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EXHIBIT 10.25
FOSSIL GROUP, INC.
2021 DEFERRED PLAN FOR DIRECTOR FEES

This Fossil Group, Inc. 2021 Deferred Plan for Director Fees (the “Plan”), adopted as of December 28, 2020 (the “Effective Date”) by Fossil Group, Inc., a Delaware corporation (the “Company”), is being established primarily for the purpose of providing to members of the Board of Directors of the Company (the “Board”) the ability to defer receipt of all or part of their compensation as a Director.  

1.Purpose. The purpose of the Plan is to provide members of the Board who are not employees of the Company or its subsidiaries with the opportunity to elect to defer all or a portion of (i) the cash fees otherwise payable to them by the Company and (ii) the restricted stock units granted to them by the Company.

1.Definitions. For purposes of the Plan:
a.“Account” means the separate account maintained on the books of the Company for each Participant pursuant to Section 7.
b.“Adjustment Date” means the last day of each calendar quarter and such other dates as the Committee in its discretion may prescribe. 
c.“Annual Fee” means the retainer and meeting fees paid to a Director for services rendered as a member of the Board, including fees for services on a committee, during a calendar year. 
d.“Board” means the Board of Directors of the Company.
e.“Claims” means any claim, liability or obligation of any nature, arising out of or relating to this Plan or an alleged breach of this Plan, or any Election Agreement.
f.“Committee” means the Compensation Committee of the Board.

a.“Common Stock” means the common stock, par value $0.01 per share, which the Company is currently authorized to issue or may in the future be authorized to issue, or any securities into which or for which the common stock of the Company may be converted or exchanged, as the case may be.

a.“Deferred Stock Units” means deferred stock units credited to a Participant’s Account pursuant to an election by the Participant under Sections 5 and 6.

a.“Director” means any member of the Board who is not an employee of the Company or any of its subsidiaries.

a.“Effective Date” means December 28, 2020.

a.“Election Agreement” shall have the meaning set forth in Section 4 below. 

a.“Fair Market Value” shall have the meaning set forth in the LTIP.

a.“LTIP” means the Fossil Group, Inc. 2016 Long-Term Incentive Plan, as amended from time to time, and any other stockholder-approved equity plan of the Company that is in effect from time to time.

a.“Participant” means a Director who makes a deferral election under Section 5 or Section 6 of the Plan.

a.“Plan” means the Fossil Group, Inc. 2021 Deferred Plan for Director Fees as set forth herein and as amended from time to time. The Plan is a sub-plan under the LTIP.

a.“Restricted Stock Units” means restricted stock units granted to the Participant under the LTIP.

a.“Section 409A” means Section 409A of the Internal Revenue Code of 1986, as amended.

a.“Termination of Service” shall have the meaning set forth in the LTIP.

1.Administration. The Plan shall be administered by the Committee. The Committee shall, subject to the terms of this Plan, interpret this Plan and the application thereof and establish, amend and revoke rules and regulations as it deems necessary or desirable for the administration of the Plan. All such interpretations, rules, regulations and conditions shall be final, binding and conclusive upon the Participants and all other persons having or claiming any right or interest in the Plan, any portion of any Account or the Deferred Stock Units.

A majority of the Committee shall constitute a quorum. The Committee shall take action either by (i) a majority of the members of the Committee present at any meeting at which a quorum is present or (ii) written approval by all of the members of the Committee without a meeting. The Committee may authorize any one or more of their number or any officer of the Company to execute and deliver documents on behalf of the Committee.

No member of the Board or the Committee, and no officer of the Company to whom the Committee delegates any of its power and authority hereunder, shall be liable for any act, omission, interpretation, construction or determination made in connection with this Plan in good faith; and the members of the Board, the Committee and such officers shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including attorneys’ fees) arising therefrom to the full extent permitted by law.

1.Eligibility. Each Director shall be eligible to participate in the Plan and to make the elections provided under Sections 5 and 6 by completing a written election agreement, in the form provided by the Company (the “Election Agreement”).  

1.Deferral of Cash Portion of the Annual Fee.  

        (a)   Annual Election to Defer Cash Portion of Annual Fee.  Each year beginning with the calendar year beginning January 1, 2021, prior to the beginning of the calendar year, a Director may elect, in accordance with this Section 5, to defer receipt of all or a specified part of his or her cash portion of his or her Annual Fee.  The Company will maintain an Account for each Participant into which the deferred portion of his or her cash portion of his or her Annual Fee will be credited on the date the Director would otherwise be entitled to receive such amount.  For each calendar year during which such amounts are deferred under the Plan, sums credited to the Account will accrue an interest equivalent from 

the date they are credited at a rate equal to the annual LIBOR rate plus 50 bps or such other annual rate as determined by the Committee prior to the beginning of each calendar year; provided that any such determination of the Committee shall be limited by, and made in accordance with, Section 409A and any guidance issued thereunder.  The accrued interest equivalent shall be credited to the Account on each Adjustment Date, and shall thereafter be subject to subsequent accruals of an interest equivalent.

                  (b)   Annual Election to Convert Cash Retainer into Deferred Stock Units. Each year beginning with the calendar year beginning January 1, 2021, prior to the beginning of the calendar year, a Participant may elect to have the deferred cash portion of his or her Annual Fee for such calendar year treated as if invested in units of Common Stock of the Company (“Deferred Stock Units”), in lieu of having the Account credited with an interest equivalent as provided in Section 5(a).  In the event of such an election, Deferred Stock Units will be deemed to be acquired on the last day of each quarter for the deferred portion of the Annual Fee credited to the Account for that quarter.  At each Adjustment Date, a Participant’s Account that has been credited with Deferred Stock Units shall be valued on the basis of shares of the Company’s Common Stock at that date, taking into account any increase or decrease in the Fair Market Value of the Company’s Common Stock.  Prior to the beginning of a calendar year, a Participant must affirmatively elect to have the deferred portion of his or her Annual Fee for such calendar year treated as if invested in Deferred Stock Units.  Such an election must be made prior to the first day of the applicable calendar year and shall apply to the deferred cash portion of the Annual Fee for the entire calendar year.  After such an election is made, the Participant may, for any subsequent calendar year, change his or her election to have the deferred cash portion of the Annual Fee for future calendar years credited with an interest equivalent.  Any amounts previously treated as invested in Deferred Stock Units will continue to be so treated as invested in Deferred Stock Units, except that at any time following a Participant’s Termination of Service, if he or she has not elected to be paid a lump sum, then he or she may elect, by written notice to the Company, to have the Deferred Stock Units in his or her Account converted into a dollar value as of the next Adjustment Date to thereafter accrue an interest equivalent on the value of the Account.

                  (c)   Initial Participant Elections. An individual who becomes an Director for the first time after a calendar year has commenced may make a deferral election, not later than the 30th day following the date the individual becomes a Director, with respect to all or a portion of the Director’s annual cash portion of his or her Annual Fee that is earned for calendar quarters that begin after the date of such election and have such fees credited to the Director’s Account under Section 7.  Any election made pursuant to this Section 5(c) shall be in a manner consistent with Sections 5(a) and 5(b).  

                  (d)   Duration of Elections. Any election made pursuant to this Section 5 shall remain in effect for future calendar years unless and until the Participant makes a new election in accordance with this Section 5. In order to change the amount of a deferral for any subsequent calendar year (or to cease deferrals), a Participant must make a new election prior to the calendar year for which the new election is to be effective.

                  (e)  Valuation of Account.  The amount payable from a Participant’s Account relating to the deferral of the cash portion of the Annual Fee shall be determined on the basis of the value of the Account as of the Adjustment Date last preceding the date of payment plus any deferrals credited to and less any distributions made from such Account since such Adjustment Date.  The amount of each payment made with respect to an Account shall be deducted from the balance of such Account at the time of payment.

1.Deferral of Restricted Stock Units.

(a)  Annual Elections. Prior to the first day of each calendar year beginning on or after January 1, 2021, each Director may elect, in accordance with rules and procedures established by the Committee, to defer payment of all or a portion of the Restricted Stock Units granted to the Director in such calendar year and have the payment credited to the Director’s Account under Section 7. Any election made under this paragraph shall become irrevocable as of December 31st of the year prior to the year in which the Restricted Stock Units relating to the election are granted.  For purposes of this Plan, any deferred Restricted Stock Units shall be refered to hereunder also as Deferred Stock Units.

(b)  Initial Participant Elections. An individual who becomes a Director for the first time after a calendar year has commenced may make a deferral election, not later than the day prior to the grant of Restricted Stock Units in such calendar year to the Director, with respect to all or a portion of the Restricted Stock Units granted to the Director in such calendar year and have the payment credited to the Director’s Account under Section 7.     

(c)  Duration of Elections. Any election made pursuant to this Section 6 shall remain in effect for future calendar years unless and until the Participant makes a new election in accordance with Section 6(a). In order to change the number of Restricted Stock Units deferred for any subsequent calendar year (or to cease deferrals), a Participant must make a new election prior to the calendar year for which the new election is to be effective.

(d)  Valuation of Account.  The amount payable from a Participant’s Account relating to the deferral of Restricted Stock Units shall be determined on the basis of the value of the Account as of the Adjustment Date last preceding the date of payment plus any deferrals credited to and less any distributions made from such Account since such Adjustment Date.  The amount of each payment made with respect to an Account shall be deducted from the balance of such Account at the time of payment.

1.Account.

a.Cash Retainers. The crediting of cash and/or Deferred Stock Units to the Director’s Account with respect to the deferral of cash portion of the Annual Fees pursuant to Section 5 shall be made as of the dates the fees earned by the Director during the applicable calendar year would otherwise have been payable to the Director. To the extent the Director elects to receive Deferred Stock Units, the number of Deferred Stock Units to be credited shall be equal to the result of dividing the amount deferred as of each such date by the Fair Market Value of one share of Common Stock on such date.
b.Restricted Stock Units. The crediting of Deferred Stock Units to the Director’s Account with respect to the deferral of Restricted Stock Units pursuant to Section 6 shall be made as of the dates the Restricted Stock Units granted to the Director during the applicable calendar year would otherwise have been payable to the Director. The number of Deferred Stock Units to be credited shall be equal to the number of Restricted Stock Units that are deferred by the Director as of such date.
c.Cash Dividends. Whenever any cash dividends are declared on the Common Stock, the Company will credit the Account of each Participant on the date such dividend is paid with a number of additional Deferred Stock Units equal to the result of dividing (i) the product of (x) the total number of Deferred Stock Units credited to the Participant’s Account on the record date for such dividend and (y) the per share amount of such dividend by (ii) the Fair Market Value of one 

share of Common Stock on the date such dividend is paid by the Company to the holders of Common Stock.
d.Capitalization Adjustments. In the event of any merger, reorganization, consolidation, recapitalization, stock dividend, special cash dividend, stock split, reverse stock split, spin-off or similar transaction or other change in corporate structure affecting the Common Stock as described in Article 12 of the LTIP, the provisions of such Article shall apply to the Deferred Stock Units credited to the Participant’s Account.

1.Distribution of Account.  The Participant’s Account will be distributed to the Participant, in accordance with the Participant’s election in his or her Election Agreement to receive payment either (i) in annual installments not exceeding ten years or (ii) in a lump sum; such installments shall begin, or lump sum payment shall be made, as soon as practicable following the Participant’s Termination of Service; provided however, that with respect to any Participant who is treated as a “specified employee” (as defined in Section 409A) for the year in which the Termination of Service occurs, to the extent required by Section 409A, such lump sum distribution or the first annual installment (as the case may be) shall be delayed until the date which is six (6) months after the Termination of Service (or, if earlier, the date of the Participant’s death); provided, however, payment of any deferral of Restricted Stock Units that were payable in Common Stock may only be paid in a lump sum in shares of Common Stock.  Any distribution election must be made in advance of the performance of services during the calendar year for which an election to participate in the Plan is or has been made and shall be irrevocable; provided however, a change in the form of the payment may be made if the change is (i) made at least 12 months before the first payment is scheduled to commence, and (ii) such change results in each payment being made no earlier than five years after such payment was scheduled to begin under the prior election.  However, no such change may result in the acceleration of any payment in violation of Section 409A.

Upon a Participant’s Termination of Service, the Participant’s distribution shall be made in accordance with the distribution election made on the Election Agreement for the calendar year or periods for which the election applies.  If the Participant fails to make an election, the Participant’s Account will be paid in annual installments over a ten-year period.  If the Participant is paid in installments, the interest equivalent sum will continue to accrue on the undisbursed balance of the Account and the Deferred Stock Units will continue to be credited with dividend equivalents on the Deferred Stock Units remaining in the Account.  All distributions will be deemed to be made pro rata from the interest equivalent balance and from the value of Deferred Stock Units, with the portion of the distribution from Deferred Stock Units being treated as if an equivalent number of Deferred Stock Units had been sold (without commission or other expense) as of the last Adjustment Date in order to make the distribution.  The preceding provisions of this paragraph to the contrary notwithstanding, the Participant may change his or her distribution election subsequent to the initial election with the new election to be effective only in the event that the new election is made (i) made at least 12 months before the first payment is scheduled to commence, and (ii) such change results in each payment being made no earlier than five years after such payment was scheduled to begin under the prior election.  However, no such change may result in the acceleration of any payment in violation of Section 409A.  Provided further that, with respect to any Participant who is treated as a “specified employee” (as defined in Section 409A) for the year in which the Termination of Service occurs, to the extent required by Section 409A, such lump sum distribution or the first annual installment (as the case may be) shall be delayed until the date which is six months after the Termination of Service (or, if earlier, the date of the Participant’s death).

Upon the death of a Participant prior to the receipt of any or all of the installments of his or her Account, such installments as are then unpaid shall be paid in full as soon as practicable following the date of his or her death, to the beneficiary or beneficiaries designated in writing on a form provided by the Company and filed with the Secretary of the Company by the Participant during his lifetime or, upon failure to make such designation or if such designee or designees shall have predeceased Participant, then to the Participant’s estate.  The Participant shall have the right to change the beneficiary designation from time to time by instrument in writing delivered to the Secretary of the Company.

1.Change in Control. In the event of a Change in Control (as defined in the LTIP) the Account of each Participant shall be paid to the Participant in a lump sum in cash on or within five business days after the date of the Change in Control, in an amount equal to the result of multiplying (i) the number of Deferred Stock Units credited to the Participant’s Account on the Change in Control date by (ii) the Fair Market Value of one share of Common Stock on the Change in Control date. Notwithstanding the foregoing, if the Change in Control involves the disposition of all of the Common Stock of the Company for cash or securities the price per share received by the holders of Common Stock shall be substituted for the Fair Market Value on the Change in Control date; if the price is paid other than solely in cash or securities with a readily determinable market value, the Board will have the sole discretion to determine the valuation of any such portion of the price per share.

1.Beneficiary Designation. Each Participant shall have the right, at any time, to designate any person or persons as his beneficiary or beneficiaries to whom payment under the Plan shall be paid in the event of his or her death prior to payment to the Participant of his or her Account. Any beneficiary designation may be made or changed by a Participant by a written instrument, in such form prescribed by the Committee, which is filed with the Company prior to the Participant’s death. If a Participant fails to designate a beneficiary, or if all designated beneficiaries predecease the Participant, the Account shall be paid to the Participant’s estate.

1.Amendment and Termination. The Board may amend or terminate the Plan at any time in whole or in part; provided, however, that no amendment or termination shall reduce the Deferred Stock Units credited to a Participant’s Account or adversely affect the rights of a Participant to such Deferred Stock Units, without the consent of the Participant (or the Participant’s beneficiary in the event of the Participant’s death). Notwithstanding the foregoing, the Plan may be amended at any time, without the consent of any Participant (or beneficiary) if necessary or desirable to comply with the requirements, or avoid the application, of Section 409A.

1.General Provisions

a.Unfunded Plan. The Company’s obligation to make payment under the Plan shall be contractual only and all payments hereunder shall be made by the Company from its general assets at the time and in the manner provided for in the Plan. No funds, securities or other property of any nature shall be segregated or earmarked for any current or former Participant, beneficiary or other person and their sole right is as a general creditor of the Company with an unsecured claim against its general assets.

a.Non-Alienation of Benefits. Neither a Participant nor any other person shall have any rights to sell, assign, transfer, pledge, anticipate, or otherwise encumber, the amounts, if any, payable under the Plan to the Participant or any other person. Any attempted sale, assignment, transfer or pledge shall be null and void and without any legal effect. No part of the amounts payable under 

the Plan shall be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency.

a.Section 409A. Notwithstanding any provision in the Plan to the contrary, the Plan will be construed, administered or deemed amended as necessary to comply with the requirements of Section 409A to avoid taxation under section 409A to the extent Section 409A applies to the Plan. The Committee, in its sole discretion shall determine the requirements of Section 409A that are applicable to the Plan and shall interpret the terms of the Plan in a manner consistent therewith. Under no circumstances, however, shall the Company or any affiliate or any of its or their employees, officers, directors, service providers or agents have any liability to any person for any taxes, penalties or interest due on amounts paid or payable under the Plan, including any taxes, penalties or interest imposed under Section 409A.

a.No Stockholder Rights. Neither the Participant nor any other person shall have any rights as a stockholder of the Company with respect to the Deferred Stock Units credited to the Participant’s Account until the shares of Common Stock are issued to the Participant (or the beneficiary of the Participant).

a.Severability. If any provision of the Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Plan, and the Plan shall be enforced as if the invalid provisions had never been set forth therein.
b.Successors in Interest.  The obligation of the Company under the Plan shall be binding upon any successor or successors of the Company, whether by merger, consolidation, sale of assets or otherwise, and for this purpose reference herein to the Company shall be deemed to include any such successor or successors.
c.Governing Law.  The Plan shall be governed by, construed, and enforced in accordance with the laws of the State of Delaware (excluding any conflict of laws, rule or principle of Delaware law that might refer the governance, construction, or interpretation of this Plan to the laws of another state).  A Director’s sole remedy for any Claim shall be against the Company, and no Director shall have any claim or right of any nature against any Subsidiary of the Company or any stockholder or existing or former director, officer or employee of the Company or any Subsidiary of the Company.  The individuals and entities described above in this Section 12(g) (other than the Company) shall be third-party beneficiaries of this Plan for purposes of enforcing the terms of this Section 12(g).Document

Exhibit 4.5

DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934

In this Exhibit 4.5, unless the context otherwise requires, the terms “PECO,” “we,” “us,” “our” and “the Company” refer to Phillips Edison and Company, Inc., a Maryland corporation.  

General

The following is a summary of some of the terms of PECO’s capital stock, PECO’s charter and PECO’s bylaws. You should read PECO’s charter and bylaws and the applicable provisions of Maryland law for complete information on PECO’s capital stock. The following summary is not complete and is subject to, and qualified in its entirety by reference to, the provisions of PECO’s charter and bylaws, which are filed as exhibits to our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, and the applicable provisions of the Maryland General Corporation Law (the “MGCL”). 

The total number of shares of stock of all classes which PECO has authority to issue is 1,010,000,000 shares, consisting of 1,000,000,000 shares of common stock, $0.01 par value per share, and 10,000,000 shares of preferred stock, $0.01 par value per share.

Common Stock

The following description of PECO common stock sets forth certain general terms and provisions of PECO common stock. This description is in all respects subject to and qualified in its entirety by reference to the applicable provisions of PECO’s charter and bylaws.

All outstanding shares of PECO common stock are duly authorized, fully paid and nonassessable. Subject to the preferential rights of any other class or series of PECO’s stock and to the provisions of PECO’s charter regarding the restrictions on ownership and transfer of PECO’s stock, holders of shares of PECO common stock are entitled to receive distributions on such stock if, as and when authorized by the Company’s Board of Directors (“PECO Board”) out of assets legally available therefor and declared by PECO and to share ratably in the assets of PECO legally available for distribution to its stockholders in the event of its liquidation, dissolution or winding up after payment or establishment of reserves for all known debts and liabilities.

Subject to the provisions of PECO’s charter regarding the restrictions on ownership and transfer of its stock, and except as may be otherwise specified therein with respect to any class or series of PECO’s stock, each outstanding share of PECO common stock entitles the holder to one vote on all matters submitted to a vote of PECO’s stockholders, including the election of directors, and the holders of such shares will possess the exclusive voting power. There is no cumulative voting in the election of PECO’s directors, which means that the holders of a majority of the outstanding shares of PECO common stock can elect all of the directors then standing for election and the holders of the remaining shares will not be able to elect any directors.
Holders of shares of PECO common stock have no preference, conversion, exchange, sinking fund or redemption rights, have no preemptive rights to subscribe for any securities of PECO and generally have no appraisal rights unless the PECO Board determines that appraisal rights apply, with respect to all or any classes or series of PECO’s stock, to one or more transactions occurring after the date of such determination in connection with which stockholders would otherwise be entitled to exercise appraisal rights. Subject to the provisions of PECO’s charter regarding the restrictions on ownership and transfer of its stock, shares of PECO common stock will have equal distribution, liquidation and other rights.

Under the MGCL, a Maryland corporation generally cannot dissolve, amend its charter, merge, convert, sell all or substantially all of its assets, engage in a share exchange or engage in similar transactions outside the ordinary course of business unless the action is approved by the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter, unless a lesser percentage (but not less than a majority of all of the votes entitled to be cast on the matter) is set forth in the corporation’s charter. PECO’s charter provides that these actions may be taken if declared advisable by the board of directors and approved by the vote of stockholders entitled to cast a majority of all of the votes entitled to be cast on the matter. However, Maryland law permits a corporation to transfer all or substantially all of its assets without the approval of the stockholders of the corporation to one or more persons or entities if all of the equity interests of the person or persons or entities are owned, directly or indirectly, by the corporation. In addition, operating assets may be held by a corporation’s subsidiaries and these subsidiaries may be able to transfer all or substantially all of such assets without a vote of the parent corporation’s stockholders.

PECO’s charter authorizes the PECO Board to reclassify any unissued shares of PECO common stock or preferred stock into other classes or series of stock and to establish the number of shares in each class or series and to set the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption for each such class or series.

Preferred Stock

The PECO Board is authorized to cause PECO to issue shares of any class of stock, and to classify or reclassify any unissued shares of stock by setting or changing the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption of such shares of stock.

Power to Increase Authorized Stock and Issue Additional Shares of PECO Common Stock

The PECO Board has the power to amend PECO’s charter from time to time without stockholder approval to increase or decrease the aggregate number of authorized shares of stock or the number of authorized shares of any class or series of stock. In addition, the PECO Board may authorize PECO to issue additional authorized but unissued shares of PECO’s stock and may classify or reclassify unissued shares of PECO’s stock into other classes or series of stock and thereafter to cause PECO to issue such classified or reclassified shares of stock.

The additional classes or series, as well as additional shares of PECO common stock, will be available for issuance without further action by the PECO stockholders, unless stockholder consent is required by the terms of any class or series of PECO’s stock or the rules of any stock exchange or automated quotation system on which the securities may be listed or traded.

Restrictions on Ownership and Transfer

In order for PECO to qualify as a real estate investment trust (“REIT”) under the Internal Revenue Code (the “Code”), its stock must be beneficially owned by 100 or more persons or entities during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year. Also, not more than 50% of the value of the outstanding shares of stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities such as qualified pension plans) during the last half of a taxable year (other than the first year for which an election to be a REIT has been made).

PECO’s charter contains restrictions on the ownership and transfer of PECO common stock, preferred stock and other capital stock that are intended to assist PECO in complying with these requirements and continuing to qualify as a REIT. The relevant sections of PECO’s charter provide that, subject to the exceptions described below, no person or entity may beneficially own, or be deemed to own by virtue of the applicable constructive ownership provisions of the Code, more than 9.8% (by value or by number of shares, whichever is more restrictive) of the aggregate of the outstanding shares of PECO common stock, or more than 9.8% of the value of PECO’s outstanding capital stock. PECO refers to these restrictions as the “common stock ownership limit” and the “aggregate stock ownership limit,” respectively. A person or entity that becomes subject to one or both of the ownership limits by virtue of a violative transfer that results in a transfer to a trust, as set forth below, is referred to as a “prohibited owner” if, had the violative transfer been effective, the person or entity would have been a record owner and beneficial owner or solely a beneficial owner of PECO common stock or PECO’s capital stock, as applicable. Additionally, no person shall beneficially own or constructively own shares of capital stock to the extent that such beneficial ownership or constructive ownership would cause any income of PECO that would otherwise qualify as “rents from real property” for purposes of Section 856(d) of the Code to fail to qualify as such (including, but not limited to, as a result of causing any entity that PECO intends to treat as an “eligible independent contractor” within the meaning of Section 856(d)(9)(A) of the Code to fail to qualify as such).

The constructive ownership rules under the Code are complex and may cause stock owned actually or constructively by a group of related individuals and/or entities to be owned constructively by one individual or entity. As a result, the acquisition of less than 9.8% of the PECO common stock or less than 9.8% of the value of PECO’s outstanding capital stock (or the acquisition of an interest in an entity that owns, actually or constructively, PECO’s capital stock) by an individual or entity could, nevertheless, cause that individual or entity, or another individual or entity, to own constructively more than 9.8% of PECO outstanding PECO common stock or capital stock, as applicable, and thereby subject such stock to the applicable ownership limit.

The PECO Board, in its sole discretion, may exempt (prospectively or retroactively) a person or entity from the aggregate stock ownership limit and the common stock ownership limit, as the case may be, and may establish or increase an excepted holder limit for such person if:

•the PECO Board obtains such representations and undertaking from such person or entity as are reasonably necessary to ascertain that no person or entity’s beneficial ownership or constructive ownership of such shares of capital stock would result in PECO (i) being “closely held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year), or (ii) otherwise failing to qualify as a REIT;
•such person or entity does not and represents that it will not own, actually or constructively, an interest in a tenant of PECO (or a tenant of any entity owned or controlled by PECO) that would cause PECO to own, actually or constructively, an interest in such tenant that would cause any income of the Company that would otherwise qualify as “rents from real property” for purposes of Section 856(d) of the Code to fail to qualify as such and the PECO Board obtains such representations and undertakings from such person or entity as are reasonably necessary to ascertain this fact (for this purpose, a tenant from whom PECO, or an entity owned or controlled by PECO, derives (and is expected to continue to derive) a sufficiently small 

amount of revenue such that, in the opinion of the PECO Board, rent from such tenant would not adversely affect PECO’s ability to qualify as a REIT shall not be treated as a tenant of PECO); and
•such person agrees that any violation or attempted violation of such representations or undertakings (or other action which is contrary to the restrictions contained in PECO’s charter) will result in such shares of capital stock being automatically transferred to a trust in accordance with PECO’s charter.

In connection with a waiver of an ownership limit or at any other time, the PECO Board may increase the common stock ownership limit and the aggregate stock ownership limit for one or more persons or entities and decrease the applicable ownership limit for all other persons and entities; provided, however, that the decreased common stock ownership limit and/or aggregate stock ownership limit will not be effective for any person or entity whose percentage ownership in shares of PECO’s capital stock exceeds the decreased common stock ownership limit and/or aggregate stock ownership limit until such time as such person’s or entity’s percentage of shares of capital stock equals or falls below the decreased common stock ownership limit and/or aggregate stock ownership limit, but any further acquisition of shares of PECO’s capital stock in excess of such percentage ownership of shares of capital stock will be in violation of the common stock ownership limit and/or aggregate stock ownership limit and, provided further, that the new common stock ownership limit and/or aggregate stock ownership limit would not allow five or fewer persons or entities to beneficially own more than 49.9% in value of PECO’s outstanding capital stock.

Any person or entity who acquires or attempts or intends to acquire beneficial ownership or constructive ownership of shares of PECO’s capital stock that will or may violate any of the foregoing restrictions on transferability and ownership will be required to give written notice immediately to PECO of such event or, in the case of such a proposed or attempted transaction, give at least 15 days prior written notice and provide to PECO such other information as it may request in order to determine the effect, if any, of such transfer on its status as a REIT. The foregoing provisions on transferability and ownership will not apply if the PECO Board determines that it is no longer in PECO’s best interests to attempt to qualify, or to continue to qualify, as a REIT or that compliance with the restrictions and limitations on beneficial ownership, constructive ownership and transfers of shares of capital stock is no longer required in order for PECO to qualify as a REIT.

Pursuant to PECO’s charter, if any purported transfer of PECO’s capital stock or any other event would otherwise result in any person or entity violating the ownership limits or such other limit as established by the PECO Board or would result in PECO’s being “closely held” under Section 856(h) of the Code or otherwise failing to qualify as a REIT, then that number of shares in excess of the applicable ownership limit or causing PECO to be “closely held” or otherwise to fail to qualify as a REIT (rounded to the nearest whole share) will be automatically transferred to a trust for the exclusive benefit of one or more charitable organizations selected by PECO and the intended transferee will acquire no rights in such shares. The automatic transfer will be effective as of the close of business on the business day prior to the purported transfer or other event that results in the transfer to the trust. Any distribution paid prior to the discovery by PECO that the shares of capital stock have been transferred to the trustee shall be paid by the recipient of such distribution to the trustee upon demand, and any distribution authorized but unpaid shall be paid when due to the trustee. Any distribution so paid to the trustee shall be held in trust for the benefit of the charitable organization or organizations selected by PECO.

Within 20 days of receiving notice from PECO of the transfer of shares to the trust, the trustee of the trust shall sell the shares to a person or entity designated by the trustee whose ownership of the shares will not violate the common stock ownership limit and the aggregate stock ownership limit or such other limit as established by the PECO Board. Upon such sale, the interest of the charitable organization in the shares sold shall terminate and the trustee shall distribute the net proceeds of the sale to the prohibited owner and to the charitable organization. The prohibited owner shall receive the lesser of (i) the price paid by the prohibited owner for the shares or, if the prohibited owner did not give value for the shares in connection with the event causing the shares to be held in the trust (e.g., in the case of a gift, devise or other such transaction), the market price (as defined in PECO’s charter) of the shares on the day of the event causing the shares to be held in the trust or (ii) the price per share received by the trustee from the sale or other disposition of the shares held in the trust. The trustee may reduce the amount payable to the prohibited owner by the amount of distributions which have been paid to the prohibited owner and are owed by the prohibited owner to the Trustee. Any net sale proceeds in excess of the amount payable to the prohibited owner shall be immediately paid to the charitable organization or organizations selected by PECO. If, prior to the discovery by PECO that shares of capital stock have been transferred to the trustee, such shares are sold by a prohibited owner, then (a) such shares shall be deemed to have been sold on behalf of the trust and (b) to the extent that the prohibited owner received an amount for such shares that exceeds the amount that such prohibited owner was entitled to receive, such excess shall be paid to the trustee upon demand.
In addition, if the PECO Board determines in good faith that a transfer or other event would violate the restrictions on ownership and transfer set forth in the PECO charter, the PECO Board or a committee thereof will take such action as it deems advisable to refuse to give effect to or to prevent such transfer or other event, including, but not limited to, causing PECO to redeem shares, refusing to give effect to such transfer on PECO’s books or instituting proceedings to enjoin the transfer or other event.

Any beneficial owner or constructive owner of shares of PECO’s capital stock and each person or entity (including the stockholder of record) who is holding shares of PECO’s capital stock for a beneficial owner shall provide PECO such information as PECO may request, in good faith, in order to determine PECO’s status as a REIT and to comply with requirements of any taxing authority or governmental authority or to determine such compliance.

Transfer Agent and Registrar. The transfer agent and registrar for the PECO common stock is Computershare Trust Company, N.A.

Size of the Board of Directors. The PECO charter provides that the number of directors may be increased or decreased from time to time pursuant to the PECO bylaws but shall never be less than three or more than 15. So long as a class of PECO’s stock is listed for trading on a national securities exchange, a majority of directors shall be “independent” in accordance with the rules and regulations of such exchange. If a class of PECO’s stock is not listed for trading on a national securities exchange, a majority of the directors shall be independent in accordance with the rules and regulations of the New York Stock Exchange. 

Bylaw Amendments. The PECO Board has the exclusive power to adopt, alter or repeal any provision of the PECO bylaws and to make new bylaws; provided, that certain provisions of PECO’s bylaws regarding the chairman of the PECO Board may not be amended, altered, repealed or replaced for so long as Jeffrey S. Edison remains a member of the PECO Board without Jeffrey S. Edison’s affirmative vote.

Annual Meeting of the Stockholders. The annual meeting of the PECO stockholders shall be held at a date and time set by the PECO Board.

Special Meetings of the Stockholders. A special meeting of PECO stockholders may be called by the president, the chief executive officer, a majority of the PECO Board or a majority of the Independent Directors (as defined in the PECO charter), and must be called by the secretary upon the written request of stockholders entitled to cast a majority of all the votes entitled to be cast at any such special meeting of stockholders.

Anti-Takeover Statutes. Under Maryland law, certain “business combinations” (which include a merger, consolidation, share exchange and certain asset transfers and issuances or reclassifications of equity securities) between a Maryland corporation and any person who beneficially owns ten percent or more of the voting power of the corporation’s outstanding voting stock, or an affiliate or associate of the corporation who beneficially owned ten percent or more of the voting power at any time within the preceding two years, in each case referred to as an ‘‘interested stockholder,’’ or an affiliate thereof, are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder.
Thereafter, any such business combination must be recommended by the corporation’s board of directors and approved by the affirmative vote of at least (i) 80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation and (ii) two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder or its affiliates or associates. The super-majority vote requirements do not apply, however, to business combinations that are approved or exempted by the corporation’s board of directors prior to the time that the interested stockholder becomes an interested stockholder or the business combination satisfies certain minimum price, form of consideration and procedural requirements. As permitted under Maryland law, the PECO Board has by resolution opted out of the business combination provisions of the MGCL and, consequently, the five-year prohibition and the supermajority vote requirements will not apply to business combinations between PECO and any interested stockholder of PECO. In addition, the PECO Board adopted a resolution exempting the merger and the other transactions contemplated by the merger agreement or the ancillary agreements from the business combination provisions of the MGCL.

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