 

(a)A withdrawal due to an Unforeseeable Emergency as defined in Section 2.24:

 

☒

Will

☐

Will Not [if Unforeseeable Emergency withdrawals are not permitted, proceed to Section 9.01]

 

be allowed.

 

 

(b)

Upon a withdrawal due to an Unforeseeable Emergency, a Participant’s deferral election for the remainder of the Plan Year:

 

☒

Will

☐

Will Not

 

be cancelled.  If cancellation occurs, the Participant may resume participation in accordance with Article 4 of the Plan.

 


- 17 -

DRAFT

 

 

9.01

INVESTMENT DECISIONS

 

Investment decisions regarding the hypothetical amounts credited to a Participant’s Account shall be made by [select one]:

 

(a)    ☒

The Participant or his Beneficiary

 

 

(b)    ☐

The Employer

 


- 18 -

DRAFT

 

 

10.01TRUST

 

The Employer [select one]:

 

☒

Does

☐

Does Not

 

intend to establish a rabbi trust as provided in Article 11 of the Plan.


- 19 -

DRAFT

 

 

11.01

TERMINATION UPON 409A CHANGE IN CONTROL

 

The Plan Sponsor

 

☒

Reserves

☐

Does Not Reserve

 

the right to terminate the Plan and distribute all vested amounts credited to Participant Accounts upon a 409A Change in Control as described in Section 10.2.

 

11.02

AUTOMATIC  DISTRIBUTION UPON 409A CHANGE IN CONTROL

 

Distribution of the remaining vested balance of each Participant’s Account

 

☐

Shall

☒

Shall Not

 

automatically be paid as a lump sum payment upon the occurrence of a 409A Change in Control as provided in Section 9.7.

 

11.03

VESTING CHANGE IN CONTROL AND 409A CHANGE IN CONTROL

 

 

(a)

A “Vesting Change in Control” for purposes of accelerated vesting under Section 7.01(c) means the occurrence of any of the following events:

 

(i) consummation of a consolidation or merger in which SITE Centers Corp. is not the surviving corporation, the sale of substantially all of the assets of SITE Centers Corp., or the liquidation or dissolution of SITE Centers Corp.;

 

(ii) any person or other entity (other than SITE Centers Corp. or a Subsidiary or any SITE Centers Corp. employee benefit plan (including any trustee of any such plan acting in its capacity as trustee)) purchases any Common Shares (or securities convertible into Common Shares) pursuant to a tender or exchange offer without the prior consent of the Board of Directors of SITE Centers Corp., or becomes the beneficial owner of securities of SITE Centers Corp. representing 30% or more of the voting power of SITE Centers Corp.’s outstanding securities without the prior consent of the Board of Directors of SITE Centers Corp.; or  

 

(iii) during any two-year period, individuals who at the beginning of such period constitute the entire Board of Directors of SITE Centers Corp. cease to constitute a majority of the Board of Directors of SITE Centers Corp.; provided, that any person becoming a director of SITE Centers Corp. during such two-year period whose election, or nomination for election by SITE Centers Corp.’s shareholders, was  approved by a vote of at least two-thirds of the directors who at the beginning of such period constituted the entire Board of Directors of SITE Centers Corp. (either by a specific vote or by approval of SITE Centers Corp.’s proxy statement in which such person is named as a nominee of SITE Centers Corp. for director), but excluding for this purpose any person whose initial assumption of office as a director of SITE Centers Corp. occurs as a result of either an actual or threatened election contest with respect to the election or removal of directors of SITE Centers Corp. or other actual or threatened solicitation of proxies or consents by or on behalf of an individual, corporation, partnership, group, associate or other entity or person other than the Board of Directors of SITE Centers Corp., shall be considered as though such person was a member of the Board of Directors of SITE Centers Corp. at the beginning of such period.

- 20 -

DRAFT

 

 

 

For purposes of this Section 11.03(a), “Subsidiary” means a corporation, company or other entity (A) more than 50 percent of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or (B) which does not have outstanding shares or securities (as may be the case in a partnership, joint venture, limited liability company, or unincorporated association), but more than 50 percent of whose ownership interest representing the right generally to make decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by SITE Centers Corp.

 

For purposes of this Section 11.03(a), “Common Shares” means the common shares of SITE Centers Corp., $0.10 par value per share, or any security into which such common shares may be changed by reason of a stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of SITE Centers Corp., any merger, consolidation, spin-off, split- off, spin-out, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities, or any other corporate transaction or event having an effect similar to any of the foregoing.

 

 

(b)

A “409A Change in Control” includes the following [select each definition that applies]:

 

 

(i)

☒    A change in the ownership of the Employer as described in Section 9.7(c) of the Plan.

 

 

(ii)

☒    A change in the effective control of the Employer as described in Section 9.7(d) of the Plan.

 

 

(iii)

☒    A change in the ownership of a substantial portion of the assets of the Employer as described in Section 9.7(e) of the Plan.

 

 

(iv)

☐    Not Applicable.

 


- 21 -

DRAFT

 

 

12.01

GOVERNING STATE LAW

 

The laws of Ohio shall apply in the administration of the Plan to the extent not preempted by ERISA.

 

- 22 -

EXECUTION PAGE

 

 

The Plan Sponsor has caused this Adoption Agreement to be executed this 5th day of June, 2019.

 

 

PLAN SPONSOR:

 

/s/ Lori D. Parsons

By:

 

Lori D. Parsons

Title:

 

Vice President of Human Resources

 

 

 

- 23 -

 

 

APPENDIX A

SPECIAL EFFECTIVE DATES

Not Applicable

 

 

- 24 -

Exhibit 10.5

 

SITE Centers corp.

2005 EQUITY DEFERRED COMPENSATION PLAN

May 9, 2019 Restatement

ARTICLE I

PURPOSE; PARTICIPATION

1.1Purpose.  SITE Centers Corp. (the “Company”) previously established effective January 1, 2003, the Developers Diversified Realty Corporation Equity Deferred Compensation Plan (the “Original Plan”) to provide a select group of key management employees of the Company, as well as members of the Company’s Board, with an opportunity to defer the receipt of Common Shares with respect to Eligible Equity Awards.  As a result of the rules provided under the American Jobs Creation Act of 2004 (the “Act”) and Section 409A of the Internal Revenue Code (the “Code”), the Company froze deferrals under the Original Plan effective December 31, 2004, and established the Developers Diversified Realty Corporation 2005 Equity Deferred Compensation Plan (the “Plan”) to reflect deferrals of equity compensation on or after January 1, 2005.  The Plan was amended and restated effective as of January 1, 2009 for the purpose of reflecting the Final Treasury Regulations published under Section 409A of the Code and for other purposes.  The Plan is hereby amended and restated effective as of May 9, 2019 and is hereby renamed the SITE Centers Corp. 2005 Equity Deferred Compensation Plan.

The Plan, which is intended to be a “nonqualified deferred compensation plan” that satisfies the requirements of the Act and Section 409A of the Code, shall be interpreted and administered by the Committee to the extent possible in a manner consistent with that intent.  

1.2Participation.  Participation in the Plan will be limited to those key management employees of the Company, as well as members of the Company’s Board, as the Committee in its sole discretion shall designate from time to time to be eligible to make Deferral Elections hereunder.

ARTICLE II

DEFINITIONS

For purposes of this Plan, the following terms shall have the following meanings:

“Board” means the Board of Directors of the Company.

“Change in Control” means the occurrence, at any time during the term of this Plan, of any of the following events:

(a)the Board or shareholders of the Company approve a consolidation or merger in which the Company is not the surviving corporation, the sale of substantially all of the assets of the Company, or the liquidation or dissolution of the Company;

(b)any person or other entity (other than the Company or a Subsidiary or any Company employee benefit plan (including any trustee of any such plan acting in its capacity as trustee)) purchases any Shares (or securities convertible into Shares) pursuant to a tender or exchange offer without the prior consent of the Board, or becomes the beneficial owner of securities of the Company representing 20% or more of the voting power of the Company’s outstanding securities;

 

 

(c)during any two-year period, individuals who at the beginning of such period constitute the entire Board cease to constitute a majority of the Board, unless the election or the nomination for election of each new director is approved by at least two­thirds of the directors then still in office who were directors at the beginning of that period; or

(d)a record date is established for determining shareholders of the Company entitled to vote upon (i) a merger or consolidation of the Company with another real estate investment trust, partnership, corporation, or other entity in which the Company is not the surviving or continuing entity or in which all or a substantial part of the outstanding shares of the Company are to be converted into or exchanged for cash, securities or other property, (ii) a sale or other disposition of all or substantially all of the assets of the Company or (iii) the dissolution of the Company.

For purposes of the foregoing definition, “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations (other than the last corporation in the unbroken chain) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in that chain.

Notwithstanding the above, a “409A Change in Control” means a change in control event with respect to the applicable corporation as defined in Treasury Regulation Section l.409A-3(i)(5).  For purposes of this definition, “applicable corporation” means:

(a)the corporation for which the Participant is performing services at the time of the change in control event;

(b)the corporation(s) liable for payment hereunder (but only if either the accrued benefit hereunder is attributable to the performance of service by the Participant for such corporation(s) or there is a bona fide business purpose for such corporation(s) to be liable for such payment and, in either case, no significant purpose of making such corporation(s) liable for such benefit is the avoidance of Federal income tax); or

(c)a corporation that is a majority shareholder of one of the corporations described in (a) or (b) above or any corporation in a chain of corporations in which each corporation is a majority shareholder of another corporation in the chain, ending in a corporation identified in (a) or (b) above.

“Code” means the Internal Revenue Code of 1986, as amended.

“Committee” means the Executive Compensation Committee of the Board.

“Company” means SITE Centers Corp., an Ohio corporation.

2

 

“Company Equity Plan” means any equity compensation plan maintained by the Company providing for the award of Restricted Stock Units and/or Restricted Stock, including but not limited to the Amended and Restated Developers Diversified Realty Corporation 1992 Employees’ Share Option Plan, the Amended and Restated Developers Diversified Realty Corporation Equity-Based Award Plan of 1996, the Amended and Restated 1998 Developers Diversified Realty Corporation Equity-Based Award Plan, the Amended and Restated 2002 Developers Diversified Realty Corporation Equity-Based Award Plan, the Amended and Restated 2004 Developers Diversified Realty Corporation Equity-Based Award Plan, the Amended and Restated 2008 Developers Diversified Realty Corporation Equity-Based Award Plan, the 2012 Equity and Incentive Compensation Plan, and the 2019 Equity and Incentive Compensation Plan.

“Deferral Election” means an election, filed with the Committee pursuant to the terms and conditions of this Plan at the time, and in the manner, specified by the Committee, pursuant to which a Participant elects to have all or part of an Eligible Equity Award cancelled and converted into Stock Units under this Plan, and to have such Stock Units credited to his or her Stock Account under this Plan pursuant to Section 4.2 hereof.

“Designated Deferral Period” shall mean the deferral period selected by the Participant with respect to an Eligible Equity Award, which deferral period shall specify the date or dates on which the delivery of Shares with respect to such Eligible Equity Award shall begin; provided however that the Designated Deferral Period specified by a Participant with respect to an Eligible Equity Award shall not end prior to the date on which the shares of Restricted Stock or Restricted Stock Units related to such Eligible Equity Award would otherwise vest and become nonforfeitable in accordance with their terms.  For purposes of this Plan, a Participant’s Designated Deferral Period with respect to an Eligible Equity Award shall end, in accordance with the Participant’s Deferral Election for such Eligible Equity Award, either (i) on the first day of the seventh month following the Participant’s Separation from Service or (ii) on the first day of the month following the month in which the Participant attains the age specified on the applicable Deferral Election.  Notwithstanding the foregoing, in the case of a Participant who has elected a Designated Deferral Period ending on the attainment of a particular age after age 70 (age 65 for Deferral Elections or Subsequent Deferral Elections made prior to May 9, 2019), (i) if he has a Separation from Service prior to the date that precedes his attainment of age 70 (age 65 for Deferral Elections or Subsequent Deferral Elections made prior to May 9, 2019) by seven months or more, delivery or payment to such Participant shall commence with respect to the Deferral Election on the January 1st next following the Participant’s 70th birthday (65th birthday for Deferral Elections or Subsequent Deferral Elections made prior to May 9, 2019), and (ii) if he has a Separation from Service after the date that precedes his attainment of age 70 (age 65 for Deferral Elections or Subsequent Deferral Elections made prior to May 9, 2019) by seven months or more, delivery or payment to such Participant shall commence with respect to the Deferral Election on the first day of the seventh month following his Separation from Service.

“Dividend Equivalent Payments” means the amount of dividends or other distributions to shareholders of the Company that a Participant would have received had the Participant’s Stock Units been actual Shares as of the date of a dividend or other distribution by the Company.

“Eligible Equity Award” means an award of Restricted Stock Units or Restricted Stock made, or to be made, under a Company Equity Plan, and such other awards as may be designated as Eligible Equity Awards by the Committee in its sole discretion.

3

 

“Participant” means any eligible management employee or member of the Board who is designated as a Participant in this Plan by the Committee with respect to a Plan Year and who participates in this Plan by timely completing a Deferral Election.

“Plan Year” means each calendar year.

“Related Employer” means any employer other than the Company that is a member with the Company of a controlled group of corporations (as defined in Section 414(b) of the Code) or trades or business (whether or not incorporated) under common control (as defined in Section 414(c) of the Code).

“Restricted Stock” means Shares awarded, or to be awarded, to a Participant in the form of restricted stock under and pursuant to the terms of a Company Equity Plan.

“Restricted Stock Subaccount” means the bookkeeping subaccount maintained by the Company for a Participant under Section 4.3 with respect to the Participant’s Restricted Stock that is subject to a Deferral Election (or a Subsequent Deferral Election) hereunder.

“Restricted Stock Unit Subaccount” means the bookkeeping subaccount maintained by the Company for a Participant under Section 4.3 with respect to the Participant’s Restricted Stock Units that are subject to a Deferral Election (or a Subsequent Deferral Election) hereunder.

“Restricted Stock Units” means a contractual right to receive Shares from the Company at a specified future date or dates to a Participant under and pursuant to the terms of a Company Equity Plan.  For the avoidance of doubt, the term “Restricted Stock Units” includes awards of deferred shares that satisfy the foregoing definition.

“Separation from Service” means the date the Participant retires or otherwise has a termination of employment (or a termination of the contract pursuant to which the Participant has provided services as a member of the Board) with the Company and all Related Employers, as further defined in Treasury Regulation Section 1.409A-1(h); provided, however, that

(a)For purposes of this definition, the term “Related Employer” shall be modified as follows:

(i)In applying Section 1563(a)(1), (2) and (3) of the Code for purposes of determining a controlled group of corporations under Section 414(b) of the Code, the phrase “at least 50%” shall be used instead of “at least 80 percent” each place “at least 80 percent” appears in Section 1563(a)(1), (2) and (3) of the Code; and

(ii)In applying Treasury Regulation Section 1.414(c)-2 for purposes of determining trades or businesses (whether or not incorporated) under common control for purposes of Section 414(c) of the Code, the phrase “at least 50%” shall be used instead of “at least 80 percent” each place “at least 80 percent” appears in Treasury Regulation Section 1.414(c)-2.

4

 

(b)In the event a Participant provides services to the Company or a Related Employer as an employee and as a member of the Board,

(i)The employee Participant’s services as a director are not taken into account in determining whether the Participant has a Separation from Service as an employee; and

(ii)The director Participant’s services as an employee are not taken into account in determining whether the Participant has a Separation from Service as a director;

provided that this Plan is not aggregated with a plan subject to Section 409A of the Code in which the director Participant participates as an employee of the Company or a Related Employer or in which the employee Participant participates as a director of the Company or a Related Employer, as applicable, pursuant to Treasury Regulation Section l.409A-l (c)(2)(ii).

“Shares” means the Common Shares, par value $0.10 per share, of the Company.

“Stock Account” means an individual bookkeeping account established for a Participant pursuant to Section 4.3 hereof, with respect to Stock Units credited to the Participant, which consists of the Participant’s Restricted Stock Unit Subaccount and Restricted Stock Subaccount.

“Stock Units” means the units credited to a Participant’s Stock Account, as described in Section 4.2 hereof.  Each Stock Unit credited to a Participant’s Stock Account shall represent the right, subject to the terms and conditions of this Plan, to receive one (1) Share at the end of the Participant’s Designated Deferral Period.

“Subsequent Deferral Election” means an election, filed with the Committee on or before the date prescribed by the Committee, pursuant to which a Participant elects to have the delivery of Shares attributable to Stock Units previously credited to his or her Stock Account under the Plan deferred past the then current Designated Deferral Period; provided however, that no Subsequent Deferral Election shall be valid unless (i) such Subsequent Deferral Election is made at least twelve (12) months before the scheduled expiration of the then current Designated Deferral Period, (ii) any such extension is for a period of not less than five (5) years after the end of the then current Designated Deferral Period for such Stock Units, and (iii) such Subsequent Deferral Election has been made at least twelve (12) months prior to the date payment of his or her Stock Account would otherwise have been made.

5

 

ARTICLE III

PARTICIPATION

3.1Eligibility and Participation.  Employees who shall be eligible to participate in this Plan shall be those employees who are or who become executive officers or members of the key management team of the Company.  The Committee shall have the sole and exclusive right to determine which employees and members of the Board will be selected to participate in the Plan in any given Plan Year.  The Committee may terminate the participation of any Participant in the Plan at any time, provided that such termination of participation shall not affect amounts previously credited to his or her Stock Account, which shall continue to be subject to all of the terms and conditions of this Plan, nor affect the terms of any Deferral Election except as permitted pursuant to Section 4.6.

ARTICLE IV

DEFERRAL ELECTIONS

4.1Deferral Elections.  

(a)The Committee will designate the Participants who are eligible to participate in this Plan for any Plan Year.  Each eligible employee or member of the Board who has been designated by the Committee as a Participant in this Plan for any Plan Year may file a Deferral Election with the Committee at the time and in the form prescribed by the Committee, and in accordance with such rules and procedures as may be established by the Committee in its sole discretion; provided, however that a Deferral Election with respect to a Plan Year, in order to be valid, must be delivered to the Committee not later than the close of the calendar year immediately preceding the Plan Year in which the Eligible Equity Award is awarded.  Once made, a Participant’s Deferral Election or Subsequent Deferral Election shall be irrevocable (except as may be permitted by the IRS in connection with the promulgation of regulations or other guidance that may be issued under Section 409A of the Code, or any successor provision of the Code).  

(b)In the case of the first year in which an eligible employee or member of the Board becomes eligible to participate in the Plan, such individual may file any initial Deferral Election with the Committee in the form prescribed by the Committee within 30 days after the date he becomes eligible to participate in the Plan, with respect to compensation paid for services to be performed after the election.

(c)A Deferral Election shall be deemed to have been made only when the completed and executed form of Deferral Election is received by the Committee or its designated agent.  A separate Deferral Election shall be made by an eligible Participant with respect to each Eligible Equity Award to be subject to a Deferral Election during such Plan Year.  If permitted under the rules and procedures established by the Committee from time to time, a Participant’s Deferral Election may specify the percentage, vesting tranche, or other portion of the Eligible Equity Award to be subject to the Deferral Election, and a Participant may make a separate Deferral Election with respect to each vesting tranche of the Eligible Equity Award.  If an eligible Participant fails to file a Deferral Election with respect to an Eligible Equity Award by the date specified by the Committee with respect to any Plan Year (or within the period permitted under Section 4.1(b) with respect to a newly eligible Participant), he or she shall be deemed to have elected not to make a Deferral Election with respect to such Eligible Equity Award for such Plan Year.

6

 

4.2Effect of Deferral Election; Subsequent Deferral Elections.

(a)If a Participant timely files a Deferral Election with the Committee with respect to an Eligible Equity Award, the following provisions will apply:

(1)Each share of Restricted Stock subject to a Deferral Election will be automatically cancelled as of the first day of the Plan Year to which such Deferral Election relates (or such later date on which it is awarded or as may be specified by the Committee in accordance with Section 409A of the Code) and will be replaced with a corresponding Stock Unit credited to the Participant’s Restricted Stock Subaccount in accordance with Section 4.3.  Stock Units credited to a Participant’s Restricted Stock Subaccount shall vest or be forfeited by the Participant in the same manner, and subject to the same terms and conditions, as applied to the shares of Restricted Stock for which the Stock Units were substituted.  As a result of a valid Deferral Election with respect to Restricted Stock, the Participant shall be entitled to a future distribution of one Share with respect to each vested Stock Unit credited to the Participant’s Restricted Stock Subaccount relating to such Deferral Election upon the expiration of the applicable Designated Deferral Period.

(2)Each Restricted Stock Unit subject to a Deferral Election will be automatically cancelled as of the first day of the Plan Year to which such Deferral Election relates (or by such later date on which the related award is made or as may be specified by the Committee in accordance with Section 409A of the Code) and will be replaced with a corresponding Stock Unit credited to the Participant’s Restricted Stock Unit Subaccount in accordance with Section 4.3.  Stock Units credited to a Participant’s Restricted Stock Unit Subaccount shall vest or be forfeited by the Participant in the same manner, and subject to the same terms and conditions, as applied to the Restricted Stock Units for which the Stock Units were substituted.  As a result of a valid Deferral Election with respect to Restricted Stock Units, the Participant shall be entitled to a future distribution of one Share with respect to each vested Stock Unit credited to the Participant’s Restricted Stock Unit Subaccount relating to such Deferral Election upon the expiration of the applicable Designated Deferral Period.

(b)Each Participant who has filed a Deferral Election with respect to an Eligible Equity Award may file a Subsequent Deferral Election thereby electing to extend the Designated Deferral Period with respect to the Participant’s Stock Units relating to such Deferral Election.  A valid Subsequent Deferral Election, if made, will extend the delivery date of the Shares represented by the Stock Units subject thereto until the end of Participant’s Designated Deferral Period, as amended by such Subsequent Deferral Election.  A Subsequent Deferral Election must be filed with the Committee at the time and in the form prescribed by the Committee, in accordance with such additional rules and procedures as may be established by the Committee in its sole discretion.  Once made, a Participant’s Subsequent Deferral Election shall be irrevocable.

7

 

4.3Stock Accounts.

(a)The Committee shall establish and maintain a bookkeeping account in the name of each Participant who makes a Deferral Election during the course of his or her participation in the Plan.  Each Participant’s Stock Account shall consist of the sum of the Stock Units credited to the Participant’s Restricted Stock Unit Subaccount and Restricted Stock Subaccount.  Each Participant’s Stock Account (and the appropriate subaccount) shall be adjusted as follows:

(1)as of the date specified in Section 4.2(a)(1) or (2) on which the Restricted Stock or Restricted Stock Units subject to the Participant’s Deferral Election are cancelled, the Participant’s Restricted Stock Unit Subaccount or Restricted Stock Subaccount, as the case may be, shall be credited with that number of Stock Units equal to the number of Shares to which the Deferral Election relates;

(2)as of the date on which Shares are distributed to the Participant in accordance with Section 4.4, the Participant’s Stock Account (and appropriate subaccount) shall be reduced by an equal number of Stock Units; and

(3)as of the date on which any Stock Units are forfeited by the Participant in connection with a termination of the Participant’s employment with the Company or membership on the Board prior to the time at which such Stock Units shall have vested as provided in Section 4.2(a)(1) or (2), as the case may be, the Participant’s Stock Account (and appropriate subaccount) shall be reduced by the number of Stock Units that are forfeited by the Participant.

In the event of changes that impact the Company’s capital structure, or Share status, each Participant’s Stock Account and the number of Stock Units credited thereto shall be equitably adjusted by the Committee in its sole discretion in a manner consistent with adjustments made to outstanding equity awards pursuant to the Company Equity Plans.

(b)Notwithstanding anything to the contrary in the Plan or in any Deferral Election hereunder, in the event of a Change in Control of the Company all Stock Units previously credited to a Participant’s Stock Account shall become fully and immediately vested.  Moreover, in the event of a 409A Change in Control, a Participant’s Designated Deferral Period(s) under the Plan shall automatically end on the effective date of such 409A Change in Control and distribution shall be made in a single payment on the tenth business day thereafter.  However, if the Committee determines to permit elections relating to distribution in the event of a 409A Change in Control (a “Change in Control Election”), which elections shall apply only to amounts credited pursuant to Deferral Elections made at the time of or after the Change in Control Election, a Participant may elect, pursuant to a Deferral Election, that his otherwise applicable Designated Deferred Period(s) shall not end on the effective date of such 409A Change in Control.

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4.4Distribution of Shares from Stock Accounts; Forfeiture of Stock Units.

(a)Subject to any limitation set forth in this Plan or any other limitations as may be established by the Committee in its sole discretion, each Participant shall specify the payment method with respect to his or her Stock Account at the time he or she makes a Deferral Election or a Subsequent Deferral Election with respect to all or part of an Eligible Equity Award.  A Participant may elect to have his or her vested Stock Units with respect to any Eligible Equity Award paid in the following manner following the expiration of the Participant’s Designated Deferral Period with respect to such Eligible Equity Award:

(1)a single lump sum; or

(2)for Deferral Elections or Subsequent Deferral Elections made prior to May 9, 2019, equal or substantially equal monthly installments over a period of between 12 and 120 months, as elected by the Participant; or

(3)for Deferral Elections or Subsequent Deferral Elections made on or after May 9, 2019, equal or substantially equal annual installments over a period of between 2 and 10 years, as elected by the Participant.

Subject to such rules and procedures as may be established by the Committee in its sole discretion, a Participant may elect a different manner of payment as described in the preceding sentence for each vesting tranche or other portion of an Eligible Equity Award for which a separate Deferral Election is made.  Notwithstanding any Plan provision to the contrary, any payments or distributions with respect to the vested Stock Units credited to a Participant’s Stock Account under this Plan shall in all cases be satisfied by the delivery by the Company of a number of Shares equal to the number of Stock Units with respect to which such distribution is being made.  Notwithstanding any Plan provision to the contrary, in accordance with Sections 4.l(a) and 4.2(b) a Participant may make certain modifications or further elections.

(b)Notwithstanding anything to the contrary in this Plan, no distribution shall be made with respect to any Stock Units that have not vested in accordance with the vesting provisions that applied to the shares of Restricted Stock or Restricted Stock Units to which such Stock Units relate, including the vesting provisions of Section 4.3(b) or any vesting which occurs by reason of the Committee’s action to vest such Stock Units.  In the event of a Participant’s Separation from Service, any Stock Units that have not vested as of the date of such event in accordance with the vesting and forfeiture provisions that applied to the related shares of Restricted Stock or Stock Units shall be forfeited by the Participant for no consideration.

4.5Dividend Equivalent Payments.  Each Participant will be entitled to a cash payment of additional compensation from the Company in an amount equal to the Dividend Equivalent Payments with respect to the Participant’s Stock Units.  Such amount shall be paid to the Participant not later than five (5) business days following the date of distribution of the dividend to which such Dividend Equivalent Payment relates.

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4.6Unforeseeable Emergency Withdrawals.  Notwithstanding any other provision of this Plan to the contrary, payments may be made to a Participant from his or her vested Stock Account in the event of an “unforeseeable emergency.”  For purposes of this Plan, an “unforeseeable emergency” shall mean a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or of a dependent of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.  The circumstances that will constitute a “unforeseeable emergency” will depend upon the facts and circumstances of each case, but, in any event, payment may not be made to the extent that such hardship is or may be relieved:

(a)through reimbursement or compensation by insurance or otherwise; or

(b)by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not itself cause severe financial hardship; or

(c)by cessation of deferrals under the Plan.

Examples of what are not considered to be unforeseeable emergencies include the need to send a Participant’s child to college or the desire to purchase a home.

4.7Death or Disability.  In the event a Participant’s service is terminated by reason of death or disability prior to the distribution of any portion of his benefits, any other provision of the Plan to the contrary notwithstanding, the Company shall, within ninety days of the date of service termination, commence distribution of benefits to the Participant (or to the beneficiary or beneficiaries in the event of death).  For purposes of the Plan, a Participant will be considered to have a “disability” if the participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.  Distribution shall be made in accordance with the method of distribution elected by the Participant pursuant to this Article IV.  In the event a Participant’s death or disability occurs after distribution of benefits hereunder has begun, the Company shall continue to make distributions to the Participant (or to the beneficiary or beneficiaries in the event of death) in accordance with the methods of distribution elected by the Participant pursuant to this Article IV.

4.8Cash-Out of Small Benefits.  Notwithstanding any provision of the Plan to the contrary, if the Participant’s total balance in his or her Stock Account, in addition to the Participant’s balances and accounts under any other agreements, methods, programs or other arrangements with respect to which deferrals of compensation are treated as having been deferred under a single nonqualified deferred compensation plan with the Plan under Treasury Regulation Section 1.409A-1(c)(2) (the “Aggregate Account Balance”), is less than the applicable dollar amount under Section 402(g)(1)(B) of the Code ($19,000 for 2019), then the Company may, in the discretion of the Committee or any Executive Vice President acting on behalf of the Company, pay the Participant’s entire Aggregate Account Balance in an immediate lump sum.  Any such exercise of discretion shall be evidenced in writing not later than the date of payment.  In no event will a Participant have discretion to determine whether his or her Aggregate Account Balance will be paid in an immediate lump sum pursuant to this Section 4.8.  For purposes of determining the present value of the distribution under this Section 4.8, the value of each Stock Unit will equal the closing price of a Share on the 5th trading day immediately preceding the date of the distribution pursuant to this Section 4.8.

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ARTICLE V

MISCELLANEOUS

5.1Beneficiaries.  Each Participant shall have the right to designate one or more beneficiaries to receive distributions in the event of the Participant’s death by filing with the Company a beneficiary designation on a form provided by the Committee.  The designated beneficiary or beneficiaries may be changed by a Participant at any time prior to his or her death by the delivery to the Company of a new beneficiary designation form.  If no beneficiary shall have been designated, or if no designated beneficiary shall survive the Participant, distribution pursuant to this provision shall be made to the Participant’s estate.

5.2Administration.  Except for those powers and duties expressly reserved for the Board hereunder, this Plan shall be administered by the Committee or any Executive Vice President acting on behalf of the Company.  The Committee shall have full power to interpret and administer the Plan and full authority to select the individuals who will be allowed to participate in this Plan.  The Committee shall have the authority to adopt, alter and repeal such rules, guidelines and practices governing this Plan, including the form and timing of Deferral Elections and Subsequent Deferral Elections, as it shall, from time to time, deem advisable.  The Committee shall also have the authority to direct designated officers or employees of the Company or other advisers to prepare such materials or perform such analysis as the Committee deems necessary or appropriate, or to otherwise supervise the administration of this Plan.  All decisions of the Committee shall be binding upon all Participants and their respective legal representatives, successors and assigns, and any and all persons claiming under or through any of them, shall be bound by the determinations of the Committee.  No member of the Committee shall be liable to any Participant or to the Company for any determination made within the scope of the administrative and interpretive functions granted by the Board.  No member of the Committee shall participate in any discussion or determination involving his or her own entitlement to benefits or the form of payment of such benefits.

5.3Reports.  Until a Participant’s entire Stock Account shall have been paid out in full or forfeited, the Company will furnish to the Participant a report, at least annually, setting forth any changes in such account and the status of such account with respect to the vesting of amounts credited to such account.

5.4Assignment and Alienation of Benefits.  The right of each Participant to payment of any account hereunder shall not, to the extent permitted by law, be subject in any manner to attachment or other legal process for the debts of such Participant, and no account shall be subject to anticipation, alienation, sale, pledge, transfer, assignment or encumbrance.

5.5Employee and Shareholder Status.  Nothing in the Plan shall interfere with nor limit in any way the right of the Company to terminate any Participant’s employment at any time, nor confer upon any Participant any right to continue in the employ of the Company, including but not limited to a Participant’s membership on the Board.  The Plan will not give any person any right or claim to any benefits under the Plan unless such right or claim has specifically accrued under the terms of the Plan.  Participation in the Plan shall not create any rights in a Participant (or any other person) as a shareholder of the Company until Shares are registered in the name of the Participant (or such other person).

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5.6Assets.  No Participant or party claiming an interest in amounts deferred by or on behalf of a Participant shall have any interest whatsoever in any specific asset of the Company.  To the extent that any party acquires a right to receive payments under the Plan, such right shall be equivalent to that of an unsecured general creditor of the Company.  No assets shall be segregated or earmarked in respect of any Stock Units, Dividend Equivalent Payments, or Stock Accounts.  The Plan and the crediting of Stock Accounts hereunder shall not constitute a trust and shall be structured solely for the purpose of recording an unsecured contractual obligation.  All amounts payable pursuant to the terms of this Plan shall be paid from the general assets of the Company.  Notwithstanding the above, the Company will establish a “rabbi trust” and will contribute to such trust, not later than March 31st of each calendar year during which the Plan remains in existence or at such earlier time or times as may be determined by the Company, that number of Shares equal to the number of Stock Units credited to Participants’ Stock Accounts under the Plan.  Distributions of Shares required to be made by the Company to any Participant hereunder may be paid from the assets of such trust.  Any “rabbi trust” established under this Plan will not include provisions of the type described in Code Section 409A(b)(1) (relating to non-U.S. trusts) or Code Section 409A(b)(2) (relating to a change in the Company’s financial health).  This Plan is intended to be an unfunded nonqualified deferred compensation plan which is neither an “employee welfare benefit plan” nor an “employee pension benefit plan” within the meaning of Section 3(1) or (2) of the Employee Retirement Income Security Act of 1974, as amended, and shall be interpreted and administered to the extent possible in a manner consistent with that intent.

5.7Taxes.  The Company shall not be responsible for the tax consequences under federal, state or local law of any election made by any Participant under the Plan.  The Company shall have the right to deduct from any payment to be made pursuant to this Plan, or to otherwise require prior to the payment or distribution of any amount hereunder, payment by the Participant of any federal, state or local taxes required by law to be withheld with respect to any such payment or distribution to the Participant.  In addition, to the extent the Company shall be required, prior to the date on which payments or other distributions are to be made to a Participant under this Plan, to withhold any taxes in connection with any Stock Units credited to a Participant’s account under this Plan, the Participant agrees that the Company shall have the right to withhold such taxes from compensation or fees otherwise payable to the Participant or to otherwise require direct payment of such withholding taxes by the Participant to the Company.

5.8Amendment or Termination.  Notwithstanding any other provision of this Plan, the Board may at any time, and from time to time, amend, in whole or in part, any or all of the provisions of the Plan, or suspend or terminate it entirely; provided, however that any such amendment, suspension or termination shall not, without the Participant’s consent, adversely affect the rights including but not limited to forfeiture or accelerated vesting of any Stock Units previously credited to the Participants’ Stock Accounts prior to the effective date of such amendment, suspension or termination.

5.9Effective Date.  This Plan was adopted by the Board effective as of January 1, 2005 (the “Effective Date”), and is amended and restated as set forth herein effective May 9, 2019 and such other dates as are specified herein and shall remain in effect until terminated pursuant to Section 5.8.

5.10Applicable Law.  This Plan shall be interpreted under the laws of the State of Ohio.

 

* * *


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IN WITNESS WHEREOF, the Company has caused this Plan to be executed this 28th day of May, 2019.

 

SITE CENTERS CORP.

 

BY:

/s/ Aaron M. Kitlowski

 

Name: Aaron M. Kitlowski

 

Title: Executive Vice President

 

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EXHIBIT 10.7

FORM AGREEMENT

 

SITE CENTERS CORP.

RESTRICTED SHARE UNITS AWARD MEMORANDUM

 

1.          Holder:

__________ (the “Holder”)

2.          Plan:

SITE Centers Corp. 2019 Equity and Incentive Compensation Plan (the “Plan”)

3.          Date of Grant:

__________, 20__ (the “Date of Grant”)

4.          Number of Restricted Share Units:

__________

5.          Purchase Price:

$_____

6.          Vesting Schedule:  If you are then and have been continuously employed by the Company (subject to the terms of this Restricted Share Units Award Memorandum (the “Award Memorandum”), the attached Restricted Share Units Terms (the “Agreement”) and the Plan), the Restricted Share Units subject hereto (the “RSUs”) shall vest as follows:

 

Vesting Date

No. of RSUs Vesting

 

 

 

 

 

 

 

Additional provisions regarding the vesting of the RSUs, and other terms and conditions of the RSUs, are specified in the Agreement.  Capitalized terms not defined in this Award Memorandum shall have the meaning as defined in the Agreement, or if not defined therein, in the Plan.

 

 

ACCEPTANCE OF AWARD

 

I accept the RSUs granted to me on the Date of Grant as specified in this Award Memorandum, and I agree to be bound by the terms and conditions of the Award Memorandum, the Agreement and the Plan.

 

SITE CENTERS CORP., an Ohio corporation

HOLDER

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

Name:

 

Title:

 

 

 

 

 

RESTRICTED SHARE UNITS TERMS

 

SITE Centers Corp., an Ohio corporation (the “Company”), has granted to the Holder named in the Award Memorandum the number of RSUs set forth in the Award Memorandum effective as of Date of Grant specified in the Award Memorandum.  Each RSU shall represent the right of the Holder to receive one Common Share subject to and upon these terms and conditions (the “Agreement”).  The RSUs have been granted pursuant to the Plan and are subject to all provisions of the Plan and the Award Memorandum, which are hereby incorporated herein by reference, and to the following provisions of this Agreement (capitalized terms not defined in this Agreement shall have the meaning as defined in the Award Memorandum, or if not defined therein, in the Plan):

1.Vesting.   Except as otherwise provided in Section 4, the RSUs will vest in accordance with the vesting schedule set forth in the Award Memorandum.

2.Purchase Price.   The purchase price for the RSUs is set forth the Award Memorandum.

3.Transferability.   The Holder may transfer RSUs prior to vesting, during his or her lifetime (a) to one or more members of such Holder’s family, (b) to one or more trusts for the benefit of one or more of such Holder’s family, or (c) to a partnership or partnerships of members of such Holder’s 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 Exchange Act with respect to the RSUs.  The RSUs are also transferable by will or the laws of descent and distribution or pursuant to a qualified domestic relations order (as defined in the Code or the Employee Retirement Income Security Act of 1974, as amended).  The transferee of any RSUs will be subject to all restrictions, terms, and conditions applicable to the RSUs.

4.Termination of Employment or Disability.   If the Holder becomes Disabled (as defined below) or Holder’s employment by the Company or any Subsidiary terminates prior to all of the RSUs vesting, the unvested RSUs will vest or be forfeited as follows:

(a)Termination by Death.  If the Holder’s employment with the Company or any Subsidiary terminates by reason of death, all unvested RSUs shall vest on the date of death.

(b)Disability.  If the Holder becomes Disabled, all unvested RSUs shall vest on the date the Holder becomes Disabled. The Holder will be considered “Disabled” if the Holder is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months and otherwise satisfies the requirements to be disabled under Section 409A of the Code.

(c)Termination Without Cause Other than Following a Change in Control.  If the Holder’s employment with the Company or any Subsidiary is terminated by the Company or such Subsidiary without Cause, other than in the circumstances described in Section 4(d), the unvested RSUs shall continue to vest following such termination of employment to the same extent that the RSUs would vest had the Holder remained continuously employed by the Company through the last Vesting Date or the occurrence of a circumstance referenced in Section 4(a) or Section 4(b), whichever occurs first.  For purposes of this Section 4(c) and Section 4(d), “Cause” is used as defined in the Holder’s employment, change in control or similar agreement with the Company or any Subsidiary (an “Individual Agreement”), if any, or if there is no Holder’s Individual Agreement or if it does not define Cause, the term “Cause” shall mean: (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 Holder’s employment duties; (iii) willful and deliberate failure on the part of the Holder to perform the Holder’s 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 Holder’s Individual Agreement, have the sole discretion to determine whether Cause exists for purposes of this Section 4(c) or Section 4(d), and its determination shall be final.

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(d)Termination Without Cause, Termination for Good Reason or Absence on Leave Termination After a Change in Control.  If, within two years following a Change in Control, the Holder’s employment with the Company or any Subsidiary is terminated by the Company or such Subsidiary without Cause, is terminated by the Holder for Good Reason, or is terminated due to an Absence on Leave Termination, the unvested RSUs shall become immediately and automatically vested.  For purposes of this Section 4(d), “Good Reason” is used as defined in the Holder’s Individual Agreement, if any, or if there is no Holder’s Individual Agreement or if it does not define Good Reason, the term “Good Reason” shall mean: (i) a material reduction in the nature or scope of the responsibilities, authorities or duties of the Holder attached to the Holder’s position held immediately prior to the Change in Control; (ii) a change of more than 50 miles in the location of the Holder’s principal office immediately prior to the Change in Control; or (iii) a material reduction in the Holder’s remuneration upon or after the Change in Control; provided, that no later than 90 days following an event constituting Good Reason the Holder gives notice to the Company or its successor following the Change in Control of the occurrence of such event and such entity fails to cure the event within 30 days following the receipt of such notice.  The Committee shall, unless otherwise provided in the Holder’s Individual Agreement, have the sole discretion to determine whether Good Reason exists for purposes of this Section 4(d), and its determination shall be final.  For purposes of this Section 4(d), “Absence on Leave Termination” means a separation from employment (within the meaning of Treasury Regulation section 1.409A-1(h)(1)) that would not constitute an interruption or termination of continuous employment under the Plan due to the absence on leave rule described in the Plan.

(e)Other Termination.  Unless otherwise determined by the Committee in compliance with Section 409A of the Code, if the Holder’s employment with the Company or any Subsidiary terminates other than in the circumstances described in paragraphs (a), (c) or (d) of this Section 4 and prior to becoming Disabled, any RSUs which are unvested at the time of termination will be forfeited upon termination.

5.Form and Time of Payment of RSUs.

(a)Payment for the RSUs, after and to the extent they have become vested, shall be made in the form of Common Shares.  Except as provided in Section 5(b) or 5(c), payment shall be made within 10 days following the date that the RSUs become vested pursuant to Section 1 or Section 4 hereof.

(b)If the RSUs become vested by reason of Holder’s employment with the Company or any Subsidiary being terminated by the Company or such Subsidiary without Cause, by the Holder for Good Reason, or due to an Absence on Leave Termination, within two years following the occurrence of a Change in Control as described in Section 4(d), and if either the Change in Control does not constitute a “change in control” for purposes of Section 409A(a)(2)(A)(v) of the Code or Holder’s termination of employment does not constitute a “separation from service” (determined in accordance with Section 409A(a)(2)(A)(i) of the Code), then payment for the RSUs shall be made upon the earliest of (A) the Holder’s “separation from service” with the Company and its Subsidiaries (determined in accordance with Section 409A(a)(2)(A)(i) of the Code) within two years following the occurrence of a Change in Control that constitutes a “change in control” for purposes of Section 409A(a)(2)(A)(v) of the Code, (B) the date the RSUs would have become nonforfeitable under Section 1 had the Holder remained in continuous employment, (C) the Holder’s death, or (D) the Holder’s becoming Disabled.

(c)If the RSUs become payable on the Holder’s “separation from service” with the Company and its Subsidiaries within the meaning of Section 409A(a)(2)(A)(i) of the Code and the Holder is a “specified employee” as determined pursuant to procedures adopted by the Company in compliance with Section 409A of the Code, then payment for the RSUs shall be made on the earlier of the tenth business day of the seventh month after the date of the Holder’s “separation from service” with the Company and its Subsidiaries within the meaning of Section 409A(a)(2)(A)(i) of the Code or the Holder’s death.

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(d)Except to the extent provided by Section 409A of the Code and permitted by the Committee, no Common Shares may be issued to the Holder at a time earlier than otherwise expressly provided in this Agreement.

(e)The Company’s obligations to the Holder with respect to the RSUs will be satisfied in full upon the issuance of Common Shares corresponding to such RSUs.

6.Dividend Equivalents; Voting and Other Rights.   

(a)The Holder shall have no rights of ownership in the Common Shares underlying the RSUs and no right to vote the Common Shares underlying the RSUs until the date on which the Common Shares underlying the RSUs are issued or transferred to the Holder pursuant to Section 5 above.

(b)From and after the Date of Grant and until the earlier of (i) the time when the RSUs become vested and are paid in accordance with Section 5 hereof or (ii) the time when the Holder’s right to receive Common Shares in payment of the RSUs is forfeited in accordance with Section 4 hereof, on the record date for the Company paying a cash dividend (if any) to holders of Common Shares generally, the Holder shall be entitled to a current cash payment equal to the value of the product of (x) the dollar amount of the cash dividend paid per Common Share on such date and (y) the total number of unpaid RSUs covered by this Agreement.  Such dividend equivalents (if any) shall be paid in cash to the Holder within 30 days following the date that the Company pays the cash dividend (if any) to holders of Common Shares generally.

(c)The obligations of the Company under this Agreement will be merely that of an unfunded and unsecured promise of the Company to deliver Common Shares in the future, and the rights of the Holder will be no greater than that of an unsecured general creditor. No assets of the Company will be held or set aside as security for the obligations of the Company under this Agreement.

7.Taxes.  To the extent that the Company is required to withhold federal, state, local or foreign taxes or other amounts in connection with the delivery to the Holder of Common Shares or any other payment or vesting event with respect to the RSUs, the Holder and the Committee hereby agree that such obligation, in whole, will be satisfied by the Company withholding a portion of the Common Shares otherwise to be delivered with a fair market value equal to the amount of such obligation; provided, however, that any such obligation in connection with a cash dividend equivalent payment to the Holder pursuant to Section 6 of this Agreement will be satisfied, in whole, by the Company withholding a portion of such cash otherwise to be delivered with a value equal to the amount of such obligation.  Additionally, 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, local or foreign taxes or other amounts of any kind required by law to be withheld with respect to the award or vesting of the RSUs so long as such withholding does not result in any adverse tax consequences under Section 409A of the Code.

8.Deferral.  The Holder may, in his or her sole discretion, with respect to this award of RSUs, elect to participate in any equity deferred compensation plan established by the Company, in which case such plan shall govern RSUs deferred.

9.Subject to the Plan.  This Agreement is made and the RSUs 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 RSUs and the terms and conditions of the grant evidenced by this Agreement are subject to mandatory adjustment, including as provided under Section 11 of the Plan.  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.  In the event of a conflict between the terms of this Agreement, the Award Memorandum and the Plan, the terms of the Plan shall govern.  In the event of a conflict between the terms of this Agreement and the Award Memorandum, the terms of this Agreement shall govern.

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10.Restrictive Covenants.  In the event the Holder breaches any of the restrictive covenants set forth in the Holder’s Individual Agreement (if any) while such restrictive covenants are in effect, the Holder will forfeit any right to the RSUs, to the extent the RSUs have not been paid pursuant to Section 5, as of the date of such breach.

11.Compliance with Section 409A of the Code.  To the extent applicable, it is intended that this Agreement, the Award Memorandum and the Plan comply with the provisions of Section 409A of the Code.  This Agreement, the Award Memorandum and the Plan shall be administered in a manner consistent with this intent, and any provision that would cause this Agreement or the Plan to fail to satisfy Section 409A of the Code shall have no force or effect until amended to comply with Section 409A of the Code (which amendment may be retroactive to the extent permitted by Section 409A of the Code and may be made by the Company without the consent of the Holder).  Any reference in this Agreement to Section 409A of the Code will also include any proposed, temporary or final regulations, or any other guidance, promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service.

12.Amendments.  Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto; provided, however, that (a) no amendment shall materially adversely affect the material rights of the Holder under this Agreement without the Holder’s written consent, and (b) the Holder’s consent shall not be required to an amendment that is deemed necessary by the Company to ensure compliance with Section 409A of the Code.

13.Securities Law Compliance.

(a)The Holder agrees that the Company may impose such restrictions on the Common Shares issuable pursuant to the RSUs 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 issuable pursuant to the RSUs, 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) 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.

14.Rights of the Holder.  The grant of the RSUs under this Agreement to the Holder is a voluntary, discretionary award being made on a one-time basis and it does not constitute a commitment to make any future awards.  The grant of the RSUs and any payments made hereunder will not be considered salary or other compensation for purposes of any severance pay or similar allowance, except as otherwise required by law.  The granting of the RSUs 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 Holder’s employment at any time, subject to the terms of any Individual Agreement between the Company and the Holder.

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15.Relation to Other Benefits.  Any economic or other benefit to the Holder under this Agreement or the Plan shall not be taken into account in determining any benefits to which the Holder may be entitled under any profit-sharing, retirement or other benefit or compensation plan maintained by the Company or any of its Subsidiaries and shall not affect the amount of any life insurance coverage available to any beneficiary under any life insurance plan covering employees of the Company or any of its Subsidiaries.

16Governing 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.

17.Severability.  If any provision of this Agreement or the Award Memorandum or the application of any provision hereof or thereof to any person or circumstances is held invalid or unenforceable, the remainder of this Agreement and the Award Memorandum and the application of such provision in any other person or circumstances shall not be affected, and the provisions so held to be invalid or unenforceable shall be reformed to the extent (and only to the extent) necessary to make it enforceable and valid.

18.Electronic Delivery.  The Company may, in its sole discretion, deliver any documents related to the RSUs and the Holder’s participation in the Plan, or future awards that may be granted under the Plan, by electronic means or request the Holder’s consent to participate in the Plan by electronic means.  The Holder hereby consents to receive such documents by electronic delivery and, if requested, agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

19.Successors and Assigns.  Without limiting Section 3 hereof, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and assigns of the Holder, and the successors and assigns of the Company.

20.Acknowledgements.  By accepting the RSUs, the Holder hereby:

(a)acknowledges that he/she has received a copy of the Plan and a copy of the Company’s most recent Annual Report and other communications routinely distributed to the Company’s shareholders;

(b)accepts this Agreement and the RSUs 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 RSUs for his/her own account, for investment, and not with a view to or any present intention of selling or distributing the RSUs 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 RSUs will be made unless the RSUs 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 proposed transfer is exempt from such registration.

-6-

EXHIBIT 10.8

FORM AGREEMENT WITHOUT DEATH/DISABILITY VESTING

 

SITE CENTERS CORP.

PERFORMANCE-BASED RESTRICTED SHARE UNITS AWARD MEMORANDUM

 

 

1.          Holder:

__________ (the “Holder”)

2.          Plan:

SITE Centers Corp. 2019 Equity and Incentive Compensation Plan (the “Plan”)

3.          Date of Grant:

__________, 20__ (the “Date of Grant”)

4.          Number of Performance-Based Restricted Share Units:

__________

5.          Purchase Price:

$_____

6.          Performance Period

__________, 20__ through __________, 20__ (the “Performance Period”)

 

Additional provisions regarding the earning and payment of the performance-based Restricted Share Units subject hereto (the “PRSUs”), and other terms and conditions of the PRSUs, are specified in the attached Performance-Based Restricted Share Units Terms (the “Agreement”).  Capitalized terms not defined in this Performance-Based Restricted Share Units Award Memorandum (the “Award Memorandum”) shall have the meaning as defined in the Agreement, or if not defined therein, in the Plan.

 

ACCEPTANCE OF AWARD

 

I accept the PRSUs granted to me on the Date of Grant as specified in this Award Memorandum, and I agree to be bound by the terms and conditions of the Award Memorandum, the Agreement and the Plan.

 

SITE CENTERS CORP., an Ohio corporation

HOLDER

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

Name:

 

Title:

 

 

 

1

 

PERFORMANCE-BASED RESTRICTED SHARE UNITS TERMS

 

SITE Centers Corp., an Ohio corporation (the “Company”), has granted to the Holder named in the Award Memorandum the number of PRSUs set forth in the Award Memorandum effective as of Date of Grant specified in the Award Memorandum.  Subject to the degree of attainment of the Management Objectives described in Section 3 of these terms and conditions (the “Agreement”), as approved by the Committee and distributed to the Holder (the “Statement of Management Objectives”), the Holder may earn a percentage of the PRSUs as described in the Statement of Management Objectives.  Each PRSU shall then represent the right of the Holder to receive one Common Share subject to and upon the terms and conditions of this Agreement.  The PRSUs have been granted pursuant to the Plan and are subject to all provisions of the Plan and the Award Memorandum, which are hereby incorporated herein by reference, and to the following provisions of this Agreement (capitalized terms not defined in this Agreement shall have the meaning as defined in the Award Memorandum, or if not defined therein, in the Plan):

 

 

1.

Payment of PRSUs.  The PRSUs will become payable in accordance with the provisions of Section 6 of this Agreement if the Restriction Period lapses and the Holder’s right to receive payment for the PRSUs becomes nonforfeitable (“Vest,” “Vesting” or “Vested”) in accordance with Section 3 and Section 4 of this Agreement.

 

2.

PRSUs Not Transferrable.  Subject to Section 15 of the Plan, neither the PRSUs evidenced hereby nor any interest therein or in the Common Shares underlying such PRSUs shall be transferable prior to payment to the Holder pursuant to Section 6 hereof other than by will or pursuant to the laws of descent and distribution, or pursuant to a qualified domestic relations order (as defined in the Code or the Employee Retirement Income Security Act of 1974, as amended).

 

3.

Vesting of PRSUs.

 

(a)

Subject to the terms and conditions of Section 4 and Section 5 of this Agreement, the PRSUs will Vest on the basis of the relative achievement of the Management Objectives described in the Statement of Management Objectives approved by the Committee for the PRSUs for the Performance Period specified in the Award Memorandum if the Holder is in the continuous employ of the Company or a Subsidiary from the Date of Grant through the last day of the Performance Period.

 

(b)

For purposes of this Agreement, the continuous employment of the Holder with the Company or a Subsidiary will not be deemed to have been interrupted, and the Holder shall not be deemed to have ceased to be an employee of the Company or a Subsidiary, by reason of the transfer of the Holder’s employment among the Company and its Subsidiaries.

 

4.

Alternative Vesting of PRSUs.  Notwithstanding the provisions of Section 3 of this Agreement, and subject to the payment provisions of Section 6 hereof, the Holder shall Vest in some or all of the PRSUs under the following circumstances (to the extent the PRSUs have not been forfeited or previously Vested):

2

 

 

(a)

Certain Qualifying Terminations:  If the Holder’s employment with the Company or any Subsidiary terminates due to termination by the Company or any Subsidiary without Cause or termination by the Holder for Good Reason, then, on the date of such termination of employment (notwithstanding anything in the Statement of Management Objectives to the contrary):  (i) the PRSUs will be earned on the basis of the relative achievement of the applicable Management Objectives determined in accordance with Section 3(a), except that the Performance Period will be deemed to have ended on the date of such termination of employment; and (ii) the Holder will Vest in the number of PRSUs earned in accordance with Section 4(a)(i).  PRSUs that Vest in accordance with this Section 4(a) will be paid as provided for in Section 6 of this Agreement.

 

(b)

Change in Control.

 

(i)

If at any time before the PRSUs have Vested or been forfeited, and while the Holder is continuously employed by the Company or a Subsidiary, a Change in Control occurs, then, except to the extent that a Replacement Award is provided to the Holder in accordance with Section 4(b)(ii) to continue, replace or assume the PRSUs covered by this Agreement (the “Replaced Award”), on the date of such Change in Control (notwithstanding anything in the Statement of Management Objectives to the contrary):  (A) the PRSUs will be earned on the basis of the relative achievement of the applicable Management Objectives determined in accordance with Section 3(a), except that the Performance Period will be deemed to have ended on the date of such Change in Control; and (B) the Holder will Vest in the number of PRSUs earned in accordance with Section 4(b)(i)(A).  PRSUs that Vest in accordance with this Section 4(b)(i) will be paid as provided for in Section 6 of this Agreement.

 

(ii)

For purposes of this Agreement, a “Replacement Award” means an award (A) of the same type (e.g., performance-based restricted stock units), (B) that has a value at least equal to the value of the Replaced Award, (C) that relates to publicly traded equity securities of the Company or its successor in the Change in Control or another entity that is affiliated with the Company or its successor following the Change in Control, (D) if the Holder holding the Replaced Award is subject to U.S. federal income tax under the Code, the tax consequences of which to such Holder under the Code are not less favorable to such Holder than the tax consequences of the Replaced Award, and (E) the other terms and conditions of which are not less favorable to the Holder holding the Replaced Award than the terms and conditions of the Replaced Award (including the provisions that would apply for certain qualifying terminations as set forth in Section 4(a) or in the event of a subsequent Change in Control).  A Replacement Award may be granted only to the extent it does not result in the Replaced Award or Replacement Award failing to comply with or be exempt from Section 409A of the Code.  The determination of whether the conditions of this Section 4(b)(ii) are satisfied will be made by the Committee, as constituted immediately before the Change in Control, in its reasonable sole discretion.

3

 

 

(iii)

If a Replacement Award is provided, notwithstanding anything in this Agreement to the contrary, any outstanding PRSUs that at the time of the Change in Control are not subject to a "substantial risk of forfeiture" (within the meaning of Section 409A of the Code) will be deemed to be Vested at the time of such Change in Control.

 

(c)

Certain Other Terminations.  If the Holder’s employment with the Company or any Subsidiary terminates for any reason following the expiration of the “Contract Period” provided for under the Employment Agreement (as the same may be extended from time to time), other than a termination due to death or disability (as reasonably determined in good faith by the Committee) or a termination by the Company or a Subsidiary for Cause, and Sections 4(a) and 4(b) are not applicable, then (notwithstanding anything in the Statement of Management Objectives to the contrary):  (i) the PRSUs will be earned on the basis of the relative achievement of the applicable Management Objectives for the entire original Performance Period determined in accordance with Section 3(a); and (ii) the Holder will Vest in the number of PRSUs earned in accordance with Section 4(c)(i).  PRSUs that Vest in accordance with this Section 4(c) will be paid as provided for in Section 6 of this Agreement.

 

5.

Forfeiture of PRSUs.  Any PRSUs that have not Vested pursuant to Section 3 or Section 4 at the end of the Performance Period will be forfeited automatically and without further notice after the end of the Performance Period (or earlier if, and on such date that, the Holder ceases to be an employee of the Company or a Subsidiary prior to the end of the Performance Period for any reason other than as described in Section 4).

 

6.

Form and Time of Payment of PRSUs.  Subject to Section 5, the PRSUs (to the extent Vested) will be payable in Common Shares as follows:

 

(a)

Except as otherwise provided in Section 6(b) or 6(c), payment for Vested PRSUs will be made no later than May 15, 20__.

 

(b)

In the event that PRSUs Vest as provided in Section 4(a), payment for Vested PRSUs will be made no later than March 15 of the calendar year immediately following the calendar year in which the Holder’s employment terminates pursuant to Section 4(a).

 

(c)

In the event that PRSUs Vest as provided in Section 4(b)(i) or 4(b)(iii), payment for Vested PRSUs will be made no later than March 15 of the calendar year immediately following the calendar year in which the Change in Control occurs.

 

7.

Certain Defined Terms.  For purposes of this Agreement, notwithstanding anything to the contrary in the Plan, the following terms have the following definitions:

 

(a)

“Cause” shall have the meaning ascribed to such term in the Employment Agreement.

 

(b)

“Employment Agreement” means the Employment Agreement, dated as of __________, 20__, by and between the Holder and the Company (including any successor agreement).

 

(c)

“Good Reason” shall have the meaning ascribed to such term in the Employment Agreement.

4

 

 

8.

Payment of Dividend Equivalents.  With respect to each of the PRSUs covered by this Agreement, the Holder shall be credited on the records of the Company with dividend equivalents in an amount equal to the amount per Common Share of any cash dividends declared by the Board on the outstanding Common Shares during the period beginning on the Date of Grant and ending either on the date on which the Holder receives payment for the PRSUs pursuant to Section 6 hereof or at the time when the PRSUs are forfeited in accordance with Section 5 of this Agreement.  These dividend equivalents will accumulate without interest and, subject to the terms and conditions of this Agreement, will be paid in the form of Common Shares at the same time, to the same extent and in the same manner as the PRSUs for which the dividend equivalents were credited, based on the Market Value per Share on the trading day immediately preceding the date of payment.

 

9.

Compensation Recovery.  Notwithstanding anything in this Agreement to the contrary, the Holder acknowledges and agrees that this Agreement and the award described herein (and any settlement thereof) are subject to the terms and conditions of the Company’s clawback policy (if any) as may be in effect from time to time specifically to implement Section 10D of the Exchange Act and any applicable rules or regulations promulgated thereunder (including applicable rules and regulations of any national securities exchange on which the Common Shares may be traded) (the “Compensation Recovery Policy”), and that applicable provisions of this Agreement shall be deemed superseded by and subject to the terms and conditions of the Compensation Recovery Policy from and after the effective date thereof.

 

10.

Restrictive Covenants.  In the event the Holder breaches any of the restrictive covenants set forth in the Employment Agreement while such restrictive covenants are in effect, the Holder will forfeit any right to the PRSUs, to the extent the PRSUs have not been paid pursuant to Section 6, as of the date of such breach.

 

11.

Compliance with Law.  The Company shall make reasonable efforts to comply with all applicable federal and state securities laws; provided, however, notwithstanding any other provision of this Agreement, the Company shall not be obligated to issue any of the Common Shares covered by this Agreement if the issuance thereof would result in violation of any such law.

 

12.

Adjustments.  The PRSUs and the number of Common Shares subject to each PRSU, and the other terms and conditions of the grant evidenced by this Agreement, are subject to mandatory adjustment, including as provided in Section 11 of the Plan.

 

13.

Withholding Taxes.  To the extent that the Company is required to withhold federal, state, local or foreign taxes or other amounts in connection with the delivery to the Holder of Common Shares or any other payment to the Holder or any other payment or vesting event with respect to the PRSUs, the Holder and the Committee hereby agree that such obligation, in whole, will be satisfied by the Company withholding a portion of the Common Shares otherwise to be delivered with a fair market value equal to the amount of such obligation.  Additionally, 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, local or foreign taxes or other amounts of any kind required by law to be withheld with respect to the award or vesting of the PRSUs so long as such withholding does not result in any adverse tax consequences under Section 409A of the Code.

5

 

 

14.

No Right to Future Awards or Continued Employment.  The grant of the PRSUs under this Agreement to the Holder is a voluntary, discretionary award being made on a one-time basis and it does not constitute a commitment to make any future awards.  The grant of the PRSUs and any payments made hereunder will not be considered salary or other compensation for purposes of any severance pay or similar allowance, except as otherwise required by law.  No provision of this Agreement will limit in any way whatsoever any right that the Company or a Subsidiary may otherwise have to terminate the employment of the Holder at any time, subject to the terms of the Employment Agreement.

 

15.

Relation to Other Benefits.  Any economic or other benefit to the Holder under this Agreement or the Plan will not be taken into account in determining any benefits to which the Holder may be entitled under any profit‑sharing, retirement or other benefit or compensation plan maintained by the Company or a Subsidiary and will not affect the amount of any life insurance coverage available to any beneficiary under any life insurance plan covering employees of the Company or a Subsidiary.

 

16.

Amendments.  Any amendment to the Plan will be deemed to be an amendment to this Agreement to the extent that the amendment is applicable to this Agreement; provided, however, that no amendment will materially adversely affect the material rights of the Holder with respect to the Common Shares or other securities covered by this Agreement without the Holder’s consent.  Notwithstanding the foregoing, the limitation requiring the consent of the Holder to certain amendments will not apply to any amendment that is deemed necessary by the Company to ensure compliance with Section 409A of the Code or Section 10D of the Exchange Act.

 

17.

Subject to Plan.  This Agreement is made and the PRSUs 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.  In the event of a conflict between the terms of this Agreement, the Award Memorandum and the Plan, the terms of the Plan shall govern.  In the event of a conflict between the terms of this Agreement and the Award Memorandum, the terms of this Agreement shall govern.

 

18.

Severability.  In the event that one or more of the provisions of this Agreement or the Award Memorandum is invalidated for any reason by a court of competent jurisdiction, any provision so invalidated will be deemed to be separable from the other provisions of this Agreement or the Award Memorandum, as applicable, and the remaining provisions of this Agreement and the Award Memorandum will continue to be valid and fully enforceable.

 

19.

Governing Law.  This Agreement is made under, and shall be construed in accordance with, the internal substantive laws of the State of Ohio.

 

20.

Section 409A of the Code.  To the extent applicable, it is intended that this Agreement, the Award Memorandum and the Plan comply with or be exempt from the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to the Holder.  This Agreement, the Award Memorandum and the Plan shall be administered in a manner consistent with this intent.  Reference to Section 409A of the Code is to Section 409A of the Internal Revenue Code of 1986, as amended, and will also include any regulations or any other formal guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service.

6

 

 

21.

Electronic Delivery.  The Company may, in its sole discretion, deliver any documents related to the PRSUs and the Holder’s participation in the Plan, or future awards that may be granted under the Plan, by electronic means or request the Holder’s consent to participate in the Plan by electronic means.  The Holder hereby consents to receive such documents by electronic delivery and, if requested, agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

 

22.

Successors and Assigns.  Without limiting Section 2 hereof, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and assigns of the Holder, and the successors and assigns of the Company.

 

23.

Acknowledgements.  By accepting the PRSUs, the Holder hereby:

 

(a)

acknowledges that he/she has received a copy of the Plan and a copy of the Company’s most recent Annual Report and other communications routinely distributed to the Company’s shareholders;

 

(b)

accepts this Agreement and the PRSUs 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 PRSUs for his/her own account, for investment, and not with a view to or any present intention of selling or distributing the PRSUs 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 PRSUs will be made unless the PRSUs 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 proposed transfer is exempt from such registration.

 

 

7

 

Statement of Management Objectives

This Statement of Management Objectives applies to the PRSUs granted to the Holder on the Date of Grant and applies with respect to the Performance-Based Restricted Share Units Terms (the “Agreement”) and the Performance-Based Restricted Share Units Award Memorandum between the Company and the Holder (the “Award Memorandum”).  Capitalized terms used in this Statement of Management Objectives that are not specifically defined in this Statement of Management Objectives have the meanings assigned to them in the Agreement, the Award Memorandum or in the Plan, as applicable.  

1.

Definitions.  For purposes hereof:

 

(a)

“Peer Group” means the following entities:  __________.  In terms of mandatory adjustments to the Peer Group during the Performance Period: (i) if any member of the Peer Group files for bankruptcy and/or liquidation, is operating under bankruptcy protection, or is delisted from its primary stock exchange because it fails to meet the exchange listing requirement, then such entity will remain in the Peer Group, but RTSR for the Performance Period will be calculated as if such entity achieved Total Shareholder Return placing it at the bottom (chronologically, if more than one such entity) of the Peer Group; (ii) if, by the last day of the Performance Period, any member of the Peer Group has been acquired and/or is no longer existing as a public company that is traded on its primary stock exchange (other than for the reasons as described in subsection (i) above), then such entity will not remain in the Peer Group and RTSR for the Performance Period will be calculated as if such entity had never been a member of the Peer Group; and (iii) except as otherwise described in subsection (i) and (ii) above, for purposes of this Statement of Management Objectives, for each of the members of the Peer Group, such entity shall be deemed to include any successor to all or substantially all of the primary business of such entity at end of the Performance Period.

 

(b)

“Relative Total Shareholder Return” or “RTSR” means the percentile rank of the Company’s Total Shareholder Return as compared to (but not included in) the Total Shareholder Returns of all members of the Peer Group, ranked in descending order, at the end of the Performance Period.

 

(c)

“Total Shareholder Return” means, with respect to each of the Common Shares and the common stock of each of the members of the Peer Group, a rate of return reflecting stock price appreciation, plus the reinvestment of dividends in additional shares of stock, from the beginning of the Performance Period through the end of the Performance Period.  For purposes of calculating Total Shareholder Return for each of the Company and the members of the Peer Group, the beginning stock price will be based on the closing price on the trading day immediately prior to the first day of the Performance Period on the principal stock exchange on which the stock then traded and the ending stock price will be based on the closing price on the last day of the Performance Period on the principal stock exchange on which the stock then trades.

8

 

2.

RTSR Performance Matrix.

From 0% to 200% of the PRSUs will be earned based on achievement of RTSR during the Performance Period as follows:

 

Performance Level

RTSR

PRSUs Earned

Below Threshold

Below [   ] percentile

0%

Threshold

[   ] percentile

50%

Target

[   ] percentile

100%

Maximum

[   ] percentile or above

200%

 

3.

Number of PRSUs Earned.  Following the Performance Period, the Committee shall determine whether and to what extent RTSR goals have been satisfied for the Performance Period and shall determine the number of PRSUs that shall become Vested hereunder and under the Agreement on the basis of the following, subject to Section 4 of this Statement of Management Objectives:

 

(a)

Below Threshold.  If, upon the conclusion of the Performance Period, RTSR for the Performance Period falls below the threshold level, as set forth in the Performance Matrix, no PRSUs shall become Vested.

 

(b)

Threshold.  If, upon the conclusion of the Performance Period, RTSR for the Performance Period equals the threshold level, as set forth in the Performance Matrix, 50% of the PRSUs (rounded up to the nearest whole number of PRSUs) shall become Vested.

 

(c)

Between Threshold and Target.  If, upon the conclusion of the Performance Period, RTSR for the Performance Period exceeds the threshold level, but is less than the target level, as set forth in the Performance Matrix, a percentage between 50% and 100% (determined on the basis of straight-line mathematical interpolation) of the PRSUs (rounded up to the nearest whole number of PRSUs) shall become Vested.

 

(d)

Target.  If, upon the conclusion of the Performance Period, RTSR for the Performance Period equals the target level, as set forth in the Performance Matrix, 100% of the PRSUs shall become Vested.

 

(e)

Between Target and Maximum.  If, upon the conclusion of the Performance Period, RTSR for the Performance Period exceeds the target level, but is less than the maximum level, as set forth in the Performance Matrix, a percentage between 100% and 200% (determined on the basis of straight-line mathematical interpolation) of the PRSUs (rounded up to the nearest whole number of PRSUs) shall become Vested.

 

(f)

Equals or Exceeds Maximum.  If, upon the conclusion of the Performance Period, RTSR for the Performance Period equals or exceeds the maximum level, as set forth in the Performance Matrix, 200% of the PRSUs (rounded up to the nearest whole number of PRSUs) shall become Vested.

4.

Absolute TSR Modifier.  Notwithstanding anything in this Statement of Management Objectives to the contrary, the number of PRSUs that become Vested pursuant to Section 3 of this Statement of Management Objectives will be reduced by __________ (_____) in the event that the Company’s Total Shareholder Return for the Performance Period is negative.

9

EXHIBIT 10.9

FORM AGREEMENT WITH DEATH/DISABILITY VESTING

 

SITE CENTERS CORP.

PERFORMANCE-BASED RESTRICTED SHARE UNITS AWARD MEMORANDUM

 

 

1.          Holder:

__________ (the “Holder”)

2.          Plan:

SITE Centers Corp. 2019 Equity and Incentive Compensation Plan (the “Plan”)

3.          Date of Grant:

__________, 20__ (the “Date of Grant”)

4.          Number of Performance-Based Restricted Share Units:

__________

5.          Purchase Price:

$_____

6.          Performance Period

__________, 20__ through __________, 20__ (the “Performance Period”)

 

Additional provisions regarding the earning and payment of the performance-based Restricted Share Units subject hereto (the “PRSUs”), and other terms and conditions of the PRSUs, are specified in the attached Performance-Based Restricted Share Units Terms (the “Agreement”).  Capitalized terms not defined in this Performance-Based Restricted Share Units Award Memorandum (the “Award Memorandum”) shall have the meaning as defined in the Agreement, or if not defined therein, in the Plan.

 

ACCEPTANCE OF AWARD

 

I accept the PRSUs granted to me on the Date of Grant as specified in this Award Memorandum, and I agree to be bound by the terms and conditions of the Award Memorandum, the Agreement and the Plan.

 

SITE CENTERS CORP., an Ohio corporation

HOLDER

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

Name:

 

Title:

 

 

 

 

 

PERFORMANCE-BASED RESTRICTED SHARE UNITS TERMS

 

SITE Centers Corp., an Ohio corporation (the “Company”), has granted to the Holder named in the Award Memorandum the number of PRSUs set forth in the Award Memorandum effective as of Date of Grant specified in the Award Memorandum.  Subject to the degree of attainment of the Management Objectives described in Section 3 of these terms and conditions (the “Agreement”), as approved by the Committee and distributed to the Holder (the “Statement of Management Objectives”), the Holder may earn a percentage of the PRSUs as described in the Statement of Management Objectives.  Each PRSU shall then represent the right of the Holder to receive one Common Share subject to and upon the terms and conditions of this Agreement.  The PRSUs have been granted pursuant to the Plan and are subject to all provisions of the Plan and the Award Memorandum, which are hereby incorporated herein by reference, and to the following provisions of this Agreement (capitalized terms not defined in this Agreement shall have the meaning as defined in the Award Memorandum, or if not defined therein, in the Plan):

 

 

1.

Payment of PRSUs.  The PRSUs will become payable in accordance with the provisions of Section 6 of this Agreement if the Restriction Period lapses and the Holder’s right to receive payment for the PRSUs becomes nonforfeitable (“Vest,” “Vesting” or “Vested”) in accordance with Section 3 and Section 4 of this Agreement.

 

2.

PRSUs Not Transferrable.  Subject to Section 15 of the Plan, neither the PRSUs evidenced hereby nor any interest therein or in the Common Shares underlying such PRSUs shall be transferable prior to payment to the Holder pursuant to Section 6 hereof other than by will or pursuant to the laws of descent and distribution, or pursuant to a qualified domestic relations order (as defined in the Code or the Employee Retirement Income Security Act of 1974, as amended).

 

3.

Vesting of PRSUs.

 

(a)

Subject to the terms and conditions of Section 4 and Section 5 of this Agreement, the PRSUs will Vest on the basis of the relative achievement of the Management Objectives described in the Statement of Management Objectives approved by the Committee for the PRSUs for the Performance Period specified in the Award Memorandum if the Holder is in the continuous employ of the Company or a Subsidiary from the Date of Grant through the last day of the Performance Period.

 

(b)

For purposes of this Agreement, the continuous employment of the Holder with the Company or a Subsidiary will not be deemed to have been interrupted, and the Holder shall not be deemed to have ceased to be an employee of the Company or a Subsidiary, by reason of the transfer of the Holder’s employment among the Company and its Subsidiaries.

 

4.

Alternative Vesting of PRSUs.  Notwithstanding the provisions of Section 3 of this Agreement, and subject to the payment provisions of Section 6 hereof, the Holder shall Vest in some or all of the PRSUs under the following circumstances (to the extent the PRSUs have not been forfeited or previously Vested):

2

 

 

(a)

Certain Qualifying Terminations:  If the Holder’s employment with the Company or any Subsidiary terminates due to death, termination by the Company or any Subsidiary due to Disability, termination by the Company or any Subsidiary without Cause or termination by the Holder for Good Reason, then, on the date of such termination of employment (notwithstanding anything in the Statement of Management Objectives to the contrary):  (i) the PRSUs will be earned on the basis of the relative achievement of the applicable Management Objectives determined in accordance with Section 3(a), except that the Performance Period will be deemed to have ended on the date of such termination of employment; and (ii) the Holder will Vest in the number of PRSUs earned in accordance with Section 4(a)(i).  PRSUs that Vest in accordance with this Section 4(a) will be paid as provided for in Section 6 of this Agreement.

 

(b)

Change in Control.

 

(i)

If at any time before the PRSUs have Vested or been forfeited, and while the Holder is continuously employed by the Company or a Subsidiary, a Change in Control occurs, then, except to the extent that a Replacement Award is provided to the Holder in accordance with Section 4(b)(ii) to continue, replace or assume the PRSUs covered by this Agreement (the “Replaced Award”), on the date of such Change in Control (notwithstanding anything in the Statement of Management Objectives to the contrary):  (A) the PRSUs will be earned on the basis of the relative achievement of the applicable Management Objectives determined in accordance with Section 3(a), except that the Performance Period will be deemed to have ended on the date of such Change in Control; and (B) the Holder will Vest in the number of PRSUs earned in accordance with Section 4(b)(i)(A).  PRSUs that Vest in accordance with this Section 4(b)(i) will be paid as provided for in Section 6 of this Agreement.

 

(ii)

For purposes of this Agreement, a “Replacement Award” means an award (A) of the same type (e.g., performance-based restricted stock units), (B) that has a value at least equal to the value of the Replaced Award, (C) that relates to publicly traded equity securities of the Company or its successor in the Change in Control or another entity that is affiliated with the Company or its successor following the Change in Control, (D) if the Holder holding the Replaced Award is subject to U.S. federal income tax under the Code, the tax consequences of which to such Holder under the Code are not less favorable to such Holder than the tax consequences of the Replaced Award, and (E) the other terms and conditions of which are not less favorable to the Holder holding the Replaced Award than the terms and conditions of the Replaced Award (including the provisions that would apply for certain qualifying terminations as set forth in Section 4(a) or in the event of a subsequent Change in Control).  A Replacement Award may be granted only to the extent it does not result in the Replaced Award or Replacement Award failing to comply with or be exempt from Section 409A of the Code.  The determination of whether the conditions of this Section 4(b)(ii) are satisfied will be made by the Committee, as constituted immediately before the Change in Control, in its reasonable sole discretion.

3

 

 

(iii)

If a Replacement Award is provided, notwithstanding anything in this Agreement to the contrary, any outstanding PRSUs that at the time of the Change in Control are not subject to a "substantial risk of forfeiture" (within the meaning of Section 409A of the Code) will be deemed to be Vested at the time of such Change in Control.

 

(c)

Certain Other Terminations.  If the Holder’s employment with the Company or any Subsidiary terminates for any reason following the expiration of the “Contract Period” provided for under the Employment Agreement (as the same may be extended from time to time), other than a termination by the Company or a Subsidiary for Cause, and Sections 4(a) and 4(b) are not applicable, then (notwithstanding anything in the Statement of Management Objectives to the contrary):  (i) the PRSUs will be earned on the basis of the relative achievement of the applicable Management Objectives for the entire original Performance Period determined in accordance with Section 3(a); and (ii) the Holder will Vest in the number of PRSUs earned in accordance with Section 4(c)(i).  PRSUs that Vest in accordance with this Section 4(c) will be paid as provided for in Section 6 of this Agreement.

 

5.

Forfeiture of PRSUs.  Any PRSUs that have not Vested pursuant to Section 3 or Section 4 at the end of the Performance Period will be forfeited automatically and without further notice after the end of the Performance Period (or earlier if, and on such date that, the Holder ceases to be an employee of the Company or a Subsidiary prior to the end of the Performance Period for any reason other than as described in Section 4).

 

6.

Form and Time of Payment of PRSUs.  Subject to Section 5, the PRSUs (to the extent Vested) will be payable in Common Shares as follows:

 

(a)

Except as otherwise provided in Section 6(b) or 6(c), payment for Vested PRSUs will be made no later than May 15, 20__.

 

(b)

In the event that PRSUs Vest as provided in Section 4(a), payment for Vested PRSUs will be made no later than March 15 of the calendar year immediately following the calendar year in which the Holder’s employment terminates pursuant to Section 4(a).

 

(c)

In the event that PRSUs Vest as provided in Section 4(b)(i) or 4(b)(iii), payment for Vested PRSUs will be made no later than March 15 of the calendar year immediately following the calendar year in which the Change in Control occurs.

 

7.

Certain Defined Terms.  For purposes of this Agreement, notwithstanding anything to the contrary in the Plan, the following terms have the following definitions:

 

(a)

“Cause” shall have the meaning ascribed to such term in the Employment Agreement.

 

(b)

“Disability” shall have the meaning ascribed to the term “Total Disability” in the Employment Agreement.

 

(c)

“Employment Agreement” means the Employment Agreement, dated as of __________, 20__, by and between the Holder and the Company (including any successor agreement).

 

(d)

“Good Reason” shall have the meaning ascribed to such term in the Employment Agreement.

4

 

 

8.

Payment of Dividend Equivalents.  With respect to each of the PRSUs covered by this Agreement, the Holder shall be credited on the records of the Company with dividend equivalents in an amount equal to the amount per Common Share of any cash dividends declared by the Board on the outstanding Common Shares during the period beginning on the Date of Grant and ending either on the date on which the Holder receives payment for the PRSUs pursuant to Section 6 hereof or at the time when the PRSUs are forfeited in accordance with Section 5 of this Agreement.  These dividend equivalents will accumulate without interest and, subject to the terms and conditions of this Agreement, will be paid in the form of Common Shares at the same time, to the same extent and in the same manner as the PRSUs for which the dividend equivalents were credited, based on the Market Value per Share on the trading day immediately preceding the date of payment.

 

9.

Compensation Recovery.  Notwithstanding anything in this Agreement to the contrary, the Holder acknowledges and agrees that this Agreement and the award described herein (and any settlement thereof) are subject to the terms and conditions of the Company’s clawback policy (if any) as may be in effect from time to time specifically to implement Section 10D of the Exchange Act and any applicable rules or regulations promulgated thereunder (including applicable rules and regulations of any national securities exchange on which the Common Shares may be traded) (the “Compensation Recovery Policy”), and that applicable provisions of this Agreement shall be deemed superseded by and subject to the terms and conditions of the Compensation Recovery Policy from and after the effective date thereof.

 

10.

Restrictive Covenants.  In the event the Holder breaches any of the restrictive covenants set forth in the Employment Agreement while such restrictive covenants are in effect, the Holder will forfeit any right to the PRSUs, to the extent the PRSUs have not been paid pursuant to Section 6, as of the date of such breach.

 

11.

Compliance with Law.  The Company shall make reasonable efforts to comply with all applicable federal and state securities laws; provided, however, notwithstanding any other provision of this Agreement, the Company shall not be obligated to issue any of the Common Shares covered by this Agreement if the issuance thereof would result in violation of any such law.

 

12.

Adjustments.  The PRSUs and the number of Common Shares subject to each PRSU, and the other terms and conditions of the grant evidenced by this Agreement, are subject to mandatory adjustment, including as provided in Section 11 of the Plan.

 

13.

Withholding Taxes.  To the extent that the Company is required to withhold federal, state, local or foreign taxes or other amounts in connection with the delivery to the Holder of Common Shares or any other payment to the Holder or any other payment or vesting event with respect to the PRSUs, the Holder and the Committee hereby agree that such obligation, in whole, will be satisfied by the Company withholding a portion of the Common Shares otherwise to be delivered with a fair market value equal to the amount of such obligation.  Additionally, 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, local or foreign taxes or other amounts of any kind required by law to be withheld with respect to the award or vesting of the PRSUs so long as such withholding does not result in any adverse tax consequences under Section 409A of the Code.

5

 

 

14.

No Right to Future Awards or Continued Employment.  The grant of the PRSUs under this Agreement to the Holder is a voluntary, discretionary award being made on a one-time basis and it does not constitute a commitment to make any future awards.  The grant of the PRSUs and any payments made hereunder will not be considered salary or other compensation for purposes of any severance pay or similar allowance, except as otherwise required by law.  No provision of this Agreement will limit in any way whatsoever any right that the Company or a Subsidiary may otherwise have to terminate the employment of the Holder at any time, subject to the terms of the Employment Agreement.

 

15.

Relation to Other Benefits.  Any economic or other benefit to the Holder under this Agreement or the Plan will not be taken into account in determining any benefits to which the Holder may be entitled under any profit‑sharing, retirement or other benefit or compensation plan maintained by the Company or a Subsidiary and will not affect the amount of any life insurance coverage available to any beneficiary under any life insurance plan covering employees of the Company or a Subsidiary.

 

16.

Amendments.  Any amendment to the Plan will be deemed to be an amendment to this Agreement to the extent that the amendment is applicable to this Agreement; provided, however, that no amendment will materially adversely affect the material rights of the Holder with respect to the Common Shares or other securities covered by this Agreement without the Holder’s consent.  Notwithstanding the foregoing, the limitation requiring the consent of the Holder to certain amendments will not apply to any amendment that is deemed necessary by the Company to ensure compliance with Section 409A of the Code or Section 10D of the Exchange Act.

 

17.

Subject to Plan.  This Agreement is made and the PRSUs 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.  In the event of a conflict between the terms of this Agreement, the Award Memorandum and the Plan, the terms of the Plan shall govern.  In the event of a conflict between the terms of this Agreement and the Award Memorandum, the terms of this Agreement shall govern.

 

18.

Severability.  In the event that one or more of the provisions of this Agreement or the Award Memorandum is invalidated for any reason by a court of competent jurisdiction, any provision so invalidated will be deemed to be separable from the other provisions of this Agreement or the Award Memorandum, as applicable, and the remaining provisions of this Agreement and the Award Memorandum will continue to be valid and fully enforceable.

 

19.

Governing Law.  This Agreement is made under, and shall be construed in accordance with, the internal substantive laws of the State of Ohio.

 

20.

Section 409A of the Code.  To the extent applicable, it is intended that this Agreement, the Award Memorandum and the Plan comply with or be exempt from the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to the Holder.  This Agreement, the Award Memorandum and the Plan shall be administered in a manner consistent with this intent.  Reference to Section 409A of the Code is to Section 409A of the Internal Revenue Code of 1986, as amended, and will also include any regulations or any other formal guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service.

6

 

 

21.

Electronic Delivery.  The Company may, in its sole discretion, deliver any documents related to the PRSUs and the Holder’s participation in the Plan, or future awards that may be granted under the Plan, by electronic means or request the Holder’s consent to participate in the Plan by electronic means.  The Holder hereby consents to receive such documents by electronic delivery and, if requested, agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

 

22.

Successors and Assigns.  Without limiting Section 2 hereof, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and assigns of the Holder, and the successors and assigns of the Company.

 

23.

Acknowledgements.  By accepting the PRSUs, the Holder hereby:

 

(a)

acknowledges that he/she has received a copy of the Plan and a copy of the Company’s most recent Annual Report and other communications routinely distributed to the Company’s shareholders;

 

(b)

accepts this Agreement and the PRSUs 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 PRSUs for his/her own account, for investment, and not with a view to or any present intention of selling or distributing the PRSUs 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 PRSUs will be made unless the PRSUs 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 proposed transfer is exempt from such registration.

 

 

7

 

Statement of Management Objectives

This Statement of Management Objectives applies to the PRSUs granted to the Holder on the Date of Grant and applies with respect to the Performance-Based Restricted Share Units Terms (the “Agreement”) and the Performance-Based Restricted Share Units Award Memorandum between the Company and the Holder (the “Award Memorandum”).  Capitalized terms used in this Statement of Management Objectives that are not specifically defined in this Statement of Management Objectives have the meanings assigned to them in the Agreement, the Award Memorandum or in the Plan, as applicable.  

1.

Definitions.  For purposes hereof:

 

(a)

“Peer Group” means the following entities:  __________.  In terms of mandatory adjustments to the Peer Group during the Performance Period: (i) if any member of the Peer Group files for bankruptcy and/or liquidation, is operating under bankruptcy protection, or is delisted from its primary stock exchange because it fails to meet the exchange listing requirement, then such entity will remain in the Peer Group, but RTSR for the Performance Period will be calculated as if such entity achieved Total Shareholder Return placing it at the bottom (chronologically, if more than one such entity) of the Peer Group; (ii) if, by the last day of the Performance Period, any member of the Peer Group has been acquired and/or is no longer existing as a public company that is traded on its primary stock exchange (other than for the reasons as described in subsection (i) above), then such entity will not remain in the Peer Group and RTSR for the Performance Period will be calculated as if such entity had never been a member of the Peer Group; and (iii) except as otherwise described in subsection (i) and (ii) above, for purposes of this Statement of Management Objectives, for each of the members of the Peer Group, such entity shall be deemed to include any successor to all or substantially all of the primary business of such entity at end of the Performance Period.

 

(b)

“Relative Total Shareholder Return” or “RTSR” means the percentile rank of the Company’s Total Shareholder Return as compared to (but not included in) the Total Shareholder Returns of all members of the Peer Group, ranked in descending order, at the end of the Performance Period.

 

(c)

“Total Shareholder Return” means, with respect to each of the Common Shares and the common stock of each of the members of the Peer Group, a rate of return reflecting stock price appreciation, plus the reinvestment of dividends in additional shares of stock, from the beginning of the Performance Period through the end of the Performance Period.  For purposes of calculating Total Shareholder Return for each of the Company and the members of the Peer Group, the beginning stock price will be based on the closing price on the trading day immediately prior to the first day of the Performance Period on the principal stock exchange on which the stock then traded and the ending stock price will be based on the closing price on the last day of the Performance Period on the principal stock exchange on which the stock then trades.

 

 

2.

RTSR Performance Matrix.

From 0% to 200% of the PRSUs will be earned based on achievement of RTSR during the Performance Period as follows:

 

Performance Level

RTSR

PRSUs Earned

Below Threshold

Below [   ] percentile

0%

Threshold

[   ] percentile

50%

Target

[   ] percentile

100%

Maximum

[   ] percentile or above

200%

 

3.

Number of PRSUs Earned.  Following the Performance Period, the Committee shall determine whether and to what extent RTSR goals have been satisfied for the Performance Period and shall determine the number of PRSUs that shall become Vested hereunder and under the Agreement on the basis of the following, subject to Section 4 of this Statement of Management Objectives:

 

(a)

Below Threshold.  If, upon the conclusion of the Performance Period, RTSR for the Performance Period falls below the threshold level, as set forth in the Performance Matrix, no PRSUs shall become Vested.

 

(b)

Threshold.  If, upon the conclusion of the Performance Period, RTSR for the Performance Period equals the threshold level, as set forth in the Performance Matrix, 50% of the PRSUs (rounded up to the nearest whole number of PRSUs) shall become Vested.

 

(c)

Between Threshold and Target.  If, upon the conclusion of the Performance Period, RTSR for the Performance Period exceeds the threshold level, but is less than the target level, as set forth in the Performance Matrix, a percentage between 50% and 100% (determined on the basis of straight-line mathematical interpolation) of the PRSUs (rounded up to the nearest whole number of PRSUs) shall become Vested.

 

(d)

Target.  If, upon the conclusion of the Performance Period, RTSR for the Performance Period equals the target level, as set forth in the Performance Matrix, 100% of the PRSUs shall become Vested.

 

(e)

Between Target and Maximum.  If, upon the conclusion of the Performance Period, RTSR for the Performance Period exceeds the target level, but is less than the maximum level, as set forth in the Performance Matrix, a percentage between 100% and 200% (determined on the basis of straight-line mathematical interpolation) of the PRSUs (rounded up to the nearest whole number of PRSUs) shall become Vested.

 

(f)

Equals or Exceeds Maximum.  If, upon the conclusion of the Performance Period, RTSR for the Performance Period equals or exceeds the maximum level, as set forth in the Performance Matrix, 200% of the PRSUs (rounded up to the nearest whole number of PRSUs) shall become Vested.

4.

Absolute TSR Modifier.  Notwithstanding anything in this Statement of Management Objectives to the contrary, the number of PRSUs that become Vested pursuant to Section 3 of this Statement of Management Objectives will be reduced by __________ (_____) in the event that the Company’s Total Shareholder Return for the Performance Period is negative.

9

Exhibit 31.1

CERTIFICATIONS

I, David R. Lukes, certify that:

1.

I have reviewed this Quarterly Report on Form 10-Q of SITE Centers 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 registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting.

 

August 5, 2019

 

Date

 

 

 

 

/s/ David R. Lukes

 

David R. Lukes

 

President and Chief Executive Officer

 

Exhibit 31.2

CERTIFICATIONS

I, Matthew L. Ostrower, certify that:

1.

I have reviewed this Quarterly Report on Form 10-Q of SITE Centers 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 registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting.

 

August 5, 2019

 

Date

 

 

 

 

/s/ Matthew L. Ostrower

 

Matthew L. Ostrower

 

Executive Vice President and Chief Financial Officer

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

 

I, David R. Lukes, President and Chief Executive Officer of SITE Centers 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 June 30, 2019, 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 R. Lukes

David R. Lukes

President and Chief Executive Officer

August 5, 2019

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

 

I, Matthew L. Ostrower, Executive Vice President and Chief Financial Officer of SITE Centers 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 June 30, 2019, 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/ Matthew L. Ostrower

Matthew L. Ostrower

Executive Vice President and Chief Financial Officer

August 5, 2019