10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended October 31, 2009

o 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 1-4372

FOREST CITY ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

Ohio	34-0863886
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

Terminal Tower	50 Public Square
Suite 1100	Cleveland, Ohio	44113
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code 216-621-6060

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes     x     No     o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes     o     No     o

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

Large accelerated filer   x Accelerated filer   o 
Non-accelerated filer   o
(Do not check if a smaller reporting company) Smaller reporting company   o

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes     o     No     x     

Indicate the number of shares outstanding, including unvested restricted stock, of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at December 3, 2009
Class A Common Stock, $.33 1/3 par value	133,850,053 shares
Class B Common Stock, $.33 1/3 par value	22,563,412 shares

Forest City Enterprises, Inc. and Subsidiaries

Table of Contents

			Page
PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Forest City Enterprises, Inc. and Subsidiaries
		Consolidated Balance Sheets October 31, 2009 and January 31, 2009	2
		Consolidated Statements of Operations Three and Nine Months Ended October 31, 2009 and 2008	3
		Consolidated Statements of Comprehensive Income (Loss) Three and Nine Months Ended October 31, 2009 and 2008	4
		Consolidated Statements of Equity Nine Months Ended October 31, 2009 and 2008	5
		Consolidated Statements of Cash Flows Nine Months Ended October 31, 2009 and 2008	6
		Notes to Consolidated Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	75
	Item 4.	Controls and Procedures	79
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings	79
	Item 1A.	Risk Factors	79
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	82
	Item 6.	Exhibits	83
	Signatures		88
	Certifications

i

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Forest City Enterprises, Inc. and Subsidiaries

Consolidated Balance Sheets

	October 31, 2009			January 31, 2009
	(Unaudited)			(As Adjusted)
	(in thousands)
Assets
Real Estate
Completed rental properties	$	8,340,178		$	8,212,144
Projects under development		2,693,712			2,241,216
Land held for development or sale		221,059			195,213
Total Real Estate		11,254,949			10,648,573
Less accumulated depreciation		(1,545,892	)		(1,419,271	)
Real Estate, net		9,709,057			9,229,302
Cash and equivalents		321,804			267,305
Restricted cash		363,098			291,224
Notes and accounts receivable, net		371,158			427,410
Investments in and advances to affiliates		239,936			228,995
Other assets		888,564			936,271
Total Assets	$	11,893,617		$	11,380,507
Liabilities and Equity
Liabilities
Mortgage debt, nonrecourse	$	7,463,623		$	7,078,390
Notes payable		181,374			181,919
Bank revolving credit facility		37,016			365,500
Senior and subordinated debt		1,075,555			846,064
Accounts payable and accrued expenses		1,199,171			1,277,199
Deferred income taxes		442,863			455,336
Total Liabilities		10,399,602			10,204,408
Commitments and Contingencies		-			-
Equity
Shareholders’ Equity
Preferred stock - without par value; 10,000,000 shares authorized; no shares issued		-			-
Common stock - $.33 1/3 par value
Class A, 271,000,000 shares authorized, 132,769,118 and 80,082,126 shares issued and 132,741,066 and 80,080,262 shares outstanding, respectively		44,256			26,694
Class B, convertible, 56,000,000 shares authorized, 22,583,412 and 22,798,025 shares issued and outstanding, respectively; 26,257,961 issuable		7,528			7,599
		51,784			34,293
Additional paid-in capital		567,327			267,796
Retained earnings		606,872			643,724
Less treasury stock, at cost; 28,052 and 1,864 Class A shares, respectively		(154	)		(21	)
Shareholders’ equity before accumulated other comprehensive loss		1,225,829			945,792
Accumulated other comprehensive loss		(91,388	)		(107,521	)
Total Shareholders’ Equity		1,134,441			838,271
Noncontrolling interests		359,574			337,828
Total Equity		1,494,015			1,176,099
Total Liabilities and Equity	$	11,893,617		$	11,380,507

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

2

Forest City Enterprises, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)

	Three Months Ended October 31,						Nine Months Ended October 31,
				2008						2008
	2009			(As Adjusted)			2009			(As Adjusted)
				(in thousands, except per share data)
Revenues from real estate operations	$	306,100		$	330,381		$	932,889		$	960,007
Expenses
Operating expenses		171,684			200,441			532,000			593,306
Depreciation and amortization		66,393			64,038			199,659			198,610
Impairment of real estate		549			-			3,124			-
		238,626			264,479			734,783			791,916
Interest expense		(87,863	)		(97,081	)		(258,434	)		(259,450	)
Amortization of mortgage procurement costs		(3,562	)		(2,838	)		(10,645	)		(8,723	)
Gain (loss) on early extinguishment of debt		28,902			3,692			37,965			(1,539	)
Interest and other income		5,522			6,752			23,924			27,976
Gain on disposition of other investments		-			-			-			150
Earnings (loss) before income taxes		10,473			(23,573	)		(9,084	)		(73,495	)
Income tax expense (benefit)
Current		3,991			(4,499	)		(9,537	)		(15,044	)
Deferred		(6,886	)		(7,417	)		(16,337	)		(13,338	)
		(2,895	)		(11,916	)		(25,874	)		(28,382	)
Equity in earnings (loss) of unconsolidated entities		1,364			(3,198	)		(10,477	)		(12,761	)
Impairment of unconsolidated entities		(13,200	)		-			(34,663	)		(6,026	)
Earnings (loss) from continuing operations		1,532			(14,855	)		(28,350	)		(63,900	)
Discontinued operations, net of tax:
Operating earnings (loss) from rental properties		(5,403	)		202			(5,087	)		1,027
Gain on disposition of rental properties		-			-			2,784			5,294
		(5,403	)		202			(2,303	)		6,321
Net loss		(3,871	)		(14,653	)		(30,653	)		(57,579	)
Net earnings attributable to noncontrolling interests		(513	)		(4,462	)		(6,199	)		(10,324	)
Net loss attributable to Forest City Enterprises, Inc.	$	(4,384	)	$	(19,115	)	$	(36,852	)	$	(67,903	)
Basic and diluted earnings (loss) per common share
Earnings (loss) from continuing operations attributable to Forest City Enterprises, Inc.	$	0.01		$	(0.19	)	$	(0.26	)	$	(0.72	)
Earnings (loss) from discontinued operations attributable to Forest City Enterprises, Inc.		(0.04	)		-			(0.01	)		0.06
Net loss attributable to Forest City Enterprises, Inc.	$	(0.03	)	$	(0.19	)	$	(0.27	)	$	(0.66	)

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

3

Forest City Enterprises, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)

	Three Months Ended October 31,						Nine Months Ended October 31,
				2008						2008
	2009			(As Adjusted)			2009			(As Adjusted)
	(in thousands)
Net loss	$	(3,871	)	$	(14,653	)	$	(30,653	)	$	(57,579	)
Other comprehensive income, net of tax:
Unrealized net losses on investment securities		(76	)		(291	)		(189	)		(140	)
Foreign currency translation adjustments		(12	)		(960	)		597			(960	)
Unrealized net losses on interest rate derivative contracts		(3,223	)		(6,594	)		16,346			9,860
Total other comprehensive income (loss), net of tax		(3,311	)		(7,845	)		16,754			8,760
Comprehensive loss		(7,182	)		(22,498	)		(13,899	)		(48,819	)
Comprehensive income attributable to noncontrolling interests		(391	)		(4,554	)		(6,820	)		(11,310	)
Total comprehensive loss attributable to Forest City Enterprises, Inc.	$	(7,573	)	$	(27,052	)	$	(20,719	)	$	(60,129	)

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

4

Forest City Enterprises, Inc. and Subsidiaries
Consolidated Statements of Equity
(Unaudited)

																							Accumulated
	Common Stock										Additional												Other
	Class A				Class B						Paid-In			Retained			Treasury Stock						Comprehensive			Noncontrolling
	Shares		Amount		Shares			Amount			Capital			Earnings			Shares			Amount			Loss			Interest			Total
	(in thousands)
Nine Months Ended October 31, 2009
Balances at January 31, 2009, as reported		80,082	$	26,694		22,798		$	7,599		$	241,539		$	645,852			2		$	(21	)	$	(107,521	)	$	-		$	814,142
Retrospective adoption of accounting guidance for convertible debt instruments												26,257			(2,128	)														24,129
Reclassification upon adoption of accounting guidance for noncontrolling interests																											337,828			337,828
Balances at January 31, 2009, as adjusted		80,082	$	26,694		22,798		$	7,599		$	267,796		$	643,724			2		$	(21	)	$	(107,521	)	$	337,828		$	1,176,099
Net loss															(36,852	)											6,199			(30,653	)
Other comprehensive income, net of tax																								16,133			621			16,754
Issuance of Class A common shares in equity offering		52,325		17,442								312,475																		329,917
Purchase of treasury stock																		26			(133	)								(133	)
Conversion of Class B to Class A shares		215		71		(215	)		(71	)																				-
Exercise of stock options		15		5								123																		128
Restricted stock vested		132		44								(44	)																	-
Stock-based compensation												12,815																		12,815
Excess income tax benefit (deficiency) from stock-based compensation												(2,007	)																	(2,007	)
Exchange of Puttable Equity-Linked Senior Notes due 2011 (Note E)												(17,490	)																	(17,490	)
Purchase of Convertible Senior Note hedge, net of tax (Note E)												(9,734	)																	(9,734	)
Acquisition of partner’s noncontrolling interest in consolidated subsidiary												3,393															(3,393	)		-
Contributions from noncontrolling interests																											21,619			21,619
Distributions to noncontrolling interests																											(8,628	)		(8,628	)
Change to full consolidation method of accounting for a subsidiary																											5,010			5,010
Other changes in noncontrolling interests																											318			318
Balances at October 31, 2009		132,769	$	44,256		22,583		$	7,528		$	567,327		$	606,872			28		$	(154	)	$	(91,388	)	$	359,574		$	1,494,015
Nine Months Ended October 31, 2008
Balances at January 31, 2008, as reported		78,238	$	26,079		24,388		$	8,129		$	229,358		$	782,871			36		$	(1,665	)	$	(72,656	)	$	-		$	972,116
Retrospective adoption of accounting guidance for convertible debt instruments												26,631			(1,081	)														25,550
Reclassification upon adoption of accounting guidance for noncontrolling interests																											281,689			281,689
Balances at January 31, 2008, as adjusted		78,238	$	26,079		24,388		$	8,129		$	255,989		$	781,790			36		$	(1,665	)	$	(72,656	)	$	281,689		$	1,279,355
Net loss															(67,903	)											10,324			(57,579	)
Other comprehensive income, net of tax																								7,774			986			8,760
Dividends $.24 per share															(24,814	)														(24,814	)
Purchase of treasury stock																		17			(651	)								(651	)
Conversion of Class B to Class A shares		1,590		530		(1,590	)		(530	)																				-
Exercise of stock options		43		15								(1,189	)					(53	)		2,307									1,133
Restricted stock vested		77		26								(26	)																	-
Stock-based compensation												13,556																		13,556
Conversion of Class A Common Units		128		42								3,736															(12,624	)		(8,846	)
Distribution of accumulated equity to noncontrolling partners												(3,710	)																	(3,710	)
Contributions from noncontrolling interests																											44,348			44,348
Distributions to noncontrolling interests																											(22,381	)		(22,381	)
Other changes in noncontrolling interests																											12,334			12,334
Balances at October 31, 2008		80,076	$	26,692		22,798		$	7,599		$	268,356		$	689,073			-		$	(9	)	$	(64,882	)	$	314,676		$	1,241,505

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

5

Forest City Enterprises, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)

	Nine Months Ended October 31,
				2008
	2009			(As Adjusted)
	(in thousands)
Net Loss	$	(30,653	)	$	(57,579	)
Depreciation and amortization		199,659			198,610
Amortization of mortgage procurement costs		10,645			8,723
Impairment of real estate		3,124			-
Impairment of unconsolidated entities		34,663			6,026
Write-off of abandoned development projects		21,398			41,452
Gain on early extinguishment of debt, net of cash prepayment penalties		(37,965	)		(3,945	)
Other income - gain on sale of an ownership interest in parking management company		-			(3,350	)
Gain on disposition of other investments		-			(150	)
Deferred income tax benefit		(16,337	)		(13,338	)
Equity in loss of unconsolidated entities		10,477			12,761
Stock-based compensation expense		5,692			7,016
Amortization and mark-to-market adjustments of derivative instruments		5,046			17,265
Non-cash interest expense related to Puttable Equity-Linked Senior Notes		6,048			6,672
Cash distributions from operations of unconsolidated entities		25,633			40,317
Discontinued operations:
Depreciation and amortization		1,347			3,911
Amortization of mortgage procurement costs		50			339
Impairment of real estate		9,775			-
Deferred income tax (benefit) expense		(2,307	)		4,617
Gain on disposition of rental properties		(4,548	)		(8,627	)
Cost of sales of land included in projects under development and completed rental properties		24,521			13,076
Increase in land held for development or sale		(5,376	)		(17,164	)
Decrease in notes and accounts receivable		29,999			20,567
Decrease in other assets		16,156			5,538
(Increase) decrease in restricted cash used for operating purposes		(12,257	)		538
Decrease in accounts payable and accrued expenses		(34,766	)		(44,038	)
Net cash provided by operating activities		260,024			239,237
Cash Flows from Investing Activities
Capital expenditures, including real estate acquisitions		(725,101	)		(828,659	)
Payment of lease procurement costs		(8,519	)		(22,728	)
Decrease (increase) in other assets		5,148			(37,533	)
Increase in restricted cash used for investing purposes		(81,422	)		(123,872	)
Proceeds from disposition of rental properties and other investments		11,914			15,309
Increase in investments in and advances to affiliates		(76,515	)		(41,598	)
Net cash used in investing activities		(874,495	)		(1,039,081	)
Cash Flows from Financing Activities
Sale of common stock, net		329,917			-
Proceeds from Convertible Senior Notes due 2016, net of $6,838 of issuance costs		193,162			-
Payment for Convertible Senior Notes hedge transaction		(15,900	)		-
Proceeds from Puttable Equity-Linked Senior Notes due 2014, net of $2,803 of issuance costs and discount		29,764			-
Purchase of Puttable Equity-Linked Senior Notes due 2011		-			(10,571	)
Proceeds from nonrecourse mortgage debt		706,335			1,052,737
Principal payments on nonrecourse mortgage debt		(228,246	)		(533,383	)
Proceeds from notes payable		12,623			55,098
Payments on notes payable		(13,168	)		(30,924	)
Borrowings on bank revolving credit facility		322,500			462,500
Payments on bank revolving credit facility		(650,984	)		(288,000	)
Payment of subordinated debt		(20,400	)		-
Change in restricted cash and book overdrafts		12,750			43,993
Payment of deferred financing costs		(22,369	)		(31,859	)
Purchase of treasury stock		(133	)		(651	)
Exercise of stock options		128			1,133
Distribution of accumulated equity to noncontrolling partners		-			(3,710	)
Contributions from noncontrolling interests		21,619			44,348
Distributions to noncontrolling interests		(8,628	)		(22,381	)
Payment in exchange for 119,000 Class A Common Units		-			(3,501	)
Dividends paid to shareholders		-			(24,742	)
Net cash provided by financing activities		668,970			710,087
Net increase (decrease) in cash and equivalents		54,499			(89,757	)
Cash and equivalents at beginning of period		267,305			254,434
Cash and equivalents at end of period	$	321,804		$	164,677

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

6

Forest City Enterprises, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)

Supplemental Non-Cash Disclosures:

The table below represents the effect of the following non-cash transactions for the nine months ended October 31, 2009 and 2008:

	Nine Months Ended October 31,
				2008
	2009			(As Adjusted)
	(in thousands)
Operating Activities
Increase in land held for development or sale (2)(10)(11)	$	(43,816	)	$	(31,058	)
Decrease (increase) in notes and accounts receivable (2)(5)(7)(8)		3,971			(693	)
Decrease (increase) in other assets (2)(5)(7)(8)		952			(47,012	)
Increase in accounts payable and accrued expenses (1)(2)(5)(7)(8)(11)		(1,858	)		115,873	)
Total effect on operating activities	$	(40,751	)	$	37,110
Investing Activities
Decrease (increase) in projects under development (2)(10)(11)(12)	$	15,412		$	(108,543	)
(Increase) decrease in completed rental properties (2)(5)(7)(8)(9)(10)(11)		(3,106	)		29,783
Non-cash proceeds from disposition of properties (1)		70,554			26,119
Decrease in investments in and advances to affiliates (2)(5)(7)		12,719			31,229
Total effect on investing activities	$	95,579		$	(21,412	)
Financing Activities
Decrease in nonrecourse mortgage debt (1)(2)(5)(7)	$	(66,961	)	$	(15,071	)
Increase in senior and subordinated debt (3)		11,414			—
Decrease in deferred tax liability (3)(4)		(6,218	)		—
Increase in additional paid-in capital (3)(4)(6)(9)(12)		5,320			10,276
Increase (decrease) in noncontrolling interest (2)(5)(6)(9)		1,617			(10,873	)
Increase in Class A common stock (9)		—			42
Dividends declared but not yet paid		—			(72	)
Total effect on financing activities	$	(54,828	)	$	(15,698	)

(1)	Assumption of nonrecourse mortgage debt by the buyer upon disposition of Sterling Glen of Great Neck and Sterling Glen of Glen Cove, supported-living apartment communities in the Residential Group, and Grand Avenue, a specialty retail center in the Commercial Group, during the nine months ended October 31, 2009, and Sterling Glen of Lynbrook, a supported-living apartment community in the Residential Group, during the nine months ended October 31, 2008.
(2)	Change to full consolidation method of accounting from equity method due to the occurrence of a triggering event for Gladden Farms II in the Land Development Group during the nine months ended October 31, 2009 and Gladden Farms in the Land Development Group and Shops at Wiregrass, a retail center in the Commercial Group, during the nine months ended October 31, 2008.
(3)	Exchange of a portion of the Company’s Puttable Equity-Linked Senior Notes due October 15, 2011 for a new issue of Puttable Equity-Linked Senior Notes due October 15, 2014 during the nine months ended October 31, 2009 (see Note E - Senior and Subordinated Debt).
(4)	Recording of a deferred tax asset on the purchased hedge transactions in conjunction with the issuance of the Company’s Convertible Senior Notes due October 15, 2016 during the nine months ended October 31, 2009 (see Note E - Senior and Subordinated Debt).
(5)	Exchange of the Company’s 50% ownership interest in Boulevard Towers, an equity method investment in the Residential Group, for 100% ownership in North Church Towers, an apartment complex in the Residential Group, during the nine months ended October 31, 2009 and exchange of the Company’s controlling ownership interests in seventeen single-tenant pharmacy properties for the noncontrolling ownership interests in two entities during the nine months ended October 31, 2008.
(6)	Acquisition of partner’s 50% noncontrolling interests in Gladden Farms in the Land Development Group during the nine months ended October 31, 2009.
(7)	Change to full consolidation method of accounting from equity method due to the acquisition of a partner’s interest in Village Center apartment community in the Residential Group during the nine months ended October 31, 2008.
(8)	Amounts related to purchase price allocations in the Commercial Group during the nine months ended October 31, 2008 for the following office buildings: New York Times, Twelve MetroTech Center, Commerce Court, Colorado Studios and Richmond Office Park.
(9)	Exchange of the Class A Common Units during the nine months ended October 31, 2008 (see Note P - Class A Common Units).
(10)	Commercial Group and Residential Group outlots reclassified prior to sale from projects under development or completed rental properties to land held for sale.
(11)	Increase or decrease in construction payables included in accounts payable and accrued expenses.
(12)	Capitalization of stock-based compensation granted to employees directly involved with the acquisition, development and construction of real estate.

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

7

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

A.    Accounting Policies

Basis of Presentation

The interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and should be read in conjunction with the consolidated financial statements and related notes included in the Company’s annual report on Form 10-K for the year ended January 31, 2009, including the Report of Independent Registered Public Accounting Firm, as amended on Form 10-K/A filed September 25, 2009 and updated on Form 8-K filed October 19, 2009. The results of interim periods are not necessarily indicative of results for the full year or any subsequent period. In the opinion of management, all adjustments considered necessary for a fair statement of financial position, results of operations and cash flows at the dates and for the periods presented have been included. Effective February 1, 2009, the Company adopted the accounting guidance for convertible debt instruments that may be settled in cash upon conversion and noncontrolling interests. This accounting guidance required the Company to adjust the prior year financial statements to show retrospective application upon adoption.

Retrospective Adoption of Accounting Guidance for Convertible Debt Instruments

The accounting guidance for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) requires the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlements) to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. This accounting guidance changed the accounting treatment for the Company’s 3.625% Puttable Equity-Linked Senior Notes due October 2011 (the “2011 Notes”), which were issued in October 2006, by requiring the initial debt proceeds from the sale of the 2011 Notes to be allocated between a liability component and an equity component. This allocation is based upon what the assumed interest rate would have been on the date of issuance if the Company had issued similar nonconvertible debt. The resulting debt discount will be amortized over the debt instrument’s expected life as additional non-cash interest expense. Due to the increase in interest expense, the Company recorded additional capitalized interest based on its qualifying expenditures on its development projects. Deferred financing costs decreased related to the reallocation of the original issuance costs between the debt instrument and equity component and the gain recognized from the purchase of $15,000,000, in principal, of the 2011 Notes during the three months ended October 31, 2008 was adjusted to reflect the requirements of gain recognition under this accounting guidance (see Note E - Senior and Subordinated Debt).

The following tables reflect the Company’s as reported amounts along with the as adjusted amounts as a result of the retrospective adoption of this accounting guidance:

	January 31, 2009
	As			Retrospective			As
	Reported			Adjustments			Adjusted
	(in thousands)
Consolidated Balance Sheet
Real estate, net	$	9,212,834		$	16,468		$	9,229,302
Other assets		936,902			(631	)		936,271
Senior and subordinated debt		870,410			(24,346	)		846,064
Deferred income taxes		439,282			16,054			455,336
Additional paid-in capital		241,539			26,257			267,796
Retained earnings		645,852			(2,128	)		643,724
	Three Months Ended October 31, 2008									Nine Months Ended October 31, 2008
	As			Retrospective			As			As			Retrospective			As
	Reported(1)			Adjustments			Adjusted			Reported(1)			Adjustments			Adjusted
	(in thousands, except per share data)
Consolidated Statements of Operations
Depreciation and amortization	$	63,992		$	46		$	64,038		$	198,474		$	136		$	198,610
Interest expense, net of capitalized interest		96,661			420			97,081			258,779			671			259,450
Gain (loss) on early extinguishment of debt		4,181			(489	)		3,692			(1,050	)		(489	)		(1,539	)
Deferred income tax benefit		(7,043	)		(374	)		(7,417	)		(12,830	)		(508	)		(13,338	)
Loss from continuing operations		(14,274	)		(581	)		(14,855	)		(63,112	)		(788	)		(63,900	)
Net loss attributable to Forest City Enterprises, Inc.		(18,534	)		(581	)		(19,115	)		(67,115	)		(788	)		(67,903	)
Net loss attributable to Forest City Enterprises, Inc. per share - basic and diluted	$	(0.18	)	$	(0.01	)	$	(0.19	)	$	(0.65	)	$	(0.01	)	$	(0.66	)

(1) Adjusted to reflect the impact of discontinued operations (see Note K).

8

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

A.    Accounting Policies (continued)

Noncontrolling Interests

In December 2007, the Financial Accounting Standards Board (“FASB”) issued accounting guidance for noncontrolling interests. A noncontrolling interest, previously referred to as minority interest, is the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent. The objective of this accounting guidance is to improve the relevance, comparability and transparency of the financial information that a reporting entity provides in its consolidated financial statements. The Company adopted this accounting guidance on February 1, 2009 and adjusted its January 31, 2009 Consolidated Balance Sheet to reflect noncontrolling interests as a component of total equity. Included in the balance sheet reclass was $58,247,000 of accumulated deficit noncontrolling interests resulting from deficit restoration obligations of noncontrolling partners, previously recorded as a component of investments in and advances to affiliates. In addition, the Company reclassed noncontrolling interests on its Consolidated Statements of Operations for the three and nine months ended October 31, 2008.

During May 2009, the Company acquired the equity interest in a consolidated subsidiary. The basis difference between the Company’s carrying amount and the proceeds paid is recorded as an adjustment to additional paid-in capital in accordance with accounting guidance for noncontrolling interests. Below is the disclosure required by this accounting guidance.

	Nine Months Ended
	October 31, 2009
	(in thousands)
Net loss attributable to Forest City Enterprises, Inc.	$	(36,852	)
Transfer from noncontrolling interests:
Increase in Forest City Enterprises, Inc. additional paid-in capital due to acquisition of a consolidated subsidiary’s noncontrolling interest		3,393
Pro forma net loss attributable to Forest City Enterprises, Inc.	$	(33,459	)

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related notes. Some of the critical estimates made by the Company include, but are not limited to, estimates of useful lives for long-lived assets, reserves for collection on accounts and notes receivable and other investments, impairment of real estate, other-than-temporary impairments on its equity method investments and the computation of expected losses on variable interest entities (“VIE”). As a result of the nature of estimates made by the Company, actual results could differ.

Reclassification

Certain prior year amounts in the accompanying consolidated financial statements have been reclassified to conform to the current year’s presentation.

Restricted Cash

Restricted cash represents legally restricted deposits with financial institutions for debt service payments, taxes and insurance, collateral, security deposits, capital replacement, improvement and operating reserves, bond funds, development escrows and construction escrows.

Capitalized Software Costs

Costs related to software developed or obtained for internal use are capitalized and amortized using the straight-line method over their estimated useful life, which is primarily three years. The Company capitalizes significant costs incurred in the acquisition or development of software for internal use, including the costs of the software, materials, consultants, interest and payroll and payroll-related costs for employees directly involved in developing internal-use computer software once final selection of the software is made. Costs incurred prior to the final selection of software, costs not qualifying for capitalization and routine maintenance costs are charged to expense as incurred.

9

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

A.    Accounting Policies (continued)

At October 31 and January 31, 2009, the Company has capitalized software costs of $8,810,000 and $16,997,000, respectively, net of accumulated amortization of $32,524,000 and $23,302,000, respectively. Total amortization of capitalized software costs amounted to $3,114,000 and $9,475,000 for the three and nine months ended October 31, 2009, respectively, and $3,000,000 and $9,053,000 for the three and nine months ended October 31, 2008, respectively.

Military Housing Fee Revenues

Revenues for development fees related to the Company’s military housing projects are earned based on a contractual percentage of the actual development costs incurred by the military housing projects and are recognized on a monthly basis as the costs are incurred. The Company also recognizes additional development incentive fees based upon successful completion of certain criteria, such as incentives to realize development cost savings, encourage small and local business participation, comply with specified safety standards and other project management incentives as specified in the development agreements. Base development and development incentive fees of $2,723,000 and $9,322,000 were recognized during the three and nine months ended October 31, 2009, respectively, and $16,792,000 and $55,500,000 during the three and nine months ended October 31, 2008, respectively, which were recorded in revenues from real estate operations in the Consolidated Statements of Operations.

Revenues for construction management fees are earned based on a contractual percentage of the actual construction costs incurred by the military housing projects and are recognized on a monthly basis as the costs are incurred. The Company also recognizes certain construction incentive fees based upon successful completion of certain criteria as set forth in the construction contracts. Base construction and construction incentive fees of $1,731,000 and $7,385,000 were recognized during the three and nine months ended October 31, 2009, respectively, and $3,172,000 and $11,022,000 during the three and nine months ended October 31, 2008, respectively, which were recorded in revenues from real estate operations in the Consolidated Statements of Operations.

Revenues for property management and asset management fees are earned based on a contractual percentage of the annual net rental income and annual operating income, respectively, that is generated by the military housing privatization projects as defined in the agreements. The Company also recognizes certain property management incentive fees based upon successful completion of certain criteria as set forth in the property management agreements. Property management, management incentive and asset management fees of $3,634,000 and $11,467,000 were recognized during the three and nine months ended October 31, 2009, respectively, and $3,741,000 and $10,683,000 during the three and nine months ended October 31, 2008, respectively, which were recorded in revenues from real estate operations in the Consolidated Statements of Operations.

Historic and New Market Tax Credit Entities

The Company has certain investments in properties that have received, or the Company believes are entitled to receive, historic preservation tax credits on qualifying expenditures under Internal Revenue Code (“IRC”) section 47 and new market tax credits on qualifying investments in designated community development entities (“CDEs”) under IRC section 45D, as well as various state credit programs. The Company typically enters into these investments with sophisticated financial investors. In exchange for the financial investor’s initial contribution into the investment, the financial investor is entitled to substantially all of the benefits derived from the tax credit, but generally has no material interest in the underlying economics of the property. Typically, these arrangements have put/call provisions (which range up to 7 years) whereby the Company may be obligated (or entitled) to repurchase the financial investor’s interest. The Company has consolidated each of these properties in its consolidated financial statements, and has reflected these investor contributions as accounts payable and accrued expenses in its Consolidated Balance Sheets.

The Company guarantees the financial investor that in the event of a subsequent recapture by a taxing authority due to the Company’s noncompliance with applicable tax credit guidelines it will indemnify the financial investor for any recaptured tax credits. The Company initially records a liability for the cash received from the financial investor. The Company generally records income upon completion and certification of the qualifying development expenditures for historic tax credits and upon certification of the qualifying investments in designated CDEs for new market tax credits resulting in an adjustment of the liability at each balance sheet date to the amount that would be paid to the financial investor based upon the tax credit compliance regulations, which range from 0 to 7 years. Income related to tax credits of $1,956,000 and $7,336,000 was recognized during the three and nine months ended October 31, 2009, respectively, and $1,562,000 and $4,544,000 during the three and nine months ended October 31, 2008, respectively, which was recorded in interest and other income in the Consolidated Statements of Operations.

Termination Benefits

During the three months ended April 30, 2009 and the three months ended January 31, 2009, management initiated involuntary employee separations in various areas of the Company’s workforce to reduce costs, which was communicated to all employees. The Company provided outplacement services to all terminated employees and severance payments based on years of service and certain other defined criteria. In accordance with accounting guidance for costs associated with exit or disposal activities, the

10

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

A.    Accounting Policies (continued)

Company recorded a pre-tax charge for total estimated termination costs (outplacement and severance) of $8,720,000 during the three months ended April 30, 2009 and $8,651,000 during the three months ended January 31, 2009, which is included in operating expenses in the Consolidated Statements of Operations for those respective periods. The expense is included in the Corporate Activities segment. The Company made payments of $5,291,000 related to the termination costs recorded during the three months ended January 31, 2009. The following table summarizes the activity in the accrued severance balance for termination costs:

	Total
	(in thousands)
Accrued severance balance at February 1, 2009	$	3,360
Accrued termination benefits expense		8,720
Payments		(3,122	)
Accrued severance balance at April 30, 2009		8,958
Accrued termination benefits expense		-
Payments		(2,937	)
Accrued severance balance at July 31, 2009	$	6,021
Accrued termination benefits expense		-
Payments		(1,476	)
Accrued severance balance at October 31, 2009	$	4,545

Accumulated Other Comprehensive Loss

Net unrealized gains or losses on securities are included in accumulated other comprehensive income (loss) (“OCI”) and represent the difference between the market value of investments in unaffiliated companies that are available-for-sale at the balance sheet date and the Company’s cost. Another component of accumulated OCI is foreign currency translation adjustments related to the Company’s London, England operations whose functional currency is the British pound. The assets and liabilities related to these operations are translated into U.S. dollars at current exchange rates; revenues and expenses are translated at average exchange rates. Also included in accumulated OCI is the Company’s portion of the unrealized gains and losses on the effective portions of derivative instruments designated and qualifying as cash flow hedges. The following table summarizes the components of accumulated OCI included within the Company’s Consolidated Balance Sheets.

	October 31, 2009			January 31, 2009
	(in thousands)
Unrealized losses on securities	$	459		$	170
Unrealized losses on foreign currency translation		1,265			2,258
Unrealized losses on interest rate contracts		148,406			174,838
		150,130			177,266
Noncontrolling interest and income tax benefit		(58,742	)		(69,745	)
Accumulated Other Comprehensive Loss	$	91,388		$	107,521

11

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

A.   Accounting Policies (continued)

Fair Value of Financial Instruments

The carrying amount of the Company’s accounts receivable and accounts payable and accrued expenses approximates fair value based upon the nature of the instruments. The Company estimates the fair value of its debt instruments by discounting future cash payments at interest rates that the Company believes approximate the current market. The estimated fair value is based upon market prices of public debt, available industry financing data, current treasury rates, recent financing transactions and other factors. Based on these parameters, the table below contains the estimated fair value of the Company’s long-term debt at October 31 and January 31, 2009.

	October 31, 2009				January 31, 2009
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in thousands)				(in thousands)
Fixed	$	5,105,131	$	4,667,857	$	4,941,899	$	4,313,068
Variable		3,471,063		3,371,552		3,348,055		3,043,161
Total long-term debt	$	8,576,194	$	8,039,409	$	8,289,954	$	7,356,229

See Note H for fair values of other financial instruments.

Derivative Instruments and Hedging Activities

In March 2008, the FASB issued further guidance on disclosures about derivative instruments and hedging activities that amends and expands disclosure requirements with the intent to provide users of financial statements with an enhanced understanding of how derivative instruments and hedging activities affect an entity’s financial position, financial performance and cash flows. These disclosure requirements include a tabular summary of the fair values of derivative instruments and their gains and losses, disclosure of derivative features that are credit risk related to provide more information regarding an entity’s liquidity and cross-referencing within footnotes to make it easier for financial statement users to locate important information about derivative instruments. The Company adopted the financial statement disclosures required by the new accounting guidance on February 1, 2009 (refer to Note G - Derivative Instruments and Hedging Activities for related disclosures).

The Company records all derivatives in the Consolidated Balance Sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.

Variable Interest Entities

In accordance with accounting guidance on consolidation of variable interest entities (“VIE”), the Company consolidates a VIE in which it has a variable interest (or a combination of variable interests) that will absorb a majority of the entity’s expected losses, receive a majority of the entity’s expected residual returns, or both, based on an assessment performed at the time the Company becomes involved with the entity. VIEs are entities in which the equity investors do not have a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. The Company reconsiders this assessment only if the entity’s governing documents or the contractual arrangements among the parties involved change in a manner that changes the characteristics or adequacy of the entity’s equity investment at risk, some or all of the equity investment is returned to the investors and other parties become exposed to expected losses of the entity, the entity undertakes additional activities or acquires additional assets beyond those that were anticipated at inception or at the last reconsideration date that increase its expected losses, or the entity receives an additional equity investment that is at risk, or curtails or modifies its activities in a way that decreases its expected losses. The Company may be subject to additional losses to the extent of any financial support that it voluntarily provides in the future. Additionally, if different estimates are applied in determining future cash flows, and how the cash flows are funded, it may have concluded otherwise on the consolidation method of an entity.

12

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

A.   Accounting Policies (continued)

The determination of the consolidation method for each entity can change as reconsideration events occur. Expected results after the formation of an entity can vary, which could cause a change in the allocation to the partners. In addition, if the Company sells a property, sells its interest in a joint venture or enters into a new joint venture, the number of VIEs it is involved with could vary between quarters.

During the nine months ended October 31, 2009, the Company settled outstanding debt of one of its unconsolidated subsidiaries, Gladden Farms II, a land development project located in Marana, Arizona. In addition, the Company was informed of the outside partner’s intention to discontinue any future funding into the project. As a result of the loan transaction and the related negotiations with the outside partner, it has been determined that Gladden Farms II is a VIE and the Company is the primary beneficiary, which required consolidation of the entity during the nine months ended October 31, 2009. The impact of the initial consolidation of Gladden Farms II is an increase in real estate, net of approximately $21,643,000 and an increase in noncontrolling interests of approximately $5,010,000. The Company recorded a gain of $1,774,000 upon consolidation of the entity that is recorded in interest and other income in the Consolidated Statements of Operations.

As of October 31, 2009, the Company determined that it was the primary beneficiary of 33 VIEs representing 21 properties (18 VIEs representing 7 properties in the Residential Group, 12 VIEs representing 11 properties in the Commercial Group and 3 VIEs/properties in the Land Development Group). The creditors of the consolidated VIEs do not have recourse to the Company’s general credit. As of October 31, 2009, the Company held variable interests in 40 VIEs for which it is not the primary beneficiary. The maximum exposure to loss as a result of its involvement with these unconsolidated VIEs is limited to the Company’s recorded investments in those VIEs totaling approximately $106,000,000 at October 31, 2009. The Company’s VIEs consist of joint ventures that are engaged, directly or indirectly, in the ownership, development and management of office buildings, regional malls, specialty retail centers, apartment communities, military housing, supported-living communities, land development and The Nets, a member of the National Basketball Association in which the Company accounts for its investment on the equity method of accounting.

The carrying value of real estate, nonrecourse mortgage debt and noncontrolling interests of VIEs for which the Company is the primary beneficiary are as follows:

	October 31, 2009		January 31, 2009
	(in thousands)
Real estate, net	$	1,866,000	$	1,602,000
Nonrecourse mortgage debt	$	1,395,000	$	1,237,000
Noncontrolling interest	$	90,000	$	63,000

In addition to the VIEs described above, the Company has also determined that it is the primary beneficiary of a VIE which holds collateralized borrowings of $29,000,000 (see Note E - Senior and Subordinated Debt) as of October 31, 2009.

New Accounting Guidance

In addition to the new accounting guidance for convertible debt instruments, noncontrolling interests and disclosures about derivative instruments and hedging activities discussed previously in Note A, the following accounting pronouncements were also adopted during the nine months ended October 31, 2009:

In June 2009, the FASB issued accounting standards codification and the hierarchy of generally accepted accounting principles (“GAAP”), that establishes the FASB Accounting Standards Codification^TM (“Codification”) as the source of GAAP recognized by the FASB to be applied by nongovernmental entities. The statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009 and as of this date, the Codification superseded all non-Securities and Exchange Commission accounting and reporting standards. For this quarterly report on Form 10-Q for the quarter ended October 31, 2009, the Company’s references to accounting guidance have been revised to conform with the Codification.

In May 2009, the FASB issued accounting guidance for subsequent events, which establishes guidance for recognizing and disclosing subsequent events in the financial statements. This guidance requires the disclosure of the date through which an entity has evaluated subsequent events. This guidance is effective for interim and annual periods ending after June 15, 2009. The Company has evaluated subsequent events through December 8, 2009, the date that the Company’s consolidated financial statements were issued, for this quarterly report on Form 10-Q for the quarter ended October 31, 2009.

In April 2009, the FASB issued accounting guidance for interim disclosures about fair value of financial instruments. This guidance amends the initial standards on fair value of financial instruments and interim financial reporting to require disclosure about the fair value of financial instruments at interim reporting periods. The guidance is effective for interim reporting periods ending after June 15, 2009 (refer to the “Fair Value of Financial Instruments” section of Note A).

13

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

A.   Accounting Policies (continued)

In April 2009, the FASB issued additional accounting guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased and for identifying circumstances that indicate a transaction is not orderly. The guidance is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. The adoption of this guidance on July 31, 2009 did not have a material impact on the Company’s consolidated financial statements.

Accounting guidance on fair value measurements defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosures about the use of fair value measurements. This guidance does not require new fair value measurements, but applies to accounting pronouncements that require or permit fair value measurements. This guidance is effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued two Staff Positions on fair value measurements. The first excludes the FASB accounting guidance on leases and other accounting pronouncements that address fair value measurements for purposes of lease classification or measurement under the guidance on leases. The second delays the effective date of fair value measurements for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. The Company adopted this guidance for its financial assets and liabilities on February 1, 2008 (see Note H - Fair Value Measurements) and for its nonfinancial assets and liabilities on February 1, 2009.

In November 2008, the FASB issued accounting guidance that clarifies the accounting for certain transactions and impairment considerations involving equity method investments. This guidance provides clarification of how business combination and noncontrolling interests accounting will impact equity method investments. This guidance is effective for fiscal years, and interim reporting periods within those fiscal years, beginning on or after December 15, 2008 and early adoption is prohibited. The adoption of this guidance on February 1, 2009 did not have a material impact on the Company’s consolidated financial statements.

In June 2008, the FASB issued accounting guidance addressing whether instruments granted in share-based payment transactions are participating securities. This guidance requires that nonvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents be treated as participating securities in the computation of earnings per share pursuant to the two-class method. This guidance will be applied retrospectively to all periods presented for fiscal years beginning after December 15, 2008. The adoption of this guidance on February 1, 2009 did not have a material impact on the Company’s consolidated financial statements.

In June 2008, the FASB issued accounting guidance for determining whether an equity-linked financial instrument (or embedded feature) is indexed to an entity’s own stock. The guidance on derivative instruments and hedging activities specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to the Company’s own stock and (b) classified in stockholders’ equity in the statement of financial position would not be considered a derivative financial instrument. This guidance provides a new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for the derivative instruments and hedging activities scope exception. This guidance is effective for the first annual reporting period beginning after December 15, 2008. The adoption of this guidance by the Company on February 1, 2009 did not have a material impact on its consolidated financial statements.

In April 2008, the FASB issued accounting guidance that amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. This guidance allows the Company to use its historical experience in renewing or extending the useful life of intangible assets. This guidance is effective for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years and shall be applied prospectively to intangible assets acquired after the effective date. The adoption of this guidance on February 1, 2009 did not have any impact on the Company’s consolidated financial statements.

In December 2007, the FASB issued revised accounting guidance on business combinations to provide greater consistency in the accounting and financial reporting of business combinations. This guidance requires the acquiring entity in a business combination to recognize all assets acquired and liabilities assumed in the transaction, establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed and requires the acquirer to disclose the nature and financial effect of the business combination. The guidance is effective for fiscal years beginning after December 15, 2008. In April 2009, the FASB issued accounting guidance that amends and clarifies the provisions related to the initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. This guidance requires that such contingencies be recognized at fair value on the acquisition date if fair value can be reasonably estimated during the allocation period. Otherwise, companies would typically account for the acquired contingencies in accordance with the accounting guidance for contingencies. The adoption of these pronouncements on February 1, 2009 did not have a material impact on the Company’s consolidated financial statements.

14

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

A.   Accounting Policies (continued)

The following new accounting pronouncements will be adopted on their respective required effective date:

In August 2009, the FASB issued amendments to the accounting guidance for the fair value measurement of liabilities. This guidance provides clarification that, in circumstances in which a quoted market price in an active market for the identical liability is not available, the fair value of a liability must be measured by using either (1) a valuation technique that uses quoted prices for identical or similar liabilities or (2) another valuation technique that is consistent with the principles of fair value measurements. In addition, this guidance clarifies that when estimating the fair value of a liability, an entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability, and clarifies how the price of a traded debt security should be considered in estimating the fair value of a liability. This guidance is effective for annual and interim reporting periods beginning after its issuance. The Company is currently evaluating the impact of adopting this guidance on its consolidated financial statements.

In June 2009, the FASB issued amendments to the accounting guidance for consolidation of VIEs to require an ongoing reassessment of determining whether a variable interest gives a company a controlling financial interest in a VIE. This guidance eliminates the quantitative approach to determining whether a company is the primary beneficiary of a VIE previously required by the guidance for consolidation of VIEs. The guidance is effective for annual and interim reporting periods beginning after November 15, 2009. The Company is currently evaluating the impact of adopting this guidance on its consolidated financial statements.

In June 2009, the FASB issued an amendment to the guidance on accounting for transfers and servicing of financial assets and extinguishments of liabilities, which aims to improve the relevance, representational faithfulness and comparability of the information provided in an entity’s financial statements about the transfer of financial assets. The guidance eliminates the concept of a qualifying special-purpose entity and changes the requirements for the derecognition of financial assets. This guidance is effective for annual and interim reporting periods beginning after November 15, 2009. The Company does not expect the adoption of this accounting guidance to have a material impact on its consolidated financial statements.

15

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

B.   Investments in and Advances to Affiliates

Included in investments in and advances to affiliates are unconsolidated investments in entities that the Company does not control and/or is not deemed to be the primary beneficiary, and which are accounted for under the equity method of accounting, as well as advances to partners and other affiliates.

Following is a reconciliation of members’ and partners’ equity to the Company’s carrying value in the accompanying Consolidated Balance Sheets:

			January 31,
	October 31,		2009
	2009		(As Adjusted)
	(in thousands)
Members’ and partners’ equity, as below	$	527,035	$	595,163
Equity of other members and partners		471,219		534,942
Company’s investment in partnerships		55,816		60,221
Advances to and on behalf of other affiliates		184,120		168,774
Total Investments in and Advances to Affiliates	$	239,936	$	228,995

Summarized financial information for the equity method investments is as follows:

	(Combined 100%)
	October 31,			January 31,
	2009			2009
	(in thousands)
Balance Sheet:
Completed rental properties	$	4,334,121		$	3,967,896
Projects under development		890,582			931,411
Land held for development or sale		269,716			278,438
Total Real Estate		5,494,419			5,177,745
Less accumulated depreciation		(763,985	)		(680,013	)
Real Estate, net		4,730,434			4,497,732
Restricted cash - military housing bond funds		550,440			795,616
Other restricted cash		211,583			207,507
Other assets		458,971			482,431
Total Assets	$	5,951,428		$	5,983,286
Mortgage debt, nonrecourse	$	4,557,677		$	4,571,375
Other liabilities		866,716			816,748
Members’ and partners’ equity		527,035			595,163
Total Liabilities and Members’/Partners’ Equity	$	5,951,428		$	5,983,286

16

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

B. Investments in and Advances to Affiliates (continued)

	(Combined 100%)						(Combined 100%)
	Three Months Ended October 31,						Nine Months Ended October 31,
	2009			2008			2009			2008
	(in thousands)						(in thousands)
Operations:
Revenues	$	197,158		$	222,403		$	682,898		$	714,669
Operating expenses		(123,318	)		(157,284	)		(454,249	)		(525,674	)
Interest expense including early extinguishment of debt		(56,789	)		(56,941	)		(170,749	)		(171,777	)
Impairment of unconsolidated entities (1)		(13,200	)		-			(36,403	)		(45,713	)
Depreciation and amortization		(35,239	)		(28,352	)		(127,963	)		(106,307	)
Interest and other income		1,182			13,644			9,954			45,444
Loss from continuing operations		(30,206	)		(6,530	)		(96,512	)		(89,358	)
Discontinued operations:
Operating earnings (loss) from rental properties		(78	)		117			159			416
Gain on disposition of rental properties (2)		8,997			400			8,997			3,470
Discontinued operations subtotal		8,919			517			9,156			3,886
Net loss (pre-tax)	$	(21,287	)	$	(6,013	)	$	(87,356	)	$	(85,472	)
Company’s portion of net loss (pre-tax)	$	(11,836	)	$	(3,198	)	$	(45,140	)	$	(18,787	)

(1) The following table shows the detail of the impairment of unconsolidated entities:

		Three Months Ended October 31,				Nine Months Ended October 31,
		2009		2008		2009		2008
		(in thousands)				(in thousands)
Apartment Communities:
Millender Center	(Detroit, Michigan)	$	3,247	$	-	$	10,317	$	-
Uptown Apartments	(Oakland, California)		-		-		6,781		-
Metropolitan Lofts	(Los Angeles, California)		1,466		-		2,505		-
Residences at University Park	(Cambridge, Massachusetts)		-		-		855		-
Fenimore Court	(Detroit, Michigan)		-		-		693		-
Mercury (Condominium)	(Los Angeles, California)		-		-		-		12,006
Classic Residence by Hyatt (Supported-Living Apartments)	(Yonkers, New York)		-		-		4,892		-
Navy Midwest (Land owned by Military Housing Project)	(Chicago, Illinois)		-		-		-		30,000
Specialty Retail Centers:
Southgate Mall	(Yuma, Arizona)		-		-		1,611		-
El Centro Mall	(El Centro, California)		-		-		-		3,342
Pittsburgh Peripheral (Land Project)	(Pittsburgh, Pennsylvania)		7,217		-		7,217		-
Shamrock Business Center (Land Project)	(Painesville, Ohio)		1,150		-		1,150		-
Other			120		-		382		365
Total impairment of unconsolidated entities		$	13,200	$	-	$	36,403	$	45,713
Company’s portion of impairment of unconsolidated entities		$	13,200	$	-	$	34,663	$	6,026

(2) Upon disposition, investments accounted for on the equity method are not classified as discontinued operations; therefore, gains or losses on the sale of equity method properties are reported in continuing operations when sold. The following table shows the detail of gain on disposition of unconsolidated entities:

		Three Months Ended October 31,				Nine Months Ended October 31,
		2009		2008		2009		2008
		(in thousands)				(in thousands)
Boulevard Towers (Apartment Community) (a)	(Amherst, New York)	$	8,997	$	-	$	8,997	$	-
Emery-Richmond (Office Building)	(Warrensville Heights, Ohio)		-		400		-		400
One International Place (Office Building)	(Cleveland, Ohio)		-		-		-		3,070
Total gain on disposition of unconsolidated entities		$	8,997	$	400	$	8,997	$	3,470
Company’s portion gain on disposition of unconsolidated entities		$	4,498	$	200	$	4,498	$	1,081

^(a) The Company disposed of its 50% ownership interest in Boulevard Towers in a nonmonetary exchange for 100% ownership interest in North Church Towers, an apartment complex in Parma Heights, Ohio.

17

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

B.   Investments in and Advances to Affiliates (continued)

For the three and nine months ended October 31, 2009 and 2008, Nets Sports and Entertainment, LLC (“NSE”), an equity method investment that owns The Nets and certain real estate in Brooklyn, New York for the proposed sports and entertainment arena, was deemed a significant subsidiary. Summarized statements of operations information for NSE is as follows:

	Three Months Ended October 31,						Nine Months Ended October 31,
	2009			2008			2009			2008
	(in thousands)						(in thousands)
Operations:
Revenues	$	1,078		$	2,046		$	49,723		$	59,520
Operating expenses		(9,856	)		(13,091	)		(70,345	)		(80,427	)
Interest expense		(5,294	)		(2,856	)		(12,970	)		(9,150	)
Depreciation and amortization		(195	)		(260	)		(19,986	)		(23,957	)
Net loss (pre-tax)	$	(14,267	)	$	(14,161	)	$	(53,578	)	$	(54,014	)
Company’s portion of net loss (pre-tax)	$	(13,244	)	$	(10,688	)	$	(33,100	)	$	(33,289	)

C.   Mortgage Debt, Nonrecourse

As of October 31, 2009, the composition of mortgage debt maturities including scheduled amortization and balloon payments for the next five years are as follows:

					Scheduled
	Total		Scheduled		Balloon
Fiscal Years Ending January 31,	Maturities		Amortization		Payments
	(in thousands)
2010	$	332,363	$	22,280	$	310,083
2011		674,739	$	74,021	$	600,718
2012		878,504	$	71,842	$	806,662
2013		1,178,832	$	56,346	$	1,122,486
2014		889,836	$	45,915	$	843,921
Thereafter		3,509,349
Total	$	7,463,623

Subsequent to October 31, 2009, the Company addressed approximately $96,301,000 of mortgage debt scheduled to mature during the year ending January 31, 2010 through closed transactions, commitments and/or automatic extensions. The Company also has extension options available on $184,984,000 of mortgage debt scheduled to mature during the year ending January 31, 2010, all of which require some predefined condition in order to qualify for the extension, such as meeting or exceeding leasing hurdles, loan to value ratios or debt service coverage requirements. The Company cannot give assurance that the defined hurdles or milestones will be achieved to qualify for these extensions.

The Company is in current negotiations to refinance and/or extend the remaining $28,798,000 of mortgage debt scheduled to mature during the year ending January 31, 2010. In the unlikely event that an agreement is not reached with a lender to refinance or extend any maturing debt, the encumbered assets could be turned over to the lender in lieu of satisfying the maturing balloon payment. It is management’s belief that it is unlikely that a material number of assets would be turned over to the lenders and the impact of this unlikely event would not have a material effect on the financial condition or operations of the Company.

18

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

D.   Bank Revolving Credit Facility

At October 31 and January 31, 2009, the Company’s bank revolving credit facility provides for maximum borrowings of $750,000,000 and matures in March 2010. The credit facility bears interest at the Company’s option at either a LIBOR-based rate plus 2.50% (2.75% and 2.98% at October 31 and January 31, 2009, respectively), or a Prime-based rate plus 1.50%. The Company has historically elected the LIBOR-based rate option. The credit facility restricts the Company’s ability to purchase, acquire, redeem or retire any of its capital stock, and prohibits the Company from paying any dividends on its capital stock through the maturity date. The credit facility allows certain actions by the Company or its subsidiaries, such as default in paying debt service or allowing foreclosure on an encumbered real estate asset, only to the extent such actions do not have a material adverse effect, as defined in the agreement, on the Company. Of the available borrowings, up to $100,000,000 may be used for letters of credit or surety bonds. The credit facility also contains certain financial covenants, including maintenance of certain debt service and cash flow coverage ratios, and specified levels of net worth (as defined in the credit facility). At October 31, 2009, the Company was in compliance with all of these financial covenants.

Effective October 5, 2009, the Company entered into a Third Amendment to the bank revolving credit facility in connection with the Company’s private placement of its 3.625% Puttable Equity-Linked Senior Notes due 2014 (“2014 Notes”). The amendment permitted the Company to exchange up to $200,000,000 of its 3.625% Puttable Equity-Linked Senior Notes due 2011 for its 2014 Notes and issue up to $75,000,000 in 2014 Notes, provided that the aggregate amount of 2014 Notes does not exceed $200,000,000 (refer to Note E – Senior and Subordinated Debt).

Effective October 22, 2009, the Company entered into a Fourth Amendment to the bank revolving credit facility in connection with the Company’s private placement of its 5.00% Convertible Senior Notes due 2016 (“2016 Notes”). The amendment permitted the Company to issue the $200,000,000 of 2016 Notes and enter into a convertible note hedge transaction in connection with the issuance of these 2016 Notes (refer to Note E – Senior and Subordinated Debt).

During the nine months ended October 31, 2009, the Company primarily used the net proceeds from the May 2009 common stock offering (refer to Note M – Common Stock Offering) and the issuance of the 2016 Notes to reduce outstanding borrowings on the bank revolving credit facility.

The available credit on the bank revolving credit facility at October 31 and January 31, 2009 was as follows:

	October 31, 2009		January 31, 2009
	(in thousands)
Maximum borrowings	$	750,000	$	750,000
Less outstanding balances:
Borrowings		37,016		365,500
Letters of credit		66,814		65,949
Surety bonds		-		-
Available credit	$	646,170	$	318,551

In November 2009, the Company reached an agreement on the principal terms of a new $500,000,000 revolving credit facility with its 15-member bank group, which would mature two years from closing. The Company expects the transaction to close prior to December 31, 2009. In the event the transaction does not close and the revolving credit facility is not otherwise extended, the Company would continue to raise capital through the sale of assets, admitting other joint venture equity partners into some of the Company’s properties, curtailing capital expenditures and/or raising additional funds in a public or private debt or equity offering.

19

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

E.   Senior and Subordinated Debt

The Company’s Senior and Subordinated Debt is comprised of the following at October 31 and January 31, 2009:

			January 31, 2009
	October 31, 2009		(As Adjusted)
	(in thousands)
Senior Notes:
3.625% Puttable Equity-Linked Senior Notes due 2011, net of discount	$	98,156	$	248,154
3.625% Puttable Equity-Linked Senior Notes due 2014, net of discount		198,399		-
7.625% Senior Notes due 2015		300,000		300,000
5.000% Convertible Senior Notes due 2016		200,000		-
6.500% Senior Notes due 2017		150,000		150,000
7.375% Senior Notes due 2034		100,000		100,000
Total Senior Notes		1,046,555		798,154
Subordinated Debt:
Redevelopment Bonds due 2010		-		18,910
Subordinate Tax Revenue Bonds due 2013		29,000		29,000
Total Subordinated Debt		29,000		47,910
Total Senior and Subordinated Debt	$	1,075,555	$	846,064

Puttable Equity-Linked Senior Notes due 2011

On October 10, 2006, the Company issued $287,500,000 of 3.625% puttable equity-linked senior notes due October 15, 2011 (“2011 Notes”) in a private placement. The notes were issued at par and accrued interest is payable semi-annually in arrears on April 15 and October 15. During the year ended January 31, 2009, the Company purchased on the open market $15,000,000 in principal of its 2011 Notes resulting in a gain, net of associated deferred financing costs of $3,692,000, which is recorded as early extinguishment of debt in the Consolidated Statements of Operations. On October 7, 2009, the Company entered into privately negotiated exchange agreements with certain holders of the 2011 Notes to exchange $167,433,000 of aggregate principal amount of their 2011 Notes for a new issue of 3.625% puttable equity-linked senior notes due October 2014. This exchange resulted in a gain, net of associated deferred financing costs of $4,683,000, which is recorded as early extinguishment of debt in the Consolidated Statements of Operations. There was $105,067,000 ($98,156,000, net of discount) and $272,500,000 ($248,154,000, net of discount) of principal outstanding at October 31 and January 31, 2009, respectively.

Holders may put their notes to the Company at their option on any day prior to the close of business on the scheduled trading day immediately preceding July 15, 2011 only under the following circumstances: (1) during the five business-day period after any five consecutive trading-day period (the “measurement period”) in which the trading price per note for each day of that measurement period was less than 98% of the product of the last reported sale price of the Company’s Class A common stock and the put value rate (as defined) on each such day; (2) during any fiscal quarter after the fiscal quarter ending January 31, 2007, if the last reported sale price of the Company’s Class A common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter exceeds 130% of the applicable put value price in effect on the last trading day of the immediately preceding fiscal quarter; or (3) upon the occurrence of specified corporate events as set forth in the applicable indenture. On and after July 15, 2011 until the close of business on the scheduled trading day immediately preceding the maturity date, holders may put their notes to the Company at any time, regardless of the foregoing circumstances. In addition, upon a designated event, as defined, holders may require the Company to purchase for cash all or a portion of their notes for 100% of the principal amount of the notes plus accrued and unpaid interest, if any, as set forth in the applicable indenture. At October 31, 2009, none of the aforementioned circumstances have been met.

If a note is put to the Company, a holder would receive (i) cash equal to the lesser of the principal amount of the note or the put value and (ii) to the extent the put value exceeds the principal amount of the note, shares of the Company’s Class A common stock, cash, or a combination of Class A common stock and cash, at the Company’s option. The initial put value rate was 15.0631 shares of Class A common stock per $1,000 principal amount of notes (equivalent to a put value price of $66.39 per share of Class A common stock). The put value rate will be subject to adjustment in some events but will not be adjusted for accrued interest. In addition, if a “fundamental change,” as defined, occurs prior to the maturity date, the Company will in some cases increase the put value rate for a holder that elects to put their notes.

20

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

E.    Senior and Subordinated Debt (continued)

Concurrent with the issuance of the notes, the Company purchased a call option on its Class A common stock in a private transaction. The purchased call option allows the Company to receive shares of its Class A common stock and/or cash from counterparties equal to the amounts of Class A common stock and/or cash related to the excess put value that it would pay to the holders of the notes if put to the Company. These purchased call options will terminate upon the earlier of the maturity date of the notes or the first day all of the notes are no longer outstanding due to a put or otherwise. In a separate transaction, the Company sold warrants to issue shares of the Company’s Class A common stock at an exercise price of $74.35 per share in a private transaction. If the average price of the Company’s Class A common stock during a defined period ending on or about the respective settlement dates exceeds the exercise price of the warrants, the warrants will be settled in shares of the Company’s Class A common stock.

The 2011 Notes are the Company’s only senior notes that qualify as convertible debt instruments that may be settled in cash upon conversion, including partial cash settlement (see the “Retrospective Adoption of Accounting Guidance for Convertible Debt Instruments” section of Note A). The carrying amounts of the Company’s debt and equity balances related to the 2011 Notes as of October 31 and January 31, 2009 are as follows:

	October 31, 2009			January 31, 2009
	(in thousands)
Carrying amount of the equity component	$	16,769		$	45,885
Outstanding principal amount of the puttable equity-linked senior notes	$	105,067		$	272,500
Unamortized discount		(6,911	)		(24,346	)
Net carrying amount of the puttable equity-linked senior notes	$	98,156		$	248,154

The unamortized discount will be amortized as additional interest expense through October 15, 2011. The effective interest rate for the liability component of the puttable equity-linked senior notes was 7.51% for both the three and nine months ended October 31, 2009 and 2008. The Company recorded non-cash interest expense of $1,705,000 and $6,020,000 for the three and nine months ended October 31, 2009, respectively, and $2,239,000 and $6,672,000 for the three and nine months ended October 31, 2008, respectively. The Company recorded contractual interest expense of $2,082,000 and $7,021,000 for the three and nine months ended October 31, 2009, respectively, and $2,571,000 and $7,782,000 for the three and nine months ended October 31, 2008, respectively.

Puttable Equity-Linked Senior Notes due 2014

On October 7, 2009, the Company issued $167,433,000 of 3.625% puttable equity-linked senior notes due October 15, 2014 (“2014 Notes”) to certain holders in exchange for $167,433,000 of 2011 Notes discussed above. Concurrent with the exchange of 2011 Notes for the 2014 Notes, the Company issued an additional $32,567,000 of 2014 Notes in a private placement, net of a 5% discount. Interest on the 2014 Notes is payable semi-annually in arrears on April 15 and October 15, beginning April 15, 2010. Net proceeds from the exchange and additional issuance transaction, net of discounts and estimated offering expenses, was $29,764,000.

Holders may put their notes to the Company at any time prior to the earlier of (i) stated maturity or (ii) the Put Termination Date, as defined below. Upon a put, a note holder would receive 68.7758 shares of the Company’s Class A common stock per $1,000 principal amount of notes, based on a Put Value Price of $14.54 per share of Class A common stock, subject to adjustment. The amount payable upon a put of the notes is only payable in shares of the Company’s Class A common stock, except for cash paid in lieu of fractional shares. If the Daily Volume Weighted Average Price of the Class A common stock has equaled or exceeded 130% of the Put Value Price then in effect for at least 20 trading days in any 30 trading day period, the Company may, at its option, elect to terminate the rights of the holders to put their notes to the Company. If elected, the Company is required to issue a Put Termination Notice that shall designate an effective date on which the holders termination put rights will be terminated, which shall be a date at least 20 days after the mailing of such Put Termination Notice (the “Put Termination Date”). Holders electing to put their notes after the mailing of a Put Termination Notice shall receive a Coupon Make-Whole Payment in an amount equal to the remaining scheduled interest payments attributable to such notes from the last applicable interest payment date through and including October 15, 2013.

21

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

E.    Senior and Subordinated Debt (continued)

Senior Notes due 2015

On May 19, 2003, the Company issued $300,000,000 of 7.625% senior notes due June 1, 2015 in a public offering. Accrued interest is payable semi-annually on December 1 and June 1. These senior notes may be redeemed by the Company, in whole or in part, at any time on or after June 1, 2008 at an initial redemption price of 103.813% that is systematically reduced to 100% through June 1, 2011. As of June 1, 2009, the redemption price was reduced to 102.542%.

Convertible Senior Notes due 2016

On October 26, 2009, the Company issued $200,000,000 of 5.00% convertible senior notes due October 15, 2016 in a private placement. The notes were issued at par and accrued interest is payable semi-annually on April 15 and October 15, beginning April 15, 2010. Net proceeds from the issuance, net of the cost of the convertible note hedge transaction described below and estimated offering costs, was $177,262,000.

Holders may convert their notes at their option at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date. Upon conversion, a note holder would receive 71.8894 shares of the Company’s Class A common stock per $1,000 principal amount of notes, based on a put value price of approximately $13.91 per share of Class A common stock, subject to adjustment. The amount payable upon a conversion of the notes is only payable in shares of the Company’s Class A common stock, except for cash paid in lieu of fractional shares.

In connection with the issuance of the notes, the Company entered into a convertible note hedge transaction. The convertible note hedge transaction is intended to reduce, subject to a limit, the potential dilution with respect to the Company’s Class A common stock upon conversion of the notes. The net effect of the convertible note hedge transaction, from the Company’s perspective, is to approximate an effective conversion price of $16.37 per share. The terms of the Notes were not affected by the convertible note hedge transaction. The convertible note hedge transaction, which cost $15,900,000 ($9,734,000 net of the related tax benefit), was recorded as a reduction of shareholders’ equity through additional paid in capital.

Senior Notes due 2017

On January 25, 2005, the Company issued $150,000,000 of 6.500% senior notes due February 1, 2017 in a public offering. Accrued interest is payable semi-annually on February 1 and August 1. These senior notes may be redeemed by the Company, in whole or in part, at any time on or after February 1, 2010 at a redemption price of 103.250% beginning February 1, 2010 and systematically reduced to 100% through February 1, 2013.

Senior Notes due 2034

On February 10, 2004, the Company issued $100,000,000 of 7.375% senior notes due February 1, 2034 in a public offering. Accrued interest is payable quarterly on February 1, May 1, August 1, and November 1. These senior notes may be redeemed by the Company, in whole or in part, at any time at a redemption price of 100% of the principal amount plus accrued interest.

All of the Company’s senior notes are unsecured senior obligations and rank equally with all existing and future unsecured indebtedness; however, they are effectively subordinated to all existing and future secured indebtedness and other liabilities of the Company’s subsidiaries to the extent of the value of the collateral securing such other debt, including the bank revolving credit facility. The indenture governing certain of the senior notes contain covenants providing, among other things, limitations on incurring additional debt and payment of dividends.

Subordinated Debt

In November 2000, the Company issued $20,400,000 of 8.25% redevelopment bonds due September 15, 2010 in a private placement, with semi-annual interest payments due on March 15 and September 15. The Company entered into a total rate of return swap (“TRS”) for the benefit of these bonds that was set to expire on September 15, 2009. Under the TRS, the Company received a rate of 8.25% and paid the Securities Industry and Financial Markets Association (“SIFMA”) rate plus a spread. The TRS, accounted for as a derivative, was required to be marked to fair value at the end of each reporting period. As stated in the “Fair Value Hedges of Interest Rate Risk” section of Note G, any fluctuation in the value of the TRS would be offset by the fluctuation in the value of the underlying borrowings. At January 31, 2009, the fair value of the TRS was $(1,490,000), recorded in accounts payable and accrued expenses; therefore, the fair value of the bonds was reduced by the same amount to $18,910,000 (see Note H – Fair Value Measurements). On July 13, 2009, the TRS contract was terminated and subsequently, a consolidated wholly owned subsidiary of the Company purchased the redevelopment bonds at par which effectively extinguished the subordinated debt.

22

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

E.   Senior and Subordinated Debt (continued)

In May 2003, the Company purchased $29,000,000 of subordinate tax revenue bonds that were contemporaneously transferred to a custodian, which in turn issued custodial receipts that represent ownership in the bonds to unrelated third parties. The bonds bear a fixed interest rate of 7.875%. The Company evaluated the transfer pursuant to the accounting guidance on accounting for transfers and servicing of financial assets and extinguishment of liabilities and has determined that the transfer does not qualify for sale accounting treatment principally because the Company has guaranteed the payment of principal and interest in the unlikely event that there is insufficient tax revenue to support the bonds when the custodial receipts are subject to mandatory tender on December 1, 2013. As such, the Company is the primary beneficiary of this VIE and the book value (which approximated amortized costs) of the bonds was recorded as a collateralized borrowing reported as senior and subordinated debt and as held-to-maturity securities reported as other assets in the Consolidated Balance Sheets.

F.   Financing Arrangements

Collateralized Borrowings

On July 13, 2005, the Park Creek Metropolitan District (the “District”) issued $65,000,000 Senior Subordinate Limited Property Tax Supported Revenue Refunding and Improvement Bonds, Series 2005 (the “Senior Subordinate Bonds”) and Stapleton Land II, LLC, a consolidated subsidiary, entered into an agreement whereby it will receive a 1% fee on the Senior Subordinate Bonds in exchange for providing certain credit enhancement. The counterparty to the credit enhancement arrangement also owns the underlying Senior Subordinate Bonds and can exercise its rights requiring payment from Stapleton Land II, LLC upon an event of default of the Senior Subordinate Bonds, a refunding of the Senior Subordinate Bonds, or failure of Stapleton Land II, LLC to post required collateral. The Senior Subordinate Bonds were refinanced on April 16, 2009 with proceeds from the issuance of $86,000,000 of Park Creek Metropolitan District Senior Limited Property Tax Supported Revenue Refunding and Improvement Bonds, Series 2009. The credit enhancement arrangement expired with the refinancing of the Senior Subordinate Bonds on April 16, 2009. The Company recorded $-0- and $132,000 of interest income related to the credit enhancement arrangement in the Consolidated Statements of Operations for the three and nine months ended October 31, 2009, respectively, and $164,000 and $488,000 for the three and nine months ended October 31, 2008, respectively.

On August 16, 2005, the District issued $58,000,000 Junior Subordinated Limited Property Tax Supported Revenue Bonds, Series 2005 (the “Junior Subordinated Bonds”). The Junior Subordinated Bonds initially were to pay a variable rate of interest. Upon issuance, the Junior Subordinated Bonds were purchased by a third party and the sales proceeds were deposited with a trustee pursuant to the terms of the Series 2005 Investment Agreement. Under the terms of the Series 2005 Investment Agreement, after March 1, 2006, the District may elect to withdraw funds from the trustee for reimbursement for certain qualified infrastructure and interest expenditures (“Qualifying Expenditures”). In the event that funds from the trustee are used for Qualifying Expenditures, a corresponding amount of the Junior Subordinated Bonds converts to an 8.5% fixed rate and matures in December 2037 (“Converted Bonds”). On August 16, 2005, Stapleton Land, LLC, a consolidated subsidiary, entered into a Forward Delivery Placement Agreement (“FDA”) whereby Stapleton Land, LLC was entitled and obligated to purchase the converted fixed rate Junior Subordinated Bonds through June 2, 2008. The District withdrew $58,000,000 of funds from the trustee for reimbursement of certain Qualifying Expenditures by June 2, 2008 and the Junior Subordinated Bonds became Converted Bonds. The Converted Bonds were acquired by Stapleton Land, LLC under the terms of the FDA by June 8, 2008. Stapleton Land, LLC immediately transferred the Converted Bonds to investment banks and the Company simultaneously entered into a TRS with a notional amount of $58,000,000. The Company receives a fixed rate of 8.5% and pays the SIFMA rate plus a spread on the TRS related to the Converted Bonds. The Company determined that the sale of the Converted Bonds to the investment banks and simultaneous execution of the TRS did not surrender control; therefore, the Converted Bonds have been recorded as a secured borrowing in the Consolidated Balance Sheets. During the year ended January 31, 2009, one of the Company’s consolidated subsidiaries purchased $10,000,000 of the Converted Bonds from one of the investment banks. Simultaneous with the purchase, a $10,000,000 TRS contract was terminated and the corresponding amount of the secured borrowing was removed from the Consolidated Balance Sheets. On April 16, 2009, an additional $5,000,000 of the Converted Bonds was purchased by one of the Company’s consolidated subsidiaries, and a corresponding amount of a related TRS was terminated and the corresponding secured borrowing was removed from the Consolidated Balance Sheets. The fair value of the Converted Bonds recorded in other assets in the Consolidated Balance Sheets was $58,000,000 at both October 31 and January 31, 2009. The outstanding TRS contracts on the $43,000,000 and $48,000,000 of secured borrowings related to the Converted Bonds at October 31 and January 31, 2009, respectively, were supported by collateral consisting primarily of certain notes receivable owned by the Company aggregating $33,035,000. The Company recorded net interest income of $499,000 and $1,819,000 related to the TRS in the Consolidated Statements of Operations for the three and nine months ended October 31, 2009, respectively, and $640,000 and $2,376,000 for the three and nine months ended October 31, 2008, respectively.

23

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

F.   Financing Arrangements (continued)

Other Structured Financing Arrangements

In May 2004, Lehman Brothers, Inc. (“Lehman”) purchased $200,000,000 in tax increment revenue bonds issued by the Denver Urban Renewal Authority (“DURA”), with a fixed-rate coupon of 8.0% and maturity date of October 1, 2024, which were used to fund the infrastructure costs associated with phase II of the Stapleton development project. The DURA bonds were transferred to a trust that issued floating rate trust certificates. Stapleton Land, LLC entered into an agreement with Lehman to purchase the DURA bonds from the trust if they are not repurchased or remarketed between June 1, 2007 and June 1, 2009. Stapleton Land, LLC is entitled to receive a fee upon removal of the DURA bonds from the trust equal to the 8.0% coupon rate, less the SIFMA index, less all fees and expenses due to Lehman (collectively, the “Fee”). The Fee was accounted for as a derivative with changes in fair value recorded through earnings. On July 1, 2008, $100,000,000 of the DURA bonds were remarketed. On July 15, 2008, Stapleton Land, LLC was paid $13,838,000 of the fee, which represented the fee earned on the remarketed DURA bonds.

During the three months ended October 31, 2008, Lehman filed for bankruptcy and the remaining $100,000,000 of DURA bonds were transferred to a creditor of Lehman. As a result, the Company reassessed the collectability of the Fee and decreased the fair value of the Fee to $-0-, resulting in an increase to operating expenses in the Consolidated Statements of Operations of $13,816,000 for the three months ended October 31, 2008. Stapleton Land, LLC informed Lehman that it determined that a “Special Member Termination Event” had occurred because Stapleton Land, LLC (a) fulfilled all of its bond purchase obligations under the transaction documents by purchasing or causing to be redeemed or repurchased all of the bonds held by Lehman and (b) fulfilled all other obligations in accordance with the transaction documents. Therefore, Stapleton Land, LLC has no other financing obligations with Lehman.

The Company recorded interest income of $-0- related to the change in fair value of the Fee in the Consolidated Statements of Operations for both the three and nine months ended October 31, 2009 and $-0- and $4,546,000 for the three and nine months ended October 31, 2008, respectively.

Stapleton Land, LLC has committed to fund $24,500,000 to the District to be used for certain infrastructure projects and has funded $16,491,000 of this commitment as of October 31, 2009. In addition, on June 23, 2009, another consolidated subsidiary of the Company entered into an agreement with the City of Denver and certain of its entities to fund $10,000,000 to be used to fund additional infrastructure projects and has funded $824,000 of this commitment as of October 31, 2009.

G.   Derivative Instruments and Hedging Activities

Risk Management Objective of Using Derivatives

The Company maintains an overall interest rate risk management strategy that incorporates the use of derivative instruments to minimize significant unplanned decreases in earnings and cash flows that may be caused by interest rate volatility. Derivative instruments that are used as part of the Company’s strategy include interest rate swaps and option contracts that have indices related to the pricing of specific balance sheet liabilities. The Company enters into interest rate swaps to convert certain floating-rate debt to fixed-rate long-term debt, and vice-versa, depending on market conditions or forward starting swaps to hedge the changes in benchmark interest rates on forecasted financings. Option products utilized include interest rate caps, floors, interest rate swaptions and Treasury options. The use of these option products is consistent with the Company’s risk management objective to reduce or eliminate exposure to variability in future cash flows primarily attributable to changes in benchmark rates relating to forecasted financings, and the variability in cash flows attributable to increases relating to interest payments on its floating-rate debt. The caps and floors have typical durations ranging from one to three years while the Treasury options are for periods of five to ten years. The Company also enters into interest rate swap agreements for hedging purposes for periods that are generally one to ten years. The Company does not have any Treasury options outstanding at October 31, 2009.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate caps and swaps as part of its interest rate risk management strategy. Interest rate caps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up front premium. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

24

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

G.   Derivative Instruments and Hedging Activities (continued)

The effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in accumulated OCI and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. The Company recorded interest expense of $-0- and $1,010,000 for the three and nine months ended October 31, 2009, respectively, and $457,000 and $482,000 for the three and nine months ended October 31, 2008, respectively, in the Consolidated Statements of Operations, which represented total ineffectiveness of all cash flow hedges of which $-0- and $928,000 for the three and nine months ended October 31, 2009, respectively, and $131,000 for the three and nine months ended October 31, 2008 represented the amount of derivative losses reclassified into earnings from accumulated OCI as a result of forecasted transactions that did not occur by the end of the originally specified time period or within an additional two-month period of time thereafter. As of October 31, 2009, the Company expects that within the next twelve months it will reclassify amounts recorded in accumulated OCI into earnings as an increase in interest expense of approximately $28,346,000, net of tax. However, the actual amount reclassified could vary due to future changes in fair value of these derivatives.

Fair Value Hedges of Interest Rate Risk

From time to time, the Company and/or certain of its joint ventures (the “Joint Ventures”) enter into TRS on various tax-exempt fixed-rate borrowings generally held by the Company and/or within the Joint Ventures. The TRS convert these borrowings from a fixed rate to a variable rate and provide an efficient financing product to lower the cost of capital. In exchange for a fixed rate, the TRS require that the Company and/or the Joint Ventures pay a variable rate, generally equivalent to the SIFMA rate plus a spread. At October 31, 2009, the SIFMA rate is 0.26%. Additionally, the Company and/or the Joint Ventures have guaranteed the fair value of the underlying borrowing. Any fluctuation in the value of the TRS would be offset by the fluctuation in the value of the underlying borrowing, resulting in no financial impact to the Company and/or the Joint Ventures. At October 31, 2009, the aggregate notional amount of TRS that are designated as fair value hedging instruments under the accounting guidance on derivatives and hedging activities, in which the Company and/or the consolidated Joint Ventures have an interest, is $482,940,000. The Company believes the economic return and related risk associated with a TRS is generally comparable to that of nonrecourse variable-rate mortgage debt. The underlying TRS borrowings are subject to a fair value adjustment (refer to Note H – Fair Value Measurements).

Nondesignated Hedges of Interest Rate Risk

The Company has entered into derivative contracts that are intended to economically hedge certain of its interest rate risk, even though the contracts do not qualify for hedge accounting or the Company has elected not to apply hedge accounting under the accounting guidance on derivatives and hedging activities. In all situations in which hedge accounting is discontinued, or not elected, and the derivative remains outstanding, the Company will report the derivative at its fair value in the Consolidated Balance Sheets, immediately recognizing changes in the fair value in the Consolidated Statements of Operations.

The Company has entered into forward swaps to protect itself against fluctuations in the swap rate at terms ranging between five to ten years associated with forecasted fixed-rate borrowings. At the time the Company secures and locks an interest rate on an anticipated financing, it intends to simultaneously terminate the forward swap associated with that financing. At October 31, 2009, the Company has two forward swaps, with notional amounts of $69,325,000 and $120,000,000, respectively, that do not qualify as cash flow hedges under the accounting guidance on derivatives and hedging activities. As such, the change in fair value of these swaps is marked to market through earnings on a quarterly basis. Related to these forward swaps, the Company recorded $4,344,000 and $(2,800,000) for the three and nine months ended October 31, 2009, respectively, and $2,058,000 and $(75,000) for the three and nine months ended October 31, 2008, respectively, as an increase (reduction) of interest expense in its Consolidated Statements of Operations. During the year ended January 31, 2009, the Company purchased an interest rate floor in order to mitigate the interest rate risk on one of the forward swaps ($120,000,000 notional) should interest rates fall below a certain level.

25

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

G.   Derivative Instruments and Hedging Activities (continued)

The following table presents the fair values and location in the Consolidated Balance Sheet of all derivative instruments as of October 31, 2009:

	Fair Value of Derivative Instruments
	October 31, 2009
						Liability Derivatives
	Asset Derivatives					(included in Accounts Payable
	(included in Other Assets)					and Accrued Expenses)
	Current					Current
	Notional		Fair Value			Notional		Fair Value
	(in thousands)
Derivatives Designated as Hedging Instruments
Interest rate caps and floors	$	566,960	$	2,590		$	-	$	-
Interest rate swap agreements		-		-			1,149,421		108,254	(1)
TRS		11,000		17			471,940		42,148
Total derivatives designated as hedging instruments	$	577,960	$	2,607		$	1,621,361	$	150,402
Derivatives Not Designated as Hedging Instruments
Interest rate caps and floors	$	1,392,301	$	537	(2)	$	-	$	-
Interest rate swap agreements		21,176		2,161			189,325		36,943
TRS		-		-			40,527		11,794
Total derivatives not designated as hedging instruments	$	1,413,477	$	2,698		$	229,852	$	48,737

(1)	$2,508 of the fair value applies to $300,000 of notional excluded from the associated current notional amount that is covered by other interest rate swaps for the nine months ended October 31, 2009. These swaps are active as of October 31, 2009; however, their effective periods are subsequent to this date.
(2)	$422 of the fair value applies to $1,447,334 of notional excluded from the associated current notional amount that is covered by other interest rate caps for the nine months ended October 31, 2009. These caps are active as of October 31, 2009; however, their effective periods are subsequent to this date.

26

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

G.   Derivative Instruments and Hedging Activities (continued)

The following tables present the impact of gains and losses related to derivative instruments designated as cash flow hedges included in the accumulated OCI section of the Consolidated Balance Sheets as of October 31, 2009, and in equity in loss of unconsolidated entities and interest expense in the Consolidated Statements of Operations for the three and nine months ended October 31, 2009:

				Loss Reclassified from
				Accumulated OCI
Three Months Ended October 31, 2009				(Effective Portion)
								Loss Recognized in
								Interest Expense on
	Loss			Location on				Derivatives (Ineffective
	Recognized			Consolidated				Portion and Amounts
Derivatives Designated as	in OCI			Statements of				Excluded from
Cash Flow Hedging Instruments(1)	(Effective Portion)			Operations	Amount			Effectiveness Testing)
				(in thousands)
Interest rate caps, interest rate swaps and Treasury options	$	(19,258	)	Interest expense	$	(14,143	)	$	-
Treasury options		-		Equity in loss of unconsolidated entities		(41	)		-
Total	$	(19,258	)		$	(14,184	)	$	-
Nine Months Ended October 31, 2009
	(in thousands)
Interest rate caps, interest rate swaps and Treasury options	$	(16,150	)	Interest expense	$	(41,022	)	$	(1,010	)
Treasury options		-		Equity in loss of unconsolidated entities		(123	)		-
Total	$	(16,150	)		$	(41,145	)	$	(1,010	)

(1) Gains and losses on terminated hedges included in accumulated OCI are being reclassified into interest expense over the original life of the hedged transactions as the transactions are still more likely than not to occur and would not be reflected in the previous table related to the fair value of designated derivatives (see Note H – Fair Value Measurements).

The following table presents the impact of gains and losses related to derivative instruments designated as fair value hedges included in interest expense in the Consolidated Statements of Operations for the three and nine months ended October 31, 2009:

Derivatives Designated as
Fair Value Hedging Instruments	Net Gain Recognized(1)
	Three Months Ended		Nine Months Ended
	October 31, 2009		October 31, 2009
	(in thousands)
TRS	$	10,056	$	17,209

(1) The net loss recognized in interest expense in the Consolidated Statements of Operations from the change in fair value of the underlying TRS borrowings for the three and nine months ended October 31, 2009 was $(10,056) and $(17,209), respectively, offsetting the gain recognized on the TRS (see Note H – Fair Value Measurements).

27

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

G.   Derivative Instruments and Hedging Activities (continued)

The following table presents the impact of gains and losses related to derivative instruments not designated as hedging instruments included in interest expense in the Consolidated Statements of Operations for the three and nine months ended October 31, 2009:

Derivatives Not Designated as
Hedging Instruments	Net Gain (Loss) Recognized
	Three Months Ended			Nine Months Ended
	October 31, 2009			October 31, 2009
	(in thousands)
Interest rate caps, interest rate swaps and floors	$	(4,833	)	$	1,589
TRS		250			(3,261	)
Total	$	(4,583	)	$	(1,672	)

Credit-risk-related Contingent Features

The principal credit risk to the Company through its interest rate risk management strategy is the potential inability of the financial institution from which the derivative financial instruments were purchased to cover all of its obligations. If a counterparty fails to fulfill its performance obligations under a derivative contract, the Company’s risk of loss approximates the fair value of the derivative. To mitigate this exposure, the Company generally purchases its derivative financial instruments from the financial institution that issues the related debt, from financial institutions with which we have other lending relationships, or from financial institutions with a minimum credit rating of AA at the time the transaction is entered into.

The Company has agreements with its derivative counterparties that contain a provision, under which the derivative counterparty could terminate the derivative obligations if the Company defaults on its obligations under its bank revolving credit facility and designated conditions have passed. In instances where subsidiaries of the Company have derivative obligations that are secured by a mortgage, the derivative obligations could be terminated if the indebtedness between the two parties is terminated, either by loan payoff or default of the indebtedness. In addition, one of the Company’s derivative contracts provides that if the Company’s credit rating were to fall below certain levels, it may trigger additional collateral to be posted with the counterparty up to the full amount of the liability position of the derivative contracts. Also, certain subsidiaries of the Company have agreements with certain of its derivative counterparties that contain provisions whereby the subsidiaries of the Company must maintain certain minimum financial ratios.

As of October 31, 2009, the aggregate fair value of all derivative instruments in a liability position, prior to the adjustment for nonperformance risk of $(15,103,000), is $214,242,000, for which the Company had posted collateral consisting of cash and notes receivable of $98,961,000. If all credit risk contingent features underlying these agreements had been triggered on October 31, 2009, as discussed above, the Company would have been required to post collateral of the full amount of the liability position referred to above, or $214,242,000.

28

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

H.   Fair Value Measurements

The Company’s financial assets and liabilities subject to fair value measurements are interest rate caps and swaptions, interest rate swap agreements (including forward swaps), TRS and borrowings subject to TRS (see Note G – Derivative Instruments and Hedging Activities). The Company’s impairment of its unconsolidated entities is also subject to fair value measurements (see Note L - Impairment of Real Estate, Impairment of Unconsolidated Entities, Write-Off of Abandoned Development Projects and Gain (Loss) on Early Extinguishment of Debt).

Fair Value Hierarchy

The accounting guidance related to estimating fair value specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (also referred to as observable inputs). The following summarizes the fair value hierarchy:

• Level 1 – Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;

• Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant observable inputs are available, either directly or indirectly such as interest rates and yield curves that are observable at commonly quoted intervals; and

• Level 3 – Prices or valuations that require inputs that are unobservable.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Measurement of Fair Value

The Company estimates the fair value of its hedging instruments, which includes the interest rate caps, floors and interest rate swap agreements (including forward swaps), based on interest rate market pricing models. Although the Company has determined that the significant inputs used to value its hedging instruments fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with the Company’s counterparties and its own credit risk utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. As of October 31, 2009, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its hedging instruments’ positions and has determined that the credit valuation adjustments are significant to the overall valuation of one interest rate swap, and are not significant to the overall valuation of all of its other hedging instruments. As a result, the Company has determined that one interest rate swap valuation is classified in Level 3 of the fair value hierarchy and all of its other hedging instruments valuations are classified in Level 2 of the fair value hierarchy.

The Company’s TRS have termination values equal to the difference between the fair value of the underlying bonds and the bonds base (acquired) price times the stated par amount of the bonds. Upon termination of the contract with the counterparty, the Company is entitled to receive the termination value if the underlying fair value of the bonds is greater than the base price and is obligated to pay the termination value if the underlying fair value of the bonds is less than the base price. The underlying borrowings generally have call features at par and without prepayment penalties. The call features of the underlying borrowings would result in a significant discount factor to any value attributed to the exchange of cash flows in these contracts by another market participant willing to purchase the Company’s positions. Therefore, the Company believes the termination value of the TRS approximates the fair value another market participant would assign to these contracts. The Company compares estimates of fair value to those provided by the respective counterparties on a quarterly basis. The Company has determined its fair value estimate of TRS is classified in Level 3 of the fair value hierarchy.

To determine the fair value of the underlying borrowings subject to TRS, the base price is initially used as the estimate of fair value. The Company adjusts the fair value based upon observable and unobservable measures such as the financial performance of the underlying collateral; interest rate risk spreads for similar transactions and loan to value ratios. In the absence of such evidence, management’s best estimate is used. At October 31, 2009, the notional amount of TRS borrowings subject to fair value adjustments are approximately $482,940,000. The Company compares estimates of fair value to those provided by the respective counterparties on a quarterly basis. The Company has determined its fair value estimate of borrowings subject to TRS is classified in Level 3 of the fair value hierarchy.

29

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

H.   Fair Value Measurements (continued)

Items Measured at Fair Value on a Recurring Basis

The Company’s financial assets consists of interest rate caps and floors, interest rate swap agreements with a positive fair value, and TRS with a positive fair value and are included in other assets. The Company’s financial liabilities consists of interest rate swap agreements with a negative fair value (which includes the forward swaps) and TRS with a negative fair value included in accounts payable and accrued expenses and borrowings subject to TRS included in mortgage debt, nonrecourse or accounts payable and accrued expenses. The following table presents information about the Company’s financial assets and liabilities that were measured at fair value on a recurring basis as of October 31, 2009, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.

	Fair Value Measurements
	at October 31, 2009
	Level 1		Level 2			Level 3			Total
	(in thousands)
Interest rate caps and floors	$	-	$	3,127		$	-		$	3,127
Interest rate swap agreements (positive fair value)		-		2,161			-			2,161
TRS (positive fair value)		-		-			17			17
Interest rate swap agreements (negative fair value)		-		(52,560	)		(92,637	)		(145,197	)
TRS (negative fair value)		-		-			(53,942	)		(53,942	)
Fair value adjustment to the borrowings subject to TRS		-		-			42,131			42,131
Total	$	-	$	(47,272	)	$	(104,431	)	$	(151,703	)

The table below presents a reconciliation of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended October 31, 2009.

	Fair Value Measurements
	Nine Months Ended October 31, 2009
							(in thousands)
							Fair value
							adjustment
							to the
	Interest Rate			Net			borrowings			Total TRS
	Swaps			TRS			subject to TRS			Related			Total
Balance, February 1, 2009	$	(113,109	)	$	(67,873	)	$	59,340		$	(8,533	)	$	(121,642	)
Total realized and unrealized gains (losses):
Included in interest expense		-			14,772			(18,102	)		(3,330	)		(3,330	)
Included in other comprehensive income		17,016			-			-			-			17,016
Purchases, issuances and settlements		-			(824	)		893			69			69
Transfer to Level 2		3,456			-			-			-			3,456
Balance, October 31, 2009	$	(92,637	)	$	(53,925	)	$	42,131		$	(11,794	)	$	(104,431	)

I.   Stock-Based Compensation

In April 2009, the Company granted 298,172 stock options and 646,862 shares of restricted stock under the Company’s 1994 Stock Plan. The stock options had a grant-date fair value of $4.56, which was computed using the Black-Scholes option-pricing model with the following assumptions: expected term of 5.5 years, expected volatility of 65.9%, risk-free interest rate of 2.02%, and expected dividend yield of 0%. The exercise price of the options is $7.80, which was the closing price of the underlying stock on the date of grant. The restricted stock had a grant-date fair value of $7.80 per share, which was the closing price of the stock on the date of grant.

At October 31, 2009, there was $8,819,000 of unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 1.77 years, and there was $13,329,000 of unrecognized compensation cost related to restricted stock that is expected to be recognized over a weighted-average period of 2.52 years.

30

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

I.   Stock-Based Compensation (continued)

The amount of stock-based compensation costs and related deferred income tax benefit recognized in the financial statements are as follows:

	Three Months Ended October 31,						Nine Months Ended October 31,
	2009			2008			2009			2008
	(in thousands)						(in thousands)
Stock option costs	$	1,928		$	2,318		$	6,546		$	7,456
Restricted stock costs		1,864			1,743			6,269			5,386
Performance shares		-			428			-			714
Total stock-based compensation costs		3,792			4,489			12,815			13,556
Less amount capitalized into qualifying real estate projects		(2,136	)		(2,421	)		(7,123	)		(6,540	)
Amount charged to operating expenses		1,656			2,068			5,692			7,016
Depreciation expense on capitalized stock-based compensation		105			61			313			184
Total stock-based compensation expense	$	1,761		$	2,129		$	6,005		$	7,200
Deferred income tax benefit	$	586		$	687		$	2,002		$	2,350

Accounting guidance on share-based payments requires the immediate recognition of stock-based compensation costs for awards granted to retirement-eligible grantees. The amount of grant-date fair value expensed immediately for awards granted to retirement-eligible grantees during the nine months ended October 31, 2009 and 2008 was $350,000 and $1,298,000, respectively.

In connection with the vesting of restricted stock during the nine months ended October 31, 2009 and 2008, the Company repurchased into treasury 26,188 shares and 17,355 shares, respectively, of Class A common stock to satisfy the employees’ related minimum statutory tax withholding requirements. These shares were placed in treasury with an aggregate cost basis of $133,000 and $651,000, respectively.

J.   Income Taxes

Income tax benefit for the three months ended October 31, 2009 and 2008 was $(2,895,000) and $(11,916,000), respectively. Income tax benefit for the nine months ended October 31, 2009 and 2008 was $(25,874,000) and $(28,382,000), respectively. The difference in the income tax benefit reflected in the Consolidated Statements of Operations versus the income tax benefit computed at the statutory federal income tax rate is primarily attributable to state income taxes, the cumulative effect of changing the Company’s effective tax rate, additional state NOL’s and general business credits, changes to the valuation allowances associated with certain deferred tax assets, and various permanent differences between pre-tax GAAP income and taxable income.

At January 31, 2009, the Company had a federal net operating loss carryforward for tax purposes of $113,458,000 (generated primarily from the impact on its net earnings of tax depreciation expense from real estate properties and excess deductions from stock-based compensation) that will expire in the years ending January 31, 2024 through January 31, 2029, a charitable contribution deduction carryforward of $42,705,000 that will expire in the years ending January 31, 2010 through January 31, 2014 ($5,651,000 expiring in the year ended January 31, 2010), general business credit carryovers of $15,099,000 that will expire in the years ending January 31, 2010 through January 31, 2029 ($36,000 expiring in the year ended January 31, 2010), and an alternative minimum tax (“AMT”) credit carryforward of $28,501,000 that is available until used to reduce federal tax to the AMT amount.

The Company’s policy is to consider a variety of tax-deferral strategies, including tax deferred exchanges, when evaluating its future tax position. The Company has a full valuation allowance against the deferred tax asset associated with its charitable contributions. The Company has a valuation allowance against its general business credits, other than those general business credits which are eligible to be utilized to reduce future AMT liabilities. These valuation allowances exist because management believes at this time that it is more likely than not that the Company will not realize these benefits.

The Company applies the “with-and-without” methodology for recognizing excess tax benefits from the deduction of stock-based compensation. The net operating loss available for the tax return, as is noted in the paragraph above, is significantly greater than the net operating loss available for the tax provision due to excess deductions from stock-based compensation reported on the return, as well as the impact of adjustments to the net operating loss under the accounting guidance on accounting for uncertainty in income taxes. The Company has not recorded a net deferred tax asset of approximately $17,096,000, as of January 31, 2009, from excess stock-based compensation deductions taken on the tax return for which a benefit has not yet been recognized in the tax provision.

31

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

J.   Income Taxes (continued)

Accounting for Uncertainty in Income Taxes

Unrecognized tax benefits represent those tax benefits related to tax positions that have been taken or are expected to be taken in tax returns that are not recognized in the financial statements because management has either concluded that it is not more likely than not that the tax position will be sustained if audited by the appropriate taxing authority or the amount of the benefit will be less than the amount taken or expected to be taken in its income tax returns.

As of October 31 and January 31, 2009, the Company had unrecognized tax benefits of $1,636,000 and $1,481,000, respectively. The Company recognizes estimated interest payable on underpayments of income taxes and estimated penalties that may result from the settlement of some uncertain tax positions as components of income tax expense. As of October 31 and January 31, 2009, the Company had approximately $501,000 and $463,000, respectively, of accrued interest related to uncertain income tax positions. Income tax expense (benefit) relating to interest and penalties on uncertain tax positions of $(87,000) and $37,000 for the three and nine months ended October 31, 2009, respectively, and $35,000 and $(297,000) for the three and nine months ended October 31, 2008, respectively, was recorded in the Consolidated Statements of Operations. The Company settled Internal Revenue Service audits of two of its partnership investments, one during the three months ended October 31, 2009 and one during the nine months ended October 31, 2008, both of which resulted in a decrease in the Company’s unrecognized tax benefits and associated accrued interest and penalties.

The total amount of unrecognized tax benefits that would affect the Company’s effective tax rate, if recognized as of October 31, 2009 and 2008, is $172,000 and $339,000, respectively. Based upon the Company’s assessment of the outcome of examinations that are in progress, the settlement of liabilities, or as a result of the expiration of the statutes of limitation for certain jurisdictions, it is reasonably possible that the related unrecognized tax benefits for tax positions taken regarding previously filed tax returns will materially change from those recorded at October 31, 2009. Included in the $1,636,000 of unrecognized benefits noted above is $1,415,000 which, due to the reasons above, could significantly decrease during the next twelve months.

K.   Discontinued Operations

All revenues and expenses of discontinued operations sold or held for sale, assuming no significant continuing involvement, have been reclassified in the Consolidated Statements of Operations for the three and nine months ended October 31, 2009 and 2008. The Company considers assets held for sale when the transaction has been approved and there are no significant contingencies related to the sale that may prevent the transaction from closing. There were no assets classified as held for sale at October 31 or January 31, 2009.

During the nine months ended October 31, 2009, the Company sold Grand Avenue, a specialty retail center in Queens, New York, which generated a pre-tax gain on disposition of rental properties of $4,548,000. The gain along with the operating results of the property through the date of sale is classified as discontinued operations for the nine months ended October 31, 2009 and 2008.

During the year ended January 31, 2008, the Company consummated an agreement to sell eight (seven operating properties and one property that was under construction at the time of the agreement) and lease four supported-living apartment properties to a third party. Pursuant to the agreement, during the second quarter of 2007, six operating properties and the property under construction were sold. The seventh operating property, Sterling Glen of Lynbrook, was operated by the purchaser under a short-term lease through the date of sale, which occurred on May 20, 2008 and generated a pre-tax gain on disposition of rental properties of $8,627,000. The gain along with the operating results of the property through the date of sale are classified as discontinued operations for the nine months ended October 31, 2008.

The four remaining properties entered into long-term operating leases with the purchaser. On January 30, 2009, the purchase agreement for the sale of Sterling Glen of Rye Brook, whose operating lease had a stated term of ten years, were amended and the property was sold. The operating results of the property for the three and nine months ended October 31, 2008 are classified as discontinued operations. On January 31, 2009, another long-term operating lease with the purchaser that had a stated term of ten years was cancelled and the operations of the property were transferred back to the Company.

During the three months ended October 31, 2009, negotiations related to amending terms of the purchase agreements for the sales of Sterling Glen of Glen Cove and Sterling Glen of Great Neck indicated the carrying value of these long-lived real estate assets may not be recoverable resulting in an impairment of real estate of $7,138,000 and $2,637,000, respectively, which reduced the carrying value of the long-lived assets to the estimated net sales price. The sale of the two properties closed on September 17 and 30, 2009, respectively, resulting in no gain or loss upon disposition. The operating results of the properties, including the impairment charges, are classified as discontinued operations for the three and nine months ended October 31, 2009 and 2008.

32

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

K.   Discontinued Operations (continued)

The following table lists the consolidated rental properties included in discontinued operations:

				Three	Nine	Three	Nine
				Months	Months	Months	Months
		Square Feet/	Period	Ended	Ended	Ended	Ended
Property	Location	Number of Units	Disposed	10/31/2009	10/31/2009	10/31/2008	10/31/2008
Commercial Group:
Grand Avenue	Queens, New York	100,000 square feet	Q1-2009	-	Yes	Yes	Yes
Residential Group:
Sterling Glen of Glen Cove	Glen Cove, New York	80 units	Q3-2009	Yes	Yes	Yes	Yes
Sterling Glen of Great Neck	Great Neck, New York	142 units	Q3-2009	Yes	Yes	Yes	Yes
Sterling Glen of Rye Brook	Rye Brook, New York	168 units	Q4-2008	-	-	Yes	Yes
Sterling Glen of Lynbrook	Lynbrook, New York	130 units	Q2-2008	-	-	-	Yes

The operating results related to discontinued operations were as follows:

	Three Months Ended October 31,						Nine Months Ended October 31,
	2009			2008			2009			2008
	(in thousands)						(in thousands)
Revenues from real estate operations	$	1,688		$	4,149		$	5,476		$	13,114
Expenses
Operating expenses		35			416			430			1,604
Depreciation and amortization		195			1,451			1,347			3,911
Impairment of real estate		9,775			-			9,775			-
		10,005			1,867			11,552			5,515
Interest expense		(502	)		(1,883	)		(2,184	)		(5,721	)
Amortization of mortgage procurement costs		(7	)		(106	)		(50	)		(339	)
Interest income		-			37			-			136
Gain on disposition of rental properties		-			-			4,548			8,627
Earnings (loss) before income taxes		(8,826	)		330			(3,762	)		10,302
Income tax expense (benefit)
Current		(3,019	)		110			848			(636	)
Deferred		(404	)		18			(2,307	)		4,617
		(3,423	)		128			(1,459	)		3,981
Net earnings (loss) from discontinued operations	$	(5,403	)	$	202		$	(2,303	)	$	6,321

33

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

L.   Impairment of Real Estate, Impairment of Unconsolidated Entities, Write-Off of Abandoned Development Projects and Gain (Loss) on Early Extinguishment of Debt

Impairment of Real Estate

The Company reviews its real estate portfolio, including land held for development or sale, for impairment whenever events or changes indicate that its carrying value of the long-lived assets may not be recoverable. In cases where the Company does not expect to recover its carrying costs, an impairment charge is recorded in accordance with accounting guidance on the impairment of long-lived assets. During the three and nine months ended October 31, 2009, the Company recorded an impairment of certain real estate assets in continuing operations of $549,000 and $3,124,000, respectively. The amounts for 2009 represent impairments of real estate of $2,000,000 primarily related to two land development projects, Gladden Farms and Tangerine Crossing located in Marana and Tucson, Arizona, respectively, and $1,124,000 related to the residential land sale and related development opportunity in Mamaroneck, New York, which occurred during the three months ended April 30, 2009. In addition, included in discontinued operations is an impairment of real estate for two properties that were sold during the three months ended October 31, 2009 (see Note K). These impairments represent a write down to the estimated fair value due to a change in events, such as a purchase offer and/or consideration of current market conditions related to the estimated future cash flows. The Company did not record any impairments of real estate during the three and nine months ended October 31, 2008.

Impairment of Unconsolidated Entities

The Company reviews its portfolio of unconsolidated entities for other-than-temporary impairments whenever events or changes indicate that its carrying value in the investments may be in excess of fair value. An equity method investment’s value is impaired only if management’s estimate of its fair value is less than the carrying value and such difference is deemed to be other-than-temporary. In order to arrive at the estimates of fair value of its unconsolidated entities, the Company uses varying assumptions that may include comparable sale prices, market discount rates, market capitalization rates and estimated future discounted cash flows specific to the geographic region and property type, which are considered to be Level 3 inputs under accounting guidance related to estimating fair value.

The following table summarizes the Company’s impairment of unconsolidated entities for the three and nine months ended October 31, 2009 and 2008, which are included in the Consolidated Statements of Operations.

		Three Months Ended				Nine Months Ended
		October 31,				October 31,
		2009		2008		2009		2008
		(in thousands)				(in thousands)
Apartment Communities:
Millender Center	(Detroit, Michigan)	$	3,247	$	-	$	10,317	$	-
Uptown Apartments	(Oakland, California)		-		-		6,781		-
Metropolitan Lofts	(Los Angeles, California)		1,466		-		2,505		-
Residences at University Park	(Cambridge, Massachusetts)		-		-		855		-
Fenimore Court	(Detroit, Michigan)		-		-		693		-
Mercury (Condominium)	(Los Angeles, California)		-		-		-		4,098
Classic Residence by Hyatt (Supported-Living Apartments)	(Yonkers, New York)		-		-		3,152		-
Specialty Retail Centers:
Southgate Mall	(Yuma, Arizona)		-		-		1,611		-
El Centro Mall	(El Centro, California)		-		-		-		1,263
Pittsburgh Peripheral (Land Project)	(Pittsburgh, Pennsylvania)		7,217		-		7,217		-
Shamrock Business Center (Land Project)	(Painesville, Ohio)		1,150		-		1,150		-
Other			120		-		382		665
Total Impairment of Unconsolidated Entities.		$	13,200	$	-	$	34,663	$	6,026

34

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

(Unaudited)

L. Impairment of Real Estate, Impairment of Unconsolidated Entities, Write-Off of Abandoned Development Projects and Gain (Loss) on Early Extinguishment of Debt (continued)

Write-Off of Abandoned Development Projects

On a quarterly basis, the Company reviews each project under development to determine whether it is probable the project will be developed. If management determines that the project will not be developed, project costs are written off to operating expenses as an abandoned development project cost. The Company may abandon certain projects under development for a number of reasons, including, but not limited to, changes in local market conditions, increases in construction or financing costs or due to third party challenges related to entitlements or public financing. As a result, the Company may fail to recover expenses already incurred in exploring development opportunities. The Company recorded write-offs of abandoned development projects of $3,758,000 and $21,398,000 for the three and nine months ended October 31, 2009, respectively, and $12,500,000 and $41,452,000 for the three and nine months ended October 31, 2008, respectively, which were recorded in operating expenses in the Consolidated Statements of Operations.

Gain (Loss) on Early Extinguishment of Debt

For the three and nine months ended October 31, 2009, the Company recorded $28,902,000 and $37,965,000, respectively, as gain on early extinguishment of debt. The amounts for 2009 include the $24,219,000 gain on early extinguishment of nonrecourse mortgage debt at an underperforming retail project, the $9,466,000 gain on early extinguishment of nonrecourse mortgage debt at Gladden Farms, a land development project located in Marana, Arizona and the $4,683,000 gain related to the exchange of a portion of the Company’s 2011 Notes for a new issue of 2014 Notes (see the “Puttable Equity-Linked Senior Notes due 2011” section of Note E). These gains were partially offset by a charge to early extinguishment of debt as a result of the payment of $20,400,000 in redevelopment bonds by a consolidated wholly-owned subsidiary of the Company (see the “Subordinated Debt” section of Note E). For the three and nine months ended October 31, 2008, the Company recorded $3,692,000 and $(1,539,000), respectively, as gain (loss) on early extinguishment of debt. The amounts for 2008 include gains on the early extinguishment of debt of a portion of the Company’s puttable equity-linked senior notes due October 15, 2011 (see the “Puttable Equity-Linked Senior Notes due 2011” section of Note E) and on the early extinguishment of the Urban Development Action Grant loan at Post Office Plaza, an office building located in Cleveland, Ohio. These gains were offset by the impact of early extinguishment of nonrecourse mortgage debt at Galleria at Sunset, a regional mall located in Henderson, Nevada, and 1251 S. Michigan and Sky55, apartment communities located in Chicago, Illinois, in order to secure more favorable financing terms.

M. Common Stock Offering

In May 2009, the Company sold 52,325,000 shares of its Class A common stock in a public offering at a price of $6.60 per share, which included 6,825,000 shares issued as a result of the underwriters’ exercise of their over-allotment option in full. The offering generated net proceeds of $329,917,000 after deducting underwriting discounts, commissions and other offering expenses, which were used to reduce a portion of the Company’s outstanding borrowings under its bank revolving credit facility.

N. Earnings Per Share

Effective February 1, 2009, the Company’s restricted stock is considered a participating security pursuant to the two-class method for computing basic earnings per share. The Class A Common Units issued in exchange for Bruce C. Ratner’s noncontrolling interests in the Forest City Ratner Company portfolio in November 2006, which are reflected as noncontrolling interests in the Company’s Consolidated Balance Sheets, are considered convertible participating securities as they are entitled to participate in any dividends paid to the Company’s common shareholders. The Class A Common Units are included in the computation of basic earnings per share using the two-class method and are included in the computation of diluted earnings per share using the if-converted method. The Class A common stock issuable in connection with the conversion of the 2014 Notes and 2016 Notes are included in the computation of diluted earnings per share using the if-converted method.

The loss from continuing operations attributable to Forest City Enterprises, Inc. for the nine months ended October 31, 2009 and the three and nine months ended October 31, 2008 as well as the net loss attributable to Forest City Enterprises, Inc. for the three and nine months ended October 31, 2009 and 2008 were allocated solely to holders of common stock as the participating security holders do not share in the losses in accordance with earnings per share accounting guidance.

35

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

N. Earnings Per Share (continued)

The reconciliation of the amounts used in the basic and diluted earnings per share computations is shown in the following table.

	Three Months Ended						Nine Months Ended
	October 31,						October 31,
	2009			2008			2009			2008
Numerators (in thousands)
Earnings (loss) from continuing operations attributable to Forest City Enterprises, Inc.	$	1,019		$	(19,317	)	$	(34,549	)	$	(74,224	)
Undistributed earnings allocated to participating securities		(30	)		-			-			-
Earnings (loss) from continuing operations attributable to Forest City Enterprises, Inc. - Basic	$	989		$	(19,317	)	$	(34,549	)	$	(74,224	)
Undistributed earnings allocated to participating securities		30			-			-			-
Earnings (loss) from continuing operations attributable to Forest City Enterprises, Inc. - Diluted	$	1,019		$	(19,317	)	$	(34,549	)	$	(74,224	)
Net loss attributable to Forest City Enterprises, Inc. - Basic and Diluted	$	(4,384	)	$	(19,115	)	$	(36,852	)	$	(67,903	)
Denominators
Weighted average shares outstanding - Basic		155,314,676			102,845,434			134,602,200			102,714,757
Effect of stock options and restricted stock		229,638			-			-			-
Weighted average shares outstanding - Diluted (1)(2)(3)(4)(5)		155,544,314			102,845,434			134,602,200			102,714,757
Earnings Per Share
Earnings (loss) from continuing operations attributable to Forest City Enterprises, Inc. - Basic	$	0.01		$	(0.19	)	$	(0.26	)	$	(0.72	)
Earnings (loss) from continuing operations attributable to Forest City Enterprises, Inc. - Diluted	$	0.01		$	(0.19	)	$	(0.26	)	$	(0.72	)
Net loss attributable to Forest City Enterprises, Inc. - Basic and Diluted	$	(0.03	)	$	(0.19	)	$	(0.27	)	$	(0.66	)

(1)	Incremental shares from dilutive stock options and restricted stock of 82,042 for the nine months ended October 31, 2009 and 422,130 and 597,020 for the three and nine months ended October 31, 2008, respectively, were not included in the computation of diluted earnings per share because their effect is anti-dilutive due to the loss from continuing operations.
(2)	Weighted-average options and restricted stock of 4,444,320 and 4,679,029 for the three and nine months ended October 31, 2009, respectively, and 3,506,478 and 2,678,153 for the three and nine months ended October 31, 2008, respectively, were not included in the computation of diluted earnings per share because their effect is anti-dilutive.
(3)	Weighted-average shares issuable upon conversion of the convertible Class A Common Units, the 2014 Notes, and the 2016 Notes of 8,322,258 and 5,222,382 for the three and nine months ended October 31, 2009, respectively, and 3,646,755 and 3,802,106 for the three and nine months ended October 31, 2008, respectively, were not included in the computation of diluted earnings per share because their effect is anti-dilutive under the if-converted method.
(4)	Weighted-average performance shares of 172,609 for both the three and nine months ended October 31, 2009, respectively, and 172,609 and 85,054 for the three and nine months ended October 31, 2008, respectively, were not included in the computation of diluted earnings per share because the performance criteria were not satisfied at the end of the respective periods.
(5)	The 2011 Notes can be put to the Company by the holders under certain circumstances (see Note E – Senior and Subordinated Debt). If the Company exercises its net share settlement option upon a put of the notes by the holders, it will then issue shares of its Class A common stock. The effect of these shares was not included in the computation of diluted earnings per share for the three and nine months ended October 31, 2009 and 2008 as the Company’s average stock price did not exceed the put value price of the 2011 Notes. These notes will be dilutive when the average stock price for the period exceeds $66.39. Additionally, the Company sold a warrant with an exercise price of $74.35, which has also been excluded from diluted earnings per share for the three and nine months ended October 31, 2009 and 2008 as the Company’s stock price did not exceed the exercise price.

36

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

O. Segment Information

The Company operates through three strategic business units and five reportable segments, determined in accordance with accounting guidance on segment reporting. The three strategic units/reportable segments are the Commercial Group, Residential Group and Land Development Group (“Real Estate Groups”). The Commercial Group, the Company’s largest business unit, owns, develops, acquires and operates regional malls, specialty/urban retail centers, office and life science buildings, hotels and mixed-use projects. The Residential Group owns, develops, acquires and operates residential rental properties, including upscale and middle-market apartments and adaptive re-use developments. Additionally, the Residential Group develops for-sale condominium projects and also owns interests in entities that develop and manage military family housing. The Land Development Group acquires and sells both land and developed lots to residential, commercial and industrial customers. It also owns and develops land into master-planned communities and mixed-use projects. The remaining two reportable segments are The Nets, a member of the National Basketball Association, and Corporate Activities. The following tables summarize financial data for the Company’s five reportable segments. All amounts are presented in thousands and all prior year amounts are “as adjusted” as applicable.

					October 31,		January 31,			Three Months Ended October 31,						Nine Months Ended October 31,
					2009		2009			2009			2008			2009			2008
					Identifiable Assets					Capital Expenditures
Commercial Group					$	8,447,933	$	8,251,407		$	160,672		$	176,646		$	432,946		$	583,225
Residential Group						2,730,550		2,548,712			105,270			99,247			291,875			244,970
Land Development Group						463,403		431,938			-			93			-			273
The Nets(1)						12,360		(3,302	)		-			-			-			-
Corporate Activities						239,371		151,752			50			106			280			191
					$	11,893,617	$	11,380,507		$	265,992		$	276,092		$	725,101		$	828,659
	Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended October 31,						Nine Months Ended October 31,
	2009		2008		2009		2008			2009			2008			2009			2008
	Revenues from Real Estate Operations									Operating Expenses
Commercial Group	$	237,162	$	240,896	$	704,586	$	694,994		$	113,604		$	119,363		$	332,703		$	363,336
Commercial Group Land Sales		4,155		6,747		16,169		20,997			3,030			4,224			10,521			12,596
Residential Group		58,663		72,475		198,643		220,172			35,110			44,455			134,110			142,655
Land Development Group		6,120		10,263		13,491		23,844			11,224			25,323			24,049			44,847
The Nets		-		-		-		-			-			-			-			-
Corporate Activities		-		-		-		-			8,716			7,076			30,617			29,872
	$	306,100	$	330,381	$	932,889	$	960,007		$	171,684		$	200,441		$	532,000		$	593,306
	Depreciation and Amortization Expense									Interest Expense
Commercial Group	$	50,779	$	48,019	$	152,807	$	151,553		$	62,770		$	64,777		$	175,916		$	177,171
Residential Group		14,660		15,019		43,949		44,114			5,512			12,411			21,460			28,359
Land Development Group		222		307		684		739			817			(127	)		1,623			(299	)
The Nets		-		-		-		-			-			-			-			-
Corporate Activities		732		693		2,219		2,204			18,764			20,020			59,435			54,219
	$	66,393	$	64,038	$	199,659	$	198,610		$	87,863		$	97,081		$	258,434		$	259,450
	Interest and Other Income									Net Earnings (Loss) Attributable to Forest City Enterprises, Inc.
Commercial Group	$	843	$	1,255	$	2,645	$	7,599		$	17,973		$	6,856		$	43,301		$	4,868
Residential Group		2,712		3,743		12,842		9,861			(1,425	)		1,874			(9,596	)		12,282
Land Development Group		1,759		1,676		7,456		9,714			(2,630	)		(5,678	)		3,350			(2,591	)
The Nets		-		-		-		-			(7,065	)		(6,482	)		(19,619	)		(20,914	)
Corporate Activities		208		78		981		802			(11,237	)		(15,685	)		(54,288	)		(61,548	)
	$	5,522	$	6,752	$	23,924	$	27,976		$	(4,384	)	$	(19,115	)	$	(36,852	)	$	(67,903	)

(1) The identifiable assets of ($3,302) at January 31, 2009 represent losses in excess of the Company’s investment basis in The Nets.

37

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

O. Segment Information (continued)

The Company uses a measure defined as Earnings Before Depreciation, Amortization and Deferred Taxes (“EBDT”) to report its operating results. EBDT is a non-GAAP measure and is defined as net earnings excluding the following items: i) gain (loss) on disposition of rental properties, divisions and other investments (net of tax); ii) the adjustment to recognize rental revenues and rental expense using the straight-line method; iii) non-cash charges for real estate depreciation, amortization, amortization of mortgage procurement costs and deferred income taxes; iv) preferred payment which is classified as noncontrolling interests expense in the Company’s Consolidated Statements of Operations; v) impairment of real estate (net of tax); vi) extraordinary items (net of tax); and vii) cumulative or retrospective effect of change in accounting principle (net of tax).

The Company believes that, although its business has many facets such as development, acquisitions, disposals, and property management, the core of its business is the recurring operations of its portfolio of real estate assets. The Company’s Chief Executive Officer, the chief operating decision maker, uses EBDT, as presented, to assess performance of its portfolio of real estate assets by operating segment because it provides information on the financial performance of the core real estate portfolio operations. EBDT measures the profitability of a real estate segment’s operations of collecting rent, paying operating expenses and servicing its debt. The Company’s segments adhere to the accounting policies described in Note A. Unlike the real estate segments, EBDT for The Nets segment equals net earnings (loss). All amounts in the following tables are presented in thousands and all prior year amounts are “as adjusted” as applicable.

(continued on next page)

38

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

O. Segment Information (continued)

Reconciliation of EBDT to Net Earnings (Loss) by Segment:

							Land
	Commercial			Residential			Development						Corporate
Three Months Ended October 31, 2009	Group			Group			Group			The Nets			Activities			Total
EBDT	$	85,114		$	26,792		$	(3,021	)	$	(7,065	)	$	(16,208	)	$	85,612
Depreciation and amortization – Real Estate Groups		(51,995	)		(19,007	)		(87	)		-			-			(71,089	)
Amortization of mortgage procurement costs – Real Estate Groups		(3,214	)		(602	)		(65	)		-			-			(3,881	)
Deferred taxes – Real Estate Groups		(10,078	)		(1,950	)		1,657			-			4,971			(5,400	)
Straight-line rent adjustment		3,148			16			-			-			-			3,164
Preference payment (1)		(585	)		-			-			-			-			(585	)
Gain on disposition of unconsolidated entities, net of tax		-			2,753			-			-			-			2,753
Impairment of real estate, net of tax		-			-			(336	)		-			-			(336	)
Impairment of unconsolidated entities, net of tax		(4,417	)		(2,885	)		(778	)		-			-			(8,080	)
Discontinued operations, net of tax: (2)
Depreciation and amortization - Real Estate Groups		-			(195	)		-			-			-			(195	)
Amortization of mortgage procurement costs - Real Estate Groups		-			(7	)		-			-			-			(7	)
Deferred taxes - Real Estate Groups		-			(356	)		-			-			-			(356	)
Impairment of real estate, net of tax		-			(5,984	)		-			-			-			(5,984	)
Net earnings (loss) attributable to Forest City Enterprises, Inc.	$	17,973		$	(1,425	)	$	(2,630	)	$	(7,065	)	$	(11,237	)	$	(4,384	)
Three Months Ended October 31, 2008
EBDT	$	55,892		$	26,172		$	(13,222	)	$	(6,482	)	$	(18,222	)	$	44,138
Depreciation and amortization – Real Estate Groups		(49,582	)		(18,523	)		(169	)		-			-			(68,274	)
Amortization of mortgage procurement costs – Real Estate Groups		(2,250	)		(781	)		(81	)		-			-			(3,112	)
Deferred taxes – Real Estate Groups		(2,016	)		(4,041	)		7,702			-			5,204			6,849
Straight-line rent adjustment		4,474			2			(1	)		-			-			4,475
Preference payment (1)		(877	)		-			-			-			-			(877	)
Gain on disposition of unconsolidated entities, net of tax		122			-			-			-			-			122
Retrospective adoption of accounting guidance for convertible debt instruments		1,359			306			93			-			(2,667	)		(909	)
Discontinued operations, net of tax: (2)
Depreciation and amortization - Real Estate Groups		(300	)		(1,151	)		-			-			-			(1,451	)
Amortization of mortgage procurement costs - Real Estate Groups		(7	)		(99	)		-			-			-			(106	)
Deferred taxes - Real Estate Groups		(7	)		(11	)		-			-			-			(18	)
Straight-line rent adjustment		48			-			-			-			-			48
Net earnings (loss) attributable to Forest City Enterprises, Inc.	$	6,856		$	1,874		$	(5,678	)	$	(6,482	)	$	(15,685	)	$	(19,115	)
Nine Months Ended October 31, 2009
EBDT	$	217,774		$	82,117		$	7,818		$	(19,619	)	$	(65,391	)	$	222,699
Depreciation and amortization – Real Estate Groups		(157,683	)		(59,131	)		(275	)		-			-			(217,089	)
Amortization of mortgage procurement costs – Real Estate Groups		(9,322	)		(1,951	)		(410	)		-			-			(11,683	)
Deferred taxes – Real Estate Groups		(12,471	)		(9,929	)		(1,829	)		-			11,103			(13,126	)
Straight-line rent adjustment		9,510			31			-			-			-			9,541
Preference payment (1)		(1,756	)		-			-			-			-			(1,756	)
Gain on disposition of unconsolidated entities, net of tax		-			2,753			-			-			-			2,753
Impairment of real estate, net of tax		-			(897	)		(1,016	)		-			-			(1,913	)
Impairment of unconsolidated entities, net of tax		(5,404	)		(14,877	)		(938	)		-			-			(21,219	)
Discontinued operations, net of tax: (2)
Depreciation and amortization – Real Estate Groups		(107	)		(1,240	)		-			-			-			(1,347	)
Amortization of mortgage procurement costs – Real Estate Groups		(5	)		(45	)		-			-			-			(50	)
Deferred taxes – Real Estate Groups		(31	)		(443	)		-			-			-			(474	)
Straight-line rent adjustment		12			-			-			-			-			12
Gain on disposition of rental properties		2,784			-			-			-			-			2,784
Impairment of real estate, net of tax		-			(5,984	)		-			-			-			(5,984	)
Net earnings (loss) attributable to Forest City Enterprises, Inc.	$	43,301		$	(9,596	)	$	3,350		$	(19,619	)	$	(54,288	)	$	(36,852	)
Nine Months Ended October 31, 2008
EBDT	$	163,018		$	73,743		$	(11,524	)	$	(20,914	)	$	(55,888	)	$	148,435
Depreciation and amortization - Real Estate Groups		(155,294	)		(54,648	)		(320	)		-			-			(210,262	)
Amortization of mortgage procurement costs - Real Estate Groups		(7,282	)		(2,053	)		(335	)		-			-			(9,670	)
Deferred taxes - Real Estate Groups		(13	)		(3,366	)		9,543			-			1,223			7,387
Straight-line rent adjustment		3,256			21			(2	)		-			-			3,275
Preference payment (1)		(2,744	)		-			-			-			-			(2,744	)
Preferred return on disposition, net of tax		-			(128	)		-			-			-			(128	)
Gain on disposition of other investments, net of tax		-			-			-			-			92			92
Gain on disposition of unconsolidated entities, net of tax		663			-			-			-			-			663
Impairment of unconsolidated entities, net of tax		(775	)		(2,699	)		(224	)		-			-			(3,698	)
Retrospective adoption of accounting guidance for convertible debt instruments		4,615			929			271			-			(6,975	)		(1,160	)
Discontinued operations, net of tax: (2)
Depreciation and amortization - Real Estate Groups		(678	)		(3,233	)		-			-			-			(3,911	)
Amortization of mortgage procurement costs - Real Estate Groups		(21	)		(318	)		-			-			-			(339	)
Deferred taxes - Real Estate Groups		(24	)		(1,260	)		-			-			-			(1,284	)
Straight-line rent adjustment		147			-			-			-			-			147
Gain on disposition of rental properties		-			5,294			-			-			-			5,294
Net earnings (loss) attributable to Forest City Enterprises, Inc.	$	4,868		$	12,282		$	(2,591	)	$	(20,914	)	$	(61,548	)	$	(67,903	)

(1)	The preference payment represents the respective period’s share of the annual preferred payment in connection with the issuance of Class A Common Units in exchange for Bruce C. Ratner’s noncontrolling interests in the Forest City Ratner Company portfolio. See Note P - Class A Common Units for more information.
(2)	See Note K for discontinued operations information.

39

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

P. Class A Common Units

Master Contribution Agreement

The Company and certain of its affiliates entered into a Master Contribution and Sale Agreement (the “Master Contribution Agreement”) with Bruce C. Ratner (“Mr. Ratner”), an Executive Vice President and Director of the Company, and certain entities and individuals affiliated with Mr. Ratner (the “BCR Entities”) on August 14, 2006. Pursuant to the Master Contribution Agreement, on November 8, 2006, the Company issued Class A Common Units (“Units”) in a jointly-owned limited liability company to the BCR Entities in exchange for their interests in a total of 30 retail, office and residential operating properties, and certain service companies, all in the greater New York City metropolitan area. The Company accounted for the issuance of the Units in exchange for the noncontrolling interests under the purchase method of accounting. The Units may be exchanged for one of the following forms of consideration at the Company’s sole discretion: (i) an equal number of shares of the Company’s Class A common stock or, (ii) cash based on a formula using the average closing price of the Class A common stock at the time of conversion or, (iii) a combination of cash and shares of the Company’s Class A common stock. The Company has no rights to redeem or repurchase the Units. The carrying value of the Units are included as noncontrolling interests on the Consolidated Balance Sheets at October 31 and January 31, 2009. Also pursuant to the Master Contribution Agreement, the Company and Mr. Ratner agreed that certain projects under development would remain owned jointly until such time as each individual project was completed and achieved “stabilization.” As each of the development projects achieves stabilization, it is valued and the Company, in its discretion, chooses among various options for the ownership of the project following stabilization consistent with the Master Contribution Agreement. The development projects were not covered by the Tax Protection Agreement that the parties entered into in connection with the Master Contribution Agreement. The Tax Protection Agreement indemnified the BCR Entities included in the initial closing against taxes payable by reason of any subsequent sale of certain operating properties.

New York Times and Twelve MetroTech Center

Two of the development projects, New York Times, an office building located in Manhattan, New York and Twelve MetroTech Center, an office building located in Brooklyn, New York, recently achieved stabilization. The Company elected to cause certain of its affiliates to acquire for cash the BCR Entities’ interests in the two projects pursuant to agreements dated May 6, 2008 and May 12, 2008, respectively. In accordance with the agreements, the applicable BCR Entities assigned and transferred their interests in the two projects to affiliates of the Company and will receive approximately $121,000,000 over a 15 year period. An affiliate of the Company has also agreed to indemnify the applicable BCR Entity against taxes payable by it by reason of a subsequent sale or other disposition of one of the projects. The tax indemnity provided by the affiliate of the Company expires on December 31, 2014 and is similar to the indemnities provided for the operating properties under the Tax Protection Agreement.

The consideration exchanged by the Company for the BCR Entities’ interest in the two development projects has been accounted for under the purchase method of accounting. Pursuant to the agreements, the BCR Entities received an initial cash amount of $49,249,000. The Company calculated the net present value of the remaining payments over the 15 year period using a discounted interest rate. This initial discounted amount of $56,495,000 was recorded in accounts payable and accrued expenses on the Company’s Consolidated Balance Sheet and will be accreted up to the total liability through interest expense over the next 15 years using the effective interest method.

The following table summarizes the final allocation of the consideration exchanged for the BCR Entities’ interests in the two projects (in thousands):

Completed rental properties (1)	$	102,378
Notes and accounts receivable, net (2)		132
Other assets (3)		12,513
Accounts payable and accrued expenses (4)		(9,279	)
Total purchase price allocated	$	105,744

Represents allocation for:
(1)	Land, building and tenant improvements associated with the underlying real estate
(2)	Above market leases
(3)	In-place leases, tenant relationships and leasing commissions
(4)	Below market leases

40

Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

P. Class A Common Units (continued)

Exchange of Units

In July 2008, the BCR Entities exchanged 247,477 of the Units. The Company issued 128,477 shares of its Class A common stock for 128,477 of the Units and paid cash of $3,501,000 for 119,000 Units. The Company accounted for the exchange as a purchase of noncontrolling interests, resulting in a reduction of noncontrolling interests of $12,624,000. The following table summarizes the components of the exchange transaction (in thousands):

Reduction of completed rental properties	$	5,345
Reduction of cash and equivalents		3,501
Increase in Class A common stock - par value		42
Increase in additional paid-in capital		3,736
Total reduction of noncontrolling interest	$	12,624

Other Related Party Transactions

During the year ended January 31, 2009, in accordance with the parties prior understanding but unrelated to the transactions discussed above, the Company redeemed Mr. Ratner’s noncontrolling interests in two entities in exchange for the Company’s majority ownership interests in 17 single-tenant pharmacy properties and $9,043,000 in cash. This transaction was accounted for in accordance with accounting guidance on business combinations as acquisitions of the noncontrolling interests in the subsidiaries. The fair value of the consideration paid was allocated to the acquired ownership interests, which approximated the fair value of the 17 single-tenant pharmacy properties. This transaction resulted in a reduction of noncontrolling interests of $14,503,000 and did not result in a gain or loss. The earnings of these properties have not been reclassified to discontinued operations for the three and nine months ended October 31, 2008 as the results do not have a material impact on the Consolidated Statements of Operations.

41

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) of Forest City Enterprises, Inc. and subsidiaries should be read in conjunction with the financial statements and the footnotes thereto contained in the annual report on Form 10-K for the year ended January 31, 2009, as amended on Form 10-K/A filed September 25, 2009 and updated on Form 8-K filed October 19, 2009.

RESULTS OF OPERATIONS

Corporate Description

We principally engage in the ownership, development, management and acquisition of commercial and residential real estate and land throughout the United States. We operate through three strategic business units and five reportable segments. The three strategic business units/reportable segments are the Commercial Group, Residential Group and Land Development Group (collectively, the “Real Estate Groups”). The Commercial Group, our largest strategic business unit, owns, develops, acquires and operates regional malls, specialty/urban retail centers, office and life science buildings, hotels and mixed-use projects. The Residential Group owns, develops, acquires and operates residential rental properties, including upscale and middle-market apartments and adaptive re-use developments. Additionally, the Residential Group develops for-sale condominium projects and also owns interests in entities that develop and manage military family housing. New York City operations are part of the Commercial Group or Residential Group depending on the nature of the operations. The Land Development Group acquires and sells both land and developed lots to residential, commercial and industrial customers. It also owns and develops land into master-planned communities and mixed-use projects.

Corporate Activities and The Nets, a member of the National Basketball Association in which we account for our investment on the equity method of accounting, are other reportable segments of the Company.

We have approximately $11.9 billion of assets in 27 states and the District of Columbia at October 31, 2009. Our core markets include the New York City/Philadelphia metropolitan area, Denver, Boston, Greater Washington D.C./Baltimore metropolitan area, Chicago and the state of California. We have offices in Albuquerque, Boston, Chicago, Denver, London (England), Los Angeles, New York City, San Francisco, Washington, D.C., and our corporate headquarters in Cleveland, Ohio.

Significant milestones occurring during the third quarter of 2009 included:

• Signing a letter of intent with an affiliate of Onexim Group, an international private investment fund, to create a strategic partnership for the development of the Atlantic Yards project, a 22-acre residential and commercial real estate project in Brooklyn, and the Barclays Center arena, the planned future home of the Nets. As part of the agreement, entities to be formed by Onexim Group will invest $200,000,000 and make certain contingent funding commitments to acquire 45% of the arena project and 80% of the Nets, and the right to purchase up to 20% of the Atlantic Yards Development Company, which will develop the non-arena real estate. We will retain a minority ownership stake in the Nets, and will be the managing partner of the arena and majority owner of the balance of the Atlantic Yards real estate;

• The exchange of $167,433,000, or approximately 61.4%, of the $272,500,000 of 3.625% Puttable Equity-Linked Senior Notes due October 2011 for a new issue of 3.625% Puttable Equity Linked Senior Notes due October 2014. In conjunction with the exchange of notes, we also issued an additional $32,567,000 of 3.625% Puttable Equity-Linked Senior Notes due October 2014;

• The issuance, at par, of $200,000,000 aggregate principal amount of convertible senior notes due October 2016. Interest on the notes is payable semiannually at a rate of 5.00% per annum. We received net proceeds from the offering of $177,262,000, net of the cost of the convertible note hedge transaction and estimated offering costs;

• The $90,000,000 refinancing of 45/75 Sydney Street, a pair of twin office buildings at our University Park at MIT mixed-use, science and technology park in Cambridge, Massachusetts. The seven-year, fixed-rate refinancing, through two insurance companies, represents approximately a 50% increase in principal over the prior in-place financing, while maintaining strong debt service coverage; and

• Closing $908,932,000 in nonrecourse mortgage financing transactions.

42

Subsequent to October 31, 2009, we achieved the following significant milestones:

• Being chosen to receive an allocation of New Market Tax Credits (“NMTC”) as part of a $5 billion federal program to create jobs and revive neighborhoods. The allocation of $55,000,000 will be used to earn or syndicate tax credits through the investment in real estate development projects located in distressed and low-income communities throughout the country as defined by the US Treasury Department’s CDFI Fund. This is the third time we have received a NMTC allocation, for a total of $151,000,000 in allocations under the program;

• The opening of the first Costco in the borough of Manhattan in our East River Plaza retail center. Costco occupies 110,000 square feet on the first floor of East River Plaza. The remainder of the approximately 500,000 square foot retail center, which is more than 90% leased and will also be home to Manhattan’s first Target, is expected to open in 2010;

• Coming to an agreement on the principal terms of a new $500,000,000 revolving credit facility with our 15-member bank group which would mature two years from closing. All 14 members of our prior bank group, along with one new bank, are part of the new facility. Upon closing, the new facility will replace the existing $750,000,000 credit facility, which is scheduled to mature in March 2010;

• Closing $87,944,000 of nonrecourse mortgage financing transactions that extend debt that would have matured during the remaining three months of our fiscal year ending January 31, 2010;

• In a ruling issued on November 24, 2009, the Court of Appeals, New York’s highest court, affirmed the right of the Empire State Development Corporation to use eminent domain to acquire privately-owned properties for inclusion in our Brooklyn Atlantic Yards development project, thereby resolving one of the major remaining hurdles prior to commencing construction of the Barclays Center arena; and

• On December 2, 2009, the City of Las Vegas City Council approved the issuance and sale of $185,000,000 of primarily Build America Bonds to finance the construction of a new City Hall building on property we own in downtown Las Vegas. The closing and funding of the Build America Bonds is scheduled for December 17, 2009. We have been engaged by the City of Las Vegas to perform fee services on their behalf for development of the new City Hall project. Construction on the project is scheduled to begin in January 2010.

43

Retrospective Adoption of Accounting Guidance for Convertible Debt Instruments

Effective February 1, 2009, we adopted the Financial Accounting Standards Board’s (“FASB”) accounting guidance for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement). This accounting guidance required us to restate the prior year financial statements to show retrospective application upon adoption. This accounting guidance requires the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. This accounting guidance changed the accounting treatment for our 3.625% Puttable Equity-Linked Senior Notes due October 2011 (the “2011 Notes”), which were issued in October 2006, by requiring the initial debt proceeds from the sale of the 2011 Notes to be allocated between a liability component and an equity component. This allocation is based upon what the assumed interest rate would have been on the date of issuance if we had issued similar nonconvertible debt. The resulting debt discount will be amortized over the debt instrument’s expected life as additional non-cash interest expense. Due to the increase in interest expense, we recorded additional capitalized interest based on our qualifying expenditures on our development projects. Deferred financing costs decreased related to the reallocation of the original issuance costs between the debt instrument and equity component and the gain recognized from the purchase of $15,000,000, in principal, of the 2011 Notes during the three months ended October 31, 2008 was adjusted to reflect the requirements of gain recognition under this accounting guidance (see the “Senior and Subordinated Debt” section of the MD&A).

The following tables reflect our as reported amounts along with the as adjusted amounts as a result of the retrospective adoption of this accounting guidance:

	January 31, 2009
	As			Retrospective			As
	Reported			Adjustments			Adjusted
	(in thousands)
Consolidated Balance Sheet
Real estate, net	$	9,212,834		$	16,468		$	9,229,302
Other assets		936,902			(631	)		936,271
Senior and subordinated debt		870,410			(24,346	)		846,064
Deferred income taxes		439,282			16,054			455,336
Additional paid-in capital		241,539			26,257			267,796
Retained earnings		645,852			(2,128	)		643,724
	Three Months Ended October 31, 2008									Nine Months Ended October 31, 2008
	As			Retrospective			As			As			Retrospective			As
	Reported (1)			Adjustments			Adjusted			Reported (1)			Adjustments			Adjusted
	(in thousands, except per share data)
Consolidated Statements of Operations
Depreciation and amortization	$	63,992		$	46		$	64,038		$	198,474		$	136		$	198,610
Interest expense, net of capitalized interest		96,661			420			97,081			258,779			671			259,450
Gain (loss) on early extinguishment of debt		4,181			(489	)		3,692			(1,050	)		(489	)		(1,539	)
Deferred income tax benefit		(7,043	)		(374	)		(7,417	)		(12,830	)		(508	)		(13,338	)
Loss from continuing operations		(14,274	)		(581	)		(14,855	)		(63,112	)		(788	)		(63,900	)
Net loss attributable to Forest City Enterprises, Inc.		(18,534	)		(581	)		(19,115	)		(67,115	)		(788	)		(67,903	)
Net loss attributable to Forest City Enterprises, Inc.
per share - basic and diluted	$	(0.18	)	$	(0.01	)	$	(0.19	)	$	(0.65	)	$	(0.01	)	$	(0.66	)

(1) Adjusted to reflect the impact of discontinued operations (see the “Discontinued Operations” section of the MD&A).

44

Net Loss Attributable to Forest City Enterprises, Inc. — Net loss attributable to Forest City Enterprises, Inc. for the three months ended October 31, 2009 was $4,384,000 versus $19,115,000 for the three months ended October 31, 2008. Although we have substantial recurring revenue sources from our properties, we also enter into significant one-time transactions, which could create substantial variances in net earnings (loss) between periods. This variance is primarily attributable to the following increases, which are net of tax and noncontrolling interests:

• $16,599,000 ($27,113,000, pre-tax, which includes $1,903,000 for unconsolidated entities) related to the 2009 early extinguishment of nonrecourse mortgage debt at an underperforming retail project and the gain on early extinguishment of debt on the exchange of a portion of our 2011 Notes for a new issue of puttable equity-linked senior notes due October 15, 2014 (see the “Puttable Equity-Linked Senior Notes due 2011” section of the MD&A);

• $7,630,000 ($12,434,000, pre-tax) related to the reduction in fair value of the Denver Urban Renewal Authority (“DURA”) purchase obligation and fee, that resulted from the Lehman Brothers, Inc. bankruptcy in 2008;

• $5,352,000 ($8,742,000, pre-tax) of decreased write-offs of abandoned development projects in 2009 compared to 2008;

• $2,753,000 ($4,498,000, pre-tax) related to the 2009 gain on disposition of our unconsolidated investment in Boulevard Towers, an apartment community in Amherst, New York;

• $1,128,000 ($1,843,000, pre-tax, which includes $1,449,000 for unconsolidated entities) related to an increase in income recognized on the sale of state and federal Historic Preservation Tax Credits and New Market Tax Credits; and

• $1,041,000 ($1,700,000, pre-tax) related to the change in fair market value of derivatives between the comparable periods, which was marked to market through interest expense as a result of the derivatives not qualifying for hedge accounting.

These increases were partially offset by the following decreases, net of tax and noncontrolling interests:

• $14,400,000 ($23,524,000, pre-tax) related to the 2009 increase in impairment charges of consolidated (including discontinued properties) and unconsolidated entities;

• $2,877,000 ($4,709,000, pre-tax) primarily related to military housing fee income from the management and development of units in Hawaii, Illinois, Washington and Colorado;

• $2,448,000 ($3,998,000, pre-tax) related to the 2009 participation payment on the refinancing of 45/75 Sidney Street, office buildings in Cambridge, Massachusetts; and

• $2,441,000 ($3,978,000, pre-tax) related to the 2008 lease termination fee income at an office building in Cleveland, Ohio.

Net loss attributable to Forest City Enterprises, Inc. for the nine months ended October 31, 2009 was $36,852,000 versus $67,903,000 for the nine months ended October 31, 2008. This variance is primarily attributable to the following increases, which are net of tax and noncontrolling interests:

• $25,182,000 ($41,134,000, pre-tax, which includes $1,749,000 for unconsolidated entities) related to the 2009 early extinguishment of nonrecourse mortgage debt at an underperforming retail project and Gladden Farms, a land development project located in Marana, Arizona and the gain on early extinguishment of debt on the exchange of a portion of our 2011 Notes for a new issue of puttable equity-linked senior notes due October 15, 2014 (see the “Puttable Equity-Linked Senior Notes due 2011” section of the MD&A);

• $10,902,000 ($17,808,000, pre-tax) of decreased write-offs of abandoned development projects in 2009 compared to 2008;

• $7,630,000 ($12,434,000, pre-tax) related to the reduction in fair value of the DURA purchase obligation and fee, that resulted from the Lehman Brothers, Inc. bankruptcy in 2008;

• $2,784,000 ($4,548,000, pre-tax) related the 2009 gain on disposition of Grand Avenue, a specialty retail center in Queens, New York;

• $2,753,000 ($4,498,000, pre-tax) related to the 2009 gain on disposition of our unconsolidated investment in Boulevard Towers;

• $2,596,000 ($4,241,000, pre-tax, which includes $1,449,000 for unconsolidated entities) related to an increase in income recognized on the sale of state and federal Historic Preservation Tax Credits and New Market Tax Credits;

• $2,203,000 ($3,599,000, pre-tax) related to a gain recognized in 2009 for insurance proceeds received related to fire damage of an apartment building in excess of the net book value of the damaged asset;

45

• $1,860,000 ($3,031,000, pre-tax) related to the 2008 participation payments on the refinancing of 350 Massachusetts Avenue, an unconsolidated office building and Jackson Building, a consolidated office building, both located in Cambridge, Massachusetts;

• $1,622,000 ($2,649,000, pre-tax) related to the change in fair market value of derivatives between the comparable periods, which was marked to market through interest expense as a result of the derivatives not qualifying for hedge accounting;

• $1,467,000 ($2,396,000, pre-tax) related to the 2009 net gain on an industrial land sale at Mesa del Sol in Albuquerque, New Mexico; and

• $1,295,000 ($2,039,000, pre-tax) related to a decrease in allocated losses from our equity investment in the New Jersey Nets basketball team (see “The Nets” section of the MD&A).

These increases were partially offset by the following decreases, net of tax and noncontrolling interests:

• $25,418,000 ($41,536,000, pre-tax) related to the 2009 increase in impairment charges of consolidated (including discontinued properties) and unconsolidated entities;

• $5,245,000 ($8,117,000, pre-tax) primarily related to military housing fee income from the management and development of units in Hawaii, Illinois, Washington and Colorado;

• $5,294,000 ($8,627,000, pre-tax) related to the 2008 gain on disposition of Sterling Glen of Lynbrook, a supported-living apartment community in Lynbrook, New York;

• $2,448,000 ($3,998,000, pre-tax) related to the 2009 participation payment on the refinancing of 45/75 Sidney Street;

• $2,441,000 ($3,978,000, pre-tax) related to the 2008 lease termination fee income at an office building in Cleveland, Ohio; and

• $2,056,000 ($3,350,000, pre-tax) related to the 2008 gain on the sale of an ownership interest in a parking management company.

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Summary of Segment Operating Results – The following tables present a summary of revenues from real estate operations, operating expenses, interest expense, equity in earnings (loss) of unconsolidated entities and impairment of unconsolidated entities by segment for the three and nine months ended October 31, 2009 and 2008, respectively. See discussion of these amounts by segment in the narratives following the tables.

	Three Months Ended October 31,									Nine Months Ended October 31,
	2008									2008
	2009			(As Adjusted)			Variance			2009			(As Adjusted)			Variance
	(in thousands)									(in thousands)
Revenues from Real Estate Operations
Commercial Group	$	237,162		$	240,896		$	(3,734	)	$	704,586		$	694,994		$	9,592
Commercial Group Land Sales		4,155			6,747			(2,592	)		16,169			20,997			(4,828	)
Residential Group		58,663			72,475			(13,812	)		198,643			220,172			(21,529	)
Land Development Group		6,120			10,263			(4,143	)		13,491			23,844			(10,353	)
The Nets		–			–			–			–			–			–
Corporate Activities		–			–			–			–			–			–
Total Revenues from Real Estate Operations	$	306,100		$	330,381		$	(24,281	)	$	932,889		$	960,007		$	(27,118	)
Operating Expenses
Commercial Group	$	113,604		$	119,363		$	(5,759	)	$	332,703		$	363,336		$	(30,633	)
Cost of Commercial Group Land Sales		3,030			4,224			(1,194	)		10,521			12,596			(2,075	)
Residential Group		35,110			44,455			(9,345	)		134,110			142,655			(8,545	)
Land Development Group		11,224			25,323			(14,099	)		24,049			44,847			(20,798	)
The Nets		–			–			–			–			–			–
Corporate Activities		8,716			7,076			1,640			30,617			29,872			745
Total Operating Expenses	$	171,684		$	200,441		$	(28,757	)	$	532,000		$	593,306		$	(61,306	)
Interest Expense
Commercial Group	$	62,770		$	64,777		$	(2,007	)	$	175,916		$	177,171		$	(1,255	)
Residential Group		5,512			12,411			(6,899	)		21,460			28,359			(6,899	)
Land Development Group		817			(127	)		944			1,623			(299	)		1,922
The Nets		–			–			–			–			–			–
Corporate Activities		18,764			20,020			(1,256	)		59,435			54,219			5,216
Total Interest Expense	$	87,863		$	97,081		$	(9,218	)	$	258,434		$	259,450		$	(1,016	)
Equity in Earnings (Loss) of Unconsolidated Entities
Commercial Group	$	3,386		$	2,027		$	1,359		$	4,965		$	4,274		$	691
Gain on disposition of Emery-Richmond		–			200			(200	)		–			200			(200	)
Gain on disposition of One International Place		–			–			–			–			881			(881	)
Residential Group		2,029			2,225			(196	)		4,949			7,335			(2,386	)
Gain on disposition of Boulevard Towers		4,498			–			4,498			4,498			–			4,498
Land Development Group		2,304			2,209			95			4,952			6,429			(1,477	)
The Nets		(10,853	)		(9,859	)		(994	)		(29,841	)		(31,880	)		2,039
Corporate Activities		–			–			–			–			–			–
Total Equity in Loss of Unconsolidated Entities	$	1,364		$	(3,198	)	$	4,562		$	(10,477	)	$	(12,761	)	$	2,284
Impairment of Unconsolidated Entities
Commercial Group	$	7,217		$	–		$	7,217		$	8,828		$	1,263		$	7,565
Residential Group		4,713			–			4,713			24,303			4,398			19,905
Land Development Group		1,270			–			1,270			1,532			365			1,167
The Nets		–			–			–			–			–			–
Corporate Activities		–			–			–			–			–			–
Total Impairment of Unconsolidated Entities	$	13,200		$	–		$	13,200		$	34,663		$	6,026		$	28,637

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Commercial Group

Revenues from Real Estate Operations – Revenues from real estate operations for the Commercial Group, including the segment’s land sales, decreased by $6,326,000, or 2.6%, for the three months ended October 31, 2009 compared to the same period in the prior year. The variance is primarily attributable to the following decreases:

• $3,978,000 related to lease termination fee income in 2008 at an office building in Cleveland, Ohio that did not recur; and

• $2,592,000 related to decreases in commercial outlot land sales primarily at White Oak Village in Richmond, Virginia, Orchard Town Center in Westminster, Colorado and Victoria Gardens in Rancho Cucamonga, California, which were partially offset by increases at Salt Lake City in Utah and Ridge Hill in Yonkers, New York.

These decreases were partially offset by the following increase:

• $5,483,000 related to new property openings as noted in the table below.

The balance of the remaining decrease of $5,239,000 was generally due to downward trends in occupancies and rental rates primarily in the retail sector.

Revenues from real estate operations for the Commercial Group, including the segment’s land sales, increased by $4,764,000, or 0.7%, for the nine months ended October 31, 2009 compared to the same period in the prior year. The variance is primarily attributable to the following increases:

• $19,443,000 related to new property openings as noted in the table below; and

• $3,028,000 related to increased revenues earned on a construction contract with the New York City School Construction Authority for the construction of a school at Beekman, a development project in Manhattan, New York. This represents a reimbursement of costs that is included in operating expenses discussed below.

These increases were partially offset by the following decreases:

• $4,828,000 related to decreases in commercial outlot land sales primarily at Short Pump Town Center in Richmond, Virginia, White Oak Village, Orchard Town Center and Saddle Rock Village in Aurora, Colorado, which were partially offset by increases in commercial outlot land sales at Salt Lake City, Victoria Gardens and Ridge Hill, and

• $3,978,000 related to lease termination fee income in 2008 at an office building in Cleveland, Ohio that did not recur.

The balance of the remaining decrease of $8,901,000 was generally due to downward trends in occupancies and rental rates primarily in the retail sector.

Operating and Interest Expenses – Operating expenses decreased $6,953,000, or 5.6%, for the three months ended October 31, 2009 compared to the same period in the prior year. The variance is primarily attributable to the following decreases:

• $4,016,000 related to decreased write-offs of abandoned development projects; and

• $1,194,000 related to decreases in commercial outlot land sales primarily at White Oak Village, Orchard Town Center and Victoria Gardens, which was partially offset by an increase in commercial outlot land sales at Salt Lake City and Ridge Hill.

These decreases were partially offset by the following increases:

• $3,998,000 related to the 2009 participation payment on the refinancing of 45/75 Sidney Street, office buildings in Cambridge, Massachusetts; and

• $2,075,000 related to new property openings as noted in the table below.

The balance of the remaining decrease of $7,816,000 was generally due to cost reduction activities within the Commercial Group relating to direct property expenses and general operating activities.

Operating expenses decreased $32,708,000, or 8.7%, for the nine months ended October 31, 2009 compared to the same period in the prior year. The variance is primarily attributable to the following decreases:

• $22,546,000 related to decreased write-offs of abandoned development projects in 2009 compared to 2008, which was primarily due to the 2008 write-off at Summit at Lehigh Valley;

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• $2,075,000 related to decreases in commercial outlot land sales primarily at Short Pump Town Center, White Oak Village, Orchard Town Center and Saddle Rock Village, which were partially offset by an increase in commercial outlot land sales at Salt Lake City and Ridge Hill; and

• $1,759,000 related to the 2008 participation payment on the refinancing at Jackson Building, an office building in Cambridge, Massachusetts that did not recur.

These decreases were partially offset by the following increases:

• $6,994,000 related to new property openings as noted in the table below;

• $3,998,000 related to the 2009 participation payment on the refinancing of 45/75 Sidney Street; and

• $3,028,000 related to construction of a school at Beekman. These costs are reimbursed by the New York City School Construction Authority and are included in revenues from real estate operations discussed above.

The balance of the remaining decrease of $20,348,000 was generally due to cost reduction activities within the Commercial Group relating to direct property expenses and general operating activities.

Interest expense for the Commercial Group decreased by $2,007,000, or 3.1%, for the three months ended October 31, 2009 and by $1,255,000, or 0.7%, for the nine months ended October 31, 2009 compared to the same periods in the prior year. The variances are primarily attributable to decreases in variable interest rates offset by increases primarily attributable to the openings of the properties listed in the table below.

The following table presents the increases (decreases) in revenues and operating expenses incurred by the Commercial Group for newly-opened properties for the three and nine months ended October 31, 2009 compared to the same period in the prior year:

					Three Months Ended					Nine Months Ended
					October 31, 2009 vs. 2008					October 31, 2009 vs. 2008
					Revenues					Revenues
					from					from
		Quarter - Year	Square		Real Estate		Operating			Real Estate		Operating
Newly - Opened Properties	Location	Opened	Feet		Operations		Expenses			Operations		Expenses
					(in thousands)					(in thousands)
Retail Centers:
Promenade at Temecula Expansion	Temecula, California	Q1-2009		127,000	$	580	$	286		$	1,307	$	632
White Oak Village	Richmond, Virginia	Q3-2008		800,000		1,438		280			5,113		1,483
Shops at Wiregrass	Tampa, Florida	Q3-2008		642,000		2,960		1,088			8,728		3,977
Orchard Town Center	Westminster, Colorado	Q1-2008		980,000		137		576			2,404		423
Office Building:
Johns Hopkins — 855 North Wolfe Street	East Baltimore, Maryland	Q1-2008		279,000		368		(155	)		1,891		479
Total					$	5,483	$	2,075		$	19,443	$	6,994

Comparable occupancy for the Commercial Group is 90.1% and 89.4% for retail and office, respectively, as of October 31, 2009 compared to 91.6% and 90.0%, respectively, as of October 31, 2008. Retail and office occupancy as of October 31, 2009 and 2008 is based on square feet leased at the end of the fiscal quarter. Average occupancy for hotels for the nine months ended October 31, 2009 is 68.5% compared to 70.7% for the nine months ended October 31, 2008.

As of October 31, 2009, the average base rent per square feet expiring for retail and office leases is $26.17 and $31.30, respectively, compared to $26.49 and $30.77, respectively, as of October 31, 2008. Square feet of expiring leases and average base rent per square feet are operating statistics that represent 100% of the square footage and base rental income per square foot from expiring leases. The average daily rate (“ADR”) for our hotel portfolio is $139.56 and $146.07 for the nine months ended October 31, 2009 and 2008, respectively. ADR is an operating statistic and is calculated by dividing revenue by the number of rooms sold for all hotels that were open and operating for both the nine months ended October 31, 2009 and 2008.

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Residential Group

Revenues from Real Estate Operations – Included in revenues from real estate operations is fee income related to the development and construction management of military housing projects. Military housing fee income and related operating expenses may vary significantly from period to period based on the timing of development and construction activity at each applicable project. Revenues from real estate operations for the Residential Group decreased by $13,812,000, or 19.1%, during the three months ended October 31, 2009 compared to the same period in the prior year. The variance is primarily attributable to the following decrease:

• $15,617,000 related to military housing fee income from development and management of military housing units located primarily on the islands of Oahu and Kauai, Hawaii, Chicago, Illinois, Seattle, Washington, and Colorado Springs, Colorado (see the “Military Housing Fee Revenues” section below for further detail).

This decrease was partially offset by the following increases:

• $1,598,000 related to the cancellation of a net leasing arrangement whereby we assumed the operations from the lessee at Forest Trace in Lauderhill, Florida; and

• $1,522,000 related to new property openings and acquired properties as noted in the table below.

The balance of the remaining decrease of $1,315,000 was generally due to downward trends in occupancy and net rental rates.

Revenues from real estate operations for the Residential Group decreased by $21,529,000, or 9.8%, during the nine months ended October 31, 2009 compared to the same period in the prior year. This variance is primarily attributable to the following decrease:

• $49,031,000 related to military housing fee income from development and management of military housing units located primarily on the islands of Oahu and Kauai, Hawaii, Chicago, Illinois, Seattle, Washington, and Colorado Springs, Colorado (see the “Military Housing Fee Revenues” section below for further detail).

This decrease was partially offset by the following increases:

• $14,000,000 related to the land sale and related development opportunity in Mamaroneck, New York;

• $7,390,000 related to insurance premiums earned from an owner’s controlled insurance program;

• $5,217,000 related to the cancellation of a net leasing arrangement whereby we assumed the operations from the lessee at Forest Trace; and

• $3,485,000 related to new property openings and acquired properties as noted in the table below.

The balance of the remaining decrease of $2,590,000 was generally due to downward trends in occupancy and net rental rates.

Operating and Interest Expenses – Operating expenses for the Residential Group decreased by $9,345,000, or 21.0%, during the three months ended October 31, 2009 compared to the same period in the prior year. This variance is primarily attributable to the following decreases:

• $6,677,000 related to expenditures associated with military housing fee revenues; and

• $4,725,000 related to write-offs of abandoned development projects.

These decreases were partially offset by the following increases:

• $2,468,000 related to the cancellation of the net lease arrangement at Forest Trace;and

• $355,000 related to new property openings and acquired properties as noted in the table below.

The balance of the remaining decrease of $766,000 was generally due to cost reduction activities within the Residential Group relating to direct property expenses and general operating activities.

Operating expenses for the Residential Group decreased by $8,545,000, or 6.0%, during the nine months ended October 31, 2009 compared to the same period in the prior year. This variance is primarily attributable to the following decrease:

• $32,791,000 related to expenditures associated with military housing fee revenues.

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This decrease was partially offset by the following increases:

• $14,000,000 related to the cost of the land sale and related development opportunity in Mamaroneck, New York;

• $7,484,000 related to the cancellation of the net lease arrangement at Forest Trace;

• $3,553,000 related to insurance expenses associated with an owner’s controlled insurance program;

• $2,492,000 related to increased write-offs of abandoned development projects; and

• $1,730,000 related to new property openings and acquired properties as noted in the table below.

The balance of the remaining decrease of $5,013,000 was generally due to cost reduction activities within the Residential Group relating to direct property expenses and general operating activities.

Interest expense for the Residential Group decreased by $6,899,000, or 55.6%, during the three months ended October 31, 2009 and $6,899,000, or 24.3%, for the nine months ended October 31, 2009 compared to the same periods in the prior year. These decreases are primarily attributable to decreases in variable interest rates partially offset by increases related to the openings and acquisitions of the properties listed in the below table.

The following table presents the increases in revenues and operating expenses incurred by the Residential Group for newly-opened/acquired properties for the three and nine months ended October 31, 2009 compared to the same period in the prior year:

				Three Months Ended				Nine Months Ended
				October 31, 2009 vs. 2008				October 31, 2009 vs. 2008
				Revenues				Revenues
				from				from
		Quarter - Year	Leasable	Real Estate		Operating		Real Estate		Operating
Property	Location	Opened	Units	Operations		Expenses		Operations		Expenses
				(in thousands)				(in thousands)
Hamel Mill Lofts	Haverhill, Massachusetts	Q4-2008 (1)	305	$	217	$	46	$	430	$	872
Lucky Strike	Richmond, Virginia	Q1-2008	131		211		57		711		150
Mercantile Place on Main	Dallas, Texas	Q1-2008/Q4-2008	366		844		71		2,094		527
North Church Towers	Parma Heights, Ohio	Q3-2009 (2)	399		250		181		250		181
Total				$	1,522	$	355	$	3,485	$	1,730

(1)	Property to open in phases.
(2)	Acquired property.

Comparable average occupancy for the Residential Group is 90.4% and 92.4% for the nine months ended October 31, 2009 and 2008, respectively. Average residential occupancy for the nine months ended October 31, 2009 and 2008 is calculated by dividing gross potential rent less vacancy by gross potential rent. Total average occupancy excludes military housing units.

Comparable average net rental income (“NRI”) for the Residential Group was 87.3% and 90.2% for the nine months ended October 31, 2009 and 2008, respectively. This decrease is primarily a result of increased vacancies due to soft market conditions and increased rent concessions in an effort to keep occupancy from declining. Comparable average NRI is calculated by dividing gross potential rent less vacancies and rent concessions by gross potential rent for properties that were open and operating in both the nine months ended October 31, 2009 and 2008. Comparable NRI excludes military housing units.

Military Housing Fee Revenues – Revenues for development fees related to our military housing projects are earned based on a contractual percentage of the actual development costs incurred by the military housing projects and are recognized on a monthly basis as the costs are incurred. We also recognize additional development incentive fees upon successful completion of certain criteria, such as incentives to realize development cost savings, encourage small and local business participation, comply with specified safety standards and other project management incentives as specified in the development agreements. Base development and development incentive fees of $2,723,000 and $9,322,000 were recognized during the three and nine months ended October 31, 2009, respectively, and $16,792,000 and $55,500,000 during the three and nine months ended October 31, 2008, respectively, which were recorded in revenues from real estate operations in the Consolidated Statements of Operations.

Revenues for construction management fees are earned based on a contractual percentage of the actual construction costs incurred by the military housing projects and are recognized on a monthly basis as the costs are incurred. We also recognize certain construction incentive fees based upon successful completion of certain criteria as set forth in the construction contracts. Base construction and construction incentive fees of $1,731,000 and $7,385,000 were recognized during the three and nine months ended October 31, 2009, respectively, and $3,172,000 and $11,022,000 during the three and nine months ended October 31, 2008, respectively, which were recorded in revenues from real estate operations in the Consolidated Statements of Operations.

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Revenues for property management and asset management fees are earned based on a contractual percentage of the annual net rental income and annual operating income, respectively, that is generated by the military housing privatization projects as defined in the agreements. We also recognize certain property management incentive fees based upon successful completion of certain criteria as set forth in the property management agreements. Property management, management incentive and asset management fees of $3,634,000 and $11,467,000 were recognized during the three and nine months ended October 31, 2009, respectively, and $3,741,000 and $10,683,000 during the three and nine months ended October 31, 2008, respectively, which were recorded in revenues from real estate operations in the Consolidated Statements of Operations.

Land Development Group

Revenues from real estate operations – Land sales and the related gross margins vary from period to period depending on the timing of sales and general market conditions relating to the disposition of significant land holdings. Our land sales have been impacted by slowing demand from home buyers in certain core markets for the land business, reflecting conditions throughout the housing industry. Revenues from real estate operations for the Land Development Group decreased by $4,143,000 for the three months ended October 31, 2009 compared to the same period in the prior year. This variance is primarily attributable to the following decreases:

• $4,335,000 related to lower land sales at Summers Walk in Davidson, North Carolina; and

• $1,153,000 related to lower land sales primarily at Legacy Lakes in Aberdeen, North Carolina and Mill Creek in York County, South Carolina, combined with several smaller decreases in land sales at other land development projects.

These decreases were partially offset by the following increase:

• $1,345,000 related to higher land sales primarily at Gladden Farms in Marana, Arizona and higher unit sales at Rockport Square in Lakewood, Ohio, combined with several smaller increases in land sales at other land development projects.

Revenues from real estate operations for the Land Development Group decreased by $10,353,000 for the nine months ended October 31, 2009 compared to the same period in the prior year. This variance is primarily attributable to the following decreases:

• $8,109,000 related to lower land sales at Summers Walk and Tangerine Crossing in Tucson, Arizona and lower unit sales at Rockport Square;

• $2,128,000 primarily related to reduced fee income and profit participation due to lower home sales at Stapleton in Denver, Colorado; and

• $2,057,000 related to lower land sales primarily at Legacy Lakes and Mill Creek, combined with several smaller decreases in land sales at other land development projects.

These decreases were partially offset by the following increase:

• $1,941,000 related to higher land sales primarily at Creekstone in Copley, Ohio and Gladden Farms, combined with several smaller increases in land sales at other land development projects.

Operating and Interest Expenses – Operating expenses decreased by $14,099,000 for the three months ended October 31, 2009 compared to the same period in the prior year. This variance is primarily attributable to the following decreases:

• $14,216,000 at Stapleton primarily related to the $13,816,000 reduction in fair value of the DURA purchase obligation and fee, that resulted from the Lehman Brothers, Inc. bankruptcy in 2008 (see the “Other Structured Financing Arrangements” section of the MD&A);

• $2,786,000 related to lower land sales at Summers Walk; and

• $1,254,000 primarily related to lower land sales at Legacy Lakes, Mill Creek and other land development projects along with reduced payroll costs and specific cost reduction activities.

These decreases were partially offset by the following increases:

• $1,657,000 primarily related to higher land sales at Gladden Farms and higher unit sales at Rockport Square, combined with several smaller increases in land sales at other land development projects; and

• $2,500,000 legal settlement related to a former joint venture.

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Operating expenses decreased by $20,798,000 for the nine months ended October 31, 2009 compared to the same period in the prior year. This variance is primarily attributable to the following decreases:

• $17,954,000 at Stapleton primarily related to the $13,816,000 reduction in fair value of the DURA purchase obligation and fee, that resulted from the Lehman Brothers, Inc. bankruptcy in 2008 (see the “Other Structured Financing Arrangements” section of the MD&A) along with reduced payroll costs and specific cost reduction activities;

• $5,446,000 related to lower land sales at Summers Walk and Tangerine Crossing and lower unit sales at Rockport Square; and

• $2,888,000 primarily related to lower land sales at Legacy Lakes, Mill Creek and other land development projects along with reduced payroll costs and specific cost reduction activities.

These decreases were partially offset by the following increases:

• $2,990,000 primarily related to higher land sales at Creekstone, Gladden Farms and other land development projects, combined with several smaller increases in land sales at other land development projects; and

• $2,500,000 legal settlement related to a former joint venture.

Interest expense for the Land Development Group increased by $944,000 for the three months ended October 31, 2009 and $1,922,000 for the nine months ended October 31, 2009 compared to the same periods in the prior year. Interest expense varies from year to year depending on the level of interest-bearing debt within the Land Development Group.

The Nets

Our equity investment in The Nets incurred a pre-tax loss of $10,853,000 and $29,841,000 for the three and nine months ended October 31, 2009, respectively, representing an increase in allocated losses of $994,000 and a decrease of $2,039,000 compared to the same periods in the prior year. Generally accepted accounting principles require us to report losses, including significant non-cash losses resulting from amortization, in excess of our legal ownership of approximately 23%. For both the nine months ended October 31, 2009 and 2008, we recognized approximately 62% of the net loss because profits and losses are allocated to each member based on an analysis of the respective member’s claim on the net book equity assuming a liquidation at book value at the end of the accounting period without regard to unrealized appreciation (if any) in the fair value of The Nets.

Included in the losses for the nine months ended October 31, 2009 and 2008 are approximately $12,750,000 and $14,934,000, respectively, of amortization, at our share, of certain assets related to the purchase of the team. The remainder of the losses substantially relate to the operations of the team. Consistent with prior years, the team is expected to continue to operate at a loss for the remainder of 2009.

Corporate Activities

Operating and Interest Expenses – Operating expenses for Corporate Activities increased by $1,640,000 for the three months ended October 31, 2009 and $745,000 for the nine months ended October 31, 2009 compared to the same periods in the prior year. The increase of $1,640,000 for the three months ended October 31, 2009 was primarily attributable to an increase in charitable contributions of $541,000 and other general corporate expenses. The increase of $745,000 for the nine months ended October 31, 2009 was primarily related to company-wide severance and outplacement expenses of $8,720,000 offset by cost savings initiatives that resulted in reductions in compensation and related benefits of $2,195,000, charitable contributions of $1,919,000 and $3,861,000 of general corporate expenses.

Interest expense for Corporate Activities consists primarily of interest expense on the senior notes and the bank revolving credit facility, excluding the portion allocated to the Land Development Group (see the “Financial Condition and Liquidity” section). Interest expense decreased by $1,256,000 for the three months ended October 31, 2009 and increased by $5,216,000 for the nine months ended October 31, 2009 compared to the same periods in the prior year. The decrease of $1,256,000 for the three months ended October 31, 2009 related to reduced interest on the credit facility as a result of decreased borrowings and decreased borrowing costs, reduced non-cash interest expense recognized on our 3.625% Puttable Equity-Linked Senior Notes due 2011, offset with increased interest expense on the corporate interest rate swaps, due to a reduction in the LIBOR rate. The increase of $5,216,000 for the nine months ended October 31, 2009 related to increased interest on the credit facility due to increased borrowings in addition to increased interest expense related to corporate interest rate swaps.

Other Activity

The following items are discussed on a consolidated basis.

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Depreciation and Amortization

We recorded depreciation and amortization of $66,393,000 and $199,659,000 for the three and nine months ended October 31, 2009, respectively, which is an increase of $2,355,000, or 3.7%, and $1,049,000, or 0.5%, compared to the same periods in the prior year.

Impairment of Real Estate

We review our real estate portfolio, including land held for development or sale, for impairment whenever events or changes indicate that our carrying value of the long-lived assets may not be recoverable. In cases where we do not expect to recover our carrying costs, we record an impairment charge in accordance with accounting guidance on the impairment of long-lived assets. During the three and nine months ended October 31, 2009, we recorded an impairment of certain real estate assets in continuing operations of $549,000 and $3,124,000, respectively. The amounts for 2009 represent impairments of real estate of $2,000,000 primarily related to two land development projects, Gladden Farms and Tangerine Crossing located in Marana and Tucson, Arizona, respectively, and $1,124,000 related to the residential land sale and related development opportunity in Mamaroneck, New York, which occurred during the three months ended April 30, 2009. In addition, included in discontinued operations is an impairment of real estate for two properties that were sold during the three months ended October 31, 2009 (see the “Discontinued Operations” section of the MD&A). These impairments represent a write down to the estimated fair value due to a change in events, such as a purchase offer and/or consideration of current market conditions related to the estimated future cash flows. We did not record any impairments of real estate during the three and nine months ended October 31, 2008.

Impairment of Unconsolidated Entities

We review our portfolio of unconsolidated entities for other-than-temporary impairments whenever events or changes indicate that our carrying value in the investments may be in excess of fair value. An equity method investment’s value is impaired only if management’s estimates of its fair value is less than the carrying value and such difference is deemed to be other-than-temporary. In order to arrive at the estimates of fair value of our unconsolidated entities, we use varying assumptions that may include comparable sale prices, market discount rates, market capitalization rates and estimated future discounted cash flows specific to the geographic region and property type, which are considered to be Level 3 inputs under accounting guidance related to estimating fair value.

The following table summarizes our impairment of unconsolidated entities for the three and nine months ended October 31, 2009 and 2008, which are included in the Consolidated Statements of Operations.

			Three Months Ended				Nine Months Ended
			October 31,				October 31,
			2009		2008		2009		2008
			(in thousands)				(in thousands)
Apartment Communities:
Millender Center		(Detroit, Michigan)	$	3,247	$	-	$	10,317	$	-
Uptown Apartments	(Oakland, California)			-		-		6,781		-
Metropolitan Lofts	(Los Angeles, California)			1,466		-		2,505		-
Residences at University Park	(Cambridge, Massachusetts)			-		-		855		-
Fenimore Court	(Detroit, Michigan)			-		-		693		-
Mercury (Condominium)	(Los Angeles, California)			-		-		-		4,098
Classic Residence by Hyatt (Supported-Living Apartments)	(Yonkers, New York)			-		-		3,152		-
Specialty Retail Centers:
Southgate Mall	(Yuma, Arizona)			-		-		1,611		-
El Centro Mall	(El Centro, California)			-		-		-		1,263
Pittsburgh Peripheral (Land Project)	(Pittsburgh, Pennsylvania)			7,217		-		7,217		-
Shamrock Business Center (Land Project)	(Painesville, Ohio)			1,150		-		1,150		-
Other				120		-		382		665
Total Impairment of Unconsolidated Entities			$	13,200	$	-	$	34,663	$	6,026

Write-Off of Abandoned Development Projects

On a quarterly basis, we review each project under development to determine whether it is probable the project will be developed. If we determine that the project will not be developed, project costs are written off to operating expenses as an abandoned development project cost. We may abandon certain projects under development for a number of reasons, including, but not limited to, changes in local market conditions, increases in construction or financing costs or due to third party challenges related to entitlements or public financing. As a result, we may fail to recover expenses already incurred in exploring development opportunities. We recorded write-offs of abandoned development projects of $3,758,000 and $21,398,000 for the three and nine months ended October 31, 2009, respectively, and $12,500,000 and $41,452,000 for the three and nine months ended October 31, 2008, respectively, which were recorded in operating expenses in the Consolidated Statements of Operations.

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Amortization of Mortgage Procurement Costs

We amortize mortgage procurement costs on a straight-line basis over the life of the related nonrecourse mortgage debt, which approximates the effective interest method. For the three and nine months ended October 31, 2009, we recorded amortization of mortgage procurement costs of $3,562,000 and $10,645,000, respectively. Amortization of mortgage procurement costs increased $724,000 and $1,922,000 for the three and nine months ended October 31, 2009, respectively, compared to the same periods in the prior year primarily related to new property openings.

Gain (Loss) on Early Extinguishment of Debt

For the three and nine months ended October 31, 2009, we recorded $28,902,000 and $37,965,000, respectively, as gain on early extinguishment of debt. The amounts for 2009 include the $24,219,000 gain on early extinguishment of nonrecourse mortgage debt at an underperforming retail project, the $9,466,000 gain on early extinguishment of nonrecourse mortgage debt at Gladden Farms, a land development project located in Marana, Arizona and the $4,683,000 gain related to the exchange of a portion of the Company’s 2011 Notes for a new issue of 2014 Notes (see the “Puttable Equity-Linked Senior Notes due 2011” section of the MD&A). These gains were partially offset by a charge to early extinguishment of debt as a result of the payment of $20,400,000 in redevelopment bonds by a consolidated wholly-owned subsidiary of ours (see the “Subordinated Debt” section of the MD&A). For the three and nine months ended October 31, 2008, we recorded $3,692,000 and $(1,539,000), respectively, as gain (loss) on early extinguishment of debt. The amounts for 2008 include gains on the early extinguishment of debt of a portion of our puttable equity-linked senior notes due October 15, 2011 (see the “Puttable Equity-Linked Senior Notes due 2011” section of the MD&A) and on the early extinguishment of the Urban Development Action Grant loan at Post Office Plaza, an office building located in Cleveland, Ohio. These gains were offset by the impact of early extinguishment of nonrecourse mortgage debt at Galleria at Sunset, a regional mall located in Henderson, Nevada, and 1251 S. Michigan and Sky55, apartment communities located in Chicago, Illinois, in order to secure more favorable financing terms.

Interest and Other Income

Interest and other income was $5,522,000 and $23,924,000 for the three and nine months ended October 31, 2009, respectively, compared to $6,752,000 and $27,976,000 for the three and nine months ended October 31, 2008, respectively. The decrease of $1,230,000 for the three months ended October 31, 2009 compared to the same period in the prior year is generally due to lower interest earned on our cash and restricted cash balances maintained with financial institutions, offset by an increase of $394,000 related to the income recognition on the sale of historic preservation and new market tax credits. The decrease of $4,052,000 for the nine months ended October 31, 2009 compared to the same period in the prior year is primarily due to the following decreases: $4,546,000 related to the income earned on the DURA purchase obligation and fee in 2008 that did not recur (see the “Other Structured Financing Arrangements” section of the MD&A) and $3,350,000 related to the 2008 gain on the sale of an ownership interest in a parking management company. These decreases were partially offset by a gain recognized in 2009 of $3,599,000 related to insurance proceeds received due to fire damage at an apartment building in excess of the net book value of the damaged asset and an increase of $2,792,000 related to the income recognition on the sale of historic preservation and new market tax credits. The remaining decrease is generally due to lower interest earned on our cash and restricted cash balances maintained with financial institutions.

Income Taxes

Income tax benefit for the three months ended October 31, 2009 and 2008 was $(2,895,000) and $(11,916,000), respectively. Income tax benefit for the nine months ended October 31, 2009 and 2008 was $(25,874,000) and $(28,382,000), respectively. The difference in the income tax benefit reflected in the Consolidated Statements of Operations versus the income tax benefit computed at the statutory federal income tax rate is primarily attributable to state income taxes, the cumulative effect of changing our effective tax rate, additional state NOL’s and general business credits, changes to the valuation allowances associated with certain deferred tax assets, and various permanent differences between pre-tax generally accepted accounting principles (“GAAP”) income and taxable income.

At January 31, 2009, we had a federal net operating loss carryforward for tax purposes of $113,458,000 (generated primarily from the impact on our net earnings of tax depreciation expense from real estate properties and excess deductions from stock-based compensation) that will expire in the years ending January 31, 2024 through January 31, 2029, a charitable contribution deduction carryforward of $42,705,000 that will expire in the years ending January 31, 2010 through January 31, 2014 ($5,651,000 expiring in the year ended January 31, 2010), general business credit carryovers of $15,099,000 that will expire in the years ending January 31, 2010 through January 31, 2029 ($36,000 expiring in the year ended January 31, 2010), and an alternative minimum tax (“AMT”) credit carryforward of $28,501,000 that is available until used to reduce federal tax to the AMT amount.

Our policy is to consider a variety of tax-deferral strategies, including tax deferred exchanges, when evaluating our future tax position. We have a full valuation allowance against the deferred tax asset associated with our charitable contributions. We have a valuation allowance against our general business credits, other than those general business credits which are eligible to be utilized to reduce future AMT liabilities. These valuation allowances exist because we believe at this time that it is more likely than not that we will not realize these benefits.

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We apply the “with-and-without” methodology for recognizing excess tax benefits from the deduction of stock-based compensation. The net operating loss available for the tax return, as is noted in the paragraph above, is significantly greater than the net operating loss available for the tax provision due to excess deductions from stock-based compensation reported on the return, as well as the impact of adjustments to the net operating loss under the accounting guidance on accounting for uncertainty in income taxes. We have not recorded a net deferred tax asset of approximately $17,096,000, as of January 31, 2009, from excess stock-based compensation deductions taken on our tax return for which a benefit has not yet been recognized in our tax provision.

Accounting for Uncertainty in Income Taxes

Unrecognized tax benefits represent those tax benefits related to tax positions that have been taken or are expected to be taken in tax returns that are not recognized in the financial statements because we have either concluded that it is not more likely than not that the tax position will be sustained if audited by the appropriate taxing authority or the amount of the benefit will be less than the amount taken or expected to be taken in our income tax returns.

As of October 31 and January 31, 2009, we had unrecognized tax benefits of $1,636,000 and $1,481,000, respectively. We recognize estimated interest payable on underpayments of income taxes and estimated penalties that may result from the settlement of some uncertain tax positions as components of income tax expense. As of October 31 and January 31, 2009, we had approximately $501,000 and $463,000, respectively, of accrued interest related to uncertain income tax positions. Income tax expense (benefit) relating to interest and penalties on uncertain tax positions of $(87,000) and $37,000 for the three and nine months ended October 31, 2009, respectively, and $35,000 and $(297,000) for the three and nine months ended October 31, 2008, respectively, was recorded in the Consolidated Statements of Operations. We settled Internal Revenue Service audits of two of our partnership investments, one during the three months ended October 31, 2009 and one during the nine months ended October 31, 2008, both of which resulted in a decrease in our unrecognized tax benefits and associated accrued interest and penalties.

The total amount of unrecognized tax benefits that would affect our effective tax rate, if recognized as of October 31, 2009 and 2008, is $172,000 and $339,000, respectively. Based upon our assessment of the outcome of examinations that are in progress, the settlement of liabilities, or as a result of the expiration of the statutes of limitation for certain jurisdictions, it is reasonably possible that the related unrecognized tax benefits for tax positions taken regarding previously filed tax returns will materially change from those recorded at October 31, 2009. Included in the $1,636,000 of unrecognized benefits noted above is $1,415,000 which, due to the reasons above, could significantly decrease during the next twelve months.

Equity in Earnings (Loss) of Unconsolidated Entities – (also see the “Impairment of Unconsolidated Entities” section of the MD&A)

Equity in earnings of unconsolidated entities was $1,364,000 for the three months ended October 31, 2009 compared to equity in loss of unconsolidated entities of $3,198,000 for the three months ended October 31, 2008, representing a variance of $4,562,000. This variance is primarily attributable to the following increases that occurred within our equity method investments:

- Residential Group

• $4,498,000 related to the 2009 gain on disposition of our partnership interest in Boulevard Towers, an apartment community in Amherst, New York.

- Land Development Group

• $1,874,000 related to the 2009 gain on early extinguishment of nonrecourse mortgage debt at Shamrock Business Center in Painesville, Ohio.

These increases were partially offset by the following decreases:

- Land Development Group

• $2,373,000 related to decreased sales at Central Station, located in Chicago, Illinois.

- The Nets

• $994,000 related to an increase in allocated losses in The Nets (see “The Nets” section of the MD&A).

The balance of the remaining increase of $1,557,000 was due to fluctuations in the operations of our equity method investments.

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Equity in loss of unconsolidated entities was $10,477,000 for the nine months ended October 31, 2009 compared to $12,761,000 for the nine months ended October 31, 2008, representing a variance of $2,284,000. This variance is primarily attributable to the following increases that occurred within our equity method investments:

- Residential Group

• $4,498,000 related to the 2009 gain on disposition of our partnership interest in Boulevard Towers.

- Land Development Group

• $2,396,000 related to the 2009 net gain on an industrial land sale at Mesa Del Sol in Albuquerque, New Mexico.

• $1,874,000 related to the 2009 gain on early extinguishment of nonrecourse mortgage debt at Shamrock Business Center.

- The Nets

• $2,039,000 related to a decrease in allocated losses in The Nets (see “The Nets” section of the MD&A).

- Commercial Group

• $1,272,000 related to the 2008 participation payment on the refinancing at 350 Massachusetts Avenue, an office building in Cambridge, Massachusetts.

These increases were partially offset by the following decreases:

- Land Development Group

• $6,613,000 related to decreased sales at Central Station.

- Residential Group

• $4,207,000 primarily related to lease-up losses at Uptown Apartments, an apartment community in Oakland, California, combined with smaller operating losses at three apartment complexes which were acquired during the second half of 2008.

- Commercial Group

• $1,081,000 related to the 2008 gains on disposition of our partnership interests in One International Place and Emery-Richmond, office buildings in Cleveland, Ohio and Warrensville Heights, Ohio, respectively.

The balance of the remaining increase of $2,106,000 was due to fluctuations in the operations of our equity method investments.

Discontinued Operations

All revenues and expenses of discontinued operations sold or held for sale, assuming no significant continuing involvement, have been reclassified in the Consolidated Statements of Operations for the three and nine months ended October 31, 2009 and 2008. We consider assets held for sale when the transaction has been approved and there are no significant contingencies related to the sale that may prevent the transaction from closing. There were no assets classified as held for sale at October 31 or January 31, 2009.

During the nine months ended October 31, 2009, we sold Grand Avenue, a specialty retail center in Queens, New York, which generated a pre-tax gain on disposition of rental properties of $4,548,000. The gain along with the operating results of the property through the date of sale is classified as discontinued operations for the nine months ended October 31, 2009 and 2008.

During the year ended January 31, 2008, we consummated an agreement to sell eight (seven operating properties and one property that was under construction at the time of the agreement) and lease four supported-living apartment properties to a third party. Pursuant to the agreement, during the second quarter of 2007, six operating properties and the property under construction were sold. The seventh operating property, Sterling Glen of Lynbrook, was operated by the purchaser under a short-term lease through the date of sale, which occurred on May 20, 2008 and generated a pre-tax gain on disposition of rental properties of $8,627,000. The gain along with the operating results of the property through the date of sale are classified as discontinued operations for the nine months ended October 31, 2008.

The four remaining properties entered into long-term operating leases with the purchaser. On January 30, 2009, the purchase agreement for the sale of Sterling Glen of Rye Brook, whose operating lease had a stated term of ten years, were amended and the property was sold. The operating results of the property for the three and nine months ended October 31, 2008 are classified as discontinued operations. On January 31, 2009, another long-term operating lease with the purchaser that had a stated term of ten years was cancelled and the operations of the property were transferred back to us.

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During the three months ended October 31, 2009, negotiations related to amending terms of the purchase agreements for the sales of Sterling Glen of Glen Cove and Sterling Glen of Great Neck indicated the carrying value of these long-lived real estate assets may not be recoverable resulting in an impairment of real estate of $7,138,000 and $2,637,000, respectively, which reduced the carrying value of the long-lived assets to the estimated net sales price. The sale of the two properties closed on September 17 and 30, 2009, respectively, resulting in no gain or loss upon disposition. The operating results of the properties, including the impairment charges, are classified as discontinued operations for the three and nine months ended October 31, 2009 and 2008.

The following table lists the consolidated rental properties included in discontinued operations:

				Three	Nine	Three	Nine
				Months	Months	Months	Months
		Square Feet/	Period	Ended	Ended	Ended	Ended
Property	Location	Number of Units	Disposed	10/31/2009	10/31/2009	10/31/2008	10/31/2008
Commercial Group:
Grand Avenue	Queens, New York	100,000 square feet	Q1-2009	-	Yes	Yes	Yes
Residential Group:
Sterling Glen of Glen Cove	Glen Cove, New York	80 units	Q3-2009	Yes	Yes	Yes	Yes
Sterling Glen of Great Neck	Great Neck, New York	142 units	Q3-2009	Yes	Yes	Yes	Yes
Sterling Glen of Rye Brook	Rye Brook, New York	168 units	Q4-2008	-	-	Yes	Yes
Sterling Glen of Lynbrook	Lynbrook, New York	130 units	Q2-2008	-	-	-	Yes

The operating results related to discontinued operations were as follows:

	Three Months Ended October 31,						Nine Months Ended October 31,
	2009			2008			2009			2008
	(in thousands)						(in thousands)
Revenues from real estate operations	$	1,688		$	4,149		$	5,476		$	13,114
Expenses
Operating expenses		35			416			430			1,604
Depreciation and amortization		195			1,451			1,347			3,911
Impairment of real estate		9,775			-			9,775			-
		10,005			1,867			11,552			5,515
Interest expense		(502	)		(1,883	)		(2,184	)		(5,721	)
Amortization of mortgage procurement costs		(7	)		(106	)		(50	)		(339	)
Interest income		-			37			-			136
Gain on disposition of rental properties		-			-			4,548			8,627
Earnings (loss) before income taxes		(8,826	)		330			(3,762	)		10,302
Income tax expense (benefit)
Current		(3,019	)		110			848			(636	)
Deferred		(404	)		18			(2,307	)		4,617
		(3,423	)		128			(1,459	)		3,981
Net earnings (loss) from discontinued operations	$	(5,403	)	$	202		$	(2,303	)	$	6,321

Disposition of Equity Method Investments

Upon disposition, investments accounted for on the equity method are not classified as discontinued operations in accordance with accounting guidance on the impairment or disposal of long-lived assets; therefore, gains or losses on the sale of equity method investments are reported in continuing operations when sold. On October 6, 2009, we exchanged our 50% ownership interest in Boulevard Towers, located in Amherst, New York, for 100% ownership in North Church Towers, an apartment complex located in Parma Heights, Ohio. The nonmonetary transaction resulted in a gain of $4,498,000 which is included in equity in loss of unconsolidated entities in the Consolidated Statements of Operations. During the three and nine months ended October 31, 2008, we recorded $200,000 and $1,081,000, respectively, related to our proportionate share of the gain on disposition of an equity method investment, Emery-Richmond, located in Warrensville Heights, Ohio ($200,000), and an equity method investment, One International Place, located in Cleveland, Ohio ($881,000), which is included in equity in loss of unconsolidated entities in the Consolidated Statements of Operations.

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FINANCIAL CONDITION AND LIQUIDITY

Ongoing economic conditions have negatively impacted the availability and access to capital, particularly for the real estate industry. Originations of new loans for the Commercial Mortgage Backed Securities market have virtually ceased. Financial institutions have significantly reduced their lending with an emphasis on reducing their exposure to commercial real estate. For those institutions still lending, underwriting standards are being tightened with lenders requiring lower loan-to-values, increased debt service coverage levels and higher lending spreads. While the long-term impact is unknown, borrowing costs for us will likely continue to rise and financing levels will continue to decrease over the foreseeable future.

Our principal sources of funds are cash provided by operations, the bank revolving credit facility, nonrecourse mortgage debt, dispositions of land held for sale as well as operating properties, proceeds from the issuance of senior notes, equity joint ventures and other financing arrangements. Our principal uses of funds are the financing of development projects and acquisitions of real estate, capital expenditures for our existing portfolio and principal and interest payments on our nonrecourse mortgage debt, interest payments on our bank revolving credit facility and previously issued senior notes and repayment of borrowings under our bank revolving credit facility.

Our primary capital strategy seeks to isolate the operating and financial risk at the property level to maximize returns and reduce risk on and of our equity capital. As such, substantially all of our operating and development properties are separately encumbered with nonrecourse mortgage debt. We do not cross-collateralize our mortgage debt outside of a single identifiable project. We operate as a C-corporation and retain substantially all of our internally generated cash flows. This cash flow, together with refinancing and property sale proceeds, has historically provided us with the necessary liquidity to take advantage of investment opportunities. Recent changes in the lending and capital markets substantially reduced our ability to refinance and/or sell property and has also increased the rates of return to make new investment opportunities appealing. As a result of these market changes, we have dramatically cut back on new development and acquisition activities.

Despite the dramatic decrease in development activities, we still intend to complete all projects that are under construction. We continue to make progress on certain other pre-development projects primarily located in core markets. The cash we believe is required to fund our equity in projects under development plus any cash necessary to extend or paydown the remaining 2009 and 2010 debt maturities is anticipated to exceed our cash from operations. As a result, we intend to extend maturing debt or repay it with net proceeds from property sales or future debt or equity financing.

We have proactively taken necessary steps to preserve liquidity by properly aligning our overhead costs with the reduced level of development and acquisition activities and suspension of cash dividends on Class A and Class B common stock. We have also increased liquidity through our May 2009 public offering of 52,325,000 shares of Class A common stock from which we received $329,917,000 in net proceeds, after deducting underwriter discounts, commissions and other offering expenses. We have also effectively extended our unsecured debt maturities by our October 2009 exchange of $167,433,000 of 2011 Notes for a new issue of 3.625% Puttable Equity-Linked Senior Notes due 2014 (“2014 Notes”). Concurrent with the exchange transaction, we generated liquidity by issuing an additional $32,567,000 of 2014 Notes, resulting in net proceeds of $29,764,000 after deducting the discount and estimated offering expenses. In October 2009, we further increased liquidity by issuing $200,000,000 of 5.00% convertible senior notes due 2016, resulting in $177,262,000 of net proceeds after deducting underwriting discounts and estimated offering expenses. We are actively exploring various other options to enhance our liquidity, such as admitting other joint venture partners into some of our properties, potential asset sales and nonrecourse mortgage refinancings. There can be no assurance, however, that any of these other options can be accomplished.

As of October 31, 2009, we had $332,363,000 of mortgage financings with scheduled maturities during the fiscal year ending January 31, 2010, of which $22,280,000 represents scheduled payments. Subsequent to October 31, 2009, we had addressed approximately $96,301,000 of these 2009 maturities, through closed transactions, commitments and/or automatic extensions. We also have extension options available on $184,984,000 of these 2009 maturities, all of which require some predefined condition in order to qualify for the extension, such as meeting or exceeding leasing hurdles, loan to value ratios or debt service coverage requirements. We cannot give assurance that the defined hurdles or milestones will be achieved to qualify for these extensions. We are currently in negotiations to refinance and/or extend the remaining $28,798,000 of scheduled nonrecourse mortgage maturities for the year ended January 31, 2010. We cannot give assurance as to the ultimate result of these negotiations.

As of October 31, 2009, our share of nonrecourse mortgage debt recorded on our unconsolidated subsidiaries amounted to $1,464,577,000 of which $157,804,000 ($3,442,000 represents scheduled payments) was scheduled to mature during the year ending January 31, 2010. Subsequent to October 31, 2009, we had addressed $65,067,000 of these 2009 maturities through closed nonrecourse mortgage transactions, commitments and/or automatic extensions. We also had extension options on $82,711,000 of these 2009 maturities, all of which require predefined condition in order to qualify for the extension, such as meeting or exceeding leasing hurdles, loan to value ratios or debt service coverage requirements. We cannot give assurance that the defined hurdles or milestones will be achieved to qualify for the extensions. We are currently in negotiations to refinance and/or extend the remaining $6,584,000 of scheduled nonrecourse mortgage maturities for the year ended January 31, 2010. We cannot give assurance as to the ultimate result of these negotiations.

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Potential Impacts to Our Financial Condition and Liquidity Relating to Brooklyn Atlantic Yards

We are in the process of developing Brooklyn Atlantic Yards (“Atlantic Yards”), which will cost an approximate $4.9 billion over the anticipated construction and development period. This long-term mixed use real estate project in downtown Brooklyn is expected to feature a sports and entertainment arena for the Nets (“Arena”). Due to the nature and magnitude of the project, there is significant development risk as more thoroughly discussed in our “We are Subject to Real Estate Development Risks” risk factor update for Brooklyn Atlantic Yards included in Part II of this Quarterly Report on Form 10-Q (“Risk Factor”).

Significant site acquisition and construction activities have occurred to date but the master closing will not occur until all negotiations with the state and local governmental authorities are completed and agreements finalized including the successful marketing of tax-exempt financing and other sources of funding to support construction of the Arena (“Master Closing”). Master Closing is currently scheduled to occur in late December 2009.

Upon Master Closing and throughout the long-term development of Atlantic Yards, significant private equity will be required from us, our current partners and any future investors to fund infrastructure and construction. During the three-month period ended October 31, 2009, we entered into a letter of intent with an affiliate of Onexim Group, an international private investment firm, to invest $200,000,000 and make certain contingent funding requirements to acquire 45% of the Arena, 80% of the Nets and the rights to purchase up to 20% of the non-Arena portion of the Atlantic Yards development (“LOI”). The LOI requires certain consents and is subject to the satisfaction of various conditions.

While we believe it is probable that the conditions precedent to Master Closing will occur, there can be no assurance they all will be achieved. In addition, there is no assurance that the investment under the LOI will be realized, that our current partners will fund any future equity requirements or that the project will attract any future investors. If any of the foregoing events do not happen, are significantly delayed, or any of the other development risks occur, we may not be able to develop Atlantic Yards to the full scope intended or at all. This may result in a potential impairment or write-off of our investment as well as other potential ramifications as disclosed in the Risk Factor. As of October 31, 2009, we estimate that the maximum at risk for impairment or write-off, if Master Closing does not occur, is approximately $350,000,000 net of prior amortization. In addition, in a worst case scenario, we could be required to refund public subsidies already received and incur other costs together totaling approximately $230,000,000.

Subsequent to October 31, 2009, we have elected to delay a November 30, 2009 scheduled amortization payment of $5,000,000 on our $162,000,000 nonrecourse mortgage secured by all land owned in the Atlantic Yards footprint and were granted an extension until December 10, 2009. We have commenced negotiations with the lender to modify the terms of the mortgage but can give no assurance that these negotiations will be successful. If no agreement is reached under the nonrecourse loan between the parties, we can relinquish the land to the lender in lieu of payment of the mortgage.

Bank Revolving Credit Facility

At October 31 and January 31, 2009, our bank revolving credit facility provides for maximum borrowings of $750,000,000 and matures in March 2010. The credit facility bears interest at our option at either a LIBOR-based rate plus 2.50% (2.75% and 2.98% at October 31 and January 31, 2009, respectively), or a Prime-based rate option plus 1.50%. We have historically elected the LIBOR-based rate option. The credit facility restricts our ability to purchase, acquire, redeem or retire any of our capital stock, and prohibits us from paying any dividends on our capital stock through the maturity date. The credit facility allows certain actions by us or our subsidiaries, such as default in paying debt service or allowing foreclosure on an encumbered real estate asset, only to the extent such actions do not have a material adverse effect, as defined in the agreement, on us. Of the available borrowings, up to $100,000,000 may be used for letters of credit or surety bonds. The credit facility also contains certain financial covenants, including maintenance of certain debt service and cash flow coverage ratios, and specified levels of net worth (as defined in the credit facility). At October 31, 2009, we were in compliance with all of these financial covenants.

Effective October 5, 2009, we entered into a Third Amendment to the bank revolving credit facility in connection with our private placement of our 3.625% Puttable Equity-Linked Senior Notes due 2014 (“2014 Notes”). The amendment permitted us to exchange up to $200,000,000 of our 3.625% Puttable Equity-Linked Senior Notes due 2011 for our 2014 Notes and issue up to $75,000,000 in 2014 Notes, provided that the aggregate amount of 2014 Notes does not exceed $200,000,000 (refer to the “Senior and Subordinated Debt” section of the MD&A).

Effective October 22, 2009, we entered into a Fourth Amendment to the bank revolving credit facility in connection with our private placement of our 5.00% Convertible Senior Notes due 2016 (“2016 Notes”). The amendment permitted us to issue the $200,000,000 of 2016 Notes and enter into a convertible note hedge transaction in connection with the issuance of these 2016 Notes (refer to the “Senior and Subordinated Debt” section of the MD&A).

During the nine months ended October 31, 2009, we primarily used the net proceeds from the May 2009 common stock offering (refer to the “Common Stock Offering” section of the MD&A) and the issuance of the 2016 Notes to reduce outstanding borrowings on the bank revolving credit facility.

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The available credit on the bank revolving credit facility at October 31 and January 31, 2009 was as follows:

	October 31, 2009		January 31, 2009
	(in thousands)
Maximum borrowings	$	750,000	$	750,000
Less outstanding balances:
Borrowings		37,016		365,500
Letters of credit		66,814		65,949
Surety bonds		-		-
Available credit	$	646,170	$	318,551

In November 2009, we reached an agreement on the principal terms of a new $500,000,000 revolving credit facility with our 15-member bank group which would mature two years from closing. We expect the transaction to close prior to December 31, 2009. In the event the transaction does not close and the revolving credit facility is not otherwise extended, we would continue to raise capital through the sale of assets, admitting other joint venture equity partners into some of our properties, curtailing capital expenditures and/or raising additional funds in a public or private debt or equity offering.

Senior and Subordinated Debt

Our Senior and Subordinated Debt is comprised of the following at October 31 and January 31, 2009:

			January 31, 2009
	October 31, 2009		(As Adjusted)
	(in thousands)
Senior Notes:
3.625% Puttable Equity-Linked Senior Notes due 2011, net of discount	$	98,156	$	248,154
3.625% Puttable Equity-Linked Senior Notes due 2014, net of discount		198,399		-
7.625% Senior Notes due 2015		300,000		300,000
5.000% Convertible Senior Notes due 2016		200,000		-
6.500% Senior Notes due 2017		150,000		150,000
7.375% Senior Notes due 2034		100,000		100,000
Total Senior Notes		1,046,555		798,154
Subordinated Debt:
Redevelopment Bonds due 2010		-		18,910
Subordinate Tax Revenue Bonds due 2013		29,000		29,000
Total Subordinated Debt		29,000		47,910
Total Senior and Subordinated Debt	$	1,075,555	$	846,064

Puttable Equity-Linked Senior Notes due 2011

On October 10, 2006, we issued $287,500,000 of 3.625% puttable equity-linked senior notes due October 15, 2011 (“2011 Notes”) in a private placement. The notes were issued at par and accrued interest is payable semi-annually in arrears on April 15 and October 15. During the year ended January 31, 2009, we purchased on the open market $15,000,000 in principal of our 2011 Notes resulting in a gain, net of associated deferred financing costs of $3,692,000, which is recorded as early extinguishment of debt in the Consolidated Statements of Operations. On October 7, 2009, we entered into privately negotiated exchange agreements with certain holders of the 2011 Notes to exchange $167,433,000 of aggregate principal amount of their 2011 Notes for a new issue of 3.625% puttable equity-linked senior notes due October 2014. This exchange resulted in a gain, net of associated deferred financing costs of $4,683,000, which is recorded as early extinguishment of debt in the Consolidated Statements of Operations. There was $105,067,000 ($98,156,000, net of discount) and $272,500,000 ($248,154,000, net of discount) of principal outstanding at October 31 and January 31, 2009, respectively.

Holders may put their notes to us at their option on any day prior to the close of business on the scheduled trading day immediately preceding July 15, 2011 only under the following circumstances: (1) during the five business-day period after any five consecutive trading-day period (the “measurement period”) in which the trading price per note for each day of that measurement period was less than 98% of the product of the last reported sale price of our Class A common stock and the put value rate (as defined) on each such day; (2) during any fiscal quarter after the fiscal quarter ending January 31, 2007, if the last reported sale price of our Class A common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately

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preceding fiscal quarter exceeds 130% of the applicable put value price in effect on the last trading day of the immediately preceding fiscal quarter; or (3) upon the occurrence of specified corporate events as set forth in the applicable indenture. On and after July 15, 2011 until the close of business on the scheduled trading day immediately preceding the maturity date, holders may put their notes to us at any time, regardless of the foregoing circumstances. In addition, upon a designated event, as defined, holders may require us to purchase for cash all or a portion of their notes for 100% of the principal amount of the notes plus accrued and unpaid interest, if any, as set forth in the applicable indenture. At October 31, 2009, none of the aforementioned circumstances have been met.

If a note is put to us, a holder would receive (i) cash equal to the lesser of the principal amount of the note or the put value and (ii) to the extent the put value exceeds the principal amount of the note, shares of our Class A common stock, cash, or a combination of Class A common stock and cash, at our option. The initial put value rate was 15.0631 shares of Class A common stock per $1,000 principal amount of notes (equivalent to a put value price of $66.39 per share of Class A common stock). The put value rate will be subject to adjustment in some events but will not be adjusted for accrued interest. In addition, if a “fundamental change,” as defined, occurs prior to the maturity date, we will in some cases increase the put value rate for a holder that elects to put their notes.

Concurrent with the issuance of the notes, we purchased a call option on our Class A common stock in a private transaction. The purchased call option allows us to receive shares of our Class A common stock and/or cash from counterparties equal to the amounts of Class A common stock and/or cash related to the excess put value that we would pay to the holders of the notes if put to us. These purchased call options will terminate upon the earlier of the maturity date of the notes or the first day all of the notes are no longer outstanding due to a put or otherwise. In a separate transaction, we sold warrants to issue shares of our Class A common stock at an exercise price of $74.35 per share in a private transaction. If the average price of our Class A common stock during a defined period ending on or about the respective settlement dates exceeds the exercise price of the warrants, the warrants will be settled in shares of our Class A common stock.

The 2011 Notes are our only senior notes that qualify as convertible debt instruments that may be settled in cash upon conversion, including partial cash settlement (see the “Retrospective Adoption of Accounting Guidance for Convertible Debt Instruments” section of the MD&A). The carrying amounts of our debt and equity balances related to the 2011 Notes as of October 31 and January 31, 2009 are as follows:

	October 31, 2009			January 31, 2009
	(in thousands)
Carrying amount of the equity component	$	16,769		$	45,885
Outstanding principal amount of the puttable equity-linked senior notes	$	105,067		$	272,500
Unamortized discount		(6,911	)		(24,346	)
Net carrying amount of the puttable equity-linked senior notes	$	98,156		$	248,154

The unamortized discount will be amortized as additional interest expense through October 15, 2011. The effective interest rate for the liability component of the puttable equity-linked senior notes was 7.51% for both the three and nine months ended October 31, 2009 and 2008. We recorded non-cash interest expense of $1,705,000 and $6,020,000 for the three and nine months ended October 31, 2009, respectively, and $2,239,000 and $6,672,000 for the three and nine months ended October 31, 2008, respectively. We recorded contractual interest expense of $2,082,000 and $7,021,000 for the three and nine months ended October 31, 2009, respectively, and $2,571,000 and $7,782,000 for the three and nine months ended October 31, 2008, respectively.

Puttable Equity-Linked Senior Notes due 2014

On October 7, 2009, we issued $167,433,000 of 3.625% puttable equity-linked senior notes due October 15, 2014 (“2014 Notes”) to certain holders in exchange for $167,433,000 of 2011 Notes discussed above. Concurrent with the exchange of 2011 Notes for the 2014 Notes, we issued an additional $32,567,000 of 2014 Notes in a private placement, net of a 5% discount. Interest on the 2014 Notes is payable semi-annually in arrears on April 15 and October 15, beginning April 15, 2010. Net proceeds from the exchange and additional issuance transaction, net of discounts and estimated offering expenses, was $29,764,000.

Holders may put their notes to us at any time prior to the earlier of (i) stated maturity or (ii) the Put Termination Date, as defined below. Upon a put, a note holder would receive 68.7758 shares of our Class A common stock per $1,000 principal amount of notes, based on a Put Value Price of $14.54 per share of Class A common stock, subject to adjustment. The amount payable upon a put of the notes is only payable in shares of our Class A common stock, except for cash paid in lieu of fractional shares. If the Daily Volume Weighted Average Price of the Class A common stock has equaled or exceeded 130% of the Put Value Price then in effect for at least 20 trading days in any 30 trading day period, we may, at our option, elect to terminate the rights of the holders to put their notes to us. If elected, we are required to issue a Put Termination Notice that shall designate an effective date on which the holders termination put rights will be terminated, which shall be a date at least 20 days after the mailing of such Put Termination Notice (the “Put Termination Date”). Holders electing to put their notes after the mailing of a Put Termination Notice shall receive a Coupon Make-Whole Payment in an amount equal to the remaining scheduled interest payments attributable to such notes from the last applicable interest payment date through and including October 15, 2013.

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Senior Notes due 2015

On May 19, 2003, we issued $300,000,000 of 7.625% senior notes due June 1, 2015 in a public offering. Accrued interest is payable semi-annually on December 1 and June 1. These senior notes may be redeemed by us, in whole or in part, at any time on or after June 1, 2008 at an initial redemption price of 103.813% that is systematically reduced to 100% through June 1, 2011. As of June 1, 2009, the redemption price was reduced to 102.542%.

Convertible Senior Notes due 2016

On October 26, 2009, we issued $200,000,000 of 5.00% convertible senior notes due October 15, 2016 in a private placement. The notes were issued at par and accrued interest is payable semi-annually on April 15 and October 15, beginning April 15, 2010. Net proceeds from the issuance, net of the cost of the convertible note hedge transaction described below and estimated offering costs, was $177,262,000.

Holders may convert their notes at their option at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date. Upon conversion, a note holder would receive 71.8894 shares of our Class A common stock per $1,000 principal amount of notes, based on a put value price of approximately $13.91 per share of Class A common stock, subject to adjustment. The amount payable upon a conversion of the notes is only payable in shares of our Class A common stock, except for cash paid in lieu of fractional shares.

In connection with the issuance of the notes, we entered into a convertible note hedge transaction. The convertible note hedge transaction is intended to reduce, subject to a limit, the potential dilution with respect to our Class A common stock upon conversion of the notes. The net effect of the convertible note hedge transaction, from our perspective, is to approximate an effective conversion price of $16.37 per share. The terms of the Notes are not affected by the convertible note hedge transaction. The convertible note hedge transaction, which cost $15,900,000 ($9,734,000 net of the related tax benefit), was recorded as a reduction of shareholders’ equity through additional paid in capital.

Senior Notes due 2017

On January 25, 2005, we issued $150,000,000 of 6.500% senior notes due February 1, 2017 in a public offering. Accrued interest is payable semi-annually on February 1 and August 1. These senior notes may be redeemed by us, in whole or in part, at any time on or after February 1, 2010 at a redemption price of 103.250% beginning February 1, 2010 and systematically reduced to 100% through February 1, 2013.

Senior Notes due 2034

On February 10, 2004, we issued $100,000,000 of 7.375% senior notes due February 1, 2034 in a public offering. Accrued interest is payable quarterly on February 1, May 1, August 1, and November 1. These senior notes may be redeemed by us, in whole or in part, at any time at a redemption price of 100% of the principal amount plus accrued interest.

All of our senior notes are unsecured senior obligations and rank equally with all existing and future unsecured indebtedness; however, they are effectively subordinated to all existing and future secured indebtedness and other liabilities of our subsidiaries to the extent of the value of the collateral securing such other debt, including the bank revolving credit facility. The indenture governing certain of the senior notes contain covenants providing, among other things, limitations on incurring additional debt and payment of dividends.

Subordinated Debt

In November 2000, we issued $20,400,000 of 8.25% redevelopment bonds due September 15, 2010 in a private placement, with semi-annual interest payments due on March 15 and September 15. We entered into a total rate of return swap (“TRS”) for the benefit of these bonds that was set to expire on September 15, 2009. Under the TRS, we received a rate of 8.25% and paid the Securities Industry and Financial Markets Association (“SIFMA”) rate plus a spread. The TRS, accounted for as a derivative, was required to be marked to fair value at the end of each reporting period. As stated in the “Sensitivity Analysis to Changes in Interest Rates” section of the MD&A, any fluctuation in the value of the TRS would be offset by the fluctuation in the value of the underlying borrowings. At January 31, 2009, the fair value of the TRS was $(1,490,000), recorded in accounts payable and accrued expenses; therefore, the fair value of the bonds was reduced by the same amount to $18,910,000. On July 13, 2009, the TRS contract was terminated and subsequently, a consolidated wholly-owned subsidiary of ours purchased the redevelopment bonds at par which effectively extinguished the subordinated debt.

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In May 2003, we purchased $29,000,000 of subordinate tax revenue bonds that were contemporaneously transferred to a custodian, which in turn issued custodial receipts that represent ownership in the bonds to unrelated third parties. The bonds bear a fixed interest rate of 7.875%. We evaluated the transfer pursuant to the accounting guidance on accounting for transfers and servicing of financial assets and extinguishment of liabilities and have determined that the transfer does not qualify for sale accounting treatment principally because we have guaranteed the payment of principal and interest in the unlikely event that there is insufficient tax revenue to support the bonds when the custodial receipts are subject to mandatory tender on December 1, 2013. As such, we are the primary beneficiary of this variable interest entity and the book value (which approximated amortized costs) of the bonds was recorded as a collateralized borrowing reported as senior and subordinated debt and as held-to-maturity securities reported as other assets in the Consolidated Balance Sheets.

Financing Arrangements

Collateralized Borrowings

On July 13, 2005, the Park Creek Metropolitan District (the “District”) issued $65,000,000 Senior Subordinate Limited Property Tax Supported Revenue Refunding and Improvement Bonds, Series 2005 (the “Senior Subordinate Bonds”) and Stapleton Land II, LLC, a consolidated subsidiary, entered into an agreement whereby it will receive a 1% fee on the Senior Subordinate Bonds in exchange for providing certain credit enhancement. The counterparty to the credit enhancement arrangement also owns the underlying Senior Subordinate Bonds and can exercise its rights requiring payment from Stapleton Land II, LLC upon an event of default of the Senior Subordinate Bonds, a refunding of the Senior Subordinate Bonds, or failure of Stapleton Land II, LLC to post required collateral. The Senior Subordinate Bonds were refinanced on April 16, 2009 with proceeds from the issuance of $86,000,000 of Park Creek Metropolitan District Senior Limited Property Tax Supported Revenue Refunding and Improvement Bonds, Series 2009. The credit enhancement arrangement expired with the refinancing of the Senior Subordinate Bonds on April 16, 2009. We recorded $-0- and $132,000 of interest income related to the credit enhancement arrangement in the Consolidated Statements of Operations for the three and nine months ended October 31, 2009, respectively, and $164,000 and $488,000 for the three and nine months ended October 31, 2008, respectively.

On August 16, 2005, the District issued $58,000,000 Junior Subordinated Limited Property Tax Supported Revenue Bonds, Series 2005 (the “Junior Subordinated Bonds”). The Junior Subordinated Bonds initially were to pay a variable rate of interest. Upon issuance, the Junior Subordinated Bonds were purchased by a third party and the sales proceeds were deposited with a trustee pursuant to the terms of the Series 2005 Investment Agreement. Under the terms of the Series 2005 Investment Agreement, after March 1, 2006, the District may elect to withdraw funds from the trustee for reimbursement for certain qualified infrastructure and interest expenditures (“Qualifying Expenditures”). In the event that funds from the trustee are used for Qualifying Expenditures, a corresponding amount of the Junior Subordinated Bonds converts to an 8.5% fixed rate and matures in December 2037 (“Converted Bonds”). On August 16, 2005, Stapleton Land, LLC, a consolidated subsidiary, entered into a Forward Delivery Placement Agreement (“FDA”) whereby Stapleton Land, LLC was entitled and obligated to purchase the converted fixed rate Junior Subordinated Bonds through June 2, 2008. The District withdrew $58,000,000 of funds from the trustee for reimbursement of certain Qualifying Expenditures by June 2, 2008 and the Junior Subordinated Bonds became Converted Bonds. The Converted Bonds were acquired by Stapleton Land, LLC under the terms of the FDA by June 8, 2008. Stapleton Land, LLC immediately transferred the Converted Bonds to investment banks and we simultaneously entered into a TRS with a notional amount of $58,000,000. We receive a fixed rate of 8.5% and pay the SIFMA rate plus a spread on the TRS related to the Converted Bonds. We determined that the sale of the Converted Bonds to the investment banks and simultaneous execution of the TRS did not surrender control; therefore, the Converted Bonds have been recorded as a secured borrowing in the Consolidated Balance Sheets. During the year ended January 31, 2009, one of our consolidated subsidiaries purchased $10,000,000 of the Converted Bonds from one of the investment banks. Simultaneous with the purchase, a $10,000,000 TRS contract was terminated and the corresponding amount of the secured borrowing was removed from the Consolidated Balance Sheets. On April 16, 2009, an additional $5,000,000 of the Converted Bonds was purchased by one of our consolidated subsidiaries, and a corresponding amount of a related TRS was terminated and the corresponding secured borrowing was removed from the Consolidated Balance Sheets. The fair value of the Converted Bonds recorded in other assets in the Consolidated Balance Sheets was $58,000,000 at both October 31 and January 31, 2009. The outstanding TRS contracts on the $43,000,000 and $48,000,000 of secured borrowings related to the Converted Bonds at October 31 and January 31, 2009, respectively, were supported by collateral consisting primarily of certain notes receivable owned by us aggregating $33,035,000. We recorded net interest income of $499,000 and $1,819,000 related to the TRS in the Consolidated Statements of Operations for the three and nine months ended October 31, 2009, respectively, and $640,000 and $2,376,000 for the three and nine months ended October 31, 2008, respectively.

Other Structured Financing Arrangements

In May 2004, Lehman Brothers, Inc. (“Lehman”) purchased $200,000,000 in tax increment revenue bonds issued by DURA, with a fixed-rate coupon of 8.0% and maturity date of October 1, 2024, which were used to fund the infrastructure costs associated with phase II of the Stapleton development project. The DURA bonds were transferred to a trust that issued floating rate trust certificates. Stapleton Land, LLC entered into an agreement with Lehman to purchase the DURA bonds from the trust if they are not repurchased or remarketed between June 1, 2007 and June 1, 2009. Stapleton Land, LLC is entitled to receive a fee upon removal of the DURA

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bonds from the trust equal to the 8.0% coupon rate, less the SIFMA index, less all fees and expenses due to Lehman (collectively, the “Fee”). The Fee was accounted for as a derivative with changes in fair value recorded through earnings. On July 1, 2008, $100,000,000 of the DURA bonds were remarketed. On July 15, 2008, Stapleton Land, LLC was paid $13,838,000 of the fee, which represented the fee earned on the remarketed DURA bonds.

During the three months ended October 31, 2008, Lehman filed for bankruptcy and the remaining $100,000,000 of DURA bonds were transferred to a creditor of Lehman. As a result, we reassessed the collectability of the Fee and decreased the fair value of the Fee to $-0-, resulting in an increase to operating expenses in our Consolidated Statements of Operations of $13,816,000 for the three months ended October 31, 2008. Stapleton Land, LLC informed Lehman that it determined that a “Special Member Termination Event” had occurred because Stapleton Land, LLC (a) fulfilled all of its bond purchase obligations under the transaction documents by purchasing or causing to be redeemed or repurchased all of the bonds held by Lehman and (b) fulfilled all other obligations in accordance with the transaction documents. Therefore, Stapleton Land, LLC has no other financing obligations with Lehman.

We recorded interest income of $-0-, related to the change in fair value of the Fee in our Consolidated Statements of Operations for both the three and nine months ended October 31, 2009 and $-0- and $4,546,000 for the three and nine months ended October 31, 2008, respectively.

Stapleton Land, LLC has committed to fund $24,500,000 to the District to be used for certain infrastructure projects and has funded $16,491,000 of this commitment as of October 31, 2009. In addition, on June 23, 2009, another consolidated subsidiary of ours entered into an agreement with the City of Denver and certain of its entities to fund $10,000,000 to be used to fund additional infrastructure projects and has funded $824,000 of this commitment as of October 31, 2009.

Mortgage Financings

We use taxable and tax-exempt nonrecourse debt for our real estate projects. For those real estate projects financed with taxable debt, we generally seek long-term, fixed-rate financing for those operating projects whose loans mature within the next 12 months or are projected to open and achieve stabilized operations during that same time frame. However, due to the limited availability of long-term fixed rate mortgage debt based upon current market conditions, we are attempting to extend maturities with existing lenders at current market terms. For real estate projects financed with tax-exempt debt, we generally utilize variable-rate debt. For construction loans, we generally pursue variable-rate financings with maturities ranging from two to five years.

We are actively working to refinance and/or extend the maturities of the nonrecourse debt that is coming due in the next 24 months. During the nine months ended October 31, 2009, we completed the following financings:

Purpose of Financing	Amount
	(in thousands)
Refinancings	$	277,841
Loan extensions/additional fundings		1,095,701
	$	1,373,542

Interest Rate Exposure

At October 31, 2009, the composition of nonrecourse mortgage debt was as follows:

										Total
	Operating		Development			Land				Weighted
	Properties		Projects			Projects		Total		Average Rate
	(dollars in thousands)
Fixed	$	4,019,535	$	-		$	10,041	$	4,029,576		6.06%
Variable (1)
Taxable		1,428,562		1,028,706			13,392		2,470,660		4.58%
Tax-Exempt		584,727		335,660			43,000		963,387		1.94%
	$	6,032,824	$	1,364,366	(2)	$	66,433	$	7,463,623		5.04%
Total commitment from lenders			$	1,997,553		$	74,320

(1)	Taxable variable-rate debt of $2,470,660 and tax-exempt variable-rate debt of $963,387 as of October 31, 2009 is protected with swaps and caps described in the tables below.
(2)	Proceeds from outstanding debt of $137,349 described above are recorded as restricted cash in our Consolidated Balance Sheets. For bonds issued in conjunction with development, the full amount of the bonds is issued at the beginning of construction and must remain in escrow until costs are incurred.

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To mitigate short-term variable interest rate risk, we have purchased interest rate hedges for our variable-rate debt as follows:

Taxable (Priced off of LIBOR Index)

	Caps					Swaps(1)
	Notional		Average Base			Notional		Average Base
Period Covered	Amount		Rate			Amount		Rate
	(dollars in thousands)
11/01/09-02/01/10 (2)	$	1,110,439		4.81	%	$	1,161,746		4.94	%
02/01/10-02/01/11		1,110,116		4.73			1,101,406		4.38
02/01/11-02/01/12		16,192		6.50			799,981		5.41
02/01/12-02/01/13		476,100		5.50			729,110		5.37
02/01/13-02/01/14		476,100		5.50			685,000		5.43
02/01/14-09/01/17		-		-			640,000		5.50

(1)	Excludes the forward swap ($120,000,000 notional) discussed below.
(2)	These LIBOR-based hedges as of November 1, 2009 protect the debt currently outstanding as well as the anticipated increase in debt outstanding for projects under development or anticipated to be under development during the year ending January 31, 2010.

Tax-Exempt (Priced off of SIFMA Index)

	Caps					Swap
	Notional		Average Base			Notional		Average Base
Period Covered	Amount		Rate			Amount		Rate
	(dollars in thousands)
11/01/09-02/01/10	$	175,025		5.68	%	$	57,000		3.21	%
02/01/10-02/01/11		175,025		5.84			57,000		3.21
02/01/11-02/01/12		131,915		5.83			57,000		3.21
02/01/12-02/01/13		12,715		6.00			57,000		3.21

The tax-exempt caps and swap expressed above mainly represent protection that was purchased in conjunction with lender hedging requirements that require the borrower to protect against significant fluctuations in interest rates. Outside of such requirements, we generally do not hedge tax-exempt debt because, since 1990, the base rate of this type of financing has averaged 2.86% and has never exceeded 8.00%.

Forward Swaps

We purchased the interest rate hedges summarized in the tables above to mitigate variable interest rate risk. We have entered into derivative contracts that are intended to economically hedge certain risks of ours, even though the contracts do not qualify for hedge accounting or we have elected not to apply hedge accounting under the accounting guidance. In all situations in which hedge accounting is discontinued, or not elected, and the derivative remains outstanding, we will report the derivative at its fair value in our Consolidated Balance Sheets, immediately recognizing changes in the fair value in our Consolidated Statements of Operations.

We have entered into forward swaps to protect ourselves against fluctuations in the swap rate at terms ranging between five to ten years associated with forecasted fixed rate borrowings. At the time we secure and lock an interest rate on an anticipated financing, we intend to simultaneously terminate the forward swap associated with that financing. At October 31, 2009, we have two forward swaps, with notional amounts of $69,325,000 and $120,000,000, respectively, that do not qualify as cash flow hedges under the accounting guidance. As such, the change in fair value of these swaps is marked to market through earnings on a quarterly basis. Related to these forward swaps, we recorded $4,344,000 and $(2,800,000) for the three and nine months ended October 31, 2009, respectively, and $2,058,000 and $(75,000) for the three and nine months ended October 31, 2008, respectively, as an increase (reduction) of interest expense in our Consolidated Statements of Operations. During the year ended January 31, 2009, we purchased an interest rate floor in order to mitigate the interest rate risk on one of the forward swaps ($120,000,000 notional) should interest rates fall below a certain level.

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Sensitivity Analysis to Changes in Interest Rates

Including the effect of the protection provided by the interest rate swaps, caps and long-term contracts in place as of October 31, 2009, a 100 basis point increase in taxable interest rates (including properties accounted for under the equity method, corporate debt and the effect of interest rate floors) would increase the annual pre-tax interest cost for the next 12 months of our variable-rate debt by approximately $10,705,000 at October 31, 2009. Although tax-exempt rates generally move in an amount that is smaller than corresponding changes in taxable interest rates, a 100 basis point increase in tax-exempt rates (including properties accounted for under the equity method) would increase the annual pre-tax interest cost for the next 12 months of our tax-exempt variable-rate debt by approximately $10,315,000 at October 31, 2009. This analysis includes a portion of our taxable and tax-exempt variable-rate debt related to construction loans for which the interest expense is capitalized.

From time to time, we and/or certain of our joint ventures (the “Joint Ventures”) enter into TRS on various tax-exempt fixed-rate borrowings generally held by us and/or within the Joint Ventures. The TRS convert these borrowings from a fixed rate to a variable rate and provide an efficient financing product to lower the cost of capital. In exchange for a fixed rate, the TRS require that we and/or the Joint Ventures pay a variable rate, generally equivalent to the SIFMA rate plus a spread. At October 31, 2009, the SIFMA rate is 0.26%. Additionally, we and/or the Joint Ventures have guaranteed the fair value of the underlying borrowing. Any fluctuation in the value of the TRS would be offset by the fluctuation in the value of the underlying borrowing, resulting in no financial impact to us and/or the Joint Ventures. At October 31, 2009, the aggregate notional amount of TRS that are designated as fair value hedging instruments under the accounting guidance on derivatives and hedging activities, in which we and/or the consolidated Joint Ventures have an interest, is $482,940,000. We believe the economic return and related risk associated with a TRS is generally comparable to that of nonrecourse variable-rate mortgage debt. The underlying TRS borrowings are subject to a fair value adjustment.

Cash Flows

Operating Activities

Net cash provided by operating activities was $260,024,000 and $239,237,000 (as adjusted) for the nine months ended October 31, 2009 and 2008, respectively. The net increase in cash provided by operating activities in the nine months ended October 31, 2009 compared to the nine months ended October 31, 2008 of $20,787,000 is the result of the following (in thousands):

Decrease in rents and other revenues received	$	(11,623	)
Increase in interest and other income received		38,083
Decrease in cash distributions from unconsolidated entities		(14,684	)
Decrease in proceeds from land sales - Land Development Group		(12,038	)
Increase in proceeds from land sales - Commercial Group		4,364
Decrease in land development expenditures paid		26,626
Decrease in operating expenditures paid		1,473
Increase in termination costs paid		(7,535	)
Increase in restricted cash used for operating purposes		(12,795	)
Decrease in interest paid		8,916
Net increase in cash provided by operating activities	$	20,787

67

Investing Activities

Net cash used in investing activities was $874,495,000 and $1,039,081,000 for the nine months ended October 31, 2009 and 2008, respectively. Net cash used in investing activities consisted of the following:

	Nine Months Ended October 31,
				2008
	2009			(As Adjusted)
	(in thousands)
Capital expenditures, including real estate acquisitions	$	(725,101	)	$	(828,659	)
Payment of lease procurement costs		(8,519	)		(22,728	)
Decrease (increase) in other assets		5,148			(37,533	)
(Increase) decrease in restricted cash used for investing purposes:
Beekman, a mixed-use residential project under construction in Manhattan, New York		(66,358	)		(71,605	)
80 DeKalb Avenue, a residential project under construction in Brooklyn, New York		(20,536	)		(35,048	)
Promenade in Temecula, a regional mall in Temecula, California		(10,789	)		-
Higbee Building, an office building in Cleveland, Ohio		(8,466	)		-
Two MetroTech Center, an office building in Brooklyn, New York		(4,403	)		-
Easthaven at the Village, an apartment community in Beachwood, Ohio		(2,045	)		-
Collateral returned (posted) for a TRS on Sterling Glen of Rye Brook, a supported-living community in Rye Brook, New York		12,500			(12,500	)
Village at Gulfstream Park, a retail project under construction in Hallandale Beach, Florida		8,661			-
One MetroTech Center, an office building in Brooklyn, New York		7,068			(8,791	)
Promenade Bolingbrook, a regional mall in Bolingbrook, Illinois		4,355			(5,040	)
New York Times, an office building in Manhattan, New York		3,081			11,705
250 Huron, an office building in Cleveland, Ohio		583			(3,929	)
Sky55, an apartment complex in Chicago, Illinois		-			4,692
Proceeds placed in escrow upon sale of Sterling Glen of Lynbrook in Lynbrook, New York, released in Q4 2008		-			(6,349	)
Other		(5,073	)		2,993
Subtotal		(81,422	)		(123,872	)
Proceeds from disposition of rental properties and other investments:
Grand Avenue, a specialty retail center in Queens, New York		9,042			-
Three Sterling Glen supported-living communities		2,872			11,159
Ownership interest in a parking management company and other		-			4,150
Subtotal		11,914			15,309
Change in investments in and advances to affiliates - (investment in) or return of investment:
Acquisitions:
818 Mission Street, an unconsolidated office building in San Francisco, California		-			(7,782	)
Legacy Arboretum and Barrington Place, unconsolidated apartment complexes in Charlotte and Raleigh, North Carolina		-			(7,448	)
Legacy Crossroads, an unconsolidated apartment complex under development in Cary, North Carolina		-			(4,531	)
Dispositions:
Emery-Richmond, an unconsolidated office building in Warrensville Heights, Ohio		-			300
One International Place, an unconsolidated office building in Cleveland, Ohio		-			1,589
Land Development:
Gladden Farms II, an unconsolidated project in Marana, Arizona (1)		(6,312	)		-
Mesa del Sol, an unconsolidated project in Albuquerque, New Mexico		(1,676	)		-
San Antonio I & II, an unconsolidated project in San Antonio, Texas		(881	)		3,810
Residential Projects:
St. Mary’s Villa, primarily refinancing proceeds from an unconsolidated project in Newark, New Jersey		4,830			-
Uptown Apartments, an unconsolidated project in Oakland, California		(4,239	)		(4,100	)
Bayside Village, an unconsolidated project in San Francisco, California		(2,022	)		-
1100 Wilshire, an unconsolidated condominium project in Los Angeles, California		-			2,395
Ohana Military Communities, an unconsolidated military housing complex in Honolulu, Hawaii		-			(2,212	)
New York City Projects:
East River Plaza, an unconsolidated retail development project in Manhattan, New York		(2,453	)		(25,786	)
Sports arena complex in Brooklyn, New York currently in pre-development		(2,081	)		(1,073	)
The Nets, a National Basketball Association member		(45,000	)		(21,678	)
Commercial Projects:
Golden Gate, an unconsolidated retail project in Mayfield Heights, Ohio		(2,678	)		-
350 Massachusetts Avenue, primarily refinancing proceeds from an unconsolidated office building in Cambridge, Massachusetts		-			24,417
Liberty Center, primarily refinancing proceeds from an unconsolidated office building in Pittsburgh, Pennsylvania		-			9,961
Marketplace at River Park, primarily refinancing proceeds from an unconsolidated regional mall in Fresno, California		-			1,920
Mesa del Sol Town Center, an unconsolidated development project in Albuquerque, New Mexico		-			(1,840	)
Unconsolidated development activity in Las Vegas, Nevada		-			(6,221	)
Village at Gulfstream Park, an unconsolidated development project in Hallandale Beach, Florida		-			2,365
Waterfront, an unconsolidated office development project in Washington, D.C.		-			(9,226	)
Other net (advances) returns of investment of equity method investments and other advances to affiliates		(14,003	)		3,542
Subtotal		(76,515	)		(41,598	)
Net cash used in investing activities	$	(874,495	)	$	(1,039,081	)

(1) During the nine months ended October 31, 2009, this land development project changed from the equity method of accounting to full consolidation. Amounts reflected above represent an investment in the project prior to the change to full consolidation.

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Financing Activities

Net cash provided by financing activities was $668,970,000 and $710,087,000 for the nine months ended October 31, 2009 and 2008, respectively. Net cash provided by financing activities consisted of the following:

	Nine Months Ended October 31,
				2008
	2009			(As Adjusted)
	(in thousands)
Sale of common stock, net	$	329,917		$	-
Proceeds from Convertible Senior Notes due 2016, net of $6,838 of issuance costs		193,162			-
Payment for Convertible Senior Notes hedge transaction		(15,900	)		-
Proceeds from Puttable Equity-Linked Senior Notes due 2014, net of $2,803 of issuance costs and discount		29,764			-
Purchase of Puttable Equity-Linked Senior Notes due 2011		-			(10,571	)
Proceeds from nonrecourse mortgage debt		706,335			1,052,737
Principal payments on nonrecourse mortgage debt		(228,246	)		(533,383	)
Net (decrease) increase in notes payable		(545	)		24,174
Borrowings on bank revolving credit facility		322,500			462,500
Payments on bank revolving credit facility		(650,984	)		(288,000	)
Payment of subordinated debt		(20,400	)		-
Decrease (increase) in restricted cash:
Hamel Mill Lofts, an apartment complex in Haverhill, Massachusetts		14,239			20,723
Sky55, an apartment complex in Chicago, Illinois		2,176			(1,662	)
Easthaven at the Village, an apartment community in Beachwood, Ohio		2,147			(3,731	)
100 Landsdowne, an apartment complex in Cambridge, Massachusetts		401			1,751
Lucky Strike, an apartment complex in Richmond, Virginia		396			7,665
Promenade Bolingbrook, a regional mall in Bolingbrook, Illinois		(572	)		2,300
Edgeworth Building, an office building in Richmond, Virginia		-			2,981
Prosper, a land development project in Prosper, Texas		-			2,688
Metro 417, an apartment complex in Los Angeles, California		-			2,558
101 San Fernando, an apartment complex in San Jose, California		-			2,509
Sterling Glen of Great Neck, a supported-living community in Great Neck, New York		-			1,520
Promenade in Temecula, a regional mall in Temecula, California		-			(1,525	)
Other		482			1,614
Subtotal		19,269			39,391
(Decrease) increase in book overdrafts, representing checks issued but not yet paid		(6,519	)		4,602
Payment of deferred financing costs		(22,369	)		(31,859	)
Purchase of treasury stock		(133	)		(651	)
Exercise of stock options		128			1,133
Distribution of accumulated equity to noncontrolling partners		-			(3,710	)
Contributions from noncontrolling interests		21,619			44,348
Distributions to noncontrolling interests		(8,628	)		(22,381	)
Payment in exchange for 119,000 Class A Common Units		-			(3,501	)
Dividends paid to shareholders		-			(24,742	)
Net cash provided by financing activities	$	668,970		$	710,087

69

LEGAL PROCEEDINGS

We are involved in various claims and lawsuits incidental to our business, and management and legal counsel believe that these claims and lawsuits will not have a material adverse effect on our consolidated financial statements.

COMMON STOCK OFFERING

In May 2009, we sold 52,325,000 shares of our Class A common stock in a public offering at a price of $6.60 per share, which included 6,825,000 shares issued as a result of the underwriters’ exercise of their over-allotment option in full. The offering generated net proceeds of $329,917,000 after deducting underwriting discounts, commissions and other offering expenses, which were used to reduce a portion of our outstanding borrowings under our bank revolving credit facility.

VARIABLE INTEREST ENTITIES

In accordance with accounting guidance on consolidation of variable interest entities (“VIE”), we consolidate a VIE in which we have a variable interest (or a combination of variable interests) that will absorb a majority of the entity’s expected losses, receive a majority of the entity’s expected residual returns, or both, based on an assessment performed at the time we become involved with the entity. VIEs are entities in which the equity investors do not have a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. We reconsider this assessment only if the entity’s governing documents or the contractual arrangements among the parties involved change in a manner that changes the characteristics or adequacy of the entity’s equity investment at risk, some or all of the equity investment is returned to the investors and other parties become exposed to expected losses of the entity, the entity undertakes additional activities or acquires additional assets beyond those that were anticipated at inception or at the last reconsideration date that increase its expected losses, or the entity receives an additional equity investment that is at risk, or curtails or modifies its activities in a way that decreases its expected losses. We may be subject to additional losses to the extent of any financial support that we voluntarily provide in the future. Additionally, if different estimates are applied in determining future cash flows, and how the cash flows are funded, we may have concluded otherwise on the consolidation method of an entity.

The determination of the consolidation method for each entity can change as reconsideration events occur. Expected results after the formation of an entity can vary, which could cause a change in the allocation to the partners. In addition, if we sell a property, sell our interest in a joint venture or enter into a new joint venture, the number of VIEs we are involved with could vary between quarters.

During the nine months ended October 31, 2009, we settled outstanding debt of one of our unconsolidated subsidiaries, Gladden Farms II, a land development project located in Marana, Arizona. In addition, we were informed of the outside partner’s intention to discontinue any future funding into the project. As a result of the loan transaction and the related negotiations with the outside partner, it has been determined that Gladden Farms II is a VIE and we are the primary beneficiary, which required consolidation of the entity during the nine months ended October 31, 2009. The impact of the initial consolidation of Gladden Farms II is an increase in real estate, net of approximately $21,643,000 and an increase in noncontrolling interests of approximately $5,010,000. We recorded a gain of $1,774,000 upon consolidation of the entity that is recorded in interest and other income in the Consolidated Statements of Operations.

As of October 31, 2009, we determined that we were the primary beneficiary of 33 VIEs representing 21 properties (18 VIEs representing 7 properties in the Residential Group, 12 VIEs representing 11 properties in the Commercial Group and 3 VIEs/properties in the Land Development Group). The creditors of the consolidated VIEs do not have recourse to our general credit. As of October 31, 2009, we held variable interests in 40 VIEs for which we are not the primary beneficiary. The maximum exposure to loss as a result of our involvement with these unconsolidated VIEs is limited to our recorded investments in those VIEs totaling approximately $106,000,000 at October 31, 2009. Our VIEs consist of joint ventures that are engaged, directly or indirectly, in the ownership, development and management of office buildings, regional malls, specialty retail centers, apartment communities, military housing, supported-living communities, land development and The Nets.

The carrying value of real estate, nonrecourse mortgage debt and noncontrolling interests of VIEs for which we are the primary beneficiary are as follows:

	October 31, 2009		January 31, 2009
	(in thousands)
Real estate, net	$	1,866,000	$	1,602,000
Nonrecourse mortgage debt	$	1,395,000	$	1,237,000
Noncontrolling interest	$	90,000	$	63,000

In addition to the VIEs described above, we have also determined that we are the primary beneficiary of a VIE that holds collateralized borrowings of $29,000,000 (see the “Senior and Subordinated Debt” section of MD&A) as of October 31, 2009.

70

NEW ACCOUNTING GUIDANCE

In addition to the new accounting guidance for convertible debt instruments previously discussed in the MD&A, the following accounting pronouncements were also adopted during the nine months ended October 31, 2009:

In June 2009, the FASB issued accounting standards codification and the hierarchy of generally accepted accounting principles (“GAAP”), that establishes the FASB Accounting Standards Codification^TM (“Codification”) as the source of GAAP recognized by the FASB to be applied by nongovernmental entities. The statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009 and as of this date, the Codification superseded all non-Securities and Exchange Commission accounting and reporting standards. For this quarterly report on Form 10-Q for the quarter ended October 31, 2009, our references to accounting guidance have been revised to conform with the Codification.

In May 2009, the FASB issued accounting guidance for subsequent events, which establishes guidance for recognizing and disclosing subsequent events in the financial statements. This guidance requires the disclosure of the date through which an entity has evaluated subsequent events. This guidance is effective for interim and annual periods ending after June 15, 2009. We have evaluated subsequent events through December 8, 2009, the date that our consolidated financial statements were issued, for this quarterly report on Form 10-Q for the quarter ended October 31, 2009.

In April 2009, the FASB issued accounting guidance for interim disclosures about fair value of financial instruments. This guidance amends the initial standards on fair value of financial instruments and interim financial reporting to require disclosure about the fair value of financial instruments at interim reporting periods. The guidance is effective for interim reporting periods ending after June 15, 2009. We have included the disclosures required by this guidance in our consolidated financial statement disclosures.

In April 2009, the FASB issued additional accounting guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased and for identifying circumstances that indicate a transaction is not orderly. The guidance is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. The adoption of this guidance on July 31, 2009 did not have a material impact on our consolidated financial statements.

Accounting guidance on fair value measurements defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosures about the use of fair value measurements. This guidance does not require new fair value measurements, but applies to accounting pronouncements that require or permit fair value measurements. This guidance is effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued two Staff Positions on fair value measurements. The first excludes the FASB accounting guidance on leases and other accounting pronouncements that address fair value measurements for purposes of lease classification or measurement under the guidance on leases. The second delays the effective date of fair value measurements for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. We adopted this guidance for our financial assets and liabilities on February 1, 2008 and for our nonfinancial assets and liabilities on February 1, 2009.

In November 2008, the FASB issued accounting guidance that clarifies the accounting for certain transactions and impairment considerations involving equity method investments. This guidance provides clarification of how business combination and noncontrolling interests accounting will impact equity method investments. This guidance is effective for fiscal years, and interim reporting periods within those fiscal years, beginning on or after December 15, 2008 and early adoption is prohibited. The adoption of this guidance on February 1, 2009 did not have a material impact on our consolidated financial statements.

In June 2008, the FASB issued accounting guidance addressing whether instruments granted in share-based payment transactions are participating securities. This guidance requires that nonvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents be treated as participating securities in the computation of earnings per share pursuant to the two-class method. This guidance will be applied retrospectively to all periods presented for fiscal years beginning after December 15, 2008. The adoption of this guidance on February 1, 2009 did not have a material impact on our consolidated financial statements.

In June 2008, the FASB issued accounting guidance for determining whether an equity-linked financial instrument (or embedded feature) is indexed to an entity’s own stock. The guidance on derivative instruments and hedging activities specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to our own stock and (b) classified in stockholders’ equity in the statement of financial position would not be considered a derivative financial instrument. This guidance provides a new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for the derivative instruments and hedging activities scope exception. This guidance is effective for the first annual reporting period beginning after December 15, 2008. The adoption of this guidance on February 1, 2009 did not have a material impact on our consolidated financial statements.

71

In April 2008, the FASB issued accounting guidance that amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. This guidance allows us to use our historical experience in renewing or extending the useful life of intangible assets. This guidance is effective for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years and shall be applied prospectively to intangible assets acquired after the effective date. The adoption of this guidance on February 1, 2009 did not have any impact on our consolidated financial statements.

In March 2008, the FASB issued an amendment to the accounting guidance on derivatives and hedging activities. This guidance expands the disclosure requirements of derivatives and hedging activities with the intent to provide users of financial statements with an enhanced understanding of how derivative instruments and hedging activities affect an entity’s financial position, financial performance and cash flows. These disclosure requirements include a tabular summary of the fair values of derivative instruments and their gains and losses, disclosure of derivative features that are credit risk related to provide more information regarding an entity’s liquidity and cross-referencing within footnotes to make it easier for financial statement users to locate important information about derivative instruments. This guidance is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. We have included the disclosures required by this guidance in our consolidated financial statement disclosures.

In December 2007, the FASB issued revised accounting guidance on business combinations to provide greater consistency in the accounting and financial reporting of business combinations. This guidance requires the acquiring entity in a business combination to recognize all assets acquired and liabilities assumed in the transaction, establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed and requires the acquirer to disclose the nature and financial effect of the business combination. The guidance is effective for fiscal years beginning after December 15, 2008. In April 2009, the FASB issued accounting guidance that amends and clarifies the provisions related to the initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. This guidance requires that such contingencies be recognized at fair value on the acquisition date if fair value can be reasonably estimated during the allocation period. Otherwise, companies would typically account for the acquired contingencies in accordance with the accounting guidance for contingencies. The adoption of these pronouncements on February 1, 2009 did not have a material impact on our consolidated financial statements.

In December 2007, the FASB issued an amendment of the accounting guidance on consolidated financial statements to establish accounting and reporting guidance for noncontrolling interests. A noncontrolling interest, previously referred to as minority interest, is the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent. The objective of this accounting guidance is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting guidance that require: (i) the ownership interest in subsidiaries held by parties other than the parent be clearly identified, labeled, and presented in the consolidated statement of financial position within equity, but separate from the parent’s equity; (ii) the amount of consolidated net income attributable to the parent and to the noncontrolling interests be clearly identified and presented on the face of the consolidated statement of operations; (iii) changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently and requires that they be accounted for similarly, as equity transactions; (iv) when a subsidiary is deconsolidated, any retained non-controlling equity investment in the former subsidiary be initially measured at fair value, the gain or loss on the deconsolidation of the subsidiary is measured using fair value of any noncontrolling equity investments rather than the carrying amount of that retained investment; and (v) entities provide sufficient disclosures that clearly identify and distinguish between the interest of the parent and the interest of the noncontrolling owners. This guidance is effective for fiscal years, and interim reporting periods within those fiscal years, beginning on or after December 15, 2008. We adopted this guidance on February 1, 2009 and adjusted our January 31, 2009 Consolidated Balance Sheet to reflect noncontrolling interests as a component of total equity.

The following new accounting pronouncements will be adopted on their respective required effective date:

In August 2009, the FASB issued amendments to the accounting guidance for the fair value measurement of liabilities. This guidance provides clarification that, in circumstances in which a quoted market price in an active market for the identical liability is not available, the fair value of a liability must be measured by using either (1) a valuation technique that uses quoted prices for identical or similar liabilities or (2) another valuation technique that is consistent with the principles of fair value measurements. In addition, this guidance clarifies that when estimating the fair value of a liability, an entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability, and clarifies how the price of a traded debt security should be considered in estimating the fair value of a liability. This guidance is effective for annual and interim reporting periods beginning after its issuance. We are currently evaluating the impact of adopting this guidance on our consolidated financial statements.

In June 2009, the FASB issued amendments to the accounting guidance for consolidation of VIEs to require an ongoing reassessment of determining whether a variable interest gives a company a controlling financial interest in a VIE. This guidance eliminates the quantitative approach to determining whether a company is the primary beneficiary of a VIE previously required by the guidance for consolidation of VIEs. The guidance is effective for annual and interim reporting periods beginning after November 15, 2009. We are currently evaluating the impact of adopting this guidance on our consolidated financial statements.

72

In June 2009, the FASB issued an amendment to the guidance on accounting for transfers and servicing of financial assets and extinguishments of liabilities, which aims to improve the relevance, representational faithfulness and comparability of the information provided in an entity’s financial statements about the transfer of financial assets. The guidance eliminates the concept of a qualifying special-purpose entity and changes the requirements for the derecognition of financial assets. This guidance is effective for annual and interim reporting periods beginning after November 15, 2009. We do not expect the adoption of this accounting guidance to have a material impact on our consolidated financial statements.

CLASS A COMMON UNITS

Master Contribution Agreement

We and certain of our affiliates entered into a Master Contribution and Sale Agreement (the “Master Contribution Agreement”) with Bruce C. Ratner (“Mr. Ratner”), an Executive Vice President and Director of ours, and certain entities and individuals affiliated with Mr. Ratner (the “BCR Entities”) on August 14, 2006. Pursuant to the Master Contribution Agreement, on November 8, 2006, we issued Class A Common Units (“Units”) in a jointly-owned limited liability company to the BCR Entities in exchange for their interests in a total of 30 retail, office and residential operating properties, and certain service companies, all in the greater New York City metropolitan area. We accounted for the issuance of the Units in exchange for the noncontrolling interests under the purchase method of accounting. The Units may be exchanged for one of the following forms of consideration at our sole discretion: (i) an equal number of shares of our Class A common stock or, (ii) cash based on a formula using the average closing price of the Class A common stock at the time of conversion or, (iii) a combination of cash and shares of our Class A common stock. We have no rights to redeem or repurchase the Units. The carrying value of the Units are included as noncontrolling interests on the Consolidated Balance Sheets at October 31 and January 31, 2009. Also pursuant to the Master Contribution Agreement, we and Mr. Ratner agreed that certain projects under development would remain owned jointly until such time as each individual project was completed and achieved “stabilization.” As each of the development projects achieves stabilization, it is valued and we, in our discretion, choose among various options for the ownership of the project following stabilization consistent with the Master Contribution Agreement. The development projects were not covered by the Tax Protection Agreement that the parties entered into in connection with the Master Contribution Agreement. The Tax Protection Agreement indemnified the BCR Entities included in the initial closing against taxes payable by reason of any subsequent sale of certain operating properties.

New York Times and Twelve MetroTech Center

Two of the development projects, New York Times, an office building located in Manhattan, New York and Twelve MetroTech Center, an office building located in Brooklyn, New York, recently achieved stabilization. We elected to cause certain of our affiliates to acquire for cash the BCR Entities’ interests in the two projects pursuant to agreements dated May 6, 2008 and May 12, 2008, respectively. In accordance with the agreements, the applicable BCR Entities assigned and transferred their interests in the two projects to affiliates of ours and will receive approximately $121,000,000 over a 15 year period. An affiliate of ours has also agreed to indemnify the applicable BCR Entity against taxes payable by it by reason of a subsequent sale or other disposition of one of the projects. The tax indemnity provided by the affiliate of ours expires on December 31, 2014 and is similar to the indemnities provided for the operating properties under the Tax Protection Agreement.

The consideration exchanged by us for the BCR Entities’ interest in the two development projects has been accounted for under the purchase method of accounting. Pursuant to the agreements, the BCR Entities received an initial cash amount of $49,249,000. We calculated the net present value of the remaining payments over the 15 year period using a discounted interest rate. This initial discounted amount of $56,495,000 was recorded in accounts payable and accrued expenses on our Consolidated Balance Sheet and will be accreted up to the total liability through interest expense over the next 15 years using the effective interest method.

The following table summarizes the final allocation of the consideration exchanged for the BCR Entities’ interests in the two projects (in thousands):

Completed rental properties (1)	$	102,378
Notes and accounts receivable, net (2)		132
Other assets (3)		12,513
Accounts payable and accrued expenses (4)		(9,279	)
Total purchase price allocated	$	105,744

Represents allocation for:

(1)	Land, building and tenant improvements associated with the underlying real estate
(2)	Above market leases
(3)	In-place leases, tenant relationships and leasing commissions
(4)	Below market leases

73

Exchange of Units

In July 2008, the BCR Entities exchanged 247,477 of the Units. We issued 128,477 shares of our Class A common stock for 128,477 of the Units and paid cash of $3,501,000 for 119,000 Units. We accounted for the exchange as a purchase of noncontrolling interests, resulting in a reduction of noncontrolling interests of $12,624,000. The following table summarizes the components of the exchange transaction (in thousands):

Reduction of completed rental properties	$	5,345
Reduction of cash and equivalents		3,501
Increase in Class A common stock - par value		42
Increase in additional paid-in capital		3,736
Total reduction of noncontrolling interest	$	12,624

Other Related Party Transactions

During the year ended January 31, 2009, in accordance with the parties prior understanding but unrelated to the transactions discussed above, we redeemed Mr. Ratner’s noncontrolling interests in two entities in exchange for our majority ownership interests in 17 single-tenant pharmacy properties and $9,043,000 in cash. This transaction was accounted for in accordance with accounting guidance on business combinations as acquisitions of the noncontrolling interests in the subsidiaries. The fair value of the consideration paid was allocated to the acquired ownership interests, which approximated the fair value of the 17 single-tenant pharmacy properties. This transaction resulted in a reduction of noncontrolling interests of $14,503,000 and did not result in a gain or loss. The earnings of these properties have not been reclassified to discontinued operations for the three and nine months ended October 31, 2008 as the results do not have a material impact on the Consolidated Statements of Operations.

INFORMATION RELATED TO FORWARD-LOOKING STATEMENTS

This Form 10-Q, together with other statements and information publicly disseminated by us, contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements reflect management’s current views with respect to financial results related to future events and are based on assumptions and expectations that may not be realized and are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial or otherwise, may differ from the results discussed in the forward-looking statements. Risk factors discussed in Item 1A of our Form 10-K for the year ended January 31, 2009, as updated in Part II, Item 1A of our Form 10-Q for the three months ended April 30, 2009 and this Form 10-Q, and other factors that might cause differences, some of which could be material, include, but are not limited to, the impact of current market conditions on our liquidity, ability to finance or refinance projects and repay our debt, the impact of the current economic environment on our ownership, development and management of our commercial real estate portfolio, general real estate investment and development risks, liquidity risks we could face if we do not close the transaction with Onexim Group to create a strategic partnership for our Brooklyn Atlantic Yards project, vacancies in our properties, further downturns in the housing market, competition, illiquidity of real estate investments, bankruptcy or defaults of tenants, anchor store consolidations or closings, international activities, the impact of terrorist acts, risks associated with an investment in a professional sports team, our substantial debt leverage and the ability to obtain and service debt, the impact of restrictions imposed by our credit facility and senior debt, exposure to hedging agreements, the level and volatility of interest rates, the continued availability of tax-exempt government financing, the impact of credit rating downgrades, effects of uninsured or underinsured losses, environmental liabilities, conflicts of interest, risks associated with developing and managing properties in partnership with others, the ability to maintain effective internal controls, compliance with governmental regulations, increased legislative and regulatory scrutiny of the financial services industry, volatility in the market price of our publicly traded securities, litigation risks, as well as other risks listed from time to time in our reports filed with the Securities and Exchange Commission. We have no obligation to revise or update any forward-looking statements, other than imposed by law, as a result of future events or new information. Readers are cautioned not to place undue reliance on such forward-looking statements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Ongoing economic conditions have negatively impacted the lending and capital markets. Our market risk includes the increased difficulty or inability to obtain construction loans, refinance existing construction loans into long-term fixed-rate nonrecourse financing, refinance existing nonrecourse financing at maturity, obtain renewals or replacement of credit enhancement devices, such as letters of credit, or otherwise obtain funds by selling real estate assets or by raising equity. We also have interest-rate exposure on our current variable-rate debt portfolio. During the construction period, we have historically used variable-rate debt to finance developmental projects. At October 31, 2009, our outstanding variable-rate debt portfolio consisted of $2,507,676,000 of taxable debt (which includes $37,016,000 related to the bank revolving credit facility) and $963,387,000 of tax-exempt variable-rate debt. Upon opening and achieving stabilized operations, we have historically procured long-term fixed-rate financing for our rental properties. However, due to the current market conditions, when available, we are currently extending maturities with existing lenders at current market terms. Additionally, we are exposed to interest rate risk upon maturity of our long-term fixed-rate financings.

To mitigate short-term variable interest rate risk, we have purchased interest rate hedges for our variable-rate debt as follows:

Taxable (Priced off of LIBOR Index)

	Caps					Swaps(1)
	Notional		Average Base			Notional		Average Base
Period Covered	Amount		Rate			Amount		Rate
	(dollars in thousands)
11/01/09-02/01/10 (2)	$	1,110,439		4.81	%	$	1,161,746		4.94	%
02/01/10-02/01/11		1,110,116		4.73			1,101,406		4.38
02/01/11-02/01/12		16,192		6.50			799,981		5.41
02/01/12-02/01/13		476,100		5.50			729,110		5.37
02/01/13-02/01/14		476,100		5.50			685,000		5.43
02/01/14-09/01/17		-		-			640,000		5.50

(1)	Excludes the forward swap ($120,000,000 notional) discussed below.
(2)	These LIBOR-based hedges as of November 1, 2009 protect the debt currently outstanding as well as the anticipated increase in debt outstanding for projects under development or anticipated to be under development during the year ending January 31, 2010.

Tax-Exempt (Priced off of SIFMA Index)

	Caps					Swap
	Notional		Average Base			Notional		Average Base
Period Covered	Amount		Rate			Amount		Rate
	(dollars in thousands)
11/01/09-02/01/10	$	175,025		5.68	%	$	57,000		3.21	%
02/01/10-02/01/11		175,025		5.84			57,000		3.21
02/01/11-02/01/12		131,915		5.83			57,000		3.21
02/01/12-02/01/13		12,715		6.00			57,000		3.21

The tax-exempt caps and swap expressed above mainly represent protection that was purchased in conjunction with lender hedging requirements that require the borrower to protect against significant fluctuations in interest rates. Outside of such requirements, we generally do not hedge tax-exempt debt because, since 1990, the base rate of this type of financing has averaged 2.86% and has never exceeded 8.00%.

Forward Swaps

We purchased the interest rate hedges summarized in the tables above to mitigate variable interest rate risk. We have entered into derivative contracts that are intended to economically hedge certain risks of ours, even though the contracts do not qualify for hedge accounting or we have elected not to apply hedge accounting under the accounting guidance. In all situations in which hedge accounting is discontinued, or not elected, and the derivative remains outstanding, we will report the derivative at its fair value in our Consolidated Balance Sheets, immediately recognizing changes in the fair value in our Consolidated Statements of Operations.

We have entered into forward swaps to protect ourselves against fluctuations in the swap rate at terms ranging between five to ten years associated with forecasted fixed rate borrowings. At the time we secure and lock an interest rate on an anticipated financing, we intend to simultaneously terminate the forward swap associated with that financing. At October 31, 2009, we have two forward

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swaps, with notional amounts of $69,325,000 and $120,000,000, respectively, that do not qualify as cash flow hedges under the accounting guidance. As such, the change in fair value of these swaps is marked to market through earnings on a quarterly basis. Related to these forward swaps, we recorded $4,344,000 and $(2,800,000) for the three and nine months ended October 31, 2009, respectively, and $2,058,000 and $(75,000) for the three and nine months ended October 31, 2008, respectively, as an increase (reduction) of interest expense in our Consolidated Statements of Operations. During the year ended January 31, 2009, we purchased an interest rate floor in order to mitigate the interest rate risk on one of the forward swaps ($120,000,000 notional) should interest rates fall below a certain level.

Sensitivity Analysis to Changes in Interest Rates

Including the effect of the protection provided by the interest rate swaps, caps and long-term contracts in place as of October 31, 2009, a 100 basis point increase in taxable interest rates (including properties accounted for under the equity method, corporate debt and the effect of interest rate floors) would increase the annual pre-tax interest cost for the next 12 months of our variable-rate debt by approximately $10,705,000 at October 31, 2009. Although tax-exempt rates generally move in an amount that is smaller than corresponding changes in taxable interest rates, a 100 basis point increase in tax-exempt rates (including properties accounted for under the equity method) would increase the annual pre-tax interest cost for the next 12 months of our tax-exempt variable-rate debt by approximately $10,315,000 at October 31, 2009. This analysis includes a portion of our taxable and tax-exempt variable-rate debt related to construction loans for which the interest expense is capitalized.

We estimate the fair value of our hedging instruments based on interest rate market bond pricing models. At October 31 and January 31, 2009, we reported interest rate caps, floors and swaptions at fair value of approximately $3,127,000 and $2,419,000, respectively, in other assets in the Consolidated Balance Sheets. At October 31 and January 31, 2009, we included interest rate swap agreements and TRS that had a negative fair value of approximately $199,139,000 and $247,048,000, respectively, (which includes the forward swaps) in accounts payable and accrued expenses in the Consolidated Balance Sheets. At October 31 and January 31, 2009, we included interest rate swap agreements and TRS that had a positive fair value of approximately $2,178,000 and $7,364,000, respectively, in other assets in the Consolidated Balance Sheets.

We estimate the fair value of our long-term debt instruments by market rates, if available, or by discounting future cash payments at interest rates that approximate the current market. Based on these parameters, the table below contains the estimated fair value of our long-term debt at October 31, 2009.

					Fair Value
					with 100 bp Decrease
	Carrying Value		Fair Value		in Market Rates
	(in thousands)
Fixed	$	5,105,131	$	4,667,857	$	4,977,572
Variable
Taxable		2,507,676		2,447,247		2,517,882
Tax-Exempt		963,387		924,305		1,042,458

The following tables provide information about our financial instruments that are sensitive to changes in interest rates.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk (continued)

October 31, 2009

	Expected Maturity Date
	Year Ending January 31,
																				Total			Fair Market
																	Period			Outstanding			Value
Long-Term Debt		2010			2011			2012			2013			2014			Thereafter			10/31/09			10/31/09
		(dollars in thousands)
Fixed:
Fixed-rate debt		$	49,126		$	221,611		$	354,292		$	330,529		$	751,859		$	2,322,159		$	4,029,576		$	3,809,145
Weighted average interest rate			6.29	%		7.18	%		7.03	%		5.98	%		5.85	%		5.88	%		6.06	%
Senior & subordinated debt (1)			-			-			98,156	(3)		-			-			977,399			1,075,555			858,712
Weighted average interest rate			-	%		-	%		3.63	%		-	%		-	%		6.09	%		5.86	%
Total Fixed-Rate Debt			49,126			221,611			452,448			330,529			751,859			3,299,558			5,105,131			4,667,857
Variable:
Variable-rate debt			283,237			453,128			391,782			643,687			46,412			652,414			2,470,660			2,410,420
Weighted average interest rate (2)			2.29	%		3.16	%		3.39	%		5.44	%		6.05	%		6.31	%		4.58	%
Tax-exempt			-			-			132,430			204,616			91,565			534,776			963,387			924,305
Weighted average interest rate (2)			-	%		-	%		2.66	%		2.72	%		1.55	%		1.53	%		1.94	%
Bank revolving credit facility (1)			-			37,016			-			-			-			-			37,016			36,827
Weighted average interest rate			-	%		2.75	%		-	%		-	%		-	%		-	%		2.75	%
Total Variable-Rate Debt			283,237			490,144			524,212			848,303			137,977			1,187,190			3,471,063			3,371,552
Total Long-Term Debt		$	332,363		$	711,755		$	976,660		$	1,178,832		$	889,836		$	4,486,748		$	8,576,194		$	8,039,409
Weighted average interest rate			2.89	%		4.39	%		4.63	%		5.12	%		5.42	%		5.47	%		5.13	%

(1)	Represents recourse debt.
(2)	Weighted average interest rate is based on current market rates as of October 31, 2009.
(3)	Represents the principal amount of the puttable equity-linked senior notes of $105,067 less the unamortized discount of $6,911 as of October 31, 2009, as adjusted for the adoption of accounting guidance for convertible debt instruments. This unamortized discount is accreted through interest expense, which resulted in an effective interest rate of 7.51% that is reflected in our Consolidated Statements of Operations.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk (continued)

January 31, 2009

	Expected Maturity Date
	Year Ending January 31,
																			Total
																Period			Outstanding			Fair Market
Long-Term Debt	2010			2011			2012			2013			2014			Thereafter			1/31/09			Value 1/31/09
	(dollars in thousands)
Fixed:
Fixed-rate debt	$	182,492		$	220,677		$	371,070		$	331,067		$	782,056		$	2,227,383		$	4,114,745		$	3,904,730
Weighted average interest rate		6.74	%		7.17	%		7.04	%		5.97	%		5.82	%		5.80	%		6.04	%
Senior & subordinated debt (1)		-			-			248,154	(3)		-			-			579,000			827,154			408,338
Weighted average interest rate		-	%		-	%		3.63	%		-	%		-	%		7.30	%		6.20	%
Total Fixed-Rate Debt		182,492			220,677			619,224			331,067			782,056			2,806,383			4,941,899			4,313,068
Variable:
Variable-rate debt		700,224			446,192			185,413			45,366			46,412			652,413			2,076,020			1,861,607
Weighted average interest rate(2)		3.63	%		2.45	%		3.55	%		6.26	%		6.05	%		6.31	%		4.32	%
Tax-exempt		-			-			33,520			204,616			765			648,724			887,625			797,144
Weighted average interest rate(2)		-	%		-	%		3.11	%		2.46	%		1.03	%		1.47	%		1.76	%
Bank revolving credit facility (1)		-			365,500			-			-			-			-			365,500			365,500
Weighted average interest rate(2)		-	%		2.98	%		-	%		-	%		-	%		-	%		2.98	%
Subordinated debt (1)		-			18,910			-			-			-			-			18,910			18,910
Weighted average interest rate		-	%		1.43	%		-	%		-	%		-	%		-	%		1.43	%
Total Variable-Rate Debt		700,224			830,602			218,933			249,982			47,177			1,301,137			3,348,055			3,043,161
Total Long-Term Debt	$	882,716		$	1,051,279		$	838,157		$	581,049		$	829,233		$	4,107,520		$	8,289,954		$	7,356,229
Weighted average interest rate		4.27	%		3.61	%		5.10	%		4.76	%		5.83	%		5.41	%		5.02	%

(1)	Represents recourse debt.
(2)	Weighted average interest rate is based on current market rates as of January 31, 2009.
(3)	Represents the principal amount of the puttable equity-linked senior notes of $272,500 less the unamortized discount of $24,346 as of January 31, 2009, as adjusted for the adoption of accounting guidance for convertible debt instruments. This unamortized discount is accreted through interest expense, which resulted in an effective interest rate of 7.51% that is reflected in our Consolidated Statements of Operations.

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Item 4. Controls and Procedures

The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or furnishes under the Securities Exchange Act of 1934 (“Securities Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. As of the end of the period covered by this quarterly report, an evaluation of the effectiveness of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act, was carried out under the supervision and with the participation of the Company’s management, which includes the CEO and CFO. Based on that evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures were effective as of October 31, 2009.

There have been no changes in the Company’s internal control over financial reporting that occurred during the fiscal quarter ended October 31, 2009 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

In connection with the rules, the Company continues to review and document its disclosure controls and procedures, including the Company’s internal control over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and ensuring that the Company’s systems evolve with the business.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

The Company is involved in various claims and lawsuits incidental to its business, and management and legal counsel believe that these claims and lawsuits will not have a material adverse effect on the Company’s consolidated financial statements.

Item 1A. Risk Factors

In the “Market Conditions May Negatively Impact Our Liquidity and Our Ability to Finance or Refinance Projects or Repay Our Debt” risk factor in our Annual Report on Form 10-K, we disclosed our total outstanding long-term debt that becomes due in fiscal 2009, non-recourse mortgage debt that was past due or in default as of January 31, 2009 and our access to liquidity through our $750 million revolving credit facility. We updated that information as of April 30, 2009 in our Quarterly Report on Form 10-Q. The following updates that information.

As of October 31, 2009, we have $332.4 million of outstanding long-term debt that remains outstanding from the $826.6 million of fiscal 2009 maturities reported as of January 31, 2009. We are actively negotiating with the lenders to address these remaining 2009 maturities, but cannot assure you that we will be successful. If these amounts cannot be refinanced, extended or repaid from other sources, our cash flow may not be sufficient to repay all such maturing debt and the lenders could foreclose on some of the properties.

At October 31, 2009, we have one non-recourse mortgage amounting to $17.2 million that has matured and is currently in default. If we are unable to negotiate an extension or refinancing of the mortgage, the lender could commence foreclosure proceedings and we could lose the property. Three of our joint ventures accounted for under the equity method of accounting have non-recourse mortgages that are past due or in default at October 31, 2009. If we are unable to negotiate an extension or refinancing or cure the default on those mortgages, the lender could commence foreclosure proceedings and we could lose the carrying value of our investment in the projects amounting to $4 million at October 31, 2009. While we are actively negotiating with the lenders to resolve these past due loans, we cannot assure you that we will be successful.

Subsequent to October 31, 2009, we elected to delay a scheduled amortization payment of $5 million on a non-recourse mortgage secured by all the land we own within the Brooklyn Atlantic Yards footprint. We have commenced negotiations with the lender to modify the terms of the mortgage but can give no assurances that these negotiations will be successful. If we are unable to negotiate a modification of the mortgage agreement, the lender could commence foreclosure proceedings and we could lose the property. If these negotiations are unsuccessful, we would have a heightened risk of being unable to develop the Brooklyn Atlantic Yards project as anticipated. See the discussion below for a more thorough discussion of the risks associated with the Brooklyn Atlantic Yards project and the impact those risks may pose to us.

Subsequent to October 31, 2009, we reached an agreement on the principal terms of a new $500 million revolving credit facility with our 15 member bank group. The parties are negotiating reasonably and in good faith to finalize and execute a definitive agreement, but may be unable to do so and the transaction may not close as anticipated. The inability to execute a definitive agreement would materially adversely affect our liquidity and financial position.

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In the “We are Subject to Real Estate Development Risks” risk factor in our Annual Report on Form 10-K we disclosed risks associated with our Brooklyn Atlantic Yards project. We updated that information as of April 30, 2009 in our Quarterly Report on Form 10-Q. The following further updates that risk factor to provide additional information.

Brooklyn Atlantic Yards. We are in the process of developing Brooklyn Atlantic Yards, which will cost an approximate $4.9 billion over the anticipated construction and development period. This long-term mixed-use project in downtown Brooklyn is expected to feature a state of the art sports and entertainment arena for The Nets basketball team, a member of the NBA. The acquisition and development of Brooklyn Atlantic Yards has been formally approved by the required state governmental authorities but final documentation of the transactions is subject to the completion of negotiations with local and state governmental authorities, including negotiation of the applicable development documentation and public subsidies. Pre-construction activities have commenced for the potential removal, remediation or other activities to address environmental contamination at, on, under or emanating to or from the land. As a result of prior litigation, this project has experienced delays and may continue to experience further delays.

There is also the potential for increased costs and further delays to the project as a result of (i) increasing construction costs, (ii) scarcity of labor and supplies, (iii) our ability to obtain tax-exempt financing or the availability of financing or public subsidies, or our inability to retain the current land acquisition financing, (iv) our or our partners’ inability or failure to meet required equity contributions, (v) increasing rates for financing, (vi) loss of arena sponsorships and related revenues, (vii) our inability to meet certain agreed upon deadlines for the development of the project and (viii) other potential litigation seeking to enjoin or prevent the project or litigation for which there may not be insurance coverage. The development of Brooklyn Atlantic Yards is being done in connection with the proposed move of The Nets to the planned arena. The arena itself (and its plans) along with any movement of the team is subject to approval by the NBA, which we may not receive. In addition, as applicable contractual and other deadlines and decision points approach, we could have less time and flexibility to plan and implement our responses to these or other risks to the extent that any of them may actually arise.

If any of the foregoing risks were to occur we may: (i) not be able to develop Brooklyn Atlantic Yards to the extent intended or at all resulting in a potential write-off of our investment, (ii) be required to repay the City and/or State of New York amounts previously advanced under public subsidies, plus penalties if applicable, (iii) be in default of our non-recourse mortgages on the project, and (iv) be required to restore the rail yards that previously existed on the land. Together, costs associated with the risks outlined in (i) through (iv) in this paragraph, are approximately $580 million and could have a significant, material adverse effect on our business, cash flows and results of operations. Even if we are able to continue with the development, or a portion thereof, we would likely not be able to do so as quickly as originally planned, would be likely to incur additional costs and may need to write-off a portion of the development.

Risks Related to Our Business

The ownership, development and management of commercial real estate is exceptionally challenging in the current economic environment and we do not anticipate meaningful improvement in the commercial real estate industry in the near term.

The current economic environment has significantly impacted the real estate industry in which we operate. Unemployment continues to increase and consumer confidence is low, putting downward pressure on retail sales. Commercial and residential tenants are experiencing financial pressure and are placing increasing demands on landlords to provide rent concessions. The financial hardships on some tenants are so severe that they are leaving the market entirely or declaring bankruptcy, creating increased vacancy rates in residential and commercial properties. The tenants with good financial condition are considering offers from the many competing projects in the real estate industry and are waiting for the best possible deal before committing.

The stress currently experienced by the real estate industry is particularly evident in our development projects. Projects that had good demographics and strong retailer interest to support a retail development when we began construction are experiencing leasing difficulty. When the financial markets began experiencing volatility in the second half of 2008 and the economy entered its recession, we experienced a corresponding volatility in retailer interest for our projects. Retailers continue to express interest in the projects, but are reluctant to commit to any new stores in the current economic environment. As a result of this difficult environment, we have delayed anticipated openings, reduced anticipated rents and incurred additional carrying costs, all resulting in an adverse impact on our business.

Until the economy, in general, and the real estate industry in particular, experience sustained improvement, fundamentals for the development and management of real estate will remain weak and we will continue to operate in a difficult environment with no near-term expectation of improvement.

The transaction proposed in our letter of intent with an affiliate of Onexim Group to create a strategic partnership for our Brooklyn Atlantic Yards project may not close, which could subject us to liquidity risks.

The letter of intent that we executed with an affiliate of Onexim Group requires certain consents and is subject to the satisfaction of various conditions. Both parties continue to negotiate reasonably and in good faith to satisfy various conditions of the LOI and execute definitive agreements. However, the transaction proposed in the letter of intent may not close and the strategic partnership for the Brooklyn Atlantic Yards project may not be realized. If the strategic partnership is not formed and the $200 million investment is not received, we could have heightened exposure to the development risks associated with the Brooklyn Atlantic Yards project. See above for a more thorough discussion of the risks associated with the Brooklyn Atlantic Yards project and the impact those risks may pose to us.

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In addition, if the transaction proposed by the letter of intent does not close, we could also have heightened exposure to the risks associated with our investment in the Nets. For a more thorough discussion of the risks associated with that investment and the impact those risks may pose to us, please refer to “The Investment in a Professional Sports Franchise Involves Certain Risks and Future Losses Are Expected for The Nets” on page 10 of our Form 10-K for the fiscal year ended January 31, 2009.

Legislative and regulatory actions taken now or in the future could adversely affect our business.

Current economic conditions have resulted in governmental regulatory agencies and political bodies placing increased focus and scrutiny on the financial services industry. This increased scrutiny has resulted in unprecedented programs and actions targeted at restoring stability in the financial markets. There is increasing pressure on the U.S. Congress to finalize a financial regulatory reform plan that would, if enacted, represent a sweeping reform of the current financial services regulation. While we do not operate in the financial services industry, the proposed legislation, as well as other legislation that could be proposed in the future, if enacted, could have an adverse impact on our financial condition and results of operations, perhaps materially, by increasing our costs for financial instruments, such as non-recourse mortgage loans and interest rate swaps, requiring additional cash collateral deposits and further reducing our access to capital.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) and (b) – Not applicable.

(c) – Repurchase of equity securities during the quarter.

	Issuer Purchases of Equity Securities
					Total Number of		Maximum Number
	Total				Shares Purchased as		of Shares that May
	Number of		Average		Part of Publicly		Yet Be Purchased
	Shares		Price Paid		Announced Plans		Under the Plans
Period	Purchased (1)		Per Share		or Programs		or Programs
Class A Common Stock
August 1 through August 31, 2009		-	$	-		-		-
September 1 through September 30, 2009		843	$	4.86		-		-
October 1 through October 31, 2009		-	$	-		-		-
Total		843	$	4.86		-		-

(1) In September 2009, the Company repurchased into treasury 843 shares of Class A common stock to satisfy the minimum tax withholding requirements relating to restricted stock vesting. These shares were not reacquired as part of a publicly announced repurchase plan or program.

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Item 6. Exhibits

Exhibit
Number		Description of Document
3.1	-	Amended Articles of Incorporation of Forest City Enterprises, Inc., restated effective October 1, 2008, incorporated by reference to Exhibit 3.1 to the Company’s Form 10-Q for the quarter ended October 31, 2008 (File No. 1-4372).
3.2	-	Code of Regulations as amended June 15, 2006, incorporated by reference to Exhibit 3.5 to the Company’s Form 10-Q for the quarter ended July 31, 2006 (File No. 1-4372).
4.1	-	Senior Note Indenture, dated as of May 19, 2003, between Forest City Enterprises, Inc., as issuer, and The Bank of New York, as trustee, incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on May 20, 2003 (File No. 1-4372).
4.2	-	Form of 7.625% Senior Note due 2015, incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K filed on May 20, 2003 (File No. 1-4372).
4.3	-	Form of 7.375% Senior Note due 2034, incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form 8-A filed on February 10, 2004 (File No. 1-4372).
4.4	-	Form of 6.5% Senior Note due 2017, incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K filed on January 26, 2005 (File No. 1-4372).
4.5	-	Indenture, dated as of October 10, 2006, between Forest City Enterprises, Inc., as issuer, and The Bank of New York Trust Company, N.A., as trustee, including, as Exhibit A thereto, the Form of 3.625% Puttable Equity-Linked Senior Note due 2011, incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on October 16, 2006 (File No. 1-4372).
*4.6		Indenture, dated as of October 7, 2009, between Forest City Enterprises, Inc., as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, including as Exhibit A thereto, the Form of 3.625% Puttable Equity-Linked Senior Note due 2014.
4.7		Indenture, dated October 26, 2009, between Forest City Enterprises, Inc., as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, including as Exhibit A thereto, the Form of 5.00% Convertible Senior Note due 2016, incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on October 26, 2009 (File No. 1-4372).
9.1	-	Voting Agreement, dated November 8, 2006, by and among Forest City Enterprises, Inc., RMS Limited Partnership, Powell Partners, Limited, Joseph M. Shafran and Bruce C. Ratner, incorporated by reference to Exhibit 9.1 to the Company’s Form 10-K for the year ended January 31, 2007 (File No. 1-4372).
*+10.1	-	Dividend Reinvestment and Stock Purchase Plan.
+10.2	-	Supplemental Unfunded Deferred Compensation Plan for Executives, incorporated by reference to Exhibit 10.9 to the Company’s Form 10-K for the year ended January 31, 1997 (File No. 1-4372).
+10.3	-	Deferred Compensation Plan for Executives, effective as of January 1, 1999, incorporated by reference to Exhibit 10.43 to the Company’s Form 10-K for the year ended January 31, 1999 (File No. 1-4372).
+10.4	-	First Amendment to the Deferred Compensation Plan for Executives, effective as of October 1, 1999, incorporated by reference to Exhibit 10.45 to the Company’s Form 10-Q for the quarter ended April 30, 2005 (File No. 1-4372).
+10.5	-	Second Amendment to the Deferred Compensation Plan for Executives, effective as of December 31, 2004, incorporated by reference to Exhibit 10.46 to the Company’s Form 10-Q for the quarter ended April 30, 2005 (File No. 1-4372).
+10.6	-	Forest City Enterprises, Inc. 2005 Deferred Compensation Plan for Executives (As Amended and Restated Effective January 1, 2008), incorporated by reference to Exhibit 10.21 to the Company’s Form 10-K for the year ended January 31, 2008 (File No. 1-4372).

83

Exhibit
Number		Description of Document
+10.7	-	Deferred Compensation Plan for Nonemployee Directors, effective as of January 1, 1999, incorporated by reference to Exhibit 10.44 to the Company’s Form 10-K for the year ended January 31, 1999 (File No. 1-4372).
+10.8	-	First Amendment to the Deferred Compensation Plan for Nonemployee Directors, effective October 1, 1999, incorporated by reference to Exhibit 4.6 to the Company’s Registration Statement on Form S-8 (Registration No. 333-38912).
+10.9	-	Second Amendment to the Deferred Compensation Plan for Nonemployee Directors, effective March 10, 2000, incorporated by reference to Exhibit 4.7 to the Company’s Registration Statement on Form S-8 (Registration No. 333-38912).
+10.10	-	Third Amendment to the Deferred Compensation Plan for Nonemployee Directors, effective March 12, 2004, incorporated by reference to Exhibit 10.39 to the Company’s Form 10-Q for the quarter ended July 31, 2004 (File No. 1-4372).
+10.11	-	Fourth Amendment to the Deferred Compensation Plan for Nonemployee Directors, effective as of December 31, 2004, incorporated by reference to Exhibit 10.47 to the Company’s Form 10-Q for the quarter ended April 30, 2005 (File No. 1-4372).
+10.12	-	Fifth Amendment to the Deferred Compensation Plan for Nonemployee Directors, effective as of March 26, 2008, incorporated by reference to Exhibit 10.60 to the Company’s Form 10-K for the year ended January 31, 2008 (File No. 1-4372).
+10.13	-	Forest City Enterprises, Inc. 2005 Deferred Compensation Plan for Nonemployee Directors (As Amended and Restated effective January 1, 2008), incorporated by reference to Exhibit 10.60 to the Company’s Form 10-Q for the quarter ended April 30, 2008 (File No. 1-4372).
+10.14	-	Forest City Enterprises, Inc. Executive Short-Term Incentive Plan (As Amended and Restated as of June 19, 2008), incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on June 24, 2008 (File No. 1-4372).
+10.15	-	Forest City Enterprises, Inc. Executive Long-Term Incentive Plan (As Amended and Restated as of June 19, 2008), incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on June 24, 2008 (File No. 1-4372).
+10.16	-	Forest City Enterprises, Inc. Senior Management Short-Term Incentive Plan (Effective February 1, 2008), incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed on June 24, 2008 (File No. 1-4372).
+10.17	-	Forest City Enterprises, Inc. Senior Management Long-Term Incentive Plan (Effective February 1, 2008), incorporated by reference to Exhibit 10.5 to the Company’s Form 8-K filed on June 24, 2008 (File No. 1-4372).
+10.18	-	Forest City Enterprises, Inc. Amended Board of Directors Compensation Policy, effective February 1, 2008, incorporated by reference to Exhibit 10.33 to the Company’s Form 10-K for the year ended January 31, 2008 (File No. 1-4372).
+10.19	-	Forest City Enterprises, Inc. Unfunded Nonqualified Supplemental Retirement Plan for Executives (As Amended and Restated Effective January 1, 2008), incorporated by reference to Exhibit 10.59 to the Company’s Form 10-K for the year ended January 31, 2008 (File No. 1-4372).
+10.20	-	Amended and Restated Form of Stock Option Agreement, effective as of June 8, 2004, incorporated by reference to Exhibit 10.17 to the Company’s Form 10-Q for the quarter ended April 30, 2005 (File No. 1-4372).
+10.21	-	Amended and Restated Form of Restricted Stock Agreement, effective as of June 8, 2004, incorporated by reference to Exhibit 10.18 to the Company’s Form 10-Q for the quarter ended April 30, 2005 (File No. 1-4372).

84

Exhibit
Number		Description of Document
+10.22	-	Form of Forest City Enterprises, Inc. Performance Shares Agreement, incorporated by reference to Exhibit 10.6 to the Company’s Form 8-K filed on June 24, 2008 (File No. 1-4372).
+10.23	-	Form of Forest City Enterprises, Inc. Nonqualified Stock Option Agreement for Nonemployee Directors, incorporated by reference to Exhibit 10.66 to the Company’s Form 10-Q for the quarter ended July 31, 2008. (File No. 1-4372).
+10.24	-	Form of Forest City Enterprises, Inc. Restricted Shares Agreement for Nonemployee Directors, incorporated by reference to Exhibit 10.67 to the Company’s Form 10-Q for the quarter ended July 31, 2008 (File No. 1-4372).
+10.25	-	Forest City Enterprises, Inc. 1994 Stock Plan (As Amended and Restated as of June 19, 2008), incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on June 24, 2008 (File No. 1-4372).
+10.26	-	Employment Agreement entered into on May 31, 1999, effective January 1, 1999, between Forest City Enterprises, Inc. and Albert B. Ratner, incorporated by reference to Exhibit 10.47 to the Company’s Form 10-Q for the quarter ended July 31, 1999 (File No. 1-4372).
+10.27	-	First Amendment to Employment Agreement effective as of February 28, 2000 between Forest City Enterprises, Inc. and Albert B. Ratner, incorporated by reference to Exhibit 10.45 to the Company’s Form 10-K for the year ended January 31, 2000 (File No. 1-4372).
+10.28	-	Employment Agreement entered into on May 31, 1999, effective January 1, 1999, between Forest City Enterprises, Inc. and Samuel H. Miller, incorporated by reference to Exhibit 10.48 to the Company’s Form 10-Q for the quarter ended July 31, 1999 (File No. 1-4372).
+10.29	-	Agreement regarding death benefits entered into on May 31, 1999, between Forest City Enterprises, Inc. and Robert G. O’Brien, incorporated by reference to Exhibit 10.29 to the Company’s Form 10-Q for the quarter ended April 30, 2009 (File No. 1-4372).
+10.30	-	Employment Agreement entered into on July 20, 2005, effective February 1, 2005, between Forest City Enterprises, Inc. and Charles A. Ratner, incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on July 26, 2005 (File No. 1-4372).
+10.31	-	First Amendment to Employment Agreement, dated as of November 9, 2006, by and among Charles A. Ratner and Forest City Enterprises, Inc., incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on November 13, 2006 (File No. 1-4372).
+10.32	-	Employment Agreement entered into on July 20, 2005, effective February 1, 2005, between Forest City Enterprises, Inc. and James A. Ratner, incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on July 26, 2005 (File No. 1-4372).
+10.33	-	First Amendment to Employment Agreement, dated as of November 9, 2006, by and among James A. Ratner and Forest City Enterprises, Inc., incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on November 13, 2006 (File No. 1-4372).
+10.34	-	Employment Agreement entered into on July 20, 2005, effective February 1, 2005, between Forest City Enterprises, Inc. and Ronald A. Ratner, incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on July 26, 2005 (File No. 1-4372).
+10.35	-	First Amendment to Employment Agreement, dated as of November 9, 2006, by and among Ronald A. Ratner and Forest City Enterprises, Inc., incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed on November 13, 2006 (File No. 1-4372).
+10.36	-	Employment Agreement, effective November 9, 2006, by and among Bruce C. Ratner and Forest City Enterprises, Inc., incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on November 13, 2006 (File No. 1-4372).

85

Exhibit
Number		Description of Document
10.37	-	Master Contribution and Sale Agreement, dated as of August 10, 2006, by and among Forest City Enterprises, Inc., certain entities affiliated with Forest City Enterprises, Inc., Forest City Master Associates III, LLC, certain entities affiliated with Forest City Master Associates III, LLC, certain entities affiliated with Bruce C. Ratner and certain individuals affiliated with Bruce C. Ratner, incorporated by reference to Exhibit 10.37 to the Company’s Form 10-Q for the quarter ended July 31, 2009 (File No. 1-4372).**
10.38	-	Registration Rights Agreement by and among Forest City Enterprises, Inc. and the holders of BCR Units listed on Schedule A thereto dated November 8, 2006, incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-3 filed on November 7, 2007 (Registration No. 333-147201).
10.39	-	Amended and Restated Credit Agreement, dated as of June 6, 2007, by and among Forest City Rental Properties Corporation, KeyBank National Association, as Administrative Agent, National City Bank, as Syndication Agent, Bank of America, N.A. and LaSalle Bank National Association, as Co-Documentation Agents, and the banks named therein, incorporated by reference to Exhibit 10.39 to the Company’s Form 10-Q for the quarter ended July 31, 2009 (File No. 1-4372).**
10.40	-	Additional Bank Assumption Agreement by and among The Bank of New York, Forest City Rental Properties Corporation, and KeyBank in its capacity as administrative agent under the Credit Agreement, incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on December 20, 2007 (File No. 1-4372).
10.41	-	Additional Bank Assumption Agreement by and among Wachovia Bank, N.A., Forest City Rental Properties Corporation, and KeyBank in its capacity as administrative agent under the Credit Agreement, incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on December 20, 2007 (File No. 1-4372).
10.42	-	Exhibit A to the Amended and Restated Credit Agreement by and among Forest City Rental Properties Corporation, KeyBank National Association, as Administrative Agent, National City Bank, as Syndication Agent, Bank of America, N.A. and LaSalle Bank National Association, as Co-Documentation Agents, and the banks named therein, revised as of December 20, 2007, further revised as of February 4, 2008 and further revised as of February 19, 2008, incorporated by reference to Exhibit 10.56 to the Company’s Form 10-K for the year ended January 31, 2008 (File No. 1-4372).
10.43	-	First Amendment to Amended and Restated Credit Agreement, dated as of September 10, 2008, by and among Forest City Rental Properties Corporation, Key Bank National Association, as Administrative Agent, National City Bank, as Syndication Agent, Bank of America, N.A., as Documentation Agent, and the banks named therein, incorporated by reference to Exhibit 10.44 to the Company’s Form 10-Q for the quarter ended October 31, 2008 (File No. 1-4372).
10.44	-	Amended and Restated Guaranty of Payment of Debt, dated as of June 6, 2007, by Forest City Enterprises, Inc. for the benefit of KeyBank National Association, as Administrative Agent, National City Bank, as Syndication Agent, Bank of America, N.A. and LaSalle Bank National Association, as Co-Documentation Agents, and the banks named therein, incorporated by reference to Exhibit 10.44 to the Company’s Form 10-Q for the quarter ended July 31, 2009 (File No. 1-4372).
10.45	-	First Amendment to Amended and Restated Guaranty of Payment of Debt, dated as of September 10, 2008, by Forest City Enterprises, Inc. for the benefit of KeyBank National Association, as Administrative Agent, National City Bank, as Syndication Agent, Bank of America, N.A., as Documentation Agent, and the banks named therein, incorporated by reference to Exhibit 10.46 to the Company’s Form 10-Q for the quarter ended October 31, 2008 (File No. 1-4372).
10.46	-	Second Amendment to Amended and Restated Credit Agreement and Amended and Restated Guaranty of Payment of Debt, dated as of January 30, 2009, by and among Forest City Rental Properties Corporation, Forest City Enterprises, Inc., KeyBank National Association, as Administrative Agent, National City Bank, as Syndication Agent, Bank of America, N.A., as Documentation Agent, and the banks named therein, incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on February 5, 2009 (File No. 1-4372).

86

Exhibit
Number		Description of Document
10.47	-	Third Amendment to Amended and Restated Credit Agreement and Amended and Restated Guaranty of Payment Of Debt, dated as of October 5, 2009, by and among Forest City Rental Properties Corporation, Forest City Enterprises, Inc., KeyBank National Association, as Administrative Agent, National City Bank, as Syndication Agent, Bank of America, N.A., as Documentation Agent, and the banks named therein, incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on October 7, 2009 (File No. 1-4372).
10.48	-	Fourth Amendment to Amended and Restated Credit Agreement and Amended and Restated Guaranty of Payment of Debt, dated as of October 22, 2009, by and among Forest City Rental Properties Corporation, Forest City Enterprises, Inc., KeyBank National Association, as Administrative Agent, National City Bank, as Syndication Agent, Bank of America, N.A., as Documentation Agent, and the banks named therein, incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on October 23, 2009 (File No. 1-4372).
*31.1	-	Principal Executive Officer’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2	-	Principal Financial Officer’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1	-	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

+	Management contract or compensatory arrangement required to be filed as an exhibit to this Form 10-Q pursuant to Item 6.
*	Filed herewith.
**	Portions of these exhibits have been omitted pursuant to a request for confidential treatment.

87

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.

	FOREST CITY ENTERPRISES, INC.                      (Registrant)
Date: December 8, 2009	/S/ ROBERT G. O’BRIEN
	Name:	Robert G. O’Brien
	Title:	Executive Vice President and Chief Financial Officer
Date: December 8, 2009	/S/ LINDA M. KANE
	Name:	Linda M. Kane
	Title:	Senior Vice President, Chief Accounting and Administrative Officer

88

Exhibit Index

Exhibit
Number		Description of Document
4.6	-	Indenture, dated as of October 7, 2009, between Forest City Enterprises, Inc., as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, including as Exhibit A thereto, the Form of 3.625% Puttable Equity-Linked Senior Note due 2014.
10.1	-	Dividend Reinvestment and Stock Purchase Plan.
31.1	-	Principal Executive Officer’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	-	Principal Financial Officer’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	-	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-4.6

Exhibit 4.6

FOREST CITY ENTERPRISES, INC.

as Issuer

and

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.

as Trustee

INDENTURE

Dated as of October 7, 2009

3.625% Puttable Equity-Linked Senior Notes due 2014

FOREST CITY ENTERPRISES, INC.
Reconciliation and tie between Trust Indenture Act of 1939 and
Indenture, dated as of October 7, 2009

Trust Indenture Act Section	Indenture Section
§310(a)(1)	6.09
(a)(2)	6.09
(a)(3)	Not Applicable
(a)(4)	Not Applicable
(a)(5)	6.09
(b)	6.08; 6.10; 6.11
(c)	Not Applicable
§311(a)	6.13
(b)	6.13
(c)	Not Applicable
§312(a)	4.01; 4.02(a)
(b)	4.02(b)
(c)	4.02(c)
§313(a)	4.03(a)
(b)	4.03(a)
(c)	4.03(a)
(d)	4.03(b)
§314(a)	4.04(a)
(b)	Not Applicable
(c)(1)	3.08
(c)(2)	15.05
(c)(3)	Not Applicable
(d)	Not Applicable
(e)	3.08
§315(a)	6.01
(b)	5.08
(c)	6.01
(d)	6.01
(e)	5.09
§316(a)	1.02
(a)(1)(A)	7.01; 5.01; 5.07
(a)(1)(B)	5.07
(a)(2)	Not Applicable
(b)	5.04
(c)	7.01
§317(a)(1)	5.02; 5.05
(a)(2)	5.02
(b)	6.05; 11.01
§318(a)	1.02
(c)	1.02

Note: This reconciliation and tie shall not, for any purpose, be deemed to be part of the Indenture.

TABLE OF CONTENTS

	Page
Article 1 Definitions		1
Section 1.01. Definitions		1
Section 1.02. Incorporation by Reference of Trust Indenture Act		14
Article 2 Issue, Description, Execution, Registration and Exchange of Notes		14
Section 2.01. Designation and Amount		14
Section 2.02. Form of Notes		14
Section 2.03. Date and Denomination of Notes; Payments of Interest		15
Section 2.04. Reserved		16
Section 2.05. Execution, Authentication and Delivery of Notes		17
Section 2.06. Exchange and Registration of Transfer of Notes; Restrictions on Transfer; Depositary		18
Section 2.07. Mutilated, Destroyed, Lost or Stolen Notes		24
Section 2.08. Temporary Notes		25
Section 2.09 Cancellation of Notes Paid, Etc		25
Section 2.10. CUSIP Numbers		25
Section 2.11. Additional Notes, Repurchases		25
Article 3 Particular Covenants of the Company		26
Section 3.01. Payment of Principal and Interest		26
Section 3.02. Maintenance of Office or Agency		26
Section 3.03. Appointments to Fill Vacancies in Trustee’s Office		27
Section 3.04. Provisions as to Paying Agent		27
Section 3.05. Existence		28
Section 3.06. Rule 144A Information Requirement and Annual Reports		28
Section 3.07. Stay, Extension and Usury Laws		28
Section 3.08. Compliance Certificate; Statements as to Defaults		29
Section 3.09. Further Instruments and Acts		29
Article 4 Lists of Noteholders and Reports by the Company and the Trustee		29
Section 4.01. Lists of Noteholders		29
Section 4.02. Preservation and Disclosure of Lists		29
Section 4.03. Reports by Trustee		30
Section 4.04. Reports by Company		30

i

	Page
Article 5 Defaults and Remedies		31
Section 5.01. Events of Default		31
Section 5.02. Payments of Notes on Default; Suit Therefor		34
Section 5.03. Application of Monies Collected by Trustee		35
Section 5.04. Proceedings by Noteholders		36
Section 5.05. Proceedings by Trustee		37
Section 5.06. Remedies Cumulative and Continuing		37
Section 5.07. Direction of Proceedings and Waiver of Defaults by Majority of Noteholders		37
Section 5.08. Notice of Defaults		38
Section 5.09. Undertaking to Pay Costs		38
Article 6 Concerning the Trustee		40
Section 6.01. Duties and Responsibilities of Trustee		40
Section 6.02. Reliance on Documents, Opinions, Etc		40
Section 6.03. No Responsibility for Recitals, Etc		42
Section 6.04. Trustee, Paying Agents, Put Exercise Agents or Registrar May Own Notes		42
Section 6.05. Monies to be Held in Trust		42
Section 6.06. Compensation and Expenses of Trustee		43
Section 6.07. Officers’ Certificate as Evidence		43
Section 6.08. Conflicting Interests of Trustee		44
Section 6.09. Eligibility of Trustee		44
Section 6.10. Resignation or Removal of Trustee		44
Section 6.11. Acceptance by Successor Trustee		45
Section 6.12. Succession by Merger, Etc		46
Section 6.13. Limitation on Rights of Trustee as Creditor		46
Section 6.14. Trustee’s Application for Instructions from the Company		46
Article 7 Concerning the Noteholders		47
Section 7.01. Action By Noteholders		47
Section 7.02. Proof of Execution by Noteholders		47
Section 7.03. Who Are Deemed Absolute Owners		48
Section 7.04. Company-owned Notes Disregarded		48
Section 7.05. Revocation of Consents; Future Holders Bound		48
Article 8 Noteholders’ Meetings		49
Section 8.01. Purpose of Meetings		49
Section 8.02. Call of Meetings by Trustee		49
Section 8.03. Call of Meetings by Company or Noteholders		50
Section 8.04. Qualifications for Voting		50

ii

	Page
Section 8.05. Regulations		50
Section 8.06. Voting		50
Section 8.07. No Delay of Rights by Meeting		51
Article 9 Supplemental Indentures		51
Section 9.01. Supplemental Indentures Without Consent of Noteholders		51
Section 9.02. Supplemental Indentures With Consent of Noteholders		51
Section 9.03. Effect of Supplemental Indentures		53
Section 9.04. Notation on Notes		53
Section 9.05. Evidence of Compliance of Supplemental Indenture to be Furnished to the Trustee		54
Article 10 Consolidation, Merger, Sale, Conveyance and Lease		54
Section 10.01. Company May Consolidate, Etc. on Certain Terms		54
Section 10.02. Successor Corporation to be Substituted		54
Section 10.03. Officers’ Certificate and Opinion of Counsel to be Given Trustee		55
Article 11 Satisfaction and Discharge of Indenture		55
Section 11.01. Discharge of Indenture		55
Section 11.02. Deposited Monies to be Held in Trust by Trustee		56
Section 11.03. Paying Agent to Repay Monies Held		56
Section 11.04. Return of Unclaimed Monies		56
Section 11.05. Reinstatement		56
Article 12 Immunity of Incorporators, Shareholders, Officers and Directors		57
Section 12.01. Indenture and Notes Solely Corporate Obligations		57
Article 13 Exercise of Put rights; Redemptions		57
Section 13.01. Put Exercise Privilege		57
Section 13.02. Put Exercise Procedure		60
Section 13.03. Related Party Limitation		63
Section 13.04. Adjustment of Put Value Rate		63
Section 13.05. Reserved		72
Section 13.06. Effect of Reclassification, Consolidation, Merger or Sale		72
Section 13.07. Certain Covenants		73
Section 13.08. Responsibility of Trustee		74
Section 13.09. Notice to Holders Prior to Certain Actions		74
Section 13.10. Shareholder Rights Plans		75
Section 13.11. Termination of Put Rights by the Company		75

iii

	Page
Section 13.12. Redemption of Notes		78
Section 13.13. Notice of Optional Redemption; Selection of Notes		78
Section 13.14. Payment for Notes Called for Redemption by the Company		80
Section 13.15. Put Arrangement on Call for Redemption		80
Section 13.16. Repayment to the Company		81
Section 13.17. Acceleration; Payments to Noteholders		81
Section 13.18. No Sinking Fund		81
Article 14 Repurchase of Notes at Option of Holders		81
Section 14.01. Repurchase at Option of Holders Upon a Designated Event		81
Article 15 Miscellaneous Provisions		85
Section 15.01. Provisions Binding on Company’s Successors		85
Section 15.02. Official Acts by Successor Corporation		85
Section 15.03. Addresses for Notices, Etc		85
Section 15.04. Governing Law		86
Section 15.05. Evidence of Compliance with Conditions Precedent; Certificates and Opinions of Counsel to Trustee		86
Section 15.06. Legal Holidays		86
Section 15.07. No Security Interest Created		86
Section 15.08. Benefits of Indenture		87
Section 15.09. Table of Contents, Headings, Etc		87
Section 15.10. Authenticating Agent		87
Section 15.11. Execution in Counterparts		88
Section 15.12. Waiver Of Jury Trial		88
Section 15.13. Force Majeure		88

iv

     INDENTURE dated as of October 7, 2009 between Forest City Enterprises, Inc., an Ohio corporation, as issuer (hereinafter sometimes called the “Company”, as more fully set forth in Section 1.01), and The Bank of New York Mellon Trust Company, N.A., a national banking association, as trustee (hereinafter sometimes called the “Trustee”, as more fully set forth in Section 1.01).

WITNESSETH:

     WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issue of its 3.625% Puttable Equity-Linked Senior Notes due 2014 (hereinafter sometimes called the “Notes”), initially in an aggregate principal amount not to exceed $200,000,000, and in order to provide the terms and conditions upon which the Notes are to be authenticated, issued and delivered, the Company has duly authorized the execution and delivery of this Indenture; and

     WHEREAS, the Notes, the certificate of authentication to be borne by the Notes, the Form of Assignment and Transfer, the Form of Designated Event Purchase Notice, the Form of Put Exercise Notice are to be substantially in the forms hereinafter provided for; and

     WHEREAS, all acts and things necessary to make the Notes, when executed by the Company and authenticated and delivered by the Trustee or a duly authorized authenticating agent, as in this Indenture provided, the valid, binding and legal obligations of the Company, and to constitute these presents a valid and legally binding agreement according to its terms, have been done and performed, and the execution of this Indenture and the issue hereunder of the Notes have in all respects been duly authorized.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

     That in order to declare the terms and conditions upon which the Notes are, and are to be, authenticated, issued and delivered, and in consideration of the premises and of the purchase and acceptance of the Notes by the holders thereof, the Company covenants and agrees with the Trustee for the equal and proportionate benefit of the respective holders from time to time of the Notes (except as otherwise provided below), as follows:

ARTICLE 1
Definitions

     Section 1.01. Definitions.

     (a) The terms defined in this Section 1.01 (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.01. All other terms used in this Indenture, which are defined in the Trust Indenture Act or which are by reference therein defined in the Securities Act (except as herein otherwise expressly provided or unless the context otherwise requires) shall have the meanings assigned to such terms in said

Trust Indenture Act and in said Securities Act as in force at the date of the execution of this Indenture. The words “herein,” “hereof,” “hereunder,” and words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other Subdivision. The terms defined in this Article include the plural as well as the singular.

     “Additional Shares” shall have the meaning specified in Section 13.01(e).

     “Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control,” when used with respect to any specified Person means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

     “Beneficial Owner” and “Beneficial Ownership” means as determined in accordance with Rule 13d-3 under the Exchange Act.

     “Board of Directors” means the Board of Directors of the Company or a committee of such Board duly authorized to act for it hereunder.

     “Board Resolution” means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors, or duly authorized committee thereof (to the extent permitted by applicable law), and to be in full force and effect on the date of such certification, and delivered to the Trustee.

     “Business Day” means any day, except a Saturday, Sunday or legal holiday on which the banking institutions in The City of New York or the city in which the Corporate Trust Office is located are authorized or obligated by law or executive order to close.

     “Capital Lease” means a lease that, in accordance with accounting principles generally accepted in the United States of America, would be recorded as a capital lease on the balance sheet of the lessee.

     “Capital Lease Obligation” of any Person means the obligation to pay rent or other payment amounts under a lease of (or other Debt arrangements conveying the right to use) real or personal property of such Person which is required to be classified and accounted for as a capital lease or a liability on the face of a balance sheet of such Person in accordance with generally accepted accounting principles. The stated maturity of such obligation shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. The principal amount of such obligation shall be the capitalized amount thereof that would appear on the face of a balance sheet of such Person prepared in accordance with generally accepted accounting principles.

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     “capital stock” means, for any entity, any and all shares, interests, participations or other equivalents of or interests in (however designated) stock issued by that entity.

     “Capital Stock” of any Person means any and all shares, interests, participations or other equivalents (however designated) of corporate stock or other equity participations or interests, including partnership interests, whether general or limited, and membership interests, whether managing or non-managing, of such Person.

     “close of business” means 5:00 p.m. (New York City time).

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

     “Commission” means the Securities and Exchange Commission.

     “Common Stock” means, subject to Section 13.06, shares of Class A common stock of the Company, par value $0.33 1/3 per share, at the date of this Indenture or shares of any class or classes resulting from any reclassification or reclassifications thereof and that have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and that are not subject to redemption by the Company; provided that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications.

     “Company” means Forest City Enterprises, Inc., an Ohio corporation, and subject to the provisions of Article 10, shall include its successors and assigns and, to the extent the obligations hereunder shall be to more than one entity pursuant to Section 13.06, shall include each of such entities.

     “Company Order” means a written order of the Company, signed by (a) the Company’s Chief Executive Officer, President, Executive or Senior Vice President, Managing Director or any Vice President (whether or not designated by a number or numbers or word or words added before or after the title “Vice President”) and (b) any such other officer designated in clause (a) of this definition or the Company’s Treasurer or Assistant Treasurer or Secretary or any Assistant Secretary, and delivered to the Trustee.

     “Corporate Trust Office” or other similar term means a corporate trust office of the Trustee at which at any particular time its corporate trust business shall be administered, which office is, at the date as of which this Indenture is dated, located at The Bank of New York Mellon Trust Company, N.A., 2 North LaSalle Street, Chicago, Illinois 60602, Attention: Corporate Trust Administration; Forest City Enterprises, Inc. or such other address as the Trustee may designate from time to time by notice to the Holders and the Company.

     “Coupon Make-Whole Payment” shall have the meaning specified in Section 13.11(a).

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     “Custodian” means The Bank of New York Mellon Trust Company, N.A., as custodian for The Depository Trust Company, with respect to the Notes in global form, or any successor entity thereto.

     “Daily Put Value” means, for each of the 10 consecutive VWAP Trading Days during the Observation Period, one-tenth (1/10) of the product of (a) the Put Value Rate in effect on such VWAP Trading Day and (b) the Daily VWAP of the Common Stock (or the Reference Property pursuant to Section 13.06) on such day, as determined by the Company. Any such determination by the Company will be conclusive absent manifest error.

     “Daily VWAP” for the Common Stock means, for any VWAP Trading Day, the per share volume-weighted average price as displayed under the heading “Bloomberg VWAP” on Bloomberg page FCE/A <equity> VAP in respect of the period from 9:30 a.m. to 4:00 p.m. (New York City time) on such VWAP Trading Day, or, in the case of Reference Property, the per unit volume-weighted average price as displayed by Bloomberg (or if such volume-weighted average price is unavailable, the market value of one share of Common Stock (or such unit of Reference Property) on such VWAP Trading Day as the Board of Directors determines in good faith using a volume-weighted method).

     “Debt” means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (i) every obligation of such Person for money borrowed, (ii) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses, (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers’ acceptances or similar facilities issued for the account of such Person, (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (including securities repurchase agreements but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business which are not overdue or which are being contested in good faith), (v) every Capital Lease Obligation of such Person, (vi) all Receivables Sales of such Person, together with any obligation of such Person to pay any discount, interest, fees, indemnities, penalties, recourse, expenses or other amounts in connection therewith, (vii) all Redeemable Stock issued by such Person, (viii) every obligation to pay rent or other payment amounts of such Person with respect to any Sale and Leaseback Transaction to which such Person is a party (including, if applicable, the full payment obligation of that Person at expiry of the lease arrangement assuming no refinancing or third party sale), (ix) every obligation under Interest Rate, Currency or Commodity Price Agreements of such Person and (x) every obligation of the type referred to in clauses (i) through (ix) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or for which such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise. The “amount” or “principal amount” of Debt at any time of determination as used herein represented by (a) any contingent Debt, shall be the maximum liability upon the occurrence of the contingency giving rise to the obligation (unless the underlying contingency has not occurred and the occurrence of the underlying contingency is entirely within the control of the Company), (b) any Debt issued at a price that is less than the principal amount at maturity thereof, shall be the amount of the liability in respect thereof

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determined in accordance with generally accepted accounting principles, (c) any Receivables Sale, shall be the amount of the unrecovered capital or principal investment of the purchaser (other than the Company or a Wholly Owned Subsidiary of the Company) thereof as of such time of determination, excluding amounts representative of yield or interest earned on such investment and (d) any Redeemable Stock, shall be the maximum fixed redemption or repurchase price in respect thereof.

     “Default” means any event that is, or after notice or passage of time, or both, would be, an Event of Default.

     “Defaulted Interest” shall have the meaning specified in Section 2.03.

     “Depositary” means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.06(c) as the Depositary with respect to such Notes, until a successor shall have been appointed and become such pursuant to the applicable provisions of this Indenture, and thereafter, “Depositary” shall mean or include such successor.

     “Designated Event” means the occurrence of either a Fundamental Change or a Termination of Trading.

     “Designated Event Company Notice” shall have the meaning specified in Section 14.01(b).

     “Designated Event Expiration Time” shall have the meaning specified in Section 14.01(b).

     “Designated Event Notice” shall have the meaning specified in Section 13.01(d).

     “Designated Event Purchase Date” shall have the meaning specified in Section 14.01(a).

     “Designated Event Purchase Notice” shall have the meaning specified in Section 14.01(a).

     “Designated Event Purchase Price” shall have the meaning specified in Section 14.01(a).

     “Distributed Property” shall have the meaning specified in Section 13.04(c).

     “Effective Date” shall have the meaning specified in Section 13.01(e)(ii).

     “Event of Default” means, with respect to the Notes, any event specified in Section 5.01, continued for the period of time, if any, and after the giving of notice, if any, therein designated.

     “Ex-Date” means, with respect to any issuance or distribution on the Common Stock or any other equity security, the first date on which the shares of Common Stock or such other

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equity security trade on the relevant exchange or in the relevant market, regular way, without the right to receive such issuance or distribution.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

     “Exchange Agreement Global Note” shall have the meaning specified in Section 2.06(b).

     “Exchange Agreement Notes” shall have the meaning specified in Section 2.06(b).

     “Extension Fee” shall have the meaning specified in Section 5.01.

     “Extension Period” shall have the meaning specified in Section 5.01.

     “Filing Failure” shall have the meaning specified in Section 5.01.

     “Fiscal Year” means a fiscal year of the Company ending on January 31 of each calendar year.

     “Fundamental Change” will be deemed to have occurred at the time after the Notes are originally issued that any of the following occurs:

     (1) (i) any Person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act (other than the members of the Ratner, Miller or Shafran families who are general partners of RMSLP (the “family interests”) and/or RMSLP), acquires Beneficial Ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of transactions, of (A) shares of the Company’s capital stock entitling the person to exercise 50% or more of the total voting power of all shares of the Company’s capital stock entitled to vote generally in elections of directors or (B) 50% or more of the voting interest in RMSLP, other than an acquisition by the Company, any of the Company’s Subsidiaries or any of the Company’s employee benefit plans or (ii) an aggregate Beneficial Ownership of more than 30% of the Common Stock then outstanding by the family interests and/or RMSLP other than upon the conversion of shares of the Company’s Class B common stock into shares of Common Stock;

     (2) the Company merges, or consolidates with or into any other Person (other than a Subsidiary), another Person merges with or into the Company, or the Company conveys, sells, transfers or leases all or substantially all of the Company’s assets to another Person, other than any transaction:

(i) that does not result in a reclassification, conversion, exchange or cancellation of the outstanding Common Stock;

(ii) pursuant to which the holders of the Common Stock immediately prior to the transaction have the entitlement to exercise, directly or indirectly, 50% or more of the

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voting power of all shares of the Company’s capital stock entitled to vote generally in the election of directors of the continuing or surviving corporation immediately after the transaction; or

(iii) which is effected solely to change the Company’s jurisdiction of incorporation and results in a reclassification, conversion or exchange of outstanding shares of the Common Stock solely into shares of Common Stock of the surviving corporation.

     “Global Note” shall have the meaning specified in Section 2.06(b).

     “Indenture” means this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or supplemented.

     “Interest Payment Date” means April 15 and October 15 of each year, beginning on April 15, 2010; provided, however, that if any Interest Payment Date falls on a date that is not a Business Day, such payment of interest will be postponed until the next succeeding Business Day, and no interest or other amount will be paid as a result of such postponement.

     “Interest Rate, Currency or Commodity Price Agreement” of any Person means any forward contract, futures contract, swap, option or other financial agreement or arrangement (including, without limitation, caps, floors, collars and similar agreements) relating to, or the value of which is dependent upon, interest rates, currency exchange rates or commodity prices or indices (excluding contracts for the purchase or sale of goods in the ordinary course of business).

     “Last Reported Sale Price” means, with respect to the Common Stock or any other security for which a Last Reported Sale Price must be determined, on any date, the closing sale price per share of the Common Stock or unit of such other security (or, if no closing sale price is reported, the average of the last bid and last ask prices or, if more than one in either case, the average of the average last bid and the average last ask prices) on such date as reported in composite transactions for the principal U.S. securities exchange on which it is then traded. If the Common Stock or such other security is not listed for trading on a United States national or regional securities exchange on the relevant date, the Last Reported Sale Price shall be the last quoted bid price per share of Common Stock or such other security in the over-the-counter market on the relevant date, as reported by the National Quotation Bureau or similar organization. In absence of such quotation, the Last Reported Sale Price shall be the average of the mid-point of the last bid and ask prices for the Common Stock or such other security on the relevant date from each of at least three nationally recognized independent investment banking firms, selected from time to time by the Board of Directors of the Company for this purpose. The Last Reported Sale Price shall be determined without reference to extended or after hours trading. Any such determination by the Company will be conclusive absent manifest error.

     “Market Disruption Event” means the occurrence or existence on any Scheduled Trading Day for the Common Stock of any suspension of or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the relevant securities exchange or otherwise) in the Common Stock on the relevant securities exchange or in any options contracts

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or futures contracts relating to the Common Stock on any relevant exchange if, in any such case, such suspension or limitation occurs or exists during the one-hour period before the closing time of the relevant exchange on such day.

     “Maturity Date” means October 15, 2014; provided, however, that if the Maturity Date falls on a date that is not a Scheduled Trading Day, then the Maturity Date will be postponed until the next succeeding Scheduled Trading Day, and no interest or other amount will be paid as a result of such postponement.

     “Merger Event” shall have the meaning specified in Section 13.06.

     “Non-Recourse” as applied to any Debt means Debt of a Person (or any portion thereof) to the extent that, under the terms thereof, no personal recourse may be had against such Person or any Affiliate of such Person for the payment of all or a portion of the principal of or interest or premium on such Debt, and enforcement of obligations on such Debt (except with respect to fraud, willful misconduct, intentional misrepresentation, misapplication of funds, waste and undertakings with respect to environmental matters) is limited only to recourse against interests in specified assets and properties owned by such Person (the “Subject Assets”), accounts and proceeds arising therefrom, and rights under purchase agreements or other agreements relating to such Subject Assets.

     “Note” or “Notes” means any note or notes, as the case may be, authenticated and delivered under this Indenture.

     “Noteholder” or “holder,” as applied to any Note, or other similar terms (but excluding the term “beneficial holder”), means any person in whose name at the time a particular Note is registered on the Note Register.

     “Note Register” shall have the meaning specified in Section 2.06(a).

     “Note Registrar” shall have the meaning specified in Section 2.06(a).

     “Observation Period” means, with respect to any Put Exercise Date, the 10 consecutive VWAP Trading Day period beginning on and including the earlier of (i) the third Business Day immediately following such Put Exercise Date (if such Business Day is also a VWAP Trading Day or, if not, then the next VWAP Trading Day) or (ii) the VWAP Trading Day immediately following the Maturity Date.

     “Officers’ Certificate,” when used with respect to the Company, means a certificate signed by (a) one of the President, the Chief Executive Officer, any Executive or Senior Vice President, or any Vice President (whether or not designated by a number or numbers or word added before or after the title “Vice President”) and (b) by any such other officer designated in (a) or by one of the Treasurer or any Assistant Treasurer, Secretary or any Assistant Secretary or Controller of the Company, which is delivered to the Trustee. Each such certificate shall include the statements provided for in Section 15.05 if and to the extent required by the provisions of

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such Section. One of the officers giving an Officers’ Certificate pursuant to Section 5.08 shall be the principal executive, financial or accounting officer of the Company.

     “opening of business” means 9:00 a.m. (New York City time).

     “Opinion of Counsel” means an opinion in writing signed by legal counsel, who may be an employee of or counsel to the Company, which is delivered to the Trustee. Each such opinion shall include the statements provided for in Section 15.05 if and to the extent required by the provisions of such Section.

     “outstanding,” when used with reference to Notes, shall, subject to the provisions of Section 7.04, mean, as of any particular time, all Notes authenticated and delivered by the Trustee under this Indenture, except:

     (i) Notes theretofore canceled by the Trustee or accepted by the Trustee for cancellation,

     (ii) Notes, or portions thereof, for the payment or purchase of which monies in the necessary amount shall have been deposited in trust with the Trustee or with any Paying Agent (other than the Company) or shall have been set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent);

     (iii) Notes in lieu of which, or in substitution for which, other Notes shall have been authenticated and delivered pursuant to the terms of Section 2.07 unless proof satisfactory to the Trustee is presented that any such Notes are held by protected purchasers in due course; and

     (iv) Notes put to the Company pursuant to Article 13.

     “Paying Agent” shall have the meaning specified in Section 3.02.

     “Person” means an individual, a corporation, a limited liability company, an association, a partnership, a joint venture, a joint stock company, a trust, an unincorporated organization or a government or an agency or a political subdivision thereof, including any syndicate or group that would be deemed to be a “person” under Section 13(d)(3) of the Exchange Act.

     “Portal Market” means The Portal Market operated by the Financial Industry Regulatory Authority or any successor thereto.

     “Predecessor Note” of any particular Note means every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 2.07 in lieu of or in exchange for a mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note that it replaces.

     “Purchase Agreement Global Note” shall have the meaning specified in Section 2.06(b).

     “Purchase Agreement Notes” shall have the meaning specified in Section 2.06(b).

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     “Put Exercise Agent” shall have the meaning specified in Section 3.02.

     “Put Exercise Date” shall have the meaning specified in Section 13.02(c).

     “Put Exercise Notice” shall have the meaning specified in Section 13.02(c).

     “Put Right” shall have the meaning specified in Section 13.11(a).

     “Put Termination” shall have the meaning specified in Section 13.11(a).

     “Put Termination Date” shall have the meaning specified in Section 13.11(a).

     “Put Termination Notice” shall have the meaning specified in Section 13.11(a).

     “Put Termination Notice Date” shall have the meaning specified in Section 13.11(a).

     “Put Termination Trigger Event” shall have the meaning specified in Section 13.11(a).

     “Put Value Obligation” shall have the meaning specified in Section 13.01(a).

     “Put Value Price” means as of any date, $1,000 divided by the Put Value Rate as of such date.

     “Put Value Rate” shall have the meaning specified in Section 13.01(a).

     “Qualified Institutional Buyer” or “QIB” shall have the meaning specified in Rule 144A.

     “Receivables” means receivables, chattel paper, instruments, documents or intangibles evidencing or relating to the right to payment of money.

     “Receivables Sale” of any Person means any sale of Receivables of such Person (pursuant to a purchase facility or otherwise), other than in connection with a disposition of the business operations of such Person relating thereto or a disposition of defaulted Receivables for purposes of collection and not as a financing arrangement.

     “record date,” with respect to the payment of interest on any Interest Payment Date, shall have the meaning specified in Section 2.03.

     “Redeemable Stock” of any Person means any Capital Stock of such Person that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or otherwise (including upon the occurrence of an event) matures or is required to be redeemed (pursuant to any sinking fund obligation or otherwise) or is convertible into or exchangeable for Debt or is redeemable at the option of the holder thereof, in whole or in part, at any time on or prior to the date that is 91 days after the Maturity Date.

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     “Reference Property” shall have the meaning specified in Section 13.06(b).

     “Related Party” means a director, officer or substantial security holder of the Company, as defined in Section 312.03 of the Listed Company Manual of the New York Stock Exchange.

     “Resale Restriction Termination Date” shall have the meaning specified in Section 2.06(c).

     “Responsible Officer” when used with respect to the Trustee, shall mean an officer of the Trustee in the Corporate Trust Office, having direct responsibility for the administration of this Indenture, and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.

     “Restricted Security” or “Restricted Securities” has the meaning specified in Section 2.06(c).

     “RMSLP” means RMS, Limited Partnership, an Ohio limited partnership.

     “Rule 144A” means Rule 144A as promulgated under the Securities Act.

     “Sale and Leaseback Transaction” of any Person means an arrangement with any lender or investor or to which such lender or investor is a party providing for the leasing by such Person of any property or asset of such Person which has been or is being sold or transferred by such Person more than 270 days after the acquisition thereof or the completion of construction or commencement of operation thereof to such lender or investor or to any person to whom funds have been or are to be advanced by such lender or investor on the security of such property or asset. The stated maturity of such arrangement shall be the date of the last payment of rent or any other amount due under such arrangement prior to the first date on which such arrangement may be terminated by the lessee without payment of a penalty.

     “Scheduled Trading Day” means any day that is scheduled to be a Trading Day on the principal U.S. national securities exchange or market on which the Common Stock is listed or admitted for trading.

     “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

     “Shelf Registration Statement” shall have the meaning specified in Section 13.11(a).

     “Spin-Off” shall have the meaning specified in Section 13.04(c).

     “Significant Subsidiary” means such Subsidiary of the Company as meets the definition of “significant subsidiary” in Rule 1-02 of Regulation S-X promulgated by the Commission as in effect on the original date of issuance of the Notes.

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     “Stock Price” means the price paid per share of Common Stock in connection with a Fundamental Change pursuant to which Additional Shares shall be added to the Put Value Rate as set forth in Section 13.01(e) hereof, which shall be equal to the average of the Last Reported Sale Prices of the Common Stock over the five consecutive Trading Day period ending on the Trading Day preceding the Effective Date of the Fundamental Change.

     “Subsidiary” of the Company means (i) a corporation a majority of whose capital stock with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by the Company, by the Company and one or more Subsidiaries of the Company or by one or more Subsidiaries of the Company or (ii) any other Person (other than a corporation) in which the Company, one or more Subsidiaries of the Company or the Company and one or more Subsidiaries of the Company, directly or indirectly, at the date of determination thereof, has greater than a 50% ownership interest.

     “subsidiary” of any Person means (i) a corporation more than 50% of the combined voting power of the outstanding Voting Stock of which is owned, directly or indirectly, by such Person or by one or more other subsidiaries of such Person or by such Person and one or more subsidiaries thereof, (ii) a partnership of which such Person, or one or more other subsidiaries of such Person or such Person and one or more other subsidiaries thereof, directly or indirectly, is the general partner and has the power to direct the policies, management and affairs of the partnership, (iii) a limited liability company of which such Person or one or more subsidiaries of such Person or such Person and one or more subsidiaries of such Person, directly or indirectly, is the managing member and has the power to direct the policies, management and affairs of the company, or (iv) any other Person (other than a corporation, partnership or limited liability company) in which such Person, or one or more other subsidiaries of such Person or such Person and one or more other subsidiaries thereof, directly or indirectly, has at least a majority ownership and power to direct the policies, management and affairs thereof.

     “Successor Company” shall have the meaning specified in Section 10.01(a).

     “Ten Day VWAP” means the arithmetic average of the Daily VWAP for the ten consecutive Trading Days ending three Trading Days prior to the applicable Put Exercise Date.

     “Termination of Trading” means the occurrence if the Common Stock is neither listed for trading on a U.S. national securities exchange nor approved for quotation on a U.S. system of automated dissemination of quotations of securities prices similar to the NASDAQ Global Market prior to its designation as a national securities exchange.

     “Termination Put Value Price” shall have the meaning specified in Section 13.11.

     “Trading Day” means a day during which (a) trading in Common Stock generally occurs and (b) there is no Market Disruption Event.

     “Trading Price” with respect to the Notes, on any date of determination, means the average of the secondary market bid quotations obtained by the Trustee for $2.0 million principal

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amount of Notes at approximately 3:30 p.m., New York City time, on such determination date from three independent nationally recognized securities dealers selected by the Company; provided that if three such bids cannot reasonably be obtained by the Trustee, but two such bids are obtained, then the average of the two bids shall be used, and if only one such bid can reasonably be obtained by the Trustee, that one bid shall be used. If the Trustee cannot reasonably obtain at least one bid for $2.0 million principal amount of Notes from a nationally recognized securities dealer, then the Trading Price per $1,000 principal amount of Notes will be deemed to be less than 98% of the product of the Last Reported Sale Price of the Common Stock (as provided to the Trustee by the Company) and the Put Value Rate. Any such determination by the Trustee will be conclusive absent manifest error.

     “transfer” shall have the meaning specified in Section 2.06(c).

     “Trigger Event” shall have the meaning specified in Section 13.04(c).

     “Trust Indenture Act” means the Trust Indenture Act of 1939, as amended, as it was in force at the date of execution of this Indenture; provided however, that in the event the Trust Indenture Act of 1939 is amended after the date hereof, the term “Trust Indenture Act” shall mean, to the extent required by such amendment, the Trust Indenture Act of 1939, as so amended.

     “Trustee” means The Bank of New York Mellon Trust Company, N.A., and its successors and any corporation resulting from or surviving any consolidation or merger to which it or its successors may be a party and any successor trustee at the time serving as successor trustee hereunder.

     “VWAP Market Disruption Event” means the occurrence or existence for more than a one-half hour period in the aggregate on any Scheduled Trading Day for the Common Stock or Reference Property of any suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the relevant securities exchange or otherwise) in the Common Stock or Reference Property on the relevant securities exchange or in any options contracts or future contracts relating to the Common Stock or Reference Property on the relevant exchange, and such suspension or limitation occurs or exists at any time before 1:00 p.m. (New York City time) on such Scheduled Trading Day.

     “VWAP Trading Day” means a Scheduled Trading Day during which (a) trading in Common Stock or Reference Property generally occurs and (b) there is no VWAP Market Disruption Event.

     “Voting Stock” of any Person means Capital Stock of such Person which ordinarily has voting power for the election of directors (or persons performing similar functions) of such Person, whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency.

     “Wholly Owned Subsidiary” of any Person means a subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors’ qualifying

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shares) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries of such Person or by such Person and one or more Wholly Owned Subsidiaries of such Person.

     Section 1.02. Incorporation by Reference of Trust Indenture Act.

     This Indenture is subject to the mandatory provisions of the Trust Indenture Act, which are incorporated by reference in and made a part of this Indenture. The following Trust Indenture Act terms have the following meanings:

     “indenture securities” means the Notes.

     “indenture security holder” means a Holder.

     “indenture to be qualified” means this Indenture.

     “indenture trustee” or “institutional trustee” means the Trustee.

     All other terms in this Indenture that are defined by the Trust Indenture Act, defined by it by reference to another statute or defined by Commission rule have the meanings assigned to them by such definitions. If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in this Indenture by the Trust Indenture Act, such required provision shall control.

ARTICLE 2
Issue, Description, Execution, Registration and Exchange of Notes

     Section 2.01. Designation and Amount. The Notes shall be designated as the “3.625% Puttable Equity-Linked Senior Notes due 2014.” The aggregate principal amount of Notes that may be authenticated and delivered under this Indenture is initially limited to $200,000,000, subject to Section 2.11 and except for Notes authenticated and delivered upon registration or transfer of, or in exchange for, or in lieu of other Notes pursuant to Section 2.06, Section 2.07 and Section 9.04.

     Section 2.02. Form of Notes. The Notes and the Trustee’s certificate of authentication to be borne by such Notes shall be substantially in the respective forms set forth in Exhibit A.

     Any Global Note may be endorsed with or have incorporated in the text thereof such legends or recitals or changes not inconsistent with the provisions of this Indenture as may be required by the Custodian, the Depositary or by the Financial Industry Regulatory Authority in order for the Notes to be tradable on The Portal Market or as may be required for the Notes to be tradable on any other market developed for trading of securities pursuant to Rule 144A or required to comply with any applicable law or any regulation thereunder or with the rules and regulations of any securities exchange or automated quotation system upon which the Notes may

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be listed or traded or designated for issuance or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Notes are subject.

     Any of the Notes may have such letters, numbers or other marks of identification and such notations, legends or endorsements as the officers executing the same may approve (execution thereof to be conclusive evidence of such approval) and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any securities exchange or automated quotation system on which the Notes may be listed or designated for issuance, or to conform to usage or to indicate any special limitations or restrictions to which any particular Notes are subject.

     Each Global Note shall represent such principal amount of the outstanding Notes as shall be specified therein and shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be increased or reduced to reflect repurchases, put exercises, transfers or exchanges permitted hereby. Any endorsement of any Global Note to reflect the amount of any increase or decrease in the amount of outstanding Notes represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in such manner and upon instructions given by the holder of such Notes in accordance with this Indenture. Payment of principal and accrued and unpaid interest on each Global Note shall be made to the holder of such Note on the date of payment, unless a record date or other means of determining holders eligible to receive payment is provided for herein.

     The terms and provisions contained in the form of Note attached as Exhibit A hereto are incorporated herein and shall constitute, and are hereby expressly made, a part of this Indenture and to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby.

     Section 2.03. Date and Denomination of Notes; Payments of Interest. The Notes shall be issuable in registered form without coupons in denominations of $1,000 principal amount and integral multiples thereof. Each Note shall be dated the date of its authentication and shall bear interest from the date specified on the face of the form of Note attached as Exhibit A hereto. Interest on the Notes shall be computed on the basis of a 360-day year comprised of twelve 30-day months.

     The Person in whose name any Note (or its Predecessor Note) is registered on the Note Register at the close of business on any record date with respect to any Interest Payment Date shall be entitled to receive the interest payable on such Interest Payment Date. Interest shall be payable at the office of the Company maintained by the Company for such purposes in the Borough of Manhattan, City of New York, which shall initially be an office or agency of the Trustee. The Company shall pay interest (i) on any Notes in certificated form by check mailed to the address of the Person entitled thereto as it appears in the Note Register (or upon written application by such Person to the Note Registrar not later than the relevant record date, by wire transfer in immediately available funds to such Person’s account within the United States, if such

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Person is entitled to interest on an aggregate principal in excess of $1,000,000) or (ii) on any Global Note by wire transfer of immediately available funds to the account of the Depositary or its nominee. The term “record date” with respect to any Interest Payment Date shall mean the March 31 or September 30 preceding the applicable April 15 or October 15 Interest Payment Date, respectively.

     Any interest on any Note which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called “Defaulted Interest”) shall forthwith cease to be payable to the Noteholder on the relevant record date by virtue of its having been such Noteholder, and such Defaulted Interest shall be paid by the Company, at its election in each case, as provided in clause (a) or (b) below:

     (a) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on a special record date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Note and the date of the proposed payment (which shall be not less than twenty-five (25) days after the receipt by the Trustee of such notice, unless the Trustee shall consent to an earlier date), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Company shall fix a special record date for the payment of such Defaulted Interest which shall be not more than fifteen (15) days and not less than ten (10) days prior to the date of the proposed payment, and not less than ten (10) days after the receipt by the Trustee of the notice of the proposed payment. The Company shall promptly notify the Trustee in writing of such special record date and the Trustee, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the special record date therefor to be mailed, first-class postage prepaid, to each holder at its address as it appears in the Note Register, not less than ten (10) days prior to such special record date. Notice of the proposed payment of such Defaulted Interest and the special record date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on such special record date and shall no longer be payable pursuant to the following clause (b) of this Section 2.03.

     (b) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange or automated quotation system on which the Notes may be listed or designated for issuance, and upon such notice as may be required by such exchange or automated quotation system, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee.

     Section 2.04. Reserved.

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     Section 2.05. Execution, Authentication and Delivery of Notes. The Notes shall be signed in the name and on behalf of the Company by the manual or facsimile signature of its Chairman or Vice-Chairman of the Board of Directors, Chief Executive Officer, President, any of its Executive or Senior Vice Presidents, or any of its Vice Presidents (whether or not designated by a number or numbers or word or words added before or after the title “Vice President”). The signature of any of these officers on the Notes shall be manual, facsimile, in the form of a .pdf attachment or by other means of electronic transmission. Notes shall be dated the date of their authentication.

     At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver additional Notes executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Notes, and the Trustee in accordance with such Company Order shall authenticate and deliver such Notes, without any further action by the Company hereunder.

     Only such Notes as shall bear thereon a certificate of authentication substantially in the form set forth on the form of Note attached as Exhibit A hereto, manually executed by the Trustee (or an authenticating agent appointed by the Trustee as provided by Section 15.11), shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Trustee (or such an authenticating agent) upon any Note executed by the Company shall be conclusive evidence that the Note so authenticated has been duly authenticated and delivered hereunder and that the holder is entitled to the benefits of this Indenture.

     In authenticating additional Notes after the date hereof, and accepting the additional responsibilities under this Indenture in relation to such Notes, the Trustee shall receive, and, shall be fully protected in relying upon:

     (a) A copy of the resolution or resolutions of the Board of Directors in or pursuant to which the terms and form of the Notes were established, certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect as of the date of such certificate, and if the terms and form of such Notes are established by an Officers’ Certificate pursuant to general authorization of the Board of Directors, such Officers’ Certificate;

     (b) an executed supplemental indenture, if any;

     (c) an Officers’ Certificate delivered in accordance with Section 15.05; and

     (d) an Opinion of Counsel which shall state:

     (i) that the form of such Notes has been established by a supplemental indenture or by or pursuant to a resolution of the Board of Directors in accordance with Sections 2.01 and 2.02 and in conformity with the provisions of this Indenture;

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     (ii) that the terms of such Notes have been established in accordance with Section 2.01 and in conformity with the other provisions of this Indenture;

     (iii) that such Notes, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other laws of general applicability relating to or affecting the enforcement of creditors’ rights and to general equity principles regardless of whether such enforceability is considered in a proceeding of law or equity; and

     (iv) that all laws and requirements in respect of the execution and delivery by the Company of such Notes have been complied with.

     In case any officer of the Company who shall have signed any of the Notes shall cease to be such officer before the Notes so signed shall have been authenticated and delivered by the Trustee, or disposed of by the Company, such Notes nevertheless may be authenticated and delivered or disposed of as though the Person who signed such Notes had not ceased to be such officer of the Company: and any Note may be signed on behalf of the Company by such Persons as, at the actual date of the execution of such Note, shall be the proper officers of the Company, although at the date of the execution of this Indenture any such person was not such an officer.

     Section 2.06. Exchange and Registration of Transfer of Notes; Restrictions on Transfer; Depositary.

     (a) The Company shall cause to be kept at the Corporate Trust Office a register (the register maintained in such office and in any other office or agency of the Company designated pursuant to Section 3.02 being herein sometimes collectively referred to as the “Note Register”) in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Notes and of transfers of Notes. Such register shall be in written form or in any form capable of being converted into written form within a reasonable period of time. The Trustee is hereby appointed “Note Registrar” for the purpose of registering Notes and transfers of Notes as herein provided. The Company may appoint one or more co-registrars in accordance with Section 3.02.

     Upon surrender for registration of transfer of any Note to the Note Registrar or any co-registrar, and satisfaction of the requirements for such transfer set forth in this Section 2.06, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes of any authorized denominations and of a like aggregate principal amount and bearing such restrictive legends as may be required by this Indenture.

     Notes may be exchanged for other Notes of any authorized denominations and of a like aggregate principal amount, upon surrender of the Notes to be exchanged at any such office or

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agency maintained by the Company pursuant to Section 3.02. Whenever any Notes are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Notes which the Noteholder making the exchange is entitled to receive, bearing registration numbers not contemporaneously outstanding.

     All Notes presented or surrendered for registration of transfer or for exchange, repurchase or put exercise shall (if so required by the Company, the Trustee, the Note Registrar or any co-registrar) be duly endorsed, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Company and duly executed, by the Noteholder thereof or his attorney-in-fact duly authorized in writing.

     No service charge shall be charged to the Noteholder for any exchange or registration of transfer of Notes, but the Company or the Trustee may require payment of a sum sufficient to cover any tax, assessments or other governmental charges that may be imposed in connection therewith.

     None of the Company, the Trustee, the Note Registrar or any co-registrar shall be required to exchange or register a transfer of (a) any Notes surrendered for put exercise or, if a portion of any Note is surrendered for put exercise, such portion thereof surrendered for put exercise or (b) any Notes, or a portion of any Note, surrendered for repurchase (and not withdrawn) except in accordance with Article 13 for put exercise and Article 14 for repurchase hereof, respectively.

     All Notes issued upon any registration of transfer or exchange of Notes in accordance with this Indenture shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture as the Notes surrendered upon such registration of transfer or exchange.

     (b) So long as the Notes are eligible for book-entry settlement with the Depositary, unless otherwise required by law, all Notes shall be represented by one or more Notes in global form as follows: (i) Notes initially sold pursuant to an exchange agreement (“Exchange Agreement Notes”) shall be issued initially in the form of one or more permanent global notes in definitive, fully registered form (collectively, the “Exchange Agreement Global Note”) and (ii) Notes initially sold pursuant to a purchase agreement (“Purchase Agreement Notes”) shall be issued initially in the form of one or more temporary global notes (collectively, the “Purchase Agreement Global Note” and, together with the Exchange Agreement Global Note, each, a “Global Note”) registered in the name of the Depositary or the nominee of the Depositary. The transfer and exchange of beneficial interests in a Global Note, which does not involve the issuance of a definitive Note, shall be effected through the Depositary (but not the Trustee or the Custodian) in accordance with this Indenture (including the restrictions on transfer set forth herein) and the procedures of the Depositary therefor.

     (c) Every Purchase Agreement Note (together with any Common Stock issued upon the exercise of a put of such Notes and required to bear the legend set forth in Section 2.06(d), collectively, the “Restricted Securities”) shall be subject to the restrictions on transfer set forth

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in this Section 2.06(c) (including the legend set forth below), unless such restrictions on transfer shall be waived by written consent of the Company, and the holder of each such Restricted Security, by such holder’s acceptance thereof, agrees to be bound by all such restrictions on transfer. As used in Section 2.06(c) and Section 2.06(d), the term “transfer” encompasses any sale, pledge, transfer or other disposition whatsoever of any Restricted Security.

     Until the date (the “Resale Restriction Termination Date”) that is six months after the last date of original issuance of the Purchase Agreement Notes, or such other period of time as permitted by Rule 144(d) under the Securities Act or any successor provision thereto, any certificate evidencing a Purchase Agreement Note (and all securities issued in exchange therefor or substitution thereof, other than Common Stock, if any, issued upon put exercise thereof which shall bear the legend set forth in Section 2.06(d), if applicable) shall bear a legend in substantially the following form (unless such Notes have been transferred pursuant to a registration statement that has become or been declared effective under the Securities Act and that continues to be effective at the time of such transfer, pursuant to the exemption from registration provided by Rule 144 or any similar provision then in force under the Securities Act, or unless otherwise agreed by the Company in writing, with notice thereof to the Trustee):

     THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT’’), OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS A “QUALIFIED INSTITUTIONAL BUYER’’ (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (2) AGREES THAT IT WILL NOT, PRIOR TO EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE NOTE EVIDENCED HEREBY UNDER RULE 144(d) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THIS NOTE OR THE COMMON STOCK ISSUABLE UPON A PUT OF THIS NOTE EXCEPT (A) TO FOREST CITY ENTERPRISES, INC., OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER), (3) PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT TO CLAUSES 2(A), 2(B) AND 2(D) ABOVE), IT WILL FURNISH TO THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, AND (4) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED PRIOR TO EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE NOTE EVIDENCED HEREBY UNDER RULE

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144(d) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THIS NOTE PURSUANT TO CLAUSE 2(D) ABOVE OR UPON ANY TRANSFER OF THIS NOTE UNDER RULE 144(d) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTION.

     No transfer of any Purchase Agreement Note prior to the Resale Restriction Termination Date will be registered by the Note Registrar unless the applicable box on the Form of Assignment and Transfer has been checked.

     Any Purchase Agreement Note (or security issued in exchange or substitution therefor) as to which such restrictions on transfer shall have expired in accordance with their terms may, upon surrender of such Note for exchange to the Note Registrar in accordance with the provisions of this Section 2.06, be exchanged for a new Note or Notes, of like tenor and aggregate principal amount, which shall not bear the restrictive legend required by this Section 2.06(c). The Company shall notify the Trustee upon the occurrence of the Resale Restriction Termination Date and promptly after a Registration Statement with respect to any Notes or the Common Stock has been declared effective under the Securities Act.

     Notwithstanding any other provisions of this Indenture, a Global Note may not be transferred as a whole or in part except (i) by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary and (ii) for transfers of portions of a Global Note in certificated form made upon request of a member of, or a participant in, the Depositary (for itself or on behalf of a beneficial owner) by written notice given to the Trustee by or on behalf of the Depositary in accordance with customary procedures of the Depositary and in compliance with this Section.

     The Depositary shall be a clearing agency registered under the Exchange Act. The Company initially appoints The Depository Trust Company to act as Depositary with respect to each Global Note. Initially, the Global Note shall be issued to the Depositary, registered in the name of Cede & Co., as the nominee of the Depositary, and deposited with the Trustee as custodian for Cede & Co.

     If at any time the Depositary for a Global Note (i) notifies the Company that it is unwilling or unable to continue as depositary for such Note or (ii) ceases to be registered as a clearing agency under the Exchange Act, the Company may appoint a successor Depositary with respect to such Note. If (A) a successor Depositary for such Global Note is not appointed by the Company within ninety (90) days after the Company receives such notice or the Depositary ceasing to be a registered clearing agency, (B) the Company, at its option, notifies the Trustee that it elects to cause the issuance of Notes in definitive form in exchange for all or any part of the Notes represented by a Global Note, subject to the procedures of the Depositary, or (C) an Event of Default has occurred and is continuing and the Note Registrar has received a request

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from the Depositary for the issuance of Notes in definitive form in exchange for a Global Note, the Company will execute, and the Trustee, upon receipt of an Officers’ Certificate for the authentication and delivery of Notes, will authenticate and deliver Notes in definitive form in an aggregate principal amount equal to the principal amount of such Global Note, in exchange for such Global Note, and upon delivery of the Global Note to the Trustee such Global Note shall be canceled.

     Definitive Notes issued in exchange for all or a part of any Global Note pursuant to this Section 2.06(c) shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. Upon execution and authentication, the Trustee shall deliver such definitive Notes to the Persons in whose names such definitive Notes are so registered.

     At such time as all interests in a Global Note have been put, canceled, repurchased or transferred, such Global Note shall be, upon receipt thereof, canceled by the Trustee in accordance with standing procedures and instructions existing between the Depositary and the Custodian. At any time prior to such cancellation, if any interest in a Global Note is exchanged for definitive Notes, put, canceled, repurchased or transferred to a transferee who receives definitive Notes therefor or any definitive Note is exchanged or transferred for part of such Global Note, the principal amount of such Global Note shall, in accordance with the standing procedures and instructions existing between the Depositary and the Custodian, be appropriately reduced or increased, as the case may be, and an endorsement shall be made on such Global Note, by the Trustee or the Custodian, at the direction of the Trustee, to reflect such reduction or increase.

     None of the Company, the Trustee nor any agent of the Company or the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Note or maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

     (d) Until the Resale Restriction Termination Date, any stock certificate representing Common Stock issued upon a put of a Purchase Agreement Note shall bear a legend in substantially the following form (unless such Note or such Common Stock has been transferred pursuant to a registration statement that has become or been declared effective under the Securities Act and that continues to be effective at the time of such transfer or pursuant to the exemption from registration provided by Rule 144 under the Securities Act or any similar provision then in force under the Securities Act, or such Common Stock has been issued upon a put of Purchase Agreement Notes that have been transferred pursuant to a registration statement that has become or been declared effective under the Securities Act and that continues to be effective at the time of such transfer or pursuant to the exemption from registration provided by Rule 144 under the Securities Act, or unless otherwise agreed by the Company with written notice thereof to the Trustee and any transfer agent for the Common Stock):

     THE CLASS A COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED

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(THE “SECURITIES ACT’’), OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. THE HOLDER HEREOF AGREES THAT UNTIL THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE CLASS A COMMON STOCK EVIDENCED HEREBY UNDER RULE 144(d) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), (1) IT WILL NOT RESELL OR OTHERWISE TRANSFER THE CLASS A COMMON STOCK EVIDENCED HEREBY EXCEPT (A) TO FOREST CITY ENTERPRISES, INC. OR TO ANY SUBSIDIARY THEREOF, (B) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (C) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); (2) PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT TO CLAUSES 1(A) OR 1(C) ABOVE), IT WILL FURNISH TO NATIONAL CITY BANK, AS TRANSFER AGENT (OR A SUCCESSOR TRANSFER AGENT), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT; AND (3) IT WILL DELIVER TO EACH PERSON TO WHOM THE CLASS A COMMON STOCK EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 1(C) ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE CLASS A COMMON STOCK EVIDENCED HEREBY PURSUANT TO CLAUSE 1(C) ABOVE OR UPON ANY TRANSFER OF THE CLASS A COMMON STOCK EVIDENCED HEREBY UNDER RULE 144(d) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION).

          Any such Common Stock as to which such restrictions on transfer shall have expired in accordance with their terms may, upon surrender of the certificates representing such shares of Common Stock for exchange in accordance with the procedures of the transfer agent for the Common Stock, be exchanged for a new certificate or certificates for a like aggregate number of shares of Common Stock, which shall not bear the restrictive legend required by this Section 2.06(d).

     (e) Notwithstanding any provision of Section 2.06 to the contrary, in the event Rule 144(d) as promulgated under the Securities Act (or any successor rule) is amended to change the six-month period under Rule 144(d) (or the corresponding period under any successor rule), from and after receipt by the Trustee of the Officers’ Certificate and Opinion of Counsel provided for in this Section 2.06(e), (i) each reference in Section 2.06(c) to “six months” and in the restrictive legend set forth in such paragraph to “SIX MONTHS” shall be deemed for all purposes hereof to be references to such changed period, (ii) each reference in Section 2.06(d) to “six months” and in the restrictive legend set forth in such paragraph to “SIX MONTHS” shall be deemed for all purposes hereof to be references to such changed period and (iii) all corresponding references in the Notes (including the definition of Resale Restriction Termination Date) and the restrictive

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legends thereon shall be deemed for all purposes hereof to be references to such changed period, provided that such changes shall not become effective if they are otherwise prohibited by, or would otherwise cause a violation of, the then-applicable federal securities laws. The provisions of this Section 2.06(e) will not be effective until such time as the Opinion of Counsel and Officers’ Certificate have been received by the Trustee hereunder. This Section 2.06(e) shall apply to successive amendments to Rule 144(d) (or any successor rule) changing the holding period thereunder.

     Section 2.07. Mutilated, Destroyed, Lost or Stolen Notes. In case any Note shall become mutilated or be destroyed, lost or stolen, the Company in its discretion may execute, and upon its written request the Trustee or an authenticating agent appointed by the Trustee shall authenticate and deliver, a new Note, bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Note, or in lieu of and in substitution for the Note so destroyed, lost or stolen. In every case the applicant for a substituted Note shall furnish to the Company, to the Trustee and, if applicable, to such authenticating agent such security or indemnity as may be required by them to save each of them harmless from any loss, liability, cost or expense caused by or connected with such substitution, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company, to the Trustee and, if applicable, to such authenticating agent evidence to their satisfaction of the destruction, loss or theft of such Note and of the ownership thereof.

     The Trustee or such authenticating agent may authenticate any such substituted Note and deliver the same upon the receipt of such security or indemnity as the Trustee, the Company and, if applicable, such authenticating agent may require. Upon the issuance of any substituted Note, the Company or the Trustee may require the payment by the holder of a sum sufficient to cover any tax, assessment or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith. In case any Note which has matured or is about to mature or has been tendered for repurchase upon a Designated Event or is about to be put to the Company shall become mutilated or be destroyed, lost or stolen, the Company may, in its sole discretion, instead of issuing a substitute Note, pay or authorize the payment or the put exercise of the same (without surrender thereof except in the case of a mutilated Note), as the case may be, if the applicant for such payment or put exercise shall furnish to the Company, to the Trustee and, if applicable, to such authenticating agent such security or indemnity as may be required by them to save each of them harmless for any loss, liability, cost or expense caused by or connected with such substitution, and, in every case of destruction, loss or theft, evidence satisfactory to the Company, the Trustee and, if applicable, any Paying Agent or Put Exercise Agent evidence of their satisfaction of the destruction, loss or theft of such Note and of the ownership thereof.

     Every substitute Note issued pursuant to the provisions of this Section 2.07 by virtue of the fact that any Note is destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Note shall be found at any time, and shall be entitled to all the benefits of (but shall be subject to all the limitations set forth in) this Indenture equally and proportionately with any and all other Notes duly issued hereunder. To the extent permitted by law, all Notes shall be held and owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement or payment

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or put exercise or repurchase of mutilated, destroyed, lost or stolen Notes and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment or put exercise of negotiable instruments or other securities without their surrender.

     Section 2.08. Temporary Notes. Pending the preparation of Notes in certificated form, the Company may execute and the Trustee or an authenticating agent appointed by the Trustee shall, upon written request of the Company, authenticate and deliver temporary Notes (printed or lithographed). Temporary Notes shall be issuable in any authorized denomination, and substantially in the form of the Notes in certificated form but with such omissions, insertions and variations as may be appropriate for temporary Notes, all as may be determined by the Company. Every such temporary Note shall be executed by the Company and authenticated by the Trustee or such authenticating agent upon the same conditions and in substantially the same manner, and with the same effect, as the Notes in certificated form. Without unreasonable delay the Company will execute and deliver to the Trustee or such authenticating agent Notes in certificated form (other than in the case of Notes in global form) and thereupon any or all temporary Notes (other than any Global Note) may be surrendered in exchange therefor, at each office or agency maintained by the Company pursuant to Section 3.02 and the Trustee or such authenticating agent shall authenticate and deliver in exchange for such temporary Notes an equal aggregate principal amount of Notes in certificated form. Such exchange shall be made by the Company at its own expense and without any charge therefor. Until so exchanged, the temporary Notes shall in all respects be entitled to the same benefits and subject to the same limitations under this Indenture as Notes in certificated form authenticated and delivered hereunder.

     Section 2.09 Cancellation of Notes Paid, Etc. All Notes surrendered for the purpose of payment, repurchase, put exercise, exchange or registration of transfer, shall, if surrendered to the Company or any Paying Agent or any Note Registrar or any Put Exercise Agent, be surrendered to the Trustee and promptly canceled by it, or, if surrendered to the Trustee, shall be promptly canceled by it, and no Notes shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Trustee shall dispose of canceled Notes in accordance with its customary procedures and, after such disposal, shall deliver a certificate of such disposal to the Company, at the Company’s written request. If the Company shall acquire any of the Notes, such acquisition shall not operate as satisfaction of the debt represented by such Notes unless and until the same are delivered to the Trustee for cancellation.

     Section 2.10. CUSIP Numbers. The Company in issuing the Notes may use “CUSIP” numbers (if then generally in use), and, if so, the Trustee shall use “CUSIP” numbers in all notices to Noteholders as a convenience to holders of the Notes; provided, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or on such notice and that reliance may be placed only on the other identification numbers printed on the Notes. The Company will promptly notify the Trustee in writing of any change in the “CUSIP” numbers.

     Section 2.11. Additional Notes, Repurchases. The Company may, without the consent of the Noteholders and notwithstanding Section 2.01, reopen this Indenture and issue additional

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Notes hereunder with the same terms and with the same CUSIP number as the Exchange Agreement Notes or the Purchase Agreement Notes initially issued hereunder, as applicable, in an unlimited aggregate principal amount, which will form the same series with the Notes initially issued hereunder; provided that no such additional Notes may be issued unless fungible with the Notes initially issued hereunder for U.S. federal income tax purposes. The Company may also from time to time repurchase the Notes in tender offers, open market purchases or negotiated transactions without prior notice to Noteholders.

ARTICLE 3
Particular Covenants of the Company

     Section 3.01. Payment of Principal and Interest. The Company covenants and agrees that it will cause to be paid the principal of, and accrued and unpaid interest on, each of the Notes and if applicable, payment of the Put Value Obligation, at the places, at the respective times and in the manner provided herein and in the Notes. Each installment of accrued and unpaid interest on the Notes due on any Interest Payment Date may be paid by mailing checks for the amount payable to or upon the written order of the Noteholders entitled thereto as they shall appear on the registry books of the Company, provided that, with respect to any Noteholder with an aggregate principal amount in excess of $1,000,000, at the application of such holder in writing to the Note Registrar not later than the relevant record date, accrued and unpaid interest on such holder’s Notes shall be paid by wire transfer in immediately available funds to such holder’s account in the United States supplied by such holder from time to time to the Trustee and Paying Agent (if different from Trustee); provided further that payment of accrued and unpaid interest made to the Depositary shall be paid by wire transfer in immediately available funds in accordance with such wire transfer instructions and other procedures provided by the Depositary from time to time.

     Section 3.02. Maintenance of Office or Agency. The Company will maintain in the Borough of Manhattan, The City of New York, an office or agency where the Notes may be surrendered for registration of transfer or exchange or for presentation for payment or repurchase (“Paying Agent”) or for put exercise (“Put Exercise Agent”) and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency not designated or appointed by the Trustee. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office or the office or agency of the Trustee in the Borough of Manhattan, The City of New York.

     The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough

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of Manhattan, The City of New York, for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The terms Paying Agent and Put Exercise Agent include any such additional or other offices or agencies, as applicable.

     The Company hereby initially designates the Trustee as the Paying Agent, Note Registrar, Custodian and Put Exercise Agent and the Corporate Trust Office and the office or agency of the Trustee in the Borough of Manhattan shall be considered as one such office or agency of the Company for each of the aforesaid purposes.

     So long as the Trustee is the Note Registrar, the Trustee agrees to mail, or cause to be mailed, the notices set forth in Section 6.10(a) and the third paragraph of Section 6.11.

     Section 3.03. Appointments to Fill Vacancies in Trustee’s Office. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 6.10, a Trustee, so that there shall at all times be a Trustee hereunder.

     Section 3.04. Provisions as to Paying Agent.

     (a) If the Company shall appoint a Paying Agent other than the Trustee or if the Trustee shall appoint such a Paying Agent, the Company will cause such Paying Agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section 3.04:

     (i) that it will hold all sums held by it as such agent for the payment of the principal of, and accrued and unpaid interest on, the Notes (whether such sums have been paid to it by the Company) in trust for the benefit of the holders of the Notes;

     (ii) that it will give the Trustee notice of any failure by the Company to make any payment of the principal of, and accrued and unpaid interest on, the Notes when the same shall be due and payable; and

     (iii) that at any time during the continuance of an Event of Default, upon request of the Trustee, it will forthwith pay to the Trustee all sums so held in trust.

     The Company shall, on or before each due date of the principal of, or accrued and unpaid interest on the Notes, deposit with the Paying Agent a sum sufficient to pay such principal or accrued and unpaid interest and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee in writing of any failure to take such action, provided that if such deposit is made on the due date, such deposit must be received by the Paying Agent by 11:00 a. m., New York City time, on such date.

     (b) If the Company shall act as its own Paying Agent, it will, on or before each due date of the principal of and accrued and unpaid interest on the Notes, set aside, segregate and hold in trust for the benefit of the holders of the Notes a sum sufficient to pay such principal and accrued and unpaid interest so becoming due and will notify the Trustee in writing of any failure

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to take such action and of any failure by the Company to make any payment of the principal of and accrued and unpaid interest on the Notes, when the same shall become due and payable.

     (c) Anything in this Section 3.04 to the contrary notwithstanding, the Company may, at any time, for the purpose of obtaining a satisfaction and discharge of this Indenture, or for any other reason, pay or cause to be paid to the Trustee all sums held in trust by the Company or any Paying Agent hereunder as required by this Section 3.04, such sums to be held by the Trustee upon the trusts herein contained and upon such payment by the Company or any Paying Agent to the Trustee, the Company or such Paying Agent shall be released from all further liability with respect to such sums.

     (d) Anything in this Section 3.04 to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 3.04 is subject to Section 11.03 and Section 11.04.

     Section 3.05. Existence. Subject to Article 10, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence.

     Section 3.06. Rule 144A Information Requirement and Annual Reports.

     (a) At any time the Company is not subject to Sections 13 or 15(d) of the Exchange Act, the Company shall, so long as any of the Notes shall, at such time, constitute “Restricted Securities” within the meaning of Rule 144(a)(3) under the Securities Act, promptly provide to the Trustee and shall, upon written request, provide to any holder, beneficial owner or prospective purchaser of such Notes, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act to facilitate the resale of such Notes pursuant to Rule 144A under the Securities Act. The Company shall take such further action as any holder or beneficial owner of such Notes may reasonably request to the extent required from time to time to enable such holder or beneficial holder to sell such Notes in accordance with Rule 144A under the Securities Act, as such rule may be amended from time to time.

     (b) The Company will deliver to the Trustee within fifteen (15) days after the filing of the same with the Commission, copies of the quarterly and annual reports and of the information, documents and other reports, if any, which the Company is required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act, and shall otherwise comply with the requirements of Trust Indenture Act Section 314(a).

     (c) Delivery of such reports, information and documents to the Trustee is for informational purposes only, and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to conclusively rely exclusively on an Officers’ Certificate).

     Section 3.07. Stay, Extension and Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other

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law which would prohibit or forgive the Company from paying all or any portion of the principal of, or interest on, the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture; and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

     Section 3.08. Compliance Certificate; Statements as to Defaults. The Company shall deliver to the Trustee within 120 calendar days after the end of each Fiscal Year of the Company (beginning with the Fiscal Year ending on January 31, 2010) an Officers’ Certificate stating whether or not the signer thereof has knowledge of any failure by the Company to comply with all conditions and covenants then required to be performed under this Indenture and, if so, specifying each such failure and the nature thereof.

     In addition, the Company shall deliver to the Trustee, as soon as possible and in any event within 30 days after the Company becomes aware of the occurrence of any Event of Default or Default, an Officers’ Certificate setting forth the details of such Event of Default or Default, its status and the action which the Company proposes to take with respect thereto.

     Section 3.09. Further Instruments and Acts. Upon request of the Trustee or as necessary, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture.

ARTICLE 4
Lists of Noteholders and Reports by the Company and the Trustee

     Section 4.01. Lists of Noteholders. The Company covenants and agrees that it will furnish or cause to be furnished to the Trustee, semi-annually, not more than fifteen (15) days after each March 31 and September 30 in each year beginning with March 31, 2010, and at such other times as the Trustee may request in writing, within thirty (30) days after receipt by the Company of any such request (or such lesser time as the Trustee may reasonably request in order to enable it to timely provide any notice to be provided by it hereunder), a list in such form as the Trustee may reasonably require of the names and addresses of the Noteholders as of a date not more than fifteen (15) days (or such other date as the Trustee may reasonably request in order to so provide any such notices) prior to the time such information is furnished, except that no such list need be furnished so long as the Trustee is acting as Note Registrar.

     Section 4.02. Preservation and Disclosure of Lists.

     (a) The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the Noteholders contained in the most recent list furnished to it as provided in Section 4.01 or maintained by the Trustee in its capacity as Note

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Registrar, if so acting. The Trustee may destroy any list furnished to it as provided in Section 4.01 upon receipt of a new list so furnished.

     (b) The rights of Noteholders to communicate with other Noteholders with respect to their rights under this Indenture or under the Notes and the corresponding rights and duties of the Trustee, shall be as provided by the Trust Indenture Act.

     (c) Every Noteholder, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Noteholders made pursuant to the Trust Indenture Act.

     Section 4.03. Reports by Trustee.

     (a) Within sixty (60) days after April 15 of each year commencing with the year 2010, the Trustee shall transmit to Noteholders such reports dated as of April 15 of each year in which such reports are made concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto.

     (b) A copy of such report shall, at the time of such transmission to Noteholders, be filed by the Trustee with each stock exchange and automated quotation system upon which the Notes are listed and with the Company. The Company will notify the Trustee in writing within a reasonable time when the Notes are listed on any stock exchange or automated quotation system and when any such listing is discontinued.

     Section 4.04. Reports by Company.

     (a) The Company shall file with the Trustee and the Commission, and transmit to Noteholders, such information, documents and other reports and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within 15 days after the same is filed with the Commission.

     (b) Delivery of such reports, information and documents to the Trustee is for informational purposes only, and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to conclusively rely exclusively on an Officers’ Certificate).

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ARTICLE 5
Defaults and Remedies

     Section 5.01. Events of Default. The following events shall be Events of Default with respect to the Notes:

     (a) default in any payment of interest on any Note when due and payable and the default continues for a period of 30 days;

     (b) default in the payment of principal of or any other amount under any Note when due and payable on the Maturity Date, upon put exercise, upon required repurchase, upon declaration of acceleration or otherwise;

     (c) failure by the Company to comply with its obligation to deliver cash or shares of Common Stock, as applicable, upon a put of any Notes;

     (d) failure by the Company to comply with its obligations under Article 10;

     (e) failure by the Company to comply with its notice obligations under Section 13.01(b), Section 13.01(c), Section 13.01(d) or Section 14.01(b);

     (f) failure by the Company for 60 days to comply with any of its other agreements (other than a covenant or warranty or default in whose performance or whose breach is elsewhere in this Section specifically provided for) contained in the Notes or the Indenture after written notice of such default from the Trustee or the holders of at least 25% in principal amount of the Notes then outstanding has been received by the Company;

     (g) a default or defaults under any bond, debenture, note or other evidence of Debt (other than Non-Recourse Debt) by the Company or any subsidiary of the Company or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Debt for money borrowed (other than Non-Recourse Debt) of the Company or any such subsidiary with a principal amount then outstanding in excess of $10 million, whether such Debt now exists or shall hereafter be created, which default or defaults shall constitute a failure to pay any portion of the principal of such Debt when due and payable after the expiration of any applicable grace period with respect thereto and shall have resulted in such Debt becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable or constitutes the failure to pay any portion of the principal of such Debt when due and payable at maturity or by acceleration;

     (h) a default or defaults under any bond, debenture, note or other evidence of Non-Recourse Debt by the Company or any subsidiary of the Company or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Non-Recourse Debt of the Company or any such subsidiary with a principal amount then outstanding in excess of 20% of the aggregate principal or similar amount of all the outstanding Non-Recourse Debt of the Company and its subsidiaries, whether such Non-Recourse Debt now exists or shall hereafter be created, which default or defaults shall constitute a failure to pay any portion of the principal of such

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Non-Recourse Debt when due and payable after the expiration of any applicable grace period with respect thereto or shall have resulted in such Non-Recourse Debt becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable;

     (i) the Company or any of its Significant Subsidiaries shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to the Company or any of their respective Significant Subsidiaries or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of the Company or any of its Significant Subsidiaries or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due; or

     (j) an involuntary case or other proceeding shall be commenced against the Company or any of its Significant Subsidiaries seeking liquidation, reorganization or other relief with respect to the Company or any of its Significant Subsidiaries or their respective debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of the Company or any of its Significant Subsidiaries or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of ninety (90) consecutive days.

     In case one or more Events of Default shall have occurred and be continuing (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body), then, and in each and every such case (other than an Event of Default specified in Section 5.01(i) or Section 5.01(j) with respect to the Company), unless the principal of all of the Notes shall have already become due and payable, either the Trustee or the holders of at least 25% in aggregate principal amount of the Notes then outstanding determined in accordance with Section 7.04, by notice in writing to the Company (and to the Trustee if given by Noteholders), may declare 100% of the principal of, and accrued and unpaid interest on, all the Notes to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in this Indenture or in the Notes contained to the contrary notwithstanding. If an Event of Default specified in Section 5.01(i) or Section 5.01(j) occurs and is continuing with respect to the Company, the principal of all the Notes and accrued and unpaid interest shall be immediately due and payable. This provision, however, is subject to the conditions that if, at any time after the principal of the Notes shall have been so declared due and payable, and before any judgment or decree for the payment of the monies due shall have been obtained or entered as hereinafter provided, the Company shall pay or shall deposit with the Trustee a sum sufficient to pay installments of accrued and unpaid interest upon all Notes and the principal of any and all Notes that shall have become due otherwise than by acceleration (with interest on overdue installments of accrued and unpaid interest (to the extent that payment of such interest is enforceable under

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applicable law) and on such principal at the rate borne by the Notes during the period of such Default) and amounts due to the Trustee pursuant to Section 6.06, and if (1) rescission would not conflict with any judgment or decree of a court of competent jurisdiction and (2) any and all Events of Defaults under this Indenture, other than the nonpayment of principal of and accrued and unpaid interest on Notes that shall have become due solely by such acceleration, shall have been cured or waived pursuant to Section 5.07, then and in every such case the holders of a majority in aggregate principal amount of the Notes then outstanding, by written notice to the Company and to the Trustee, may waive all Defaults or Events of Default with respect to the Notes and rescind and annul such declaration and its consequences and such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver or rescission and annulment shall extend to or shall affect any subsequent Default or Event of Default, or shall impair any right consequent thereon. The Company shall notify the Responsible Officer of the Trustee in writing, promptly upon becoming aware thereof, of any Event of Default by delivering to the Trustee a statement specifying such Event of Default and any action the Company has taken, is taking or proposes to take with respect thereto.

     Notwithstanding the foregoing, the Company may, at its option, elect that the sole remedy for an Event of Default relating to its failure to comply with the Company’s obligation to file annual or quarterly reports in accordance with this Indenture or to comply with the requirements of Section 314(a)(1) of the Trust Indenture Act (a “Filing Failure”) shall for the first one hundred eighty (180) days after the occurrence of such Event of Default (the “Extension Period”) consist exclusively of the right to receive a fee (the “Extension Fee”) accruing at the rate of 1.00% per annum of the aggregate principal amount of Notes that are then outstanding, on the terms and in the manner described below. Any Extension Fee shall be paid on the same times and in the same manner as interest shall be paid in accordance with this Indenture. The Extension Fee shall accrue on the Notes that are then outstanding from the first day of the Event of Default to, but excluding, the earlier of (i) the date on which the Company has made the filings initially giving rise to the Filing Failure and (ii) the date that is one hundred eighty (180) days after the occurrence of the Event of Default. The Company must give written notice of its election to pay the Extension Fee prior to the occurrence of the Event of Default. On the 181st day after such Event of Default (if the Event of Default relating to the reporting obligations is not cured or waived prior to such 181st day), the Notes shall be subject to acceleration as provided in this Section 5.01. This right shall not affect the rights of holders of Notes if any other Event of Default occurs under the Indenture. If the Company does not pay the Extension Fee on a timely basis in accordance with this Section 5.01, the Notes shall be subject to acceleration as provided in this Section 5.01. Notwithstanding the foregoing, if an additional Filing Failure occurs during an Extension Period, the Notes will be subject to acceleration for such additional Filing Failure at the end of the Extension Period for the first Filing Failure to the extent it has not been remedied before the end of the first Extension Period, provided, however that to the extent the Company has agreed to pay an additional Extension Fee in accordance with the terms of this Section 5.01 as to such additional Filing Failure, and the first Filing Failure has been remedied before the end of the first Extension Period, the Notes will not be subject to acceleration until the end of the additional Extension Period as to such additional Filing Failure.

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For the avoidance of doubt, notwithstanding the occurrence of multiple concurrent Filing Failures, the Extension Fee shall not exceed the rate provided for in the first sentence of this paragraph.

     In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such waiver or rescission and annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company, the Noteholders, and the Trustee shall, subject to any determination in such proceeding, be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Company, the Noteholders, and the Trustee shall continue as though no such proceeding had been instituted.

     Section 5.02. Payments of Notes on Default; Suit Therefor. In the event that the Trustee or the holders of not less than 25% in aggregate principal amount of the Notes then outstanding hereunder have declared the principal of and accrued and unpaid interest on, the Notes, to be due and payable immediately in accordance with Section 5.01, and the Company shall have failed forthwith to pay such amounts, the Trustee, in its own name and as trustee of an express trust, after being furnished suitable indemnity pursuant to Section 6.01, shall be entitled and empowered to institute any actions or proceedings at law or in equity for the collection of the sums so due and unpaid (including such further amounts as shall be sufficient to cover the reasonable costs and expenses of collection, including reasonable compensation to the Trustee, its agents, attorneys and counsel, and any expenses or liabilities incurred by the Trustee hereunder other than through its negligence or bad faith), and may prosecute any such action or proceeding to judgment or final degree, and may enforce any such judgment or final decree against the Company and collect in the manner provided by law out of the property of the Company wherever situated the monies adjudged or decreed to be payable.

     In case there shall be pending proceedings for the bankruptcy or for the reorganization of the Company under Title 11 of the United States Code, or any other applicable law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Company, the property of the Company, or in the event of any other judicial proceedings relative to the Company, upon the Notes, or to the creditors or property of the Company, the Trustee, irrespective of whether the principal of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 5.02, shall be entitled and empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of principal and accrued and unpaid interest and other amounts payable in respect of the Notes, and, in case of any judicial proceedings, to file such proofs of claim and other papers or documents and to take such other actions as it may deem necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Noteholders allowed in such judicial proceedings relative to the Company on the Notes, its creditors, or its property, and to collect and receive any monies or other property payable or deliverable on any such claims, and to distribute the same after the deduction of any amounts due the Trustee under Section 6.06; and any

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receiver, assignee or trustee in bankruptcy or reorganization, liquidator, custodian or similar official is hereby authorized by each of the Noteholders to make such payments to the Trustee, as administrative expenses, and, in the event that the Trustee shall consent to the making of such payments directly to the Noteholders, to pay to the Trustee any amount due it for reasonable compensation, expenses, advances and disbursements, including agents and counsel fees and including any other amounts due to the Trustee under Section 6.06 hereof, incurred by it up to the date of such distribution. To the extent that such payment of reasonable compensation, expenses, advances and disbursements out of the estate in any such proceedings shall be denied for any reason, payment of the same shall be secured by a lien on, and shall be paid out of, any and all distributions, dividends, monies, securities and other property which the holders of the Notes may be entitled to receive in such proceedings, whether in liquidation or under any plan of reorganization or arrangement or otherwise.

     Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting the Noteholder or the rights of any Noteholder thereof, or to authorize the Trustee to vote in respect of the claim of any Noteholder in any such proceeding.

     All rights of action and of asserting claims under this Indenture, or under any of the Notes, may be enforced by the Trustee without the possession of any of the Notes, or the production thereof at any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the holders of the Notes.

     In any proceedings brought by the Trustee (and in any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party) the Trustee shall be held to represent all the holders of the Notes, and it shall not be necessary to make any holders of the Notes parties to any such proceedings.

     Section 5.03. Application of Monies Collected by Trustee. Any monies collected by the Trustee pursuant to this Article 5 with respect to the Notes shall be applied in the order following, at the date or dates fixed by the Trustee for the distribution of such monies, upon presentation of the several Notes, and stamping thereon the payment, if only partially paid, and upon surrender thereof, if fully paid:

     First, to the payment of all amounts due the Trustee under Section 6.06;

     Second, in case the principal of and other amounts under the outstanding Notes shall not have become due and be unpaid, to the payment of interest on the Notes in default in the order of the maturity of the installments of such interest, with interest (to the extent that such interest has been collected by the Trustee) upon the overdue installments of interest at the rate borne by the Notes, such payments to be made ratably to the Persons entitled thereto;

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     Third, in case the principal of and other amounts under the outstanding Notes shall have become due, by declaration or otherwise, and be unpaid to the payment of the whole amount (including, if applicable, payments in respect of the Put Value Obligation) then owing and unpaid upon the Notes for principal, such other amounts and interest, with interest on the overdue principal, such other amounts (to the extent that such interest has been collected by the Trustee), and upon overdue installments of interest at the rate borne by the Notes, and in case such monies shall be insufficient to pay in full the whole amounts so due and unpaid upon the Notes, then to the payment of such principal, such other amounts and interest without preference or priority of principal or such other amounts over interest, or of interest over principal, such other amounts or of any installment of interest over any other installment of interest, or of any Note over any other Note, ratably to the aggregate of such principal, such other amounts and accrued and unpaid interest; and

     Fourth, to the payment of the remainder, if any, to the Company or as any court of competent jurisdiction may direct.

     Section 5.04. Proceedings by Noteholders. No holder of any Note shall have any right by virtue of or by availing of any provision of this Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Indenture, or for the appointment of a receiver, trustee, liquidator, custodian or other similar official, or for any other remedy hereunder, unless such holder previously shall have given to the Trustee written notice of an Event of Default and of the continuance thereof, as hereinbefore provided, and unless also the holders of not less than 25% in aggregate principal amount of the Notes then outstanding shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such security or indemnity reasonably satisfactory to it against any loss, liability or expense to be incurred therein or thereby, and the Trustee for sixty (60) days after its receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute any such action, suit or proceeding and no direction that, in the opinion of the Trustee, is inconsistent with such written request shall have been given to the Trustee by the holders of a majority in principal amount of the Notes outstanding pursuant to Section 5.07; it being understood and intended, and being expressly covenanted by the taker and holder of every Note with every other taker and holder and the Trustee, that no one or more Noteholders shall have any right in any manner whatever by virtue of or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of any other Noteholder, or to obtain or seek to obtain priority over or preference to any other such holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all Noteholders (except as otherwise provided herein). For the protection and enforcement of this Section 5.04, each and every Noteholder and the Trustee shall be entitled to such relief as can be given either at law or in equity.

     Notwithstanding any other provision of this Indenture and any provision of any Note, the right of any Noteholder to receive payment of the principal of, other amounts under and accrued and unpaid interest on such Note, on or after the respective due dates expressed or provided in such Note or in this Indenture, or to institute suit for the enforcement of any such payment on or

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after such respective dates against the Company shall not be impaired or affected without the consent of such Noteholder.

     Anything in this Indenture or the Notes to the contrary notwithstanding, the holder of any Note, without the consent of either the Trustee or the holder of any other Note, in its own behalf and for his own benefit, may enforce, and may institute and maintain any proceeding suitable to enforce, its rights of put exercise as provided herein.

     Section 5.05. Proceedings by Trustee. In case of an Event of Default the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as are necessary to protect and enforce any of such rights, either by suit in equity or by action at law or by proceeding in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law.

     Section 5.06. Remedies Cumulative and Continuing. Except as provided in the last paragraph of Section 2.07, all powers and remedies given by this Article 5 to the Trustee or to the Noteholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any thereof or of any other powers and remedies available to the Trustee or the holders of the Notes, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture, and no delay or omission of the Trustee or of any holder of any of the Notes to exercise any right or power accruing upon any Default or Event of Default shall impair any such right or power, or shall be construed to be a waiver of any such Default or any acquiescence therein; and, subject to the provisions of Section 5.04, every power and remedy given by this Article 5 or by law to the Trustee or to the Noteholders may be exercised from time to time, and as often as shall be deemed expedient by the Trustee or by the Noteholders.

     Section 5.07. Direction of Proceedings and Waiver of Defaults by Majority of Noteholders. The holders of a majority in aggregate principal amount of the Notes at the time outstanding determined in accordance with Section 7.04 shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to Notes; provided, however, that (a) such direction shall not be in conflict with any rule of law or with this Indenture, and (b) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. The Trustee may refuse to follow any direction that it determines is unduly prejudicial to the rights of any other holder or that would involve the Trustee in personal liability. The holders of a majority in aggregate principal amount of the Notes at the time outstanding determined in accordance with Section 7.04 may, on behalf of the holders of all of the Notes waive any past Default or Event of Default hereunder and its consequences except (i) a Default in the payment of accrued and unpaid interest on, or the principal of or other amounts under, the Notes when due which has not been cured pursuant to the provisions of Section 5.01, (ii) a failure by the Company to deliver cash and, if applicable, shares of Common Stock (and cash in lieu of fractional shares) with respect to any Notes put to the Company, or (iii) a default in

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respect of a covenant or provision hereof which under Article 9 cannot be modified or amended without the consent of each holder of an outstanding Note affected thereby. Upon any such waiver the Company, the Trustee and the holders of the Notes shall be restored to their former positions and rights hereunder, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. Whenever any Default or Event of Default hereunder shall have been waived as permitted by this Section 5.07, said Default or Event of Default shall for all purposes of the Notes and this Indenture be deemed to have been cured and to be not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon.

     Section 5.08. Notice of Defaults. The Trustee shall, within ninety (90) days after the occurrence and continuance of a Default of which a Responsible Officer has actual knowledge, mail to all Noteholders as the names and addresses of such holders appear upon the Note Register, notice of all Defaults known to a Responsible Officer, unless such Defaults shall have been cured or waived before the giving of such notice; and provided that, except in the case of a Default in the payment of the principal of, accrued and unpaid interest on or other amounts due under any of the Notes, then in any such event the Trustee shall be protected in withholding such notice if and so long as a committee of trust officers of the Trustee in good faith determine that the withholding of such notice is in the interests of the Noteholders.

     Section 5.09. Undertaking to Pay Costs. All parties to this Indenture agree, and each holder of any Note by its acceptance thereof shall be deemed to have agreed, that any court may, in its discretion, require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided that the provisions of this Section 5.09 (to the extent permitted by law) shall not apply to any suit instituted by the Trustee, to any suit instituted by any Noteholder, or group of Noteholders, holding in the aggregate more than 10% in principal amount of the Notes at the time outstanding determined in accordance with Section 7.04, or to any suit instituted by any Noteholder for the enforcement of the payment of the principal of, other amounts under and accrued and unpaid interest on any Note on or after the due date expressed in such Note or to any suit for the enforcement of the right to put any Note to the Company in accordance with the provisions of Article 13 or Article 14.

ARTICLE 6
Concerning the Trustee

     Section 6.01. Duties and Responsibilities of Trustee. The Trustee, except during an Event of Default, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Event of Default has occurred (which has not been cured or waived) the Trustee shall exercise such of the rights and powers vested in it by this Indenture,

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and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs; provided that if an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under this Indenture at the request or direction of any of the holders unless such holders have offered to the Trustee indemnity or security reasonably satisfactory to it against loss, liability or expense.

     No provision of this Indenture shall be construed to relieve the Trustee from liability for its own grossly negligent action, its own grossly negligent failure to act or its own willful misconduct, except that:

     (a) prior to the occurrence of an Event of Default and after the curing or waiving of all Events of Default which may have occurred:

     (i) the duties and obligations of the Trustee shall be determined solely by the express provisions of this Indenture and, after it has been qualified thereunder, the Trust Indenture Act, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture and the Trust Indenture Act against the Trustee; and

     (ii) in the absence of bad faith and willful misconduct on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but, in the case of any such certificates or opinions which by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein);

     (b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Officers of the Trustee, unless it shall be proved that the Trustee was grossly negligent in ascertaining the pertinent facts;

     (c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the holders of not less than a majority in principal amount of the Notes at the time outstanding determined as provided in Section 7.04 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture;

     (d) whether or not therein provided, every provision of this Indenture relating to the conduct or affecting the liability of, or affording protection to, the Trustee shall be subject to the provisions of this Section;

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     (e) the Trustee shall not be liable in respect of any payment (as to the correctness of amount, entitlement to receive or any other matters relating to payment) or notice effected by the Company or any Paying Agent or any records maintained by any co-registrar with respect to the Notes;

     (f) if any party fails to deliver a notice relating to an event the fact of which, pursuant to this Indenture, requires notice to be sent to the Trustee, the Trustee may conclusively rely on its failure to receive such notice as reason to act as if no such event occurred, unless such Responsible Officer of the Trustee had actual knowledge of such event;

     (g) in the absence of written investment direction from the Company, all cash received by the Trustee shall be placed in a non-interest bearing trust account. In no event shall the Trustee be liable for the selection of investments or for investment losses incurred thereon or for losses incurred as a result of the liquidation of any such investment prior to its stated maturity or the failure of the party directing such investments prior to its stated maturity or the failure of the party directing such investment to provide timely written investment direction, and the Trustee shall have no obligation to invest or reinvest any amounts held hereunder in the absence of such written investment direction from the Company; and

     (h) in the event that the Trustee is also acting as Custodian, Note Registrar, Paying Agent, Put Exercise Agent or transfer agent hereunder, the rights and protections afforded to the Trustee pursuant to this Article 6 shall also be afforded to such Custodian, Note Registrar, Paying Agent, Put Exercise Agent or transfer agent.

     None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers.

     Section 6.02. Reliance on Documents, Opinions, Etc:

     Except as otherwise provided in Section 6.01:

     (a) the Trustee may conclusively rely and shall be fully protected in acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, note, coupon or other paper or document believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties;

     (b) any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by an Officers’ Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any resolution of the Board of Directors may be evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company;

     (c) the Trustee may consult with counsel of its selection and require an Opinion of Counsel and any advice of such counsel or Opinion of Counsel shall be full and complete

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authorization and protection in respect of any action taken or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel;

     (d) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Noteholders pursuant to the provisions of this Indenture, unless such Noteholders shall have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby;

     (e) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the expense of the Company and shall incur no liability of any kind by reason of such inquiry or investigation;

     (f) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, custodians, nominees or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent, custodian, nominee or attorney appointed by it with due care hereunder;

     (g) the permissive rights of the Trustee enumerated herein shall not be construed as duties;

     (h) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon Officers’ Certificates or Opinions of Counsel furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such Certificates or Opinions which by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein);

     (i) the Trustee may request that the Company deliver an Officers’ Certificate setting forth the names of individuals and/or titles of officers’ authorized at such time to take specified actions pursuant to this Indenture, which Officers’ Certificate may be signed by any person authorized to sign Officers’ Certificates, including any person specified as so authorized in any such certificate previously delivered and not superseded;

     (j) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officers’ Certificate;

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     (k) the Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; and

     (l) the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder.

     In no event shall the Trustee be liable for any consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action other than through the Trustee’s willful misconduct or gross negligence. The Trustee shall not be charged with knowledge of any Default or Event of Default with respect to the Notes, unless either (1) a Responsible Officer shall have actual knowledge of such Default or Event of Default or (2) written notice of such Default or Event of Default shall have been given to the Trustee by the Company or by any holder of the Notes at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture; and the permissive rights of the Trustee enumerated herein shall not be construed as duties.

     Section 6.03. No Responsibility for Recitals, Etc. The recitals contained herein and in the Notes (except in the Trustee’s certificate of authentication) shall be taken as the statements of the Company, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Notes. The Trustee shall not be accountable for the use or application by the Company of any Notes or the proceeds of any Notes authenticated and delivered by the Trustee in conformity with the provisions of this Indenture. The Trustee shall not be responsible or liable for any loss suffered in connection with any investment of funds made by it in accordance with this Indenture or at the direction of the Company. Except for information provided by the Trustee concerning the Trustee, the Trustee shall have no responsibility for any information in any offering memorandum, prospectus or other disclosure material distributed with respect to the Notes.

     Section 6.04. Trustee, Paying Agents, Put Exercise Agents or Registrar May Own Notes. The Trustee, any Paying Agent, any Put Exercise Agent or Note Registrar, in its individual or any other capacity, may become the owner or pledgee of Notes with the same rights it would have if it were not Trustee, Paying Agent, Put Exercise Agent or Note Registrar.

     Section 6.05. Monies to be Held in Trust. Subject to the provisions of Section 11.04, all monies received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as may be agreed from time to time by the Company and the Trustee.

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     Section 6.06. Compensation and Expenses of Trustee. The Company covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, reasonable compensation for all services rendered by it hereunder in any capacity (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) as mutually agreed to in writing between the Trustee and the Company, and the Company will pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances reasonably incurred or made by the Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel and of all persons not regularly in its employ) except any such expense, disbursement or advance as shall have been determined to have been caused by its own gross negligence, willful misconduct or bad faith. The Company also covenants to indemnify the Trustee in any capacity under this Indenture and any other document or transaction entered into in connection herewith and its agents and any authenticating agent for, and to hold them harmless against, any loss, liability, claim, damage, expense or taxes incurred without gross negligence, willful misconduct or bad faith on the part of the Trustee, its officers, directors, agents or employees, or such agent or authenticating agent, as the case may be, and arising out of or in connection with the acceptance or administration of this trust or in any other capacity hereunder, including the costs and expenses of defending themselves against any claim of liability in the premises. The obligations of the Company under this Section 6.06 to compensate or indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall be secured by a lien prior to that of the Notes upon all property and funds held or collected by the Trustee as such, except, subject to the effect of Section 5.03, funds held in trust herewith for the benefit of the holders of particular Notes prior to the date of the accrual of such unpaid compensation or identifiable claim. The Trustee’s right to receive payment of any amounts due under this Section 6.06 shall not be subordinate to any other liability or Debt of the Company. The obligation of the Company under this Section 6.06 shall survive the satisfaction and discharge of this Indenture and the earlier resignation or removal or the Trustee. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The indemnification provided in this Section 6.06 shall extend to the officers, directors, agents and employees of the Trustee.

     When the Trustee and its agents and any authenticating agent incur expenses or render services after an Event of Default specified in Section 5.01(i) or Section 5.01(j) with respect to the Company occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any bankruptcy, insolvency or similar laws.

     Section 6.07. Officers’ Certificate as Evidence. Except as otherwise provided in Section 8.01, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of gross negligence, willful misconduct, recklessness and bad faith on the part of the Trustee, be deemed to be conclusively proved and established by an Officers’ Certificate delivered to the Trustee, and such Officers’ Certificate, in the absence of gross negligence, willful misconduct, recklessness and bad faith on the part of the Trustee, shall

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be full warrant to the Trustee for any action taken or omitted by it under the provisions of this Indenture upon the faith thereof.

     Section 6.08. Conflicting Interests of Trustee. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture.

     Section 6.09. Eligibility of Trustee. There shall at all times be a Trustee hereunder which shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.

     Section 6.10. Resignation or Removal of Trustee.

     (a) The Trustee may at any time resign by giving written notice of such resignation to the Company and by mailing, at the expense of the Company, notice thereof to the Noteholders at their addresses as they shall appear on the Note Register. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted appointment sixty (60) days after the mailing of such notice of resignation to the Noteholders, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee, or any Noteholder who has been a bona fide holder of a Note or Notes for at least six months may, subject to the provisions of Section 5.09, on behalf of itself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee.

     (b) In case at any time any of the following shall occur:

     (i) the Trustee shall fail to comply with Section 6.08 within a reasonable time after written request therefor by the Company or by any Noteholder who has been a bona fide holder of a Note or Notes for at least six (6) months, or

     (ii) the Trustee shall cease to be eligible in accordance with the provisions of Section 6.09 and shall fail to resign after written request therefor by the Company or by any such Noteholder, or

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     (iii) the Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

     then, in any such case, the Company may by a Board Resolution remove the Trustee and appoint a successor trustee by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 5.09, any Noteholder who has been a bona fide holder of a Note or Notes for at least six (6) months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee.

     (c) The holders of a majority in aggregate principal amount of the Notes at the time outstanding, as determined in accordance with Section 7.04, may at any time remove the Trustee and nominate a successor trustee which shall be deemed appointed as successor trustee unless within ten (10) days after notice to the Company of such nomination the Company objects thereto, in which case the Trustee so removed or any Noteholder, upon the terms and conditions and otherwise as in Section 6.10(a) provided, may petition any court of competent jurisdiction for an appointment of a successor trustee.

     (d) Any resignation or removal of the Trustee and appointment of a successor trustee pursuant to any of the provisions of this Section 6.10 shall become effective upon acceptance of appointment by the successor trustee as provided in Section 6.11.

     Section 6.11. Acceptance by Successor Trustee. Any successor trustee appointed as provided in Section 6.10 shall execute, acknowledge and deliver to the Company and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as trustee herein; but, nevertheless, on the written request of the Company or of the successor trustee, the trustee ceasing to act shall, upon payment of any amounts then due it pursuant to the provisions of Section 6.06, execute and deliver an instrument transferring to such successor trustee all the rights and powers of the trustee so ceasing to act. Upon request of any such successor trustee, the Company shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a lien upon all property and funds held or collected by such trustee as such, except for funds held in trust for the benefit of holders of particular Notes, to secure any amounts then due it pursuant to the provisions of Section 6.06.

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     No successor trustee shall accept appointment as provided in this Section 6.11 unless at the time of such acceptance such successor trustee shall be qualified under the provisions of Section 6.08 and be eligible under the provisions of Section 6.09.

     Upon acceptance of appointment by a successor trustee as provided in this Section 6.11, each of the Company and the successor trustee, at the written direction and at the expense of the Company shall mail or cause to be mailed notice of the succession of such trustee hereunder to the Noteholders at their addresses as they shall appear on the Note Register. If the Company fails to mail such notice within ten (10) days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the expense of the Company.

     Section 6.12. Succession by Merger, Etc. Any corporation or other entity into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation or other entity resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation or other entity succeeding to all or substantially all of the corporate trust business of the Trustee (including the administration of this Indenture), shall be the successor to the Trustee hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that in the case of any corporation or other entity succeeding to all or substantially all of the corporate trust business of the Trustee such corporation or other entity shall be qualified under the provisions of Section 6.08 and eligible under the provisions of Section 6.09.

     In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture, any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee or authenticating agent appointed by such predecessor trustee, and deliver such Notes so authenticated, and in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee or an authenticating agent appointed by such successor trustee may authenticate such Notes either in the name of any predecessor trustee hereunder or in the name of the successor trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Notes in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation.

     Section 6.13. Limitation on Rights of Trustee as Creditor. If and when the Trustee shall be or become a creditor of the Company, the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of the claims against the Company.

     Section 6.14. Trustee’s Application for Instructions from the Company. Any application by the Trustee for written instructions from the Company (other than with regard to any action proposed to be taken or omitted to be taken by the Trustee that affects the rights of the holders of the Notes under this Indenture) may, at the option of the Trustee, set forth in writing any action proposed to be taken or omitted by the Trustee under this Indenture and the date on and/or after which such action shall be taken or such omission shall be effective. The Trustee shall not be

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liable for any action taken by, or omission of, the Trustee in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than three (3) Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to any earlier date), unless, prior to taking any such action (or the effective date in the case of any omission), the Trustee shall have received written instructions in response to such proposal specifying the action to be taken or omitted.

ARTICLE 7
Concerning the Noteholders

     Section 7.01. Action By Noteholders. Whenever in this Indenture it is provided that the holders of a specified percentage in aggregate principal amount of the Notes may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action), the fact that at the time of taking any such action, the holders of such specified percentage have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by Noteholders in person or by agent or proxy appointed in writing, or (b) by the record of the Noteholders voting in favor thereof at any meeting of Noteholders duly called and held in accordance with the provisions of Article 8, or (c) by a combination of such instrument or instruments and any such record of such a meeting of Noteholders and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. Whenever the Company or the Trustee solicits the taking of any action by the holders of the Notes, the Company or the Trustee may fix, but shall not be required to, in advance of such solicitation, a date as the record date for determining Noteholders entitled to take such action. The record date if one is selected shall be not more than fifteen (15) days prior to the date of commencement of solicitation of such action. Any request, demand, authorization, direction, notice consent, waiver or other action by a Holder of any Note shall bind every future Holder of the same Note, and the holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted, or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Note.

     Section 7.02. Proof of Execution by Noteholders. Subject to the provisions of Section 6.01, Section 6.02 and Section 8.05, proof of the execution of any instrument by a Noteholder or his agent or proxy shall be sufficient if made in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. The holding of Notes shall be proved by the Note Register or by a certificate of the Note Registrar. The record of any Noteholders’ meeting shall be proved in the manner provided in Section 8.06.

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     Section 7.03. Who Are Deemed Absolute Owners. The Company, the Trustee, any authenticating agent, any Paying Agent, any Put Exercise Agent and any Note Registrar may deem the Person in whose name such Note shall be registered upon the Note Register to be, and may treat it as, the absolute owner of such Note (whether or not such Note shall be overdue and notwithstanding any notation of ownership or other writing thereon made by any Person other than the Company or any Note Registrar) for the purpose of receiving payment of or on account of the principal of, other amounts under and accrued and unpaid interest on such Note, for put exercise of such Note and for all other purposes; and neither the Company nor the Trustee nor any Paying Agent nor any Put Exercise Agent nor any Note Registrar shall be affected by any notice to the contrary. All such payments so made to any holder for the time being, or upon its order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for monies payable upon any such Note. Notwithstanding anything to the contrary in this Indenture or the Notes following an Event of Default, any holder of a beneficial interest in a Global Note may directly enforce against the Company, without the consent, solicitation, proxy, authorization or any other action of the Depositary or any other Person, such holder’s right to exchange such beneficial interest for a Note in certificated form in accordance with the provisions of this Indenture.

     Section 7.04. Company-owned Notes Disregarded. In determining whether the holders of the requisite aggregate principal amount of Notes have concurred in any direction, consent, waiver or other action under this Indenture, Notes that are owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding for the purpose of any such determination; provided that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, consent, waiver or other action only Notes that a Responsible Officer knows are so owned shall be so disregarded. Notes so owned that have been pledged in good faith may be regarded as outstanding for the purposes of this Section 7.04 if the pledgee shall establish to the satisfaction of the Trustee the pledgee’s right to so act with respect to such Notes and that the pledgee is not the Company, or a Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company. In the case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. Upon request of the Trustee, the Company shall furnish to the Trustee promptly an Officers’ Certificate listing and identifying all Notes, if any, known by the Company to be owned or held by or for the account of any of the above described Persons; and, subject to Section 6.01, the Trustee shall be entitled to accept such Officers’ Certificate as conclusive evidence of the facts therein set forth and of the fact that all Notes not listed therein are outstanding for the purpose of any such determination.

     Section 7.05. Revocation of Consents; Future Holders Bound. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 7.01, of the taking of any action by the holders of the percentage in aggregate principal amount of the Notes specified in this Indenture in connection with such action, any holder of a Note that is shown by the evidence to be included in the Notes the holders of which have consented to such action may, by filing written notice with the Trustee at its Corporate Trust Office and upon proof of holding as provided in Section 7.02, revoke such action so far as concerns such Note. Except as aforesaid,

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any such action taken by the holder of any Note shall be conclusive and binding upon such holder and upon all future holders and owners of such Note and of any Notes issued in exchange or substitution therefor or upon registration of transfer, irrespective of whether any notation in regard thereto is made upon such Note or any Note issued in exchange or substitution therefor or upon registration of transfer thereof.

ARTICLE 8
Noteholders’ Meetings

     Section 8.01. Purpose of Meetings. A meeting of Noteholders may be called at any time and from time to time pursuant to the provisions of this Article 8 for any of the following purposes:

     (a) to give any notice to the Company or to the Trustee or to give any directions to the Trustee permitted under this Indenture, or to consent to the waiving of any Default or Event of Default hereunder and its consequences, or to take any other action authorized to be taken by Noteholders pursuant to any of the provisions of Article 5;

     (b) to remove the Trustee and nominate a successor trustee pursuant to the provisions of Article 6;

     (c) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 9.02; or

     (d) to take any other action authorized to be taken by or on behalf of the holders of any specified aggregate principal amount of the Notes under any other provision of this Indenture or under applicable law.

     Section 8.02. Call of Meetings by Trustee. The Trustee may at any time call a meeting of Noteholders to take any action specified in Section 8.01, to be held at such time and at such place as the Trustee shall determine. Notice of every meeting of the Noteholders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting and the establishment of any record date pursuant to Section 7.01, shall be mailed to holders of such Notes at their addresses as they shall appear on the Note Register. Such notice shall also be mailed to the Company. Such notices shall be mailed not less than twenty (20) nor more than ninety (90) days prior to the date fixed for the meeting.

     Any meeting of Noteholders shall be valid without notice if the holders of all Notes then outstanding are present in person or by proxy or if notice is waived before or after the meeting by the holders of all Notes outstanding, and if the Company and the Trustee are either present by duly authorized representatives or have, before or after the meeting, waived notice.

     Section 8.03. Call of Meetings by Company or Noteholders. In case at any time the Company, pursuant to a resolution of its Board of Directors, or the holders of at least 10% in

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aggregate principal amount of the Notes then outstanding, shall have requested the Trustee to call a meeting of Noteholders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have mailed the notice of such meeting within twenty (20) days after receipt of such request, then the Company or such Noteholders may determine the time and the place for such meeting and may call such meeting to take any action authorized in Section 8.01, by mailing notice thereof as provided in Section 8.02.

     Section 8.04. Qualifications for Voting. To be entitled to vote at any meeting of Noteholders a Person shall (a) be a holder of one or more Notes on the record date pertaining to such meeting or (b) be a Person appointed by an instrument in writing as proxy by a holder of one or more Notes. The only Persons who shall be entitled to be present or to speak at any meeting of Noteholders shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the Trustee and its counsel and any representatives of the Company and its counsel.

     Section 8.05. Regulations. Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Noteholders, in regard to proof of the holding of Notes and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think fit.

     The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Noteholders as provided in Section 8.03, in which case the Company or the Noteholders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the holders of a majority in principal amount of the Notes represented at the meeting and entitled to vote at the meeting.

     Subject to the provisions of Section 7.04, at any meeting of Noteholders each Noteholder or proxyholder shall be entitled to one vote for each $1,000 principal amount of Notes held or represented by it; provided, however, that no vote shall be cast or counted at any meeting in respect of any Note challenged as not outstanding and ruled by the chairman of the meeting to be not outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Notes held by it or instruments in writing as aforesaid duly designating it as the proxy to vote on behalf of other Noteholders. Any meeting of Noteholders duly called pursuant to the provisions of Section 8.02 or Section 8.03 may be adjourned from time to time by the holders of a majority of the aggregate principal amount of Notes represented at the meeting, whether or not constituting a quorum, and the meeting may be held as so adjourned without further notice.

     Section 8.06. Voting. The vote upon any resolution submitted to any meeting of Noteholders shall be by written ballot on which shall be subscribed the signatures of the Noteholders or of their representatives by proxy and the principal amount of the Notes held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of

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votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Noteholders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more Persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was mailed as provided in Section 8.02. The record shall show the principal amount of the Notes voting in favor of or against any resolution. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting.

     Any record so signed and verified shall be conclusive evidence of the matters therein stated.

     Section 8.07. No Delay of Rights by Meeting. Nothing contained in this Article 8 shall be deemed or construed to authorize or permit, by reason of any call of a meeting of Noteholders or any rights expressly or impliedly conferred hereunder to make such call, any hindrance or delay in the exercise of any right or rights conferred upon or reserved to the Trustee or to the Noteholders under any of the provisions of this Indenture or of the Notes.

ARTICLE 9
Supplemental Indentures

     Section 9.01. Supplemental Indentures Without Consent of Noteholders. The Company, when authorized by the resolutions of the Board of Directors, and the Trustee, at the Company’s expense, may from time to time and at any time enter into an indenture or indentures supplemental hereto for one or more of the following purposes:

     (a) to cure any ambiguity, omission, defect or inconsistency in this Indenture in a manner that does not individually or in the aggregate adversely affect the rights of any Noteholder in any respect;

     (b) to provide for the assumption by a Successor Company of the obligations of the Company under the Indenture pursuant to Article 10;

     (c) to add guarantees with respect to the Notes;

     (d) to secure the Notes;

     (e) to add to the covenants of the Company for the benefit of the holders or surrender any right or power conferred upon the Company;

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     (f) to make any other change that does not adversely affect the rights of any holder; or

     (g) to comply with any requirements of the Commission in connection with the qualification of the Indenture under the Trust Indenture Act.

     Upon the written request of the Company, accompanied by a Board Resolution authorizing the execution of such supplemental indenture, the Trustee is hereby authorized to join with the Company in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer and assignment of any property thereunder, but the Trustee shall not be obligated to, but may in its discretion, enter into any supplemental indenture which affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

     Any supplemental indenture authorized by the provisions of this Section 9.01 may be executed by the Company and the Trustee without the consent of the holders of any of the Notes at the time outstanding.

     Section 9.02. Supplemental Indentures With Consent of Noteholders. With the consent (evidenced as provided in Article 7) of the holders of at least a majority in aggregate principal amount of the Notes at the time outstanding (determined in accordance with Article 7 and including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), the Company, when authorized by the resolutions of the Board of Directors, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or any supplemental indenture or of modifying in any manner the rights of the holders of the Notes; provided, however, that no such supplemental indenture shall:

     (a) reduce the percentage in aggregate principal amount of Notes the holders of which must consent to an amendment;

     (b) reduce the rate, or extend the stated time for payment, of interest on any Note;

     (c) reduce the principal of or other amount payable under, or extend the Maturity Date of, any Note;

     (d) make any change that adversely affects the put rights of any Noteholder under Article 13 or Article 14;

     (e) reduce the Designated Event Purchase Price of any Note or amend or modify in any manner adverse to the holders of the Notes the Company’s obligation to make such payments, whether through an amendment or waiver of provisions in the covenants, definitions or otherwise;

     (f) change the place or currency of payment of principal or interest or other amount payable in respect of any Note;

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     (g) impair the right of any holder to receive payment of principal of and interest on or other amount payable under such holder’s Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such holder’s Note;

     (h) adversely affect the ranking of the Notes as the senior unsubordinated debt of the Company; or

     (i) make any change in the provisions of this Article 9 that require each holder’s consent or in the waiver provisions in Section 5.01 and Section 5.07,

in each case without the consent of each holder of an outstanding Note affected.

     Upon the written request of the Company, accompanied by a copy of the Board Resolutions authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Noteholders as aforesaid, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture.

     It shall not be necessary for the consent of the Noteholders under this Section 9.02 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. After an amendment under the Indenture becomes effective, the Company shall mail to the holders a notice briefly describing such amendment. However, the failure to give such notice to all the holders, or any defect in the notice, will not impair or affect the validity of the amendment.

     Section 9.03. Effect of Supplemental Indentures. Any supplemental indenture executed pursuant to the provisions of this Article 9 shall comply with the Trust Indenture Act, as then in effect, provided that this Section 9.03 shall not require such supplemental indenture or the Trustee to be qualified under the Trust Indenture Act prior to the time such qualification is in fact required under the terms of the Trust Indenture Act, nor shall it constitute any admission or acknowledgment by any party to such supplemental indenture that any such qualification is required prior to the time such qualification is in fact required under the terms of the Trust Indenture Act. Upon the execution of any supplemental indenture pursuant to the provisions of this Article 9, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitation of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the Noteholders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.

     Section 9.04. Notation on Notes. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article 9 may bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture.

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If the Company or the Trustee shall so determine, new Notes so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any modification of this Indenture contained in any such supplemental indenture may, at the Company’s expense, be prepared and executed by the Company, authenticated by the Trustee (or an authenticating agent duly appointed by the Trustee pursuant to Section 15.11) and delivered in exchange for the Notes then outstanding, upon surrender of such Notes then outstanding.

     Section 9.05. Evidence of Compliance of Supplemental Indenture to be Furnished to the Trustee. In addition to the documents required by Section 15.05, the Trustee shall receive an Officers’ Certificate and an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant hereto complies with the requirements of this Article 9.

ARTICLE 10
Consolidation, Merger, Sale, Conveyance and Lease

     Section 10.01. Company May Consolidate, Etc. on Certain Terms. Subject to the provisions of Section 10.02, the Company shall not consolidate with, merge with or into, or convey, transfer or lease all or substantially all of its assets and properties to another Person, unless:

     (a) the resulting, surviving or transferee Person (the “Successor Company”) if not the Company shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) shall expressly assume, by supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Notes, this Indenture; and

     (b) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing.

     Upon any such consolidation, merger, conveyance, transfer or lease the resulting, surviving or transferee (by conveyance, lease or otherwise) Person (if not the Company) shall succeed to, and may exercise every right and power of, the Company under this Indenture.

     For purposes of this Section 10.01, the sale, lease, conveyance, assignment, transfer, or other disposition of all or substantially all of the properties and assets of one or more Subsidiaries of the Company, which properties and assets, if held by the Company instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Company on a consolidated basis, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company.

     Section 10.02. Successor Corporation to be Substituted. In case of any such consolidation, merger, conveyance, transfer or lease and upon the assumption by the Successor Company, by supplemental indenture, executed and delivered to the Trustee and satisfactory in

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form to the Trustee, of the due and punctual payment of the principal of and accrued and unpaid interest on all of the Notes, the due and punctual settlement of the put exercise of the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Company, such Successor Company shall succeed to and be substituted for the Company and the Company shall be released from those obligations, with the same effect as if it had been named herein as the party of the first part. Such Successor Company thereupon may cause to be signed, and may issue either in its own name or in the name of the Company any or all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such Successor Company instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver, or cause to be authenticated and delivered, any Notes which previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication, and any Notes which such Successor Company thereafter shall cause to be signed and delivered to the Trustee for that purpose. All the Notes so issued shall in all respects have the same legal rank and benefit under this Indenture as the Notes theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Notes had been issued at the date of the execution hereof. In the event of any such consolidation, merger, conveyance, transfer or lease, the Person named as the “Company” in the first paragraph of this Indenture or any successor which shall thereafter have become such in the manner prescribed in this Article 10 may be dissolved, wound up and liquidated at any time thereafter and such Person shall be released from its liabilities as obligor and maker of the Notes and from its obligations under this Indenture.

     In case of any such consolidation, merger, conveyance, transfer or lease, such changes in phraseology and form (but not in substance) may be made in the Notes thereafter to be issued as may be appropriate.

     Section 10.03. Officers’ Certificate and Opinion of Counsel to be Given Trustee. No merger, consolidation, sale transfer or lease shall be effective unless the Trustee shall receive an Officers’ Certificate and an Opinion of Counsel as conclusive evidence that any such consolidation, merger, conveyance, transfer or lease and any such assumption complies with the provisions of this Article 10.

ARTICLE 11
Satisfaction and Discharge of Indenture

     Section 11.01. Discharge of Indenture. When (a) the Company shall deliver to the Note Registrar for cancellation all Notes theretofore authenticated (other than any Notes that have been destroyed, lost or stolen and in lieu of or in substitution for which other Notes shall have been authenticated and delivered) and not theretofore canceled, or (b) all the Notes not theretofore canceled or delivered to the Notes Registrar for cancellation shall have become due and payable, whether on the Maturity Date or on any earlier Designated Event Purchase Date or otherwise, and the Company shall deposit with the Trustee, in trust, cash or cash and shares of

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Common Stock, if applicable, sufficient to pay at maturity all of the Notes (other than any Notes that shall have been mutilated, destroyed, lost or stolen and in lieu of or in substitution for which other Notes shall have been authenticated and delivered) not theretofore canceled or delivered to the Trustee for cancellation, including principal and accrued and unpaid interest due thereon, and if the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then this Indenture shall cease to be of further effect except as to (i) the right of holders to receive payments of principal of and accrued and unpaid interest, and any unpaid Put Value Obligation on, the Notes and the other rights, duties and obligations of Noteholders, as beneficiaries hereof with respect to the amounts, if any, so deposited with the Trustee, (ii) the rights, obligations and immunities of the Trustee hereunder and (iii) the obligations of the Company under Section 6.06, and the Trustee, on written demand of the Company accompanied by an Officers’ Certificate and an Opinion of Counsel as required by Section 15.05 and at the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture; the Company, however, hereby agrees to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred by the Trustee and to compensate the Trustee for any services thereafter reasonably and properly rendered by the Trustee in connection with this Indenture or the Notes.

     Section 11.02. Deposited Monies to be Held in Trust by Trustee. Subject to Section 11.04, all monies deposited with the Trustee pursuant to Section 11.01 shall be held in trust and applied by it to the payment, either directly or through any Paying Agent (including the Company if acting as its own Paying Agent), to the holders of the particular Notes for the payment of which such monies have been deposited with the Trustee, of all sums due thereon for principal and accrued and unpaid interest.

     Section 11.03. Paying Agent to Repay Monies Held. Upon the satisfaction and discharge of this Indenture, all monies then held by any Paying Agent of the Notes (other than the Trustee) shall, upon written request of the Company, be repaid to it or paid to the Trustee, and thereupon such Paying Agent shall be released from all further liability with respect to such monies.

     Section 11.04. Return of Unclaimed Monies. Subject to the requirements of applicable law, any monies deposited with or paid to the Trustee for payment of the principal of, other amounts payable under or accrued and unpaid interest on, Notes and not applied but remaining unclaimed by the Noteholders for two years after the date upon which the principal of, other amounts payable under, or accrued and unpaid interest on such Notes, as the case may be, shall have become due and payable, shall be repaid to the Company by the Trustee on written request and all liability of the Trustee shall thereupon cease with respect to such monies; and the holder of any of the Notes shall thereafter look only to the Company for any payment which such holder may be entitled to collect unless an applicable abandoned property law designates another Person. The Trustee shall, promptly after such payment of the principal of, and any accrued and unpaid interest, on Notes, as described in this Section 11.04 and upon written request of the Company, return to the Company any funds in excess of the amount required for such payment.

     Section 11.05. Reinstatement. If (i) the Trustee or the Paying Agent is unable to apply any money in accordance with Section 11.02 by reason of any order or judgment of any court or

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governmental authority enjoining, restraining or otherwise prohibiting such application and (ii) the holders of at least a majority in principal amount of the then outstanding Notes so request by written notice to the Trustee, the Company’s obligations under this Indenture shall be revived and reinstated as though no deposit had occurred pursuant to Section 11.01 until such time as the Trustee or the Paying Agent is permitted to apply all such money in accordance with Section 11.02; provided, however, that if the Company makes any payment of interest on or principal of any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Noteholders to receive such payment from the money held by the Trustee or Paying Agent.

ARTICLE 12
Immunity of Incorporators, Shareholders, Officers and Directors

     Section 12.01. Indenture and Notes Solely Corporate Obligations. No recourse for the payment of the principal of, or accrued and unpaid interest on, any Note, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in this Indenture or in any supplemental indenture or in any Note, or because of the creation of any debt represented thereby, shall be had against any past, present or future incorporator, shareholder, employee, agent, officer or director or Subsidiary of the Company as such or of any successor corporation, either directly or through the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Notes.

ARTICLE 13
Exercise of Put rights; Redemptions

     Section 13.01. Put Exercise Privilege.

     (a) Subject to the conditions described in Section 13.01(b), Section 13.01(c) and Section 13.01(d) below, and upon compliance with the provisions of this Article 13, a Noteholder shall have the right, at such holder’s option, to put to the Company all or any portion (if the portion to be put to the Company is $1,000 principal amount or an integral multiple thereof) of such Note at any time prior to the close of business on the Scheduled Trading Day immediately preceding the Maturity Date at a rate (the “Put Value Rate”) of 66.7758 shares of Common Stock (subject to adjustment by the Company as provided in Section 13.01(e) and 13.04) per $1,000 principal amount Note (the “Put Value Obligation”) under the circumstances and during the periods set forth below.

     (b) In the event that the Company elects to:

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     (i) distribute to all or substantially all holders of its outstanding shares of Common Stock any rights or warrants entitling them for a period expiring not more than 60 calendar days after the record date of such distribution to subscribe for or purchase shares of Common Stock at a price per share less than the Last Reported Sale Price of the Common Stock on the Trading Day immediately preceding the record date for such distribution; or

     (ii) distribute to all or substantially all holders of Common Stock, assets or debt securities of the Company or rights to purchase the Company’s securities, which distribution has a per share value (as determined by the Board of Directors) exceeding 15% of the Last Reported Sale Price of the Common Stock on the Trading Day immediately preceding the date of declaration of such distribution,

then, in either case, holders may put the Notes to the Company at any time on and after the date that the Company provides notice to holders referred to in the next sentence until the earlier of (1) 5:00 p.m. (New York City time) on the Business Day immediately preceding the Ex-Date for such distribution or (2) the date the Company announces that such distribution will not take place. The Company shall notify holders of any distribution referred to in either clause (i) or clause (ii) above and of the resulting put right no later than 35 Business Days prior to the Ex-Date for such distribution. Holders may not exercise this right if holders participate (as a result of holding the Notes, and at the same time as the holders of Common Stock) in any of the distributions described in clauses (i) or (ii) above as if such holders held a number of shares of Common Stock equal to the applicable Put Value Rate on the record date for such distribution, multiplied by the aggregate principal amount (expressed in thousands) of Notes held by such holders, without having to put their Notes.

     (c) If the Company consolidates with or merges with or into another Person or is a party to a binding share exchange or conveys, transfers, sells, leases or otherwise disposes of all or substantially all of its properties and assets in each case pursuant to which the Common Stock would be converted into cash, securities and/or other property, then the holders shall have the right to put the Notes to the Company at any time beginning 30 Business Days prior to the anticipated effective date of such transaction and until and including the date that is the 30th Business Day after the effective date of such transaction; provided such transaction does not otherwise constitute a Designated Event to which the provisions of Section 13.01(d) shall apply. The Company will notify holders of Notes at least 35 Business Days prior to the anticipated effective date of such transaction. The Board of Directors shall determine the anticipated effective date of the transaction, and such determination shall be conclusive and binding on the holders and shall be publicly announced by the Company and posted on its web site not later than 32 Business Days prior to the anticipated effective date of the transaction.

     (d) If the Company is a party to any transaction or event that constitutes a Designated Event, a holder may put the Notes to the Company at any time from and after the 30th Business Day prior to the anticipated effective date of such transaction or event until the related Designated Event Purchase Date. In addition, if such Designated Event also constitutes a Fundamental Change, the holder shall be entitled to an increase in the Put Value Rate, if any,

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specified in Section 13.01(e). The Company shall give notice in writing to all record Noteholders and the Trustee of the Designated Event no later than 35 Business Days prior to the anticipated effective date of the Designated Event (the “Designated Event Notice”).

     (e) (i) If a Noteholder elects to put the Notes to the Company pursuant to Section 13.01(d) in connection with a Fundamental Change that occurs prior to October 15, 2013, the Put Value Rate applicable to each $1,000 principal amount of Notes that is put to the Company shall be increased by an additional number of shares of Common Stock (the “Additional Shares”) as described below; provided, however, that no increase will be made in the case of Fundamental Change if at least 90% of the consideration paid for the Common Stock (excluding cash payments for fractional shares and cash payments made pursuant to dissenters’ appraisal rights) in such Fundamental Change transaction consists of shares of capital stock traded on a U.S. national securities exchange or approved for quotation on a United States system of automated dissemination of quotations of securities prices similar to NASDAQ Global Market prior to its designation as a national securities exchange (or that will be so traded or quoted immediately following the transaction) and as a result of such transaction the Notes become puttable based on the Put Value Rate determined on the basis of shares of such capital stock. The Company shall satisfy the Put Value Obligation with respect to each $1,000 principal amount of Notes put to it in connection with a Fundamental Change pursuant to Section 13.02(b). For purposes of this Section 13.01(e), the exercise of the put rights shall be deemed to be “in connection” with a Fundamental Change to the extent that such put exercise is effected during the time period specified in Section 13.01(d) (regardless of whether the provisions of clause (a)(i), (a)(ii), (b) or (c) of this Section 13.01 shall apply to such put exercise). For the avoidance of doubt, holders that receive Additional Shares pursuant to this Section 13.01(e) with respect to Notes being put to the Company in connection with a Fundamental Change will not be entitled to a Coupon Make-Whole Payment for such Notes pursuant to Section 13.11.

     (ii) The number of Additional Shares by which the Put Value Rate will be increased pursuant to this Section 13.01(e) shall be determined by reference to the table attached as Schedule A-1 hereto, based on the date on which the Fundamental Change occurs or becomes effective (the “Effective Date”), and the Stock Price; provided that if the actual Stock Price is between two Stock Price amounts in the table or the Effective Date is between two Effective Dates in the table, the number of Additional Shares shall be determined by a straight-line interpolation between the number of Additional Shares set forth for the next higher and next lower Stock Price amounts and the two nearest Effective Dates, as applicable, based on a 365-day year; provided further that if (1) the Stock Price is greater than $29.00 per share of Common Stock (subject to adjustment in the same manner as set forth in Section 13.04), or (2) the Stock Price is less than $12.41 per share of Common Stock (subject to adjustment in the same manner as set forth in Section 13.04), then, in each case, no adjustment to the Put Value Rate in respect of Additional Shares will be made pursuant to this Section 13.01(e).

     (iii) The Stock Prices set forth in the first row of the table in Schedule A-1 hereto shall be adjusted by the Company as of any date on which the Put Value Rate of the Notes is adjusted (except for any adjustment pursuant to this Section 13.01(e)). The

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adjusted Stock Prices shall equal the Stock Prices applicable immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the Put Value Rate in effect immediately prior to the adjustment giving rise to the Stock Price adjustment and the denominator of which is the Put Value Rate as so adjusted. The number of Additional Shares within the table shall be adjusted in the same manner as the Put Value Rate as set forth in Section 13.04 (except for any adjustment pursuant to this Section 13.01(e)).

     (iv) For the avoidance of doubt, if a holder puts the Notes to the Company prior to the effective date of a Fundamental Change, and the Fundamental Change does not occur, the holder will not be entitled to an increased Put Value Rate in connection with such put exercise.

     Section 13.02. Put Exercise Procedure.

     (a) The Company will satisfy the Put Value Obligation with respect to each $1,000 principal amount of Notes put to the Company by delivering, on the third Business Day immediately following the last day of the Observation Period for the related Put Exercise Date, a number of shares of Common Stock equal to the sum of the quotients obtained by dividing (i) the Daily Put Values for each of the 10 VWAP Trading Days during such Observation Period by (ii) the Daily VWAP for such VWAP Trading Day, provided that the Company will deliver cash in lieu of fractional shares of Common Stock as set forth pursuant to clause (k) below. The Daily Put Values shall be determined by the Company following the last day of the Observation Period.

     (b) Notwithstanding Section 13.02(a), the Company shall satisfy the Put Value Obligation with respect to each $1,000 principal amount of Notes put to it in connection with a Fundamental Change pursuant to Section 13.01(d) pursuant to this clause (b).

     (i) If the last day of the applicable Observation Period related to Notes put to the Company is prior to the third Scheduled Trading Day preceding the Effective Date of the Fundamental Change, the Company will satisfy the related Put Value Obligation with respect to each $1,000 principal amount of Notes put to the Company as described in Section 13.02(a) by delivering shares of Common Stock (and cash in lieu of fractional shares, if any) based on the Put Value Rate, but without regard to the number of Additional Shares to be added to the Put Value Rate pursuant to Section 13.01(e), on the third Business Day immediately following the last day of the applicable Observation Period. As soon as practicable following the Effective Date of the Fundamental Change, the Company will deliver the increase in such amount of shares of Common Stock (and cash in lieu of fractional shares, if any) as if the Put Value Rate had been increased by such number of Additional Shares during the related Observation Period (and based upon the related Daily VWAP prices during such Observation Period). If such increased amount of shares of Common Stock results in an increase to the number of shares of Common Stock delivered to holders, the Company will deliver such increase by delivering Reference Property based on such increased number of shares.

     (ii) If the last day of the applicable Observation Period related to Notes put to the Company is on or following the third Scheduled Trading Day preceding the Effective

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Date of such Fundamental Change, the Company will satisfy the Put Value Obligation with respect to each $1,000 principal amount of Notes put to the Company as described in Section 13.02(d) (based on the Put Value Rate as increased by the Additional Shares pursuant to Section 13.01(e) above) on the later to occur of (1) the Effective Date of the Fundamental Change and (2) the third Business Day immediately following the last day of the applicable Observation Period.

     (c) Before any holder of a Note shall be entitled to exercise its put right as set forth above, such holder shall (i) in the case of a Global Note, comply with the procedures of the Depositary in effect at that time and, if required, pay funds equal to interest payable on the next Interest Payment Date to which such holder is not entitled as set forth in Section 13.02(i) and, if required, pay all taxes or duties, if any, and (ii) in the case of a Note issued in certificated form, (A) complete and manually sign and deliver an irrevocable written notice to the Put Exercise Agent in the form on the reverse of such certificated Note (or a facsimile thereof) (a “Put Exercise Notice”) at the office of the Put Exercise Agent and shall state in writing therein the principal amount of Notes to be put to the Company and the name or names (with addresses) in which such holder wishes the certificate or certificates for any shares of Common Stock, if any, to be delivered upon settlement of the Put Value Obligation to be registered, (B) surrender such Notes, duly endorsed to the Company or in blank (and accompanied by appropriate endorsement and transfer documents), at the office of the Put Exercise Agent, (C) if required, pay funds equal to interest payable on the next Interest Payment Date to which such holder is not entitled as set forth in Section 13.02(i), and (D) if required, pay all taxes or duties, if any. A Note shall be deemed to have been put to the Company immediately prior to the close of business on the date (the “Put Exercise Date”) that the holder has complied with the requirements set forth in this Section 13.02(c).

     No Put Exercise Notice with respect to any Notes may be delivered by a holder thereof if such holder has also tendered a Designated Event Purchase Notice and not validly withdrawn such Designated Event Purchase Notice in accordance with the applicable provisions of Section 14.01.

     If more than one Note shall be put to the Company at one time by the same holder, the Put Value Obligation with respect to such Notes, if any, that shall be payable upon put exercise shall be computed on the basis of the aggregate principal amount of the Notes (or specified portions thereof to the extent permitted thereby) so put to the Company.

     (d) Delivery of the amounts owing in satisfaction of the Put Value Obligation shall be made by the Company in no event later than the date specified in Section 13.02(a), except to the extent specified in Section 13.02(b). The Company shall make such delivery by issuing, or causing to be issued, and delivering to the Put Exercise Agent or to such holder, or such holder’s nominee or nominees, certificates or a book-entry transfer through the Depositary for the number of full shares of Common Stock, if any, to which such holder shall be entitled as part of such Put Value Obligation (together with any cash in lieu of fractional shares).

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     (e) In case any Note shall be surrendered for partial put exercise, the Company shall execute and the Trustee shall authenticate and deliver to or upon the written order of the holder of the Note so surrendered, without charge to such holder, a new Note or Notes in authorized denominations in an aggregate principal amount equal to the portion of the surrendered Notes not put to the Company.

     (f) The Company shall pay all stamp and other duties, if any, which may be imposed by the United States or any political subdivision thereof or taxing authority thereof or therein with respect to the issuance of shares of Common Stock upon the put exercise. However, the holder shall pay any such tax which is due because the holder requests any shares of Common Stock to be issued in a name other than the holder’s name. The Put Exercise Agent may refuse to deliver the certificates representing the shares of Common Stock being issued in a name other than the holder’s name until the Trustee receives a sum sufficient to pay any tax which will be due because the shares are to be issued in a name other than the holder’s name. Nothing herein shall preclude any tax withholding required by law or regulations.

     (g) Except as provided in Section 13.04, no adjustment shall be made for dividends on any shares issued the Company with respect to any Note as provided in this Article.

     (h) Upon the put exercise with respect to an interest in a Global Note, the Trustee, or the Custodian at the direction of the Trustee, shall make a notation on such Global Note as to the reduction in the principal amount represented thereby. The Company shall notify the Trustee in writing of any Notes put to the Company through any Put Exercise Agent other than the Trustee.

     (i) Upon put exercise, a Noteholder shall not receive any separate cash payment for accrued and unpaid interest except as set forth below. The Company’s settlement of the Put Value Obligation as described above shall be deemed to satisfy its obligation to pay the principal amount of the Note and accrued and unpaid interest to, but not including, the Put Exercise Date. As a result, accrued and unpaid interest to, but not including, the Put Exercise Date shall be deemed to be paid in full rather than cancelled, extinguished or forfeited. Notwithstanding the preceding sentence, if Notes are put to the Company after the close of business on a record date, holders of such Notes as of the close of business on the record date will receive the interest payable on such Notes on the corresponding Interest Payment Date notwithstanding the put exercise. Notes surrendered for put exercise during the period from the close of business on any regular record date to the opening of business on the corresponding Interest Payment Date must be accompanied by payment of an amount equal to the interest payable on the Notes so put to the Company; provided, however, that no such payment need be made (i) if the Company has specified a Designated Event Purchase Date that is after a record date and on or prior to the corresponding Interest Payment Date; (ii) in respect of any put exercise that occurs after the record date immediately preceding the Maturity Date; or (iii) to the extent of any overdue interest existing at the time of put exercise with respect to such Note. Except as described above, no payment or adjustment will be made for accrued interest on the Notes put to the Company.

     (j) The Person in whose name the certificate for any shares of Common Stock issued upon the put exercise is registered shall be treated as a shareholder of record on and after the Put

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Exercise Date; provided, however, that no surrender of Notes on any date when the stock transfer books of the Company shall be closed shall be effective to constitute the Person or Persons entitled to receive the shares of Common Stock as the record holder or holders of such shares of Common Stock on such date, but such surrender shall be effective to constitute the Person or Persons entitled to receive such shares of Common Stock as the record holder or holders thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open; such put exercise shall be at the Put Value Rate in effect during the Observation Period for the Put Exercise Date on the date that such Notes shall have been surrendered for put exercise, as if the stock transfer books of the Company had not been closed. Upon the put exercise with respect to the Notes, such Person shall no longer be a Noteholder.

     (k) No fractional shares of Common Stock shall be issued upon the exercise of any Note or Notes put to the Company. If more than one Note shall be surrendered for put exercise at one time by the same holder, the number of full shares that shall be issued by the Company shall be computed on the basis of the aggregate principal amount of the Notes (or specified portions thereof) so surrendered. Instead of any fractional share of Common Stock that would otherwise be issued with respect to any Note or Notes (or specified portions thereof), the Company shall pay a cash adjustment in respect of such fraction (calculated to the nearest one-100th of a share) in an amount equal to the same fraction of the Last Reported Sale Price of the Common Stock on the last Trading Day of the applicable Observation Period.

     Section 13.03. Related Party Limitation. Notwithstanding anything to the contrary in this Article 13, no Noteholder that is a Related Party on the date that such Noteholder exercises its put rights pursuant to this Article 13 shall be entitled to acquire shares of Common Stock delivered upon a put of its Notes if the amount of shares of Common Stock required to be issued to such Related Party would exceed 1% of the voting power of the Company or 1% of the Common Stock prior to the issuance, unless the Company has obtained shareholder approval of the issuance of the Notes, including approval of the issuance of the underlying Common Stock, pursuant to Section 312.03 of the Listed Company Manual of the New York Stock Exchange, which it shall be under no obligation to seek. If, pursuant to this Section 13.03, a Noteholder is not entitled to acquire shares of Common Stock upon the exercise of its put rights, the Company will satisfy the Put Value Obligation for Notes put to the Company by such Noteholder by delivering cash equal to the sum of the Daily Put Values for each of the 10 VWAP Trading Days during the Observation Period.

     Section 13.04. Adjustment of Put Value Rate. The Put Value Rate shall be adjusted from time to time by the Company as follows:

     (a) In case the Company shall issue shares of Common Stock as a dividend or distribution to all holders of the outstanding Common Stock on shares of Common Stock, or if the Company effects a share split or share combination, the Put Value Rate shall be adjusted based on the following formula:

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where
PVR0	=	the Put Value Rate in effect immediately prior to the Ex-Date for such dividend or distribution or the effective date of such share split or share combination, as the case may be;
PVR’	=	the Put Value Rate in effect immediately after the Ex-Date for such dividend or distribution, or the effective date of such share split or share combination, as the case may be;
OS0	=	the number of shares of Common Stock outstanding immediately prior to the Ex-Date for such dividend or distribution or the effective date of such share split or combination, as the case may be;
OS’	=	the number of shares of Common Stock outstanding immediately after such dividend, distribution, share split or combination, as the case may be.

     Such adjustment shall become effective immediately after 9:00 a.m., New York City time, on the Ex-Date fixed for such dividend or distribution, or the effective date for such share split or share combination. If any dividend or distribution of the type described in this Section 13.04(a) is declared but not so paid or made, or the outstanding shares of Common Stock are not split or combined, as the case may be, the Put Value Rate shall be immediately readjusted, effective as of the date the Board of Directors determines not to pay such dividend or distribution, or split or combine the outstanding shares of Common Stock, as the case may be, to the Put Value Rate that would then be in effect if such dividend, distribution, share split or share combination had not been declared. In no event (except for share combinations) shall the Put Value Rate be decreased pursuant to this Section 13.04(a).

     (b) In case the Company shall distribute to all or substantially all holders of its outstanding shares of Common Stock any rights or warrants entitling them for a period expiring not more than 60 calendar days after the record date of such distribution to subscribe for or purchase shares of the Common Stock, at a price per share less than the Last Reported Sale Price of the Common Stock on the Trading Day immediately preceding the record date for such distribution, the Put Value Rate shall be adjusted based on the following formula:

where
PVR0	=	the Put Value Rate in effect immediately prior to the Ex-Date for such distribution;

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PVR’	=	the Put Value Rate in effect immediately after the Ex-Date for such distribution;
OS0	=	the number of shares of Common Stock outstanding immediately prior to the Ex-Date for such distribution;
X	=	the total number of shares of Common Stock issuable pursuant to such rights or warrants; and
Y	=	the number of shares of Common Stock equal to the aggregate price payable to exercise such rights or warrants divided by the average of the Last Reported Sale Prices of Common Stock over the ten consecutive Trading Day period ending on the Business Day immediately preceding the Ex-Date for such distribution.

     Such adjustment shall be successively made whenever any such rights or warrants are distributed and shall become effective immediately after the opening of business on the Ex-Date for such distribution. The Company shall not issue any such rights or warrants in respect of shares of the Common Stock held in treasury by the Company. To the extent that shares of the Common Stock are not delivered after the expiration of such rights or warrants, the Put Value Rate shall be readjusted to the Put Value Rate that would then be in effect had the adjustments made upon the issuance of such rights or warrants been made on the basis of delivery of only the number of shares of Common Stock actually delivered. If such rights or warrants are not so issued, the Put Value Rate shall again be adjusted to be the Put Value Rate that would then be in effect if such Ex- Date for such distribution had not been fixed.

     In determining whether any rights or warrants entitle the holders to subscribe for or purchase shares of the Common Stock at less than such Last Reported Sale Price of the Common Stock, and in determining the aggregate offering price of such shares of the Common Stock, there shall be taken into account any consideration received by the Company for such rights or warrants and any amount payable on exercise or conversion thereof, the value of such consideration, if other than cash, to be determined by the Board of Directors. In no event shall the Put Value Rate be decreased pursuant to this Section 13.04(b).

     (c) In case the Company shall distribute shares of its capital stock, evidences of its indebtedness or its other assets or property other than (i) dividends or distributions referred to in Section 13.04(a) and Section 13.04(b), (ii) dividends or distributions paid exclusively in cash, and (iii) Spin-Offs to which the provisions set forth below in this Section 13.04(c) shall apply (any of such shares of capital stock, indebtedness, or other asset or property hereinafter in this Section 13.04(c) called the “Distributed Property”), to all or substantially all holders of its Common Stock, then, in each such case the Put Value Rate shall be adjusted based on the following formula:

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where
PVR0	=	the Put Value Rate in effect immediately prior to the Ex-Date for such distribution;
PVR’	=	the Put Value Rate in effect immediately after the Ex-Date for such distribution;
SP0	=	the average of the Last Reported Sale Prices of the Common Stock over the ten consecutive Trading Day period ending on the Trading Day immediately preceding the Ex-Date relating to such distribution; and
FMV	=	the fair market value (as determined by the Board of Directors) of the shares of capital stock, evidences of indebtedness, assets or property distributed with respect to each outstanding share of Common Stock on the Ex-Date for such distribution.

     Such adjustment shall become effective immediately prior to the opening of business on the Ex-Date for such distribution; provided that if “FMV” as set forth above is equal to or greater than “SP₀” as set forth above, in lieu of the foregoing adjustment, adequate provision shall be made so that each Noteholder shall receive on the date on which the Distributed Property is distributed to holders of Common Stock, for each $1,000 principal amount of Notes, the amount of Distributed Property such holder would have received had such holder owned a number of shares of Common Stock equal to the Put Value Rate on the record date for such distribution, without being required to put the Notes to the Company. If such distribution is not so paid or made, the Put Value Rate shall again be adjusted to be the Put Value Rate that would then be in effect if such dividend or distribution had not been declared. If the Board of Directors determines “FMV” for purposes of this Section 13.04(c) by reference to the actual or when issued trading market for any securities, it must in doing so consider the prices in such market over the same period used in computing the Last Reported Sale Prices of the Common Stock over the ten consecutive Trading Day period ending on the Trading Day immediately preceding the Ex-Date for such distribution.

     With respect to an adjustment pursuant to this Section 13.04(c) where there has been a payment of a dividend or other distribution on the Common Stock in shares of capital stock of any class or series, or similar equity interest, of or relating to a Subsidiary or other business unit of the Company (a “Spin-Off”), the Put Value Rate in effect immediately before 5:00 p.m., New York City time, on the 10th Trading Day immediately following, and including, the effective date of the Spin-Off will be increased based on the following formula:

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where
PVR0	=	the Put Value Rate in effect immediately prior to the 10th Trading Day immediately following, and including, the effective date of the Spin-Off;
PVR’	=	the Put Value Rate in effect immediately after the 10th Trading Day immediately following, and including, the effective date of the Spin-Off;
FMV0	=	the average of the Last Reported Sale Prices of the capital stock or similar equity interest distributed to holders of Common Stock applicable to one share of Common Stock over the first ten consecutive Trading Day period immediately following, and including, the effective date of the Spin-Off; and
MP0	=	the average of the Last Reported Sale Prices of Common Stock over the first ten consecutive Trading Day period, immediately following, and including the effective date of the Spin-Off.

     Such adjustment to the Put Value Rate shall occur after the close of business on the tenth Trading Day immediately following, and including, the effective date of the Spin-Off; provided that in respect of any put exercise within the ten Trading Days following, and including, the effective date of any Spin-Off, references within this paragraph (c) to ten Trading Days shall be deemed replaced with such lesser number of Trading Days as have elapsed between the effective date of such Spin-Off and the Put Exercise Date in determining the applicable Put Value Rate.

     Rights or warrants distributed by the Company to all holders of Common Stock, entitling the holders thereof to subscribe for or purchase shares of the Company’s capital stock, including Common Stock (either initially or under certain circumstances), which rights or warrants, until the occurrence of a specified event or events (“Trigger Event”): (i) are deemed to be transferred with such shares of Common Stock; (ii) are not exercisable; and (iii) are also issued in respect of future issuances of Common Stock, shall be deemed not to have been distributed for purposes of this Section 13.04 (and no adjustment to the Put Value Rate under this Section 13.04 will be required) until the occurrence of the earliest Trigger Event, whereupon such rights and warrants shall be deemed to have been distributed and an appropriate adjustment (if any is required) to the Put Value Rate shall be made under this Section 13.04(c). If any such right or warrant, including any such existing rights or warrants distributed prior to the date of this Indenture, are subject to events, upon the occurrence of which such rights or warrants become exercisable to purchase different securities, evidences of indebtedness or other assets, then the date of the occurrence of any and each such event shall be deemed to be the date of distribution and Ex-Date with respect to new rights or warrants with such rights (and a termination or expiration of the existing rights or warrants without exercise by any of the holders thereof). In addition, in the event of any distribution (or deemed distribution) of rights or warrants, or any Trigger Event or other event (of the type described in the preceding sentence) with respect thereto that was counted for purposes of calculating a distribution amount for which an adjustment to the Put Value Rate under this Section 13.04 was made, (1) in the case of any such rights or warrants that shall all have been redeemed or repurchased without exercise by any holders thereof, the Put Value Rate shall be readjusted upon such final redemption or repurchase to give effect to such distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal to the per share

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redemption or repurchase price received by a holder or holders of Common Stock with respect to such rights or warrants (assuming such holder had retained such rights or warrants), made to all holders of Common Stock as of the date of such redemption or repurchase, and (2) in the case of such rights or warrants that shall have expired or been terminated without exercise by any holders thereof, the Put Value Rate shall be readjusted as if such rights and warrants had not been issued.

     In no event shall the Put Value Rate be decreased pursuant to this Section 13.04(c).

     For purposes of this Section 13.04(c), Section 13.04(a) and Section 13.04(b), any dividend or distribution to which this Section 13.04(c) is applicable that also includes shares of Common Stock to which Section 13.04(a) applies and/or also includes rights or warrants to subscribe for or purchase shares of Common Stock to which Section 13.04(b) applies shall be deemed instead to be (1) a dividend or distribution of the Distributed Property other than such shares of Common Stock to which Section 13.04(a) applies and/or other than such rights or warrants to which Section 13.04(b) applies and any Put Value Rate adjustment required by this Section 13.04(c) with respect to such dividend or distribution shall then be made immediately followed by (2) a dividend or distribution of such shares of Common Stock or such rights or warrants (and any further Put Value Rate adjustment required by Section 13.04(a) and/or Section 13.04(b) with respect to such dividend or distribution shall then be made), except (A) the Ex-Date of such dividend or distribution shall under this Section 13.04(c) be substituted as “the Ex-Date” within the meaning of Section 13.04(a) and Section 13.04(b) and (B) any shares of Common Stock included in such dividend or distribution shall not be deemed “outstanding immediately prior to the Ex-Date for such dividend or distribution, or the effective date of such share split or share combination, as the case may be” within the meaning of Section 13.04(a) or “outstanding immediately prior to the Ex-Date for such distribution” within the meaning of Section 13.04(b).

     (d) In case the Company shall pay a dividend or make a distribution consisting exclusively of cash to all or substantially all holders of its Common Stock, the Put Value Rate shall be adjusted based on the following formula:

where
PVR0	=	the Put Value Rate in effect immediately prior to the Ex-Date for such distribution;
PVR’	=	the Put Value Rate in effect immediately after the Ex-Date for such distribution;
SP0	=	the Last Reported Sale Price of the Common Stock on the Trading Day immediately preceding the Ex-Date for such distribution; and

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C = the amount in cash per share the Company distributes to holders of Common Stock.

     Such adjustment shall become effective immediately after the opening of business on the Ex-Date for such dividend or distribution; provided that if the portion of the cash so distributed applicable to one share of the Common Stock is equal to or greater than SP₀ as set forth above, in lieu of the foregoing adjustment, adequate provision shall be made so that each Noteholder shall receive on the date on which such cash dividend is distributed to holders of Common Stock, for each $1,000 principal amount of Notes, the amount of cash such holder would have received had such holder owned a number of shares equal to the Put Value Rate on the record date for such distribution, without being required to put the Notes to the Company. If such dividend or distribution is not so paid or made, the Put Value Rate shall again be adjusted to be the Put Value Rate that would then be in effect if such dividend or distribution had not been declared. In no event shall the Put Value Rate be decreased pursuant to this Section 13.04(d).

     For the avoidance of doubt, for purposes of this Section 13.04(d), in the event of any reclassification of the Common Stock, as a result of which the Notes become convertible into more than one class of Common Stock, if an adjustment to the Put Value Rate is required pursuant to this Section 13.04(d), references in this Section to one share of Common Stock or Last Reported Sale Price of one share of Common Stock shall be deemed to refer to a unit or to the price of a unit consisting of the number of shares of each class of Common Stock into which the Notes are then exercisable equal to the numbers of shares of such class issued in respect of one share of Common Stock in such reclassification. The above provisions of this paragraph shall similarly apply to successive reclassifications.

     (e) In case the Company or any of its Subsidiaries makes a payment in respect of a tender offer or exchange offer for the Common Stock, to the extent that the cash and value of any other consideration included in the payment per share of Common Stock exceeds the Last Reported Sale Price of the Common Stock on the Trading Day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender or exchange offer (as it may be amended), the Put Value Rate shall be increased based on the following formula:

where
PVR0	=	the Put Value Rate in effect on the date such tender or exchange offer expires;
PVR’	=	the Put Value Rate in effect on the day next succeeding the date such tender or exchange offer expires;
AC	=	the aggregate value of all cash and any other consideration (as determined by the Board of Directors) paid or payable for shares of Common Stock purchased in such tender or exchange offer;

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OS0	=	the number of shares of Common Stock outstanding immediately prior to the date such tender or exchange offer expires;
OS’	=	the number of shares of Common Stock outstanding immediately after the date such tender or exchange offer expires (after giving effect to such tender offer or exchange offer); and
SP’	=	the Last Reported Sale Price of Common Stock on the Trading Day next succeeding the date such tender or exchange offer expires,

     Such adjustment shall become effective immediately after close of business on the Trading Day next succeeding the date such tender or exchange offer expires. If the Company or its Subsidiary is obligated to purchase shares of Common Stock pursuant to any such tender or exchange offer, but the Company or its Subsidiary is permanently prevented by applicable law from effecting all or any such purchases or all or any portion of such purchases are rescinded, the Put Value Rate shall again be adjusted to be the Put Value Rate that would then be in effect if such tender or exchange offer had not been made or had only been made in respect of the purchases that had been effected. In no event shall the Put Value Rate be decreased pursuant to this Section 13.04(e).

     (f) For purposes of this Section 13.04 the term “record date” shall mean, with respect to any dividend, distribution or other transaction or event in which the holders of Common Stock have the right to receive any cash, securities or other property or in which the Common Stock (or other applicable security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of shareholders entitled to receive such cash, securities or other property (whether such date is fixed by the Board of Directors or by statute, contract or otherwise).

     (g) In addition to those required by clauses (a), (b), (c), (d), and (e) of this Section 13.04, and to the extent permitted by applicable law, the Company from time to time may increase the Put Value Rate by any amount for a period of at least 20 calendar days if the Board of Directors determines that such increase would be in the Company’s best interest. In addition, the Company may also (but is not required to) increase the Put Value Rate to avoid or diminish any income tax to holders of Common Stock or rights to purchase Common Stock in connection with any dividend or distribution of shares (or rights to acquire shares) or similar event. Whenever the Put Value Rate is increased pursuant to the preceding sentence, the Company shall mail to the holder of each Note at its last address appearing on the Note Register provided for in Section 2.06 a notice of the increase at least fifteen days prior to the date the increased Put Value Rate takes effect, and such notice shall state the increased Put Value Rate and the period during which it will be in effect.

     (h) All calculations and other determinations under this Article 13 shall be made by the Company and shall be made to the nearest cent or to the nearest one-ten thousandth (1/10,000) of a share, as the case may be. No adjustment shall be made for the Company’s issuance of Common Stock or convertible or exchangeable securities or rights to purchase Common Stock or

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convertible or exchangeable securities, other than as provided in this Section 13.04. No adjustment shall be made to the Put Value Rate unless such adjustment would require a change of at least 1% in the Put Value Rate then in effect at such time. The Company shall carry forward any adjustments that are less than 1% of the Put Value Rate, take such carry-forward adjustments into account in any subsequent adjustment and make such carried forward adjustments, regardless of whether the aggregate adjustment is less than 1% within one year of the first such adjustment carried forward, upon a Designated Event, or upon maturity, unless any such adjustment has already been made.

     (i) Whenever the Put Value Rate is adjusted as herein provided, the Company shall promptly file with the Trustee and any Put Exercise Agent other than the Trustee an Officers’ Certificate setting forth the Put Value Rate after such adjustment and setting forth a brief statement of the facts requiring such adjustment. The Trustee and Put Exercise Agent may conclusively rely on the accuracy of the Put Value Rate adjustment provided by the Company. Unless and until a Responsible Officer of the Trustee shall have received such Officers’ Certificate, the Trustee shall not be deemed to have knowledge of any adjustment of the Put Value Rate and may assume without inquiry that the last Put Value Rate of which it has knowledge is still in effect. Promptly after delivery of such certificate, the Company shall prepare a notice of such adjustment of the Put Value Rate setting forth the adjusted Put Value Rate and the date on which each adjustment becomes effective and shall mail such notice of such adjustment of the Put Value Rate to the holder of each Note at his last address appearing on the Note Register provided for in Section 2.06 of this Indenture, within twenty (20) days of the effective date of such adjustment. Failure to deliver such notice shall not affect the legality or validity of any such adjustment.

     (j) The applicable Put Value Rate will not be adjusted:

          (i) upon the issuance of any shares of the Common Stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on the Company’s securities and the investment of additional optional amounts in shares of the Common Stock under any plan;

          (ii) upon the issuance of any shares of the Common Stock or restricted stock units or options or rights (including shareholder appreciation rights) to purchase those shares pursuant to any present or future employee, director or consultant benefit plan or program of or assumed by the Company or any of the Company’s Subsidiaries;

          (iii) upon the issuance of any shares of the Common Stock pursuant to any option, warrant, right or exercisable, exchangeable or convertible securities not described in clause (ii) of this subsection and outstanding as of the date the Notes were first issued;

          (iv) for a change in the par value of the Common Stock;

          (v) for accrued and unpaid interest; or

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          (vi) for any transactions described in this Section 13.04 if Noteholders participate (as a result of holding the Notes, and at the same time as holders of Common Stock participate) in such transactions as if such Noteholders held a number shares of Common Stock equal to the Put Value Rate at the time such adjustment would be required, multiplied by the principal amount (expressed in thousands) of Notes held by such Noteholders, without having to put their Notes to the Company.

     (k) For purposes of this Section 13.04, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock.

     Section 13.05. Reserved.

     Section 13.06. Effect of Reclassification, Consolidation, Merger or Sale.

     If any of the following events occur, namely (i) any reclassification or change of the outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a split, subdivision or combination), (ii) any consolidation, merger or combination of the Company with another Person, or (iii) any sale or conveyance of all or substantially all of the property and assets of the Company to any other Person, in either case as a result of which holders of Common Stock shall be entitled to receive cash, securities or other property or assets with respect to or in exchange for such Common Stock (any such event a “Merger Event”), then:

     (a) the Company or the successor or purchasing Person, as the case may be, shall execute with the Trustee a supplemental indenture (which shall comply with the Trust Indenture Act as in force at the date of execution of such supplemental indenture if such supplemental indenture is then required to so comply) permitted under Section 9.01(a) providing for the put exercise and settlement of the Notes as set forth in this Indenture. Such supplemental indenture shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article and the Trustee may conclusively rely on the determination by the Company of the equivalency of such adjustments. If, in the case of any Merger Event, the Reference Property includes shares of stock or other securities and assets of a corporation other than the successor or purchasing corporation, as the case may be, in such reclassification, change, consolidation, merger, combination, sale or conveyance, then such supplemental indenture shall also be executed by such other corporation and shall contain such additional provisions to protect the interests of the holders of the Notes as the Board of Directors shall reasonably consider necessary by reason of the foregoing, including to the extent required by the Board of Directors and practicable the provisions providing for the repurchase rights set forth in Article 14 herein.

     In the event the Company shall execute a supplemental indenture pursuant to this Section 13.06, the Company shall promptly file with the Trustee an Officers’ Certificate briefly stating the reasons therefore, the kind or amount of cash, securities or property or asset that will

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constitute the Reference Property after any such Merger Event, any adjustment to be made with respect thereto and that all conditions precedent have been complied with, and shall promptly mail notice thereof to all Noteholders.

     (b) Notwithstanding the provisions of Section 13.02(a) and Section 13.02(b), and subject to the provisions of Section 13.01, at the effective time of such Merger Event, the right to put each $1,000 principal amount of Notes to the Company based on the Put Value Rate based on Shares of Common Stock will be changed to the Put Value Rate based on the kind and amount of cash, securities or other property or assets that a holder of a number of shares of Common Stock equal to the Put Value Rate immediately prior to such transaction would have owned or been entitled to receive (the “Reference Property”) such that from and after the effective time of such transaction upon the put exercise by the Noteholder, a Noteholder will be entitled to receive with respect to its Notes in lieu of the shares of Common Stock otherwise deliverable, the same type (and in the same proportion) of Reference Property. The amount of any Reference Property shall be based on the Daily Put Values in an amount equal to the applicable Put Value Rate, as described under Section 13.02(a).

     For purposes of determining the constitution of Reference Property, the type and amount of consideration that a holder of Common Stock would have been entitled to in the case of reclassifications, consolidations, mergers, sales or conveyance of assets or other transactions that cause the Common Stock to be converted into the right to receive more than a single type of consideration (determined based in part upon any form of shareholder election) will be deemed to be the weighted average of the types and amounts of consideration received by the holders of Common Stock that affirmatively make such an election. The Company shall not become a party to any such transaction unless its terms are consistent with this Section 13.06. None of the foregoing provisions shall affect the right of a holder of Notes to put its Notes to the Company in accordance with the provisions of Article 13 hereof prior to the effective date of the Merger Event.

     (c) The Company shall cause notice of the execution of such supplemental indenture to be mailed to each Noteholder, at his address appearing on the Note Register provided for in this Indenture, within twenty (20) days after execution thereof. Failure to deliver such notice shall not affect the legality or validity of such supplemental indenture.

     (d) The above provisions of this Section shall apply to successive Merger Events.

     Section 13.07. Certain Covenants.

     (a) Before taking any action which would cause an adjustment reducing the Put Value Rate below the then par value, if any, of the shares of Common Stock issuable upon a put, the Company will take all corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue shares of such Common Stock at such adjusted Put Value Rate.

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     The Company covenants that all shares of Common Stock issued upon a put will be fully paid and non-assessable by the Company and free from all taxes, liens and charges with respect to the issue thereof.

     (b) The Company covenants that, if any shares of Common Stock to be provided for the purpose of a put require registration with or approval of any governmental authority under any federal or state law before such shares may be validly issued upon such exercise, the Company will in good faith and as expeditiously as possible, to the extent then permitted by the rules and interpretations of the Commission (or any successor thereto), endeavor to secure such registration or approval, as the case may be.

     (c) The Company further covenants that if at any time the Common Stock shall be listed on any other national securities exchange or automated quotation system the Company will, if permitted and required by the rules of such exchange or automated quotation system, list and keep listed, so long as the Common Stock shall be so listed on such exchange or automated quotation system, all Common Stock issuable upon a put.

     Section 13.08. Responsibility of Trustee. Notwithstanding any provision of this Indenture to the contrary, the Trustee and any other Put Exercise Agent shall not at any time be under any duty or responsibility to any Noteholder to determine the Put Value Rate or whether any facts exist which may require any adjustment of the Put Value Rate, or with respect to the nature or extent or calculation of any such adjustment when made, or with respect to the method employed, or herein or in any supplemental indenture provided to be employed, in making the same. The Trustee and any other Put Exercise Agent shall not be accountable with respect to the validity or value (or the kind or amount) of any shares of Common Stock, or of any securities or property, which may at any time be issued or delivered by the Company with respect to any Note; and the Trustee and any other Put Exercise Agent make no representations with respect thereto. Neither the Trustee nor any Put Exercise Agent shall be responsible for any failure of the Company to issue, transfer or deliver any shares of Common Stock or stock certificates or other securities or property or cash upon the surrender of any Note for the purpose of put exercise or to comply with any of the duties, responsibilities or covenants of the Company contained in this Article.

     Without limiting the generality of the foregoing, neither the Trustee nor any Put Exercise Agent shall be under any responsibility to determine the correctness of any provisions contained in any supplemental indenture entered into pursuant to Section 13.06 relating either to the kind or amount of shares of stock or securities or property (including cash) receivable by Noteholders upon the put exercise after any event referred to in such Section 13.06 or to any adjustment to be made with respect thereto, but, subject to the provisions of Section 6.01, may accept as conclusive evidence of the correctness of any such provisions, and shall be protected in relying upon, the Officers’ Certificate (which the Company shall be obligated to file with the Trustee prior to the execution of any such supplemental indenture) with respect thereto.

     Section 13.09. Notice to Holders Prior to Certain Actions.

     In case:

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     (a) the Company shall declare a dividend (or any other distribution) on its Common Stock that would require an adjustment in the Put Value Rate pursuant to Section 13.04; or

     (b) the Company shall authorize the granting to all of the holders of its Common Stock of rights or warrants to subscribe for or purchase any share of any class or any other rights or warrants, or

     (c) of any reclassification of the Common Stock of the Company (other than a subdivision or combination of its outstanding Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation or merger to which the Company is a party and for which approval of any shareholders of the Company is required, or of the sale or transfer of all or substantially all of the assets of the Company; or

     (d) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company;

the Company shall cause to be filed with the Trustee and to be mailed to each Noteholder at his address appearing on the Note Register, provided for in Section 2.06 of this Indenture, as promptly as possible but in any event at least twenty days prior to the applicable date specified in clause (x) or (y) below, as the case may be, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution or rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or rights are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up is expected to become effective or occur, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such dividend, distribution, reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up.

     Section 13.10. Shareholder Rights Plans. To the extent that the Company has a shareholder rights plan (the “Rights Plan”) in effect upon a put of the Notes, the holders shall receive, in addition to any shares of Common Stock, the associated rights issued under the Rights Plan or under any future shareholder rights plan the Company adopts. If the rights have separated from the Common Stock, expired, terminated or been redeemed or exchanged in accordance with the Rights Plan prior to any delivery of shares by the Company in respect of any put exercise, the Put Value Rate will be adjusted at the time of separation as if the Company distributed to all holders of the Common Stock, shares of its capital stock, evidences of indebtedness or assets as set forth in Section 13.04(c), subject to readjustment in the event of the expiration, termination or redemption of such rights.

     Section 13.11. Termination of Put Rights by the Company.

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     (a) The Company may, at its option and subject to the last sentence of this paragraph, elect to terminate the right of the holders to put their Notes to the Company (the “Put Right”) if at any time the Daily VWAP of the Common Stock has equaled or exceeded 130% of the Put Value Price (the “Termination Put Value Price”) then in effect for at least twenty (20) Trading Days within a period of any thirty (30) consecutive Trading Days (a “Put Termination Trigger Event”). If the Company elects to terminate the Put Right upon a Put Termination Trigger Event, the Company, or, at its request, the Trustee in the name of and at the expense of the Company, will be required to deliver an irrevocable notice to holders of Notes within five Trading Days of the date of the Put Termination Trigger Event (the “Put Termination Notice,” and the date of such Put Termination Notice, the “Put Termination Notice Date”). Holders may put their Notes at any time on or prior to the twentieth (20th) day following the Put Termination Notice Date (the “Put Termination Date”), subject to the restrictions set forth in Section 13.03. The Put Rights of holders shall terminate after the Put Termination Date (a “Put Termination”), and thereafter the holders shall have no rights to put Notes to the Company under the Notes or this Indenture. During the period from the date of this Indenture until the date that is one-year after the later of the last date of original issuance of the Notes and the last date on which the Company or any Affiliate of the Company was the owner of the Notes, the Company may only terminate the Put Right upon a Put Termination Trigger Event if a shelf registration statement that registers the resale of the Notes and the Common Stock issuable upon a put of the Notes (including any shares issuable pursuant to the Coupon Make-Whole Payment (as defined below), if applicable) (the “Shelf Registration Statement”) has been filed by the Company and been declared effective by the Commission or is automatically effective and is available for use, and the Company expects such Shelf Registration Statement to remain effective and available for use from the Put Termination Notice Date until thirty (30) days following the Put Termination Date. After the one-year period referenced in the immediately preceding sentence, the Company may terminate the Put Right upon a Put Termination Trigger Event only so long as there is an effective Shelf Registration Statement or the Common Stock issuable upon a put of the Notes (including any shares issuable pursuant to the Coupon Make-Whole Payment (as defined below)) is otherwise freely transferable by a person who is not an affiliate of the Company pursuant to Rule 144 under the Securities Act (or any successor provision thereto) without any volume or manner of sale restrictions thereunder.

     If the Put Termination Date occurs prior to October 15, 2013, each holder whose Notes are put to the Company after the Put Termination Notice Date and on or before the Put Termination Date will receive an additional payment (the “Coupon Make-Whole Payment”) in cash (except as provided below) with respect to the Notes put in an amount equal to the aggregate amount of interest payments that would have been payable on the Notes from the last day through which interest was paid on the Notes, or, if no interest has been paid, from, and including, April 15, 2010, in each case to (but excluding) October 15, 2013. The Coupon Make-Whole Payment shall be calculated in accordance with the foregoing as determined in good faith by the Company. For the avoidance of doubt, holders that receive Additional Shares pursuant to Section 13.01(e) with respect to Notes put to the Company in connection with a Fundamental Change will not be entitled to a Coupon Make-Whole Payment for such put of Notes pursuant to this Section 13.11.

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     Notwithstanding the foregoing, the Company may, in its sole discretion, elect to make any or all of such Coupon Make-Whole Payment in Common Stock in lieu of cash by providing notice of such election in the Put Termination Notice. Such Common Stock will be valued at a price per share equal to 95% of the Termination Put Value Price. Prior to or concurrently with such payment, the Company will provide the Trustee with an Officers’ Certificate setting forth the calculation of the payment required by this Section 13.11(a). The Trustee shall have no obligation or liability with respect to the calculation of the payments required by this Section 13.11(a).

     (b) The Company shall mail the Put Termination Notice to the Trustee and to each holder (and to beneficial owners as required by applicable law). The Put Termination Notice shall include the form of the put election notice to be completed by the holder and shall state:

     (i) the Put Termination Date;

     (ii) briefly, the put rights of the Notes;

     (iii) the name and address of each Paying Agent and Put Exercise Agent;

     (iv) the Coupon Make-Whole Payment, and if the Company intends to pay any or all of the Coupon Make-Whole Payment in shares of Common Stock in accordance with Section 13.11(a); and

     (v) the Put Value Price and the Put Value Rate and any adjustments thereto.

     Whenever in the Notes or in this Indenture there is a reference, in any context, to any obligation of the Company with respect to a put of the Notes to the Company, such reference shall be qualified by the put termination provisions of this Section 13.11, and the Company will not be required to comply with any of the put provisions of the Notes and this Indenture (including, without limitation, Article 13 (other than this Section 13.11)) after a Put Termination has occurred pursuant to the provisions of Section 13.11 of this Indenture, and any express mention of the put termination provisions of this Section 13.11 in any provision of this Indenture shall not be construed as excluding the put termination provisions of this Section 13.11 in those provisions of this Indenture when such express mention is not made.

     (c) Concurrently with the mailing of any such Put Termination Notice, the Company shall issue a press release announcing such Put Termination, the form and content of which press release shall be determined by the Company in good faith, but in its sole discretion, and in accordance with applicable securities laws.

     During the period beginning on the date of the Put Termination Notice and ending on the date following the Put Termination Date, the Company shall not publicly offer to sell any shares of Common Stock or securities convertible into or exchangeable for Common Stock (other than the Common Stock and shares issued pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans existing prior to the date of the Put Termination

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Notice or pursuant to then outstanding options, warrants or rights), or publicly offer to sell or grant options, rights or warrants with respect to any shares of Common Stock or securities convertible into or exchangeable for Common Stock (other than the grant of options pursuant to option plans existing prior to the date of the Put Termination Notice).

     Section 13.12. Redemption of Notes. The Company may not redeem any Notes prior to October 15, 2013. On or after October 15, 2013, and prior to maturity, the Notes may be redeemed at any time or from time to time at the option of the Company, in whole or in part. Upon any redemption pursuant to this Section 13.12, the Company shall provide the notice required by Section 13.13 hereof (which notice may be revoked at any time prior to the time at which the Company or the Trustee, as the case may be, has given such notice to Noteholders) and shall pay a redemption price in cash equal to 100% of the principal amount of the Notes being redeemed, together with accrued and unpaid interest to, but excluding, the date fixed for redemption; provided that if the date fixed for redemption falls after a record date and on or prior to the corresponding interest payment date, then the interest payable on such Interest Payment Date shall be paid to the holders of record of the Notes on the applicable record date instead of the holders surrendering the Notes for redemption.

     Section 13.13. Notice of Optional Redemption; Selection of Notes. In case the Company shall desire to exercise the right to redeem all or, as the case may be, any part of the Notes pursuant to Section 13.12, it shall fix a date for redemption and it or, at its written request (which may be revoked at any time prior to the time on which the Trustee has given notice to the holders of the Notes) received by the Trustee not fewer than forty-five (45) days prior (or such shorter period of time as may be acceptable to the Trustee) to the date fixed for redemption, the Trustee in the name of and at the expense of the Company, shall mail or cause to be mailed a notice of such redemption not fewer than thirty (30) nor more than sixty (60) days prior to the redemption date to each holder of Notes so to be redeemed as a whole or in part at its last address as the same appears on the Note Register; provided that if the Company shall give such notice, it shall also give written notice of the redemption date to the Trustee. Such mailing shall be by first class mail. The notice, if mailed in the manner herein provided, shall be conclusively presumed to have been duly given, whether or not the holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the holder of any Note designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Note. Concurrently with the mailing of any such notice of redemption, the Company shall issue a press release announcing such redemption, the form and content of which press release shall be determined by the Company in its sole discretion. The failure to issue any such press release or any defect therein shall not affect the validity of the redemption notice or any of the proceedings for the redemption of any Note called for redemption.

     Each such notice of redemption shall specify the aggregate principal amount of Notes to be redeemed, the CUSIP number or numbers of the Notes being redeemed, the date fixed for redemption (which shall be a Business Day), the redemption price at which Notes are to be redeemed, the place or places of payment, that payment will be made upon presentation and surrender of such Notes, that interest accrued and unpaid to the date fixed for redemption will be paid as specified in said notice, and that on and after said date interest thereon or on the portion

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thereof to be redeemed will cease to accrue. Such notice shall also state, if applicable, the current Put Value Rate and the date on which the right to put such Notes or portions thereof will expire. If fewer than all the Notes are to be redeemed, the notice of redemption shall identify the Notes to be redeemed (including CUSIP numbers, if any). In case any Note is to be redeemed in part only, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that, on and after the redemption date, upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion thereof will be issued.

     On or prior to the redemption date specified in the notice of redemption given as provided in this Section 13.13, the Company will deposit with the Trustee or with one or more paying agents (or, if the Company is acting as its own paying agent, set aside, segregate and hold in trust) an amount of money in immediately available funds sufficient to redeem on the redemption date all the Notes (or portions thereof) so called for redemption (other than those theretofore put to the Company) at the appropriate redemption price, together with accrued and unpaid interest to, but excluding, the redemption date; provided that if such payment is made on the redemption date it must be received by the Trustee or paying agent, as the case may be, by 10:00 a.m., New York City time, on such date. The Company shall be entitled to retain any interest, yield or gain on amounts deposited with the Trustee or any paying agent pursuant to this Section 13.13 in excess of amounts required hereunder to pay the redemption price and accrued and unpaid interest to, but excluding, the redemption date. If any Note called for redemption is put pursuant hereto prior to such redemption date, any money deposited with the Trustee or any paying agent or so segregated and held in trust for the redemption of such Note shall be paid to the Company upon its written request, or, if then held by the Company, shall be discharged from such trust. Whenever any Notes are to be redeemed, the Company will give the Trustee written notice in the form of an Officers’ Certificate not fewer than forty-five (45) days (or such shorter period of time as may be acceptable to the Trustee) prior to the redemption date as to the aggregate principal amount of Notes to be redeemed.

     If less than all of the outstanding Notes are to be redeemed, the Trustee shall select the Notes or portions thereof of the Global Note or the Notes in certificated form to be redeemed (in principal amounts of $1,000 or multiples thereof) by lot, on a pro rata basis or by another method the Trustee deems fair and appropriate. If any Notes selected for partial redemption are put in part after such selection, the portion of such Note put shall be deemed (so far as may be possible) to be the portion to be selected for redemption. The Notes (or portions thereof) so selected shall be deemed duly selected for redemption for all purposes hereof, notwithstanding that any such Note is put in part before the mailing of the notice of redemption.

     Upon any redemption of less than all of the outstanding Notes, the Company and the Trustee may (but need not), solely for purposes of determining the pro rata allocation among such Notes as have not been put to the Company and are outstanding at the time of redemption, treat as outstanding any Notes put to the Company during the period of fifteen (15) days next preceding the mailing of a notice of redemption and may (but need not) treat as outstanding any Note authenticated and delivered during such period in respect of the unput portion of any Note put to the Company in part during such period.

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     Section 13.14. Payment for Notes Called for Redemption by the Company. If notice of redemption has been given as provided in Section 13.13, the Notes or portion of Notes with respect to which such notice has been given shall, unless put to the Company pursuant to the terms hereof, become due and payable on the date fixed for redemption and at the place or places stated in such notice at the applicable redemption price, together with interest accrued and unpaid to (but excluding) the redemption date, and on and after said date (unless the Company shall default in the payment of such Notes at the redemption price, together with interest accrued to said date). Interest on the Notes or portion of Notes so called for redemption shall cease to accrue and, after the close of business on the Business Day immediately preceding the redemption date (unless the Company shall default in the payment of such Notes at the redemption price, together with interest accrued to said date), such Notes shall cease to be puttable into Common Stock and, except as provided in Section 6.05 and Section 11.04, to be entitled to any benefit or security under this Indenture, and the holders thereof shall have no right in respect of such Notes except the right to receive the redemption price thereof and accrued and unpaid interest to (but excluding) the redemption date. On presentation and surrender of such Notes at a place of payment in said notice specified, the said Notes or the specified portions thereof shall be paid and redeemed by the Company at the applicable redemption price, together with interest accrued and unpaid thereon to, but excluding, the redemption date.

     Upon presentation of any Note redeemed in part only, the Company shall execute and the Trustee shall authenticate and make available for delivery to the holder thereof, at the expense of the Company, a new Note or Notes, of authorized denominations, in principal amount equal to the unredeemed portion of the Notes so presented.

     Notwithstanding the foregoing, the Trustee shall not redeem any Notes or mail any notice of redemption during the continuance of a default in payment of interest on the Notes.

     Section 13.15. Put Arrangement on Call for Redemption. In connection with any redemption of Notes, the Company may arrange for the purchase and put of any Notes by an agreement with one or more investment banks or other purchasers to purchase such Notes by paying to the Trustee in trust for the Noteholders, on or before the date fixed for redemption, an amount not less than the applicable redemption price, together with interest accrued and unpaid to, but excluding, the date fixed for redemption, of such Notes. Notwithstanding anything to the contrary contained in this Article 13, the obligation of the Company to pay the redemption price of such Notes, together with interest accrued and unpaid to, but excluding, the date fixed for redemption, shall be deemed to be satisfied and discharged to the extent such amount is so paid by such purchasers. If such an agreement is entered into, a copy of which will be filed with the Trustee prior to the date fixed for redemption, any Notes not duly surrendered for conversion by the holders thereof may, at the option of the Company, be deemed, to the fullest extent permitted by law, acquired by such purchasers from such holders and (notwithstanding anything to the contrary contained in Article 13) put by such purchasers, all as of immediately prior to the close of business on the date fixed for redemption (and the right to put any such Notes shall be extended through such time), subject to payment of the above amount as aforesaid. At the

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direction of the Company, the Trustee shall hold and dispose of any such amount paid to it in the same manner as it would monies deposited with it by the Company for the redemption of Notes. Without the Trustee’s prior written consent, no arrangement between the Company and such purchasers for the purchase and put of any Notes shall increase or otherwise affect any of the powers, duties, responsibilities or obligations of the Trustee as set forth in this Indenture.

     Section 13.16. Repayment to the Company. The Trustee (or other paying agent appointed by the Company) shall return to the Company any cash that remains unclaimed as provided in Section 11.04, together with interest, if any, thereon, held by them for the payment of the repurchase price; provided that to the extent that the aggregate amount of cash deposited by the Company pursuant to Section 13.13 exceeds the aggregate redemption price or purchase price, as the case may be, of the Notes or portions thereof that the Company is obligated to redeem or purchase as of the redemption date or the Designated Event Purchase Date, as the case may be, then, unless otherwise agreed in writing with the Company, promptly after the Business Day following the redemption date or the Designated Event Purchase Date, as the case may be, the Trustee shall return any such excess to the Company together with interest, if any, thereon.

     Section 13.17. Acceleration; Payments to Noteholders. In the event of the acceleration of the Notes because of an Event of Default, no payment or distribution shall be made to the Trustee or any holder of Notes in respect of the principal of or interest on the Notes called for redemption in accordance with Section 13.13 as provided in this Indenture, until such acceleration is rescinded in accordance with the terms of this Indenture.

     Section 13.18. No Sinking Fund. The Notes are not subject to redemption through the operation of a sinking fund.

ARTICLE 14
Repurchase of Notes at Option of Holders

     Section 14.01. Repurchase at Option of Holders Upon a Designated Event.

     (a) If a Designated Event occurs at any time, then each Noteholder shall have the right, at such holder’s option, to require the Company to repurchase all of such holder’s Notes or any portion thereof that is a multiple of $1,000 principal amount, for cash on the date (the “Designated Event Purchase Date”) specified by the Company that is not less than twenty (20) days and not more than thirty-five (35) calendar days after the date of the Designated Event Company Notice (as defined below) at a repurchase price equal to 100% of the principal amount thereof, together with accrued and unpaid interest thereon to, but excluding, the Designated Event Purchase Date (unless the Designated Event Purchase Date is between a regular record date and the corresponding Interest Payment Date to which it relates, in which case, the Company will pay the full amount of accrued and unpaid interest payable on such Interest Payment Date to the Noteholders of record at the close of business on the corresponding regular record date) (the “Designated Event Purchase Price”). Any Notes purchased by the Company shall be paid in cash.

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     However, notwithstanding the foregoing, Noteholders will not have the right to require the Company to purchase any Notes upon a Fundamental Change, and the Company will not be required to deliver the Designated Event Purchase Notice incidental thereto, if at least 90% of the consideration paid for the Common Stock (excluding cash payments for fractional shares and cash payments made pursuant to dissenters’ appraisal rights) in such Fundamental Change transaction consists of capital stock traded on a U.S. national securities exchange or approved for quotation on a United States system of automated dissemination of quotations of securities prices similar to the NASDAQ Global Market prior to its designation as a national securities exchange (or will be so traded or quoted immediately following the merger or consolidation) and, as a result of such transaction, the Notes become puttable based on the Put Value Rate determined on the basis of shares of such capital stock.

     Repurchases of Notes under this Section 14.01 shall be made, at the option of the holder thereof, upon:

     (i) delivery to the Trustee (or other Paying Agent appointed by the Company) by a holder of a duly completed notice (the “Designated Event Purchase Notice”) in the form set forth on the reverse of the Note on or before the Business Day prior to the Designated Event Purchase Date; and

     (ii) delivery or book-entry transfer of the Notes to the Trustee (or other Paying Agent appointed by the Company) at any time after delivery of the Designated Event Purchase Notice (together with all necessary endorsements) at the Corporate Trust Office of the Trustee (or other Paying Agent appointed by the Company) in the Borough of Manhattan, such delivery being a condition to receipt by the holder of the Designated Event Purchase Price therefor; provided that such Designated Event Purchase Price shall be so paid pursuant to this Section 14.01 only if the Note so delivered to the Trustee (or other Paying Agent appointed by the Company) shall conform in all respects to the description thereof in the related Designated Event Purchase Notice.

     The Designated Event Purchase Notice shall state:

     (A) if certificated, the certificate numbers of Notes to be delivered for repurchase, or if not certificated, such notice must comply with appropriate procedures of the Depositary;

     (B) the portion of the principal amount of Notes to be repurchased, which must be $1,000 or an integral multiple thereof, and

     (C) that the Notes are to be repurchased by the Company pursuant to the applicable provisions of the Notes and the Indenture.

     Any purchase by the Company contemplated pursuant to the provisions of this Section 14.01 shall be consummated by the delivery of the consideration to be received by the holder

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promptly following the later of the Designated Event Purchase Date and the time of the book-entry transfer or delivery of the Note.

     The Trustee (or other Paying Agent appointed by the Company) shall promptly notify the Company of the receipt by it of any Designated Event Repurchase Notice or written notice of withdrawal thereof in accordance with the provisions of Section 14.01(c).

     Any Note that is to be repurchased only in part shall be surrendered to the Trustee (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by the holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and make available for delivery to the holder of such Note without service charge, a new Note or Notes, containing identical terms and conditions, each in an authorized denomination in aggregate principal amount equal to and in exchange for the unrepurchased portion of the principal of the Note so surrendered.

     (b) On or before the tenth day after the Effective Date of any Designated Event, the Company shall provide to all holders of record of the Notes and the Trustee and Paying Agent a notice (the “Designated Event Company Notice”) of the occurrence of such Designated Event and of the repurchase right at the option of the holders arising as a result thereof. Such mailing shall be by first class mail. Simultaneously with providing such notice, the Company shall issue a press release containing this information, publish a notice containing this information in a newspaper of general circulation in The City of New York or publish the information on the Company’s website or through such other public medium as the Company may use at that time.

     Each Designated Event Company Notice shall specify:

     (i) the events causing the Designated Event and whether such Designated Event also constituted a Fundamental Change;

     (ii) the date of the Designated Event;

     (iii) the last date on which a holder may exercise the repurchase right;

     (iv) the Designated Event Purchase Date;

     (v) the Designated Event Purchase Price;

     (vi) the name and address of the Paying Agent and the Put Exercise Agent;

     (vii) the applicable Put Value Rate and any adjustments to the applicable Put Value Rate;

     (viii) that the holder may put the Notes to the Company with respect to which a Designated Event Purchase Notice has been previously delivered to the Company by a

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holder only if the holder withdraws the Designated Event Purchase Notice in accordance with Section 14.01(c);

     (ix) that the holder must exercise the repurchase right on or prior to the close of business on the Business Day prior to the Designated Event Purchase Date (the “Designated Event Expiration Time”);

     (x) that the holder shall have the right to withdraw any Notes surrendered prior to the Designated Event Expiration Time, and

     (xi) the procedures that holders must follow to require the Company to repurchase their Notes.

     No failure of the Company to give the foregoing notices and no defect therein shall limit the Noteholders’ repurchase rights or affect the validity of the proceedings for the repurchase of the Notes pursuant to this Section 14.01.

     (c) A Designated Event Purchase Notice may be withdrawn by means of a written notice of withdrawal delivered to the Paying Agent in accordance with the Designated Event Company Notice at any time prior to the close of business on the Business Day prior to the Designated Event Purchase Date, specifying:

     (i) if certificated Notes have been issued, the certificate numbers of the withdrawn Notes, or if not certificated, such notice must comply with appropriate procedures of the Depositary;

     (ii) the principal amount of the Note with respect to which such notice of withdrawal is being submitted, and

     (iii) the principal amount, if any, of such Note that remains subject to the original Designated Event Purchase Notice, which portion must be in principal amounts of $1,000 or an integral multiple of $1,000;

     (d) On or prior to 11:00 a.m. (local time in The City of New York) on the Business Day following the Designated Event Purchase Date, the Company will deposit with the Trustee (or other Paying Agent appointed by the Company or if the Company is acting as its own Paying Agent, set aside, segregate and hold in trust as provided in Section 3.04) an amount of money sufficient to repurchase on the Designated Event Purchase Date all of the Notes to be repurchased on such date at the Designated Event Purchase Price. Subject to receipt of funds and/or Notes by the Trustee (or other Paying Agent appointed by the Company), payment for Notes surrendered for repurchase (and not withdrawn) prior to the Designated Event Expiration Time will be made promptly after the later of (x) the Designated Event Purchase Date with respect to such Note (provided the holder has satisfied the conditions to the payment of the Designated Event Purchase Price in Section 14.01), and (y) the time of book-entry transfer or the delivery of such Note to the Trustee (or other Paying Agent appointed by the Company) by the

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holder thereof in the manner required by Section 14.01 by mailing checks for the amount payable to the holders of such Notes entitled thereto as they shall appear in the Note Register, provided, however, that payments to the Depositary shall be made by wire transfer of immediately available funds to the account of the Depositary or its nominee. The Trustee shall, promptly after such payment and upon written demand by the Company, return to the Company any funds in excess of the Designated Event Purchase Price.

     (e) If the Trustee (or other Paying Agent appointed by the Company) holds money sufficient to repurchase on the Designated Event Purchase Date all the Notes or portions thereof that are to be purchased as of the Business Day following the Designated Event Purchase Date, then on and after the Designated Event Purchase Date (i) such Notes will cease to be outstanding and interest will cease to accrue on such Notes (whether or not book-entry transfer of the Notes has been made or the Notes have been delivered to the Trustee or Paying Agent); and (ii) all other rights of the holders of such Notes will terminate (other than the right to receive the Designated Event Purchase Price upon delivery of the Notes).

ARTICLE 15
Miscellaneous Provisions

     Section 15.01. Provisions Binding on Company’s Successors. All the covenants, stipulations, promises and agreements of the Company contained in this Indenture shall bind its successors and assigns whether so expressed or not.

     Section 15.02. Official Acts by Successor Corporation. Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with like force and effect by the like board, committee or officer of any corporation that shall at the time be the lawful sole successor of the Company.

     Section 15.03. Addresses for Notices, Etc. Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the Noteholders on the Company shall be deemed to have been sufficiently given or made, for all purposes if given or served by being deposited postage prepaid by registered or certified mail in a post office letter box addressed (until another address is filed by the Company with the Trustee) to Forest City Enterprises, Inc., 50 Public Square, Terminal Tower, Suite 1100, Cleveland, Ohio 44113-2203, Attention: General Counsel. Any notice, direction, request or demand hereunder to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or served by being deposited postage prepaid by registered or certified mail in a post office letter box addressed to the Corporate Trust Office.

     The Trustee, by notice to the Company, may designate additional or different addresses for subsequent notices or communications.

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     Any notice or communication mailed to a Noteholder shall be mailed to it by first class mail, postage prepaid, at his address as it appears on the Note Register and shall be sufficiently given to it if so mailed within the time prescribed.

     Failure to mail a notice or communication to a Noteholder or any defect in it shall not affect its sufficiency with respect to other Noteholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it.

     Section 15.04. Governing Law. THIS INDENTURE AND EACH NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS ENTERED INTO AND TO BE PERFORMED THEREIN (WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS THEREOF).

     Section 15.05. Evidence of Compliance with Conditions Precedent; Certificates and Opinions of Counsel to Trustee. Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture after the date hereof, the Company shall furnish to the Trustee an Officers’ Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with, and an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

     Each certificate or opinion provided for by or on behalf of the Company in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (1) a statement that the Person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statement or opinion contained in such certificate or opinion is based; (3) a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable it to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with.

     Section 15.06. Legal Holidays. In any case where any Interest Payment Date, Designated Event Purchase Date, Put Exercise Date or Maturity Date will not be a Business Day (or in the case of Maturity Date, Scheduled Trading Day), then any action to be taken on such date need not be taken on such date, but may be taken on the next succeeding Business Day (or, in the case of Maturity Date, the next succeeding Scheduled Trading Day) with the same force and effect as if taken on such date, and no interest shall accrue for the period from and after such date to the next succeeding Business Day (or, in the case of Maturity Date, the next succeeding Scheduled Trading Day).

     Section 15.07. No Security Interest Created. Nothing in this Indenture or in the Notes, expressed or implied, shall be construed to constitute a security interest under the Uniform

86

Commercial Code or similar legislation, as now or hereafter enacted and in effect, in any jurisdiction.

     Section 15.08. Benefits of Indenture. Nothing in this Indenture or in the Notes, expressed or implied, shall give to any Person, other than the parties hereto, any Paying Agent, any Put Exercise Agent, any authenticating agent, any Note Registrar and their successors hereunder, and the Noteholders, any benefit or any legal or equitable right, remedy or claim under this Indenture.

     Section 15.09. Table of Contents, Headings, Etc. The table of contents and the titles and headings of the articles and sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.

     Section 15.10. Authenticating Agent. The Trustee may appoint an authenticating agent which shall be authorized to act on its behalf and subject to its direction in the authentication and delivery of Notes in connection with the original issuance thereof and transfers and exchanges of Notes hereunder, including under Section 2.05, Section 2.06, Section 2.07 and Section 2.08, as fully to all intents and purposes as though the authenticating agent had been expressly authorized by this Indenture and those Sections to authenticate and deliver Notes. For all purposes of this Indenture, the authentication and delivery of Notes by the authenticating agent shall be deemed to be authentication and delivery of such Notes “by the Trustee” and a certificate of authentication executed on behalf of the Trustee by an authenticating agent shall be deemed to satisfy any requirement hereunder or in the Notes for the Trustee’s certificate of authentication. Such authenticating agent shall at all times be a Person eligible to serve as trustee hereunder pursuant to Section 6.09.

     Any corporation into which any authenticating agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any authenticating agent shall be a party, or any corporation succeeding to the corporate trust business of any authenticating agent, shall be the successor of the authenticating agent hereunder, if such successor corporation is otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the parties hereto or the authenticating agent or such successor corporation.

     Any authenticating agent may at any time resign by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time terminate the agency of any authenticating agent by giving written notice of termination to such authenticating agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any authenticating agent shall cease to be eligible under this Section, the Trustee shall promptly appoint a successor authenticating agent (which may be the Trustee), shall give written notice of such appointment to the Company and shall mail notice of such appointment to all Noteholders as the names and addresses of such holders appear on the Note Register.

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     The Company agrees to pay to the authenticating agent from time to time reasonable compensation for its services although the Company may terminate the authenticating agent, if it determines such agent’s fees to be unreasonable.

     The provisions of Section 6.02, Section 6.03, Section 6.04, Section 7.03 and this Section 15.10 shall be applicable to any authenticating agent.

     Section 15.11. Execution in Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.

     Section 15.12. Waiver Of Jury Trial. Each of the Company and the Trustee hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Indenture, the Notes or the transaction contemplated hereby.

     Section 15.13. Force Majeure. In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

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     IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the date first written above.

FOREST CITY ENTERPRISES, INC.
By:	/s/ Robert G. O’Brien
	Name:	Robert G. O’Brien
	Title:	Executive Vice President and Chief Financial Officer
THE BANK OF NEW YORK MELLON      TRUST COMPANY, N.A. as Trustee
By:	/s/ Linda E. Garcia
	Name:	Linda E. Garcia
	Title:	Vice President

SCHEDULE A-1

	Stock Price
Effective Date	$12.41		$13.00		$15.00		$17.00		$19.00		$21.00		$23.00		$25.00		$27.00		$29.00
October 7, 2009		11.80		10.63		7.21		4.83		3.16		1.99		1.17		0.60		0.23		0.01
October 15, 2010		11.80		10.00		5.37		3.60		2.36		1.48		0.87		0.45		0.17		0.00
October 15, 2011		11.80		9.38		3.58		2.40		1.57		0.99		0.58		0.30		0.12		0.00
October 15, 2012		11.80		8.76		1.79		1.20		0.79		0.49		0.29		0.15		0.06		0.00
October 15, 2013		11.80		8.14		0.00		0.00		0.00		0.00		0.00		0.00		0.00		0.00

EXHIBIT A

[FORM OF FACE OF NOTE]

[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]

[Include only for Notes that are Restricted Securities]

THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT’’), OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS A “QUALIFIED INSTITUTIONAL BUYER’’ (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (2) AGREES THAT IT WILL NOT, PRIOR TO EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE NOTE EVIDENCED HEREBY UNDER RULE 144(d) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THIS NOTE OR THE CLASS A COMMON STOCK ISSUABLE UPON A PUT WITH RESPECT TO THIS NOTE EXCEPT (A) TO FOREST CITY ENTERPRISES, INC., OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER), (3) PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT TO CLAUSES 2(A), 2(B) AND 2(D) ABOVE), IT WILL FURNISH TO THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, AND (4) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED PRIOR TO EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE NOTE EVIDENCED HEREBY UNDER RULE 144(d) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THIS NOTE PURSUANT TO CLAUSE 2(D) ABOVE OR UPON ANY TRANSFER OF THIS NOTE UNDER RULE 144(d) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTION.

A-2

FOREST CITY ENTERPRISES, INC.
3.625% Puttable Equity-Linked Senior Notes due 2014

No.                    

CUSIP No. 

     Forest City Enterprises, Inc., a corporation duly organized and validly existing under the laws of the State of Ohio (herein called the “Company,” which term includes any successor corporation under the Indenture referred to on the reverse hereof), for value received hereby promises to pay to CEDE & CO., or registered assigns, the principal sum of Two Hundred Million Dollars or such other principal amount as shall be set forth on the Schedule I hereto on October 15, 2014.

     This Note shall bear interest at the rate of 3.625% per year from October ___, 2009, or from the most recent date to which interest had been paid or provided. Interest is payable semi-annually in arrears on each April 15 and October 15, commencing April 15, 2010, to holders of record at the close of business on the preceding March 31 and September 30 (whether or not such day is a Business Day), respectively. Interest payable on each Interest Payment Date shall equal the amount of interest accrued from and including the immediately preceding Interest Payment Date (or from and including October ___, 2009 if no interest has been paid hereon) to but excluding such Interest Payment Date.

     Payment of the principal of and interest accrued on this Note shall be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York, or, at the option of the holder of this Note, at the Corporate Trust Office, in such lawful money of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts; provided, however, interest may be paid by check mailed to such holder’s address as it appears in the Note Register; provided, further, however, that, with respect to any Noteholder with an aggregate principal amount in excess of $1,000,000, at the application of such holder in writing to the Note Registrar, interest on such holder’s Notes shall be paid by wire transfer in immediately available funds to such holder’s account in the United States supplied by such holder from time to time to the Trustee and Paying Agent (if different from the Trustee) not later than the applicable record date; provided that any payment to the Depositary or its nominee shall be paid by wire transfer in immediately available funds in accordance with the wire transfer instruction supplied by the Depositary or its nominee from time to time to the Trustee and Paying Agent (if different from Trustee).

     Reference is made to the further provisions of this Note set forth on the reverse hereof, including, without limitation, provisions giving the holder of this Note the right to receive with respect to this Note Common Stock of the Company on the terms and subject to the limitations referred to on the reverse hereof and as more

A-3

fully specified in the Indenture. Such further provisions shall for all purposes have the same effect as though fully set forth at this place.

     This Note shall be deemed to be a contract made under the laws of the State of New York, and for all purposes shall be construed in accordance with the laws of the State of New York applicable to contracts entered into and to be performed therein (without regard to the conflicts of laws provisions thereof).

     This Note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been manually signed by the Trustee or a duly authorized authenticating agent under the Indenture.

[Remainder of page intentionally left blank]

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     IN WITNESS WHEREOF, the Company has caused this Note to be duly executed.

FOREST CITY ENTERPRISES, INC.
By:
	Name:
	Title:

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Dated: October __, 2009

TRUSTEE’S CERTIFICATE OF AUTHENTICATION
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,
as Trustee, certifies that this is one of the Notes described in the within-named Indenture.

By:
	Name:
	Authorized Officer

A-6

[FORM OF REVERSE OF NOTE]

FOREST CITY ENTERPRISES, INC.
3.625% Puttable Equity-Linked Senior Notes due 2014

     This Note is one of a duly authorized issue of Notes of the Company, designated as its 3.625% Puttable Equity-Linked Senior Notes due 2014 (herein called the “Notes”), issued under and pursuant to an Indenture dated as of October ___, 2009 (herein called the “Indenture”), between the Company and The Bank of New York Mellon Trust Company, N.A. (herein called the “Trustee”), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Notes. Additional Notes may be issued in an unlimited aggregate principal amount, subject to certain conditions specified in the Indenture.

     In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of, and accrued and unpaid interest on, all Notes, may be declared, and upon said declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture.

     Subject to the terms and conditions of the Indenture, the Company will make all payments and deliveries in respect of the Designated Event Purchase Price and the principal amount on the Maturity Date, as the case may be, to the holder who surrenders a Note to a Paying Agent to collect such payments in respect of the Note. The Company will pay cash amounts in money of the United States that at the time of payment is legal tender for payment of public and private debts.

     The Indenture contains provisions permitting the Company and the Trustee in certain circumstances, without the consent of the holders of the Notes, and in other circumstances, with the consent of the holders of not less than a majority in aggregate principal amount of the Notes at the time outstanding, evidenced as in the Indenture provided, to execute supplemental indentures modifying the terms of the Indenture and the Notes as described therein; provided, however, that no such supplemental indenture shall make any of the changes set forth in Section 9.02 of the Indenture, without the consent of each holder of an outstanding Note affected thereby. It is also provided in the Indenture that, prior to any declaration accelerating the maturity of the Notes, the holders of a majority in aggregate principal amount of the Notes at the time outstanding may on behalf of the holders of all of the Notes waive any past Default or Event of Default under the Indenture and its consequences except as provided in the Indenture. Any such consent or waiver by the holder of this Note (unless revoked as provided in the Indenture) shall be conclusive and binding upon such holder and upon all future

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holders and owners of this Note and any Notes which may be issued in exchange or substitution hereof or upon registration of transfer, irrespective of whether or not any notation thereof is made upon this Note or such other Notes.

     No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and accrued and unpaid interest on, this Note, at the place, at the respective times, at the rate and in the lawful money herein prescribed.

     The Notes are issuable in registered form without coupons in denominations of $1,000 principal amount and integral multiples thereof. Upon due presentment for registration of transfer of this Note at the office or agency of the Company in the Borough of Manhattan, The City of New York, a new Note or Notes of other authorized denominations for an equal aggregate principal amount will be issued to the transferee in exchange thereof, subject to the limitations provided in the Indenture, without charge except for any tax, assessments or other governmental charges imposed in connection therewith.

     The Notes are not subject to redemption prior to maturity through the operation of any sinking fund.

     Upon the occurrence of a Designated Event, the holder has the right, at such holder’s option, to require the Company to repurchase all of such holder’s Notes or any portion thereof (in principal amounts of $1,000 or integral multiples thereof) on the Designated Event Purchase Date at a price equal to 100% of the principal amount of the Notes such holder elects to require the Company to repurchase, together with accrued and unpaid interest to but excluding the Designated Event Purchase Date. The Company or, at the written request of the Company, the Trustee shall mail to all holders of record of the Notes a notice of the occurrence of a Designated Event and of the repurchase right arising as a result thereof on or before the tenth day after the occurrence of any Designated Event.

Subject to the provisions of the Indenture, the holder hereof has the right, at its option, upon the occurrence of certain conditions specified in the Indenture and prior to the close of business on the Scheduled Trading Day immediately preceding the Maturity Date, to put to the Company any Notes or portion thereof which is $1,000 or an integral multiple thereof, in exchange for shares of Common Stock at the Put Value Rate specified in the Indenture, as adjusted from time to time as provided in the Indenture, upon surrender of this Note, together with a Put Exercise Notice, a form of which is attached to the Note, as provided in the Indenture and this Note, to the Company at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York, or at the option of such holder, the Corporate Trust Office. The initial

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Put Value Rate shall be                      shares for each $1,000 principal amount of Notes. No fractional shares of Common Stock will be issued upon any put, but an adjustment in cash will be paid to the holder, as provided in the Indenture, in respect of any fraction of a share which would otherwise be issuable upon the surrender of any Note or Notes after put exercise. No adjustment shall be made for dividends or any shares issued upon put exercise except as provided in the Indenture. A Noteholder that certifies that it is a Related Person may not receive shares of Common Stock upon a put of its Notes to the Company pursuant to Section 13.03 of the Indenture.

     The Company, the Trustee, any authenticating agent, any Paying Agent, any Put Exercise Agent and any Note Registrar may deem and treat the registered holder hereof as the absolute owner of this Note (whether or not this Note shall be overdue and notwithstanding any notation of ownership or other writing hereon), for the purpose of receiving payment hereof, or on account hereof, for the put exercise hereof and for all other purposes, and neither the Company nor the Trustee nor any other authenticating agent nor any Paying Agent nor any other Put Exercise Agent nor any Note Registrar shall be affected by any notice to the contrary. All payments made to or upon the order of such registered holder shall, to the extent of the sum or sums paid, satisfy and discharge liability for monies payable on this Note.

     No recourse for the payment of the principal of, or accrued and unpaid interest on, this Note, or for any claim based hereon or otherwise in respect hereof, and no recourse under or upon any obligation, covenant or agreement of the Company in the Indenture or any indenture supplemental thereto or in any Note, or because of the creation of any debt represented thereby, shall be had against any incorporator, shareholder, employee, agent, officer, director or Subsidiary, as such, past, present or future, of the Company or of any successor corporation, either directly or through the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released.

     Terms used in this Note and defined in the Indenture are used herein as therein defined.

     Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TENANT (=tenants by the entireties), JT TEN (joint tenants with right of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act).

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[FORM OF PUT EXERCISE NOTICE]

To: FOREST CITY ENTERPRISES, INC. (THE “COMPANY”)

     The undersigned registered owner of this Note hereby exercises the option to put to the Company this Note, or the portion hereof (which is $1,000 principal amount or an integral multiple thereof) below designated, in exchange for shares of Common Stock in accordance with the terms of the Indenture referred to in this Note, and directs that the shares, if any, issuable and deliverable upon such put exercise, together with any Notes representing any principal amount hereof not put to the Company, be issued and delivered to the registered holder hereof unless a different name has been indicated below. If shares, if any, or any portion of this Note not put to the Company are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Any amount required to be paid to the undersigned on account of interest accompanies this Note. The undersigned certifies that it is not a Related Party, as defined in Section 312.03 of the Listed Company Manual of the New York Stock Exchange.

Dated:
	Signature(s)
	Signature Guarantee
Signature(s) must be guaranteed by an eligible Guarantor Institution (banks, stock brokers, savings and loan associations and credit unions) with membership in an approved signature guarantee medallion program pursuant to Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, if shares of Common Stock are to be issued, or Notes to be delivered, other than to and in the name of the registered holder.

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Fill in for registration of shares of Common Stock if to be issued, and Notes if to be delivered, other than to and in the name of the registered holder:
(Name)
(Street Address)
(City, State and Zip Code) Please print name and address
	Principal amount to be put
	(if less than all): $___,000
	Social Security or Other Taxpayer Identification Number:

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[FORM OF DESIGNATED EVENT PURCHASE NOTICE]

To: Forest City Enterprises, Inc.

     The undersigned registered owner of this Note hereby acknowledges receipt of a notice from Forest City Enterprises, Inc. (the “Company”) as to the occurrence of a Designated Event with respect to the Company and requests and instructs the Company to repay the entire principal amount of this Note, or the portion thereof (which is $1,000 principal amount or an integral multiple thereof) below designated, in accordance with the terms of the Indenture referred to in this Note, to the registered holder hereof.

Dated:
	Signature(s)
	Social Security or Other Taxpayer Identification Number
	Principal amount to be repaid (if less than all): $_,000
	NOTICE: The above signatures of the holder(s) hereof must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatever.

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Schedule l

FOREST CITY ENTERPRISES, INC.
3.625% Puttable Equity-Linked Senior Notes Due 2014

No.                    

		Notation Explaining	Authorized
		Principal Amount	Signature of Trustee
Date	Principal Amount	Recorded	or Custodian
October ___, 2009	$

EX-10.1

Exhibit 10.1

Dividend Reinvestment
and Stock Purchase Plan
for shareholders of
Forest City Enterprises, Inc.

Class A CUSIP # 345550 10 7

Class B CUSIP # 345550 30 5

Administered by:
Wells Fargo Shareowner Services

Dear Shareholder:

We cordially invite you to participate in the Forest City Enterprises, Inc. Dividend Reinvestment and Stock Purchase Plan. You only need to be a shareholder of record to join the Plan. You may have all or a portion of your dividends automatically reinvested in shares of Common Stock of Forest City. You may elect to be in the Plan but still have the dividends on your Common Stock paid to you. For any of the reinvestment options, all Plan shares will be reinvested. Whenever you wish, you may make optional cash investments which will be used to buy additional shares of Common Stock for you. All costs and service charges incurred in purchasing Common Stock through the Plan are paid by the Company. However, you will incur service and brokerage commission fees on shares sold under the Plan.

This Plan provides you with an economical and convenient method for investing in additional shares of Forest City Enterprises, Inc. Common Stock. Your participation in the Plan is, of course, completely voluntary, and may be discontinued at any time.

Details of the Plan are contained in this brochure. We recommend that you read it carefully and retain if for future reference.

All questions, inquiries, remittances, and other correspondence in connection with the Plan should be addressed to the Plan Administrator, Wells Fargo Shareowner Services.

Sincerely,

Samuel H. Miller
Co-Chairman of the Board
and Treasurer

Albert B. Ratner
Co-Chairman of the Board

Charles A. Ratner
President and
Chief Executive Officer

The Company has appointed Wells Fargo Shareowner Services, a division of Wells Fargo Bank, N.A., as processing agent and administrator for the Plan. The Plan is not sponsored or administered by the Company. Neither Wells Fargo Shareowner Services nor the Company provides any advice or recommendations with respect to the purchasing or selling of the Common Stock of Forest City Enterprises, Inc. Any decision to purchase or sell shall be made by each individual based on their own research and judgment.

Securities in the Plan are not subject to protection under the Securities Investor Protection Act of 1970.

What is the purpose of the Plan

The Dividend Reinvestment and Stock Purchase Plan (the “Plan”) offers you an opportunity to reinvest and purchase shares of Common Stock of Forest City Enterprises, Inc. (the “Company”) with all or a portion of your dividends. You may make optional cash investments ranging from a minimum of $10 to a maximum of $5,000 per month. The Plan provides you with a 3% discount to market price at the time of purchase through Wells Fargo Shareowner Services, a division of Wells Fargo Bank, N.A. (the “Plan Administrator”). Details of the Plan, reinvestment options, and their benefits to you as a shareholder of the Company are contained in this brochure.

Benefits of the Plan

• You do not pay a commission as you would if you invested through a broker. Your dividend or cash is invested in full and fractional shares at a 3% discount to market price, and the Company pays the Plan Administrator’s service fees and brokerage commissions for purchases. However, you will incur service fees and brokerage commissions on shares sold under the Plan.

• You will receive an acknowledgement from the Plan Administrator each time you send cash to invest. You also will receive a statement from the Plan Administrator after each transaction.

• Even small dividend payments may be fully utilized. You may reinvest all or a portion of your dividends. Your dollars are invested in full and fractional shares to three decimal places.

• All Common Shares purchased through the Plan are held by the Plan Administrator for you as beneficial owner, in the name of the Plan Administrator or the Plan Administrator’s nominee. This convenience provides protection against certificates being lost, misplaced or stolen.

• You may send your other Forest City stock certificate(s) to the Plan Administrator for safekeeping, free of charge.

• The Plan is entirely voluntary, and you may terminate your participation at any time.

• You maintain the voting rights on full and fractional shares in the Plan.

Who is Eligible

If you are a holder of Class A Common Stock or Class B Common Stock and your shares are registered in your name, you are eligible to participate in the Plan. If your shares are registered in a name other than your own and you would like to participate, you must make arrangements with your broker, bank or other entity acting in a representative capacity to have all or a portion of your shares transferred into your name.

Regulations in certain countries may limit or prohibit participation in this type of Plan. Accordingly, persons residing outside the United States who wish to participate in the Plan should first determine whether they are subject to any governmental regulation prohibiting their participation.

Internet Privileges

You may access your account information and perform transactions on the internet.

To activate your account and establish a Username and Password, you will need your 10-digit Wells Fargo Shareowner Services account number (which is listed on your account statement), your Social Security number, your email address, and the company name you own shares in, Forest City Enterprises, Inc.

Instructions to access your account online are as follows:

Go to www.shareowneronline.com and click “First Time Visitor Sign On,” then click “Continue.” Next, simply follow the instructions found on the “First Time Visitor New Member Registration” page.

Once you have successfully signed up, you will be able to access your account information immediately. You will receive written confirmation by mail that your account has been activated for online access.

Once you have activated your account online, you can also:

• Authorize, change or stop your Automatic Cash Withdrawal and Investment Service

• Sell some or all of your Plan shares if the current market value of the shares to be sold is $25,000 or less

• Change your reinvestment option. (example: from full to partial)

Certain restrictions may apply.

Telephone Transactions

If you already participate in the Plan and want to establish telephone privileges for your account, please call Wells Fargo Shareowner Services (see “Questions About the Plan”).

You may establish telephone privileges for your Plan account, enabling you to execute certain Plan orders by telephone as follows:

• Sell a portion or all of your Plan shares if the current market value of the shares to be sold is $25,000 or less

• Change your reinvestment option. (example: from full to partial)

• Request a certificate for a portion or all of your full Plan shares if the current market value of shares to be issued is $50,000 or less

Certain restrictions may apply.

How does the Plan Work

The Plan Administrator purchases shares on the open market. The price of shares acquired for your account is at a 3% discount to the market price for all shares purchased by the Plan Administrator for all participants with participants’ dividends and/or optional cash investments.

Investment Options

Full Reinvestment. All cash dividends on shares held in physical certificate form registered in your name including book-entry (DRS) on the records of the Company and all cash dividends on all Plan shares credited to your account under the Plan will be used to purchase additional shares. You will not receive cash dividends from the Company; instead, the dividends will be reinvested. Upon enrollment, you also have the option of sending the Plan Administrator additional contributions (see “Optional Cash Investments”).

Partial Reinvestment. Dividends will be reinvested on the full number of shares that you designate. The remaining shares held in physical certificate form registered in your name including book-entry (DRS) on the records of the Company will be paid by check or direct deposit. All Plan shares credited to your account under the Plan will be reinvested. Upon enrollment, you also have the option of sending the Plan Administrator additional contributions (see “Optional Cash Investments”).

Optional Cash Investments Only. All cash dividends on shares held in physical certificate form registered in your name including book-entry (DRS) on the records of the Company will be paid by check or direct deposit. All Plan shares credited to your account under the Plan will be reinvested.

You may change your reinvestment option at any time by going online (see “Internet Privileges”), calling (see “Telephone Transactions”) or sending written notice to the Plan Administrator. Notices received on or before a dividend record date will be effective for that dividend. Notices received after a dividend record date will not be effective until the next dividend record date.

Direct Deposit of Dividends

You can have your cash dividends not being reinvested transferred directly to your bank for deposit. For electronic direct deposit of dividend funds, contact the Plan Administrator to request a Direct Deposit of Dividends Authorization Form, complete the form, and return the form to the Plan Administrator. Be sure to include a voided check for checking account or savings deposit slip for savings account. If your shares are jointly owned, all owners must sign the form.

Fractional Shares

If your dividend, optional cash payment, or combinations of both are not sufficient to buy a full share, the Plan Administrator will credit you with a fractional share computed to three decimals.

Optional Cash Investments

You have the option of sending the Plan Administrator additional contributions, ranging from $10 to $5,000, which will be used to purchase additional shares for you. You may make these optional cash investments at any time, either monthly or at random, by check or automatic withdrawal from your checking or savings account. In no instance may a single month’s optional cash investment exceed $5,000. You may request a refund for your entire optional cash investment, provided your written notice is received by the Plan Administrator at least two business days before such amount is to be invested.

To participate in the Optional Cash investments feature, you may either send a check payable to Shareowner Services along with the authorization form or with the tear-off portion of the Plan account statement you will receive after your initial dividend has been invested. Checks must be in U.S. funds and drawn on a U.S. bank.

Automatic Cash Withdrawal and Investment Service

You may elect to make optional cash investments, paid by electronic funds transfer and withdrawn automatically from your pre-designated bank account. To make optional cash investments by automatic deduction, you may go online (see “Internet Privileges”) or complete and sign an Automatic Cash Withdrawal and Investment form, available from the Plan Administrator, and return the form to the Plan Administrator. Forms are processed and become effective as promptly as practicable. Once the automatic monthly deduction option is initiated, funds will be drawn from your designated bank account on or about the last business day of each month and will be invested on the investment date. You do not receive any confirmation of the transfer of funds other than as reflected in your Plan account statement and in your bank account statement.

You may change the designated account for automatic deduction by going online (see “Internet Privileges”) or sending written instruction to the Plan Administrator. You can stop the Automatic Cash Withdrawal and Investment Service by going online (see “Internet Privileges”), calling (see “Telephone Transactions”) or writing the Plan Administrator at the address shown in this brochure. To be effective with respect to a particular investment date, your request to enroll in, change, or terminate the Automatic Cash Withdrawal and Investment Service must be received by the Plan Administrator at least 15 business days prior to the investment date.

You are under no obligation to make optional cash investments. Funds awaiting investment do not earn interest.

Investments Dates

Dividend Reinvestments. Dividends are reinvested on the dividend payment date. The payment of dividends is at the discretion of Forest City’s Board of Directors and will depend upon future earnings, the financial condition of Forest City, and other factors. The Board of Directors may change the amount and timing of dividends at any time without notice.

Optional Cash Investments. Optional cash investments are invested either (i) on the 15th of each month in which no dividend is payable, or (ii) on the dividend payment date in months in which a dividend is paid (the “Cash Investment Date”). The Plan Administrator will apply any optional cash investments received from you before a Cash Investment Date to the purchase of shares for your account on the Cash Investment Date. The Plan Administrator will not pay interest on optional cash investments held pending investment and therefore it is recommended that you submit these shortly before, but no later than one business day before, the Cash Investment Date.

Deposit of Stock Certificates

If you are enrolled in the Plan, you may also send certificate(s) of Forest City Common Stock to the Plan Administrator for safekeeping. Because you bear the risk of loss in sending stock certificate(s) to the Plan Administrator, it is recommended that your certificate(s) be sent registered insured mail for 2% of the current market value and request a return receipt. Certificate(s) should NOT be endorsed. Whenever certificate(s) are issued to you either upon your request or upon termination of your participation, new, differently numbered certificate(s) are issued.

Issuance of Shares

The Plan Administrator will hold your additional shares until you choose to terminate your participation in the Plan. This convenience provides added protection against loss, theft or inadvertent destruction of stock certificates. However, upon your written request, the Plan Administrator will issue certificates to you for all or part of your full shares. Fractional shares will not be issued under any circumstance.

Withdrawal from the Plan

You may terminate your participation in the Plan at any time by written notice to the Plan Administrator. If your request to terminate from the Plan is received on or after a dividend record date, but before the dividend payment date, your termination will be processed as soon as practicable, and a separate dividend check will be mailed to you. Future dividends will be paid in cash, unless you rejoin the Plan. The Plan Administrator will then convert all or a portion of your full Plan shares to book-entry (DRS) or issue you a certificate. Alternatively, you may instruct the Plan Administrator to sell all or a portion of your full Plan shares and to send you the proceeds, less any brokerage commissions and service charges. In either case, fractional shares will be converted to cash at the then current market price, less any brokerage commission and service charges. If applicable, a check for the net proceeds will be sent to you. Sales of shares by the Plan Administrator are made as soon as practicable after the receipt of your written request.

If submitting a request to sell all or a portion of your Plan shares, and you are requesting net proceeds to be automatically deposited to a U.S. bank checking or savings account, you must provide a voided blank check for a checking account or blank savings deposit slip for a savings account. If you are unable to provide a voided check or deposit slip, your written request must have your signature(s) medallion guaranteed by an eligible financial institution for direct deposit. Requests for automatic deposit of sale proceeds that do not provide the required documentation will not be processed and a check for the net proceeds will be issued.

Regular Statements

You will receive a detailed statement of your account after each purchase of shares with your dividends and/or optional cash investments, which helps you maintain your personal records. These statements should be retained for calculating the cost basis of your shares.

To Join the Plan

Go online or complete and sign the enclosed authorization form and mail it to the Plan Administrator in the enclosed envelope. Your participation will begin with the next dividend payment, unless the Plan Administrator does not receive your completed authorization form until after the dividend record date. In that case, your account will open with the following dividend.

Income Tax Information

Reinvested dividends are subject to income taxes, the same as if you had received them in cash. In addition, the Internal Revenue Service has ruled that the brokerage commissions and 3% discount Forest City pays for you under the Plan are also taxable as dividend income. The Plan Administrator will send you a Form 1099 showing the dividends credited to your account, as well as the applicable fees, commissions and discount paid for you. Keep this statement with your tax records.

You should consult your personal tax advisor concerning proper tax treatment of these amounts, as interpretation may differ, and laws, regulations and rulings may change over time.

Questions About the Plan

Questions about the Plan, Plan Requests and Optional Cash Investments should be mailed to:

Wells Fargo Shareowner Services
P.O. Box 64856
St. Paul, MN 55164-0856

Certified/Overnight Mail:
Wells Fargo Shareowner Services
161 North Concord Exchange
South St. Paul, MN 55075-1139

General Information:
Fax: 651-450-4085
Tel: 1-800-468-9716
Tel: 651-450-4064 (outside the United States)
An automated voice response system is available
24 hours a day, 7 days a week. Customer Service
Representatives are available from 7:00 a.m. to
7:00 p.m., Central Standard Time, Monday through
Friday

Internet:
For General Inquiries: www.wellsfargo.com/shareownerservices
For Account Information: www.shareowneronline.com

Terms and Conditions

The following pages contain additional Plan information. Please read them carefully and keep this brochure with your stock materials.

TERMS AND CONDITIONS

Terms and Conditions of Authorization for Stock Purchase and Dividend Reinvestment Plan

• As the Plan Administrator, Wells Fargo Shareowner Services, a division of Wells Fargo Bank, N.A. (the “Plan Administrator”) will apply all or any designated portion of dividends on the shares of Forest City Enterprises, Inc. (the “Company”) Class A Common Stock or Class B Common Stock held by the participant, all optional cash investments, or a combination of both, and dividends on any full or fractional shares acquired under the Dividend Reinvestment and Stock Purchase Plan (the “Plan”), to the purchase of additional Common Stock for the participant’s account. Such purchases may be made on any securities exchange where such shares are traded, in the over-the-counter market or in negotiated transactions, and may be on such terms as to price, delivery and otherwise as the Plan Administrator may determine.

• The participant may make optional cash investments ($10 minimum, $5,000 maximum per month in U.S. funds) to the Plan Administrator, accompanied by either the signed authorization form or optional cash election form attached to the Plan statement. In making purchases for the participant’s account, the Plan Administrator may commingle the participant’s funds with those of other participants participating in the Plan. In the case of each purchase, the price at which the Plan Administrator shall be deemed to have acquired shares for the participant’s account shall be a 3% discount to market price of all shares purchased by it, with their aggregate funds used for such purchase. The Plan Administrator may hold the shares of all participants together in its name or in the name of the nominee. The Plan Administrator shall have no responsibility as to the value of the Common Stock acquired for the participant’s account. Dividends will be invested by the Plan Administrator no later than 30 days after receipt, and optional cash investments will be invested on or about the 15^th of each month, if the 15^th is not a business day then the next business day, or where deferment is necessary to comply with Regulation M under the Securities Exchange Act of 1934 or other applicable provisions of law. It is understood that, in any event, neither the Plan Administrator nor the Company shall have liability in connection with any inability to purchase shares or the timing of any purchases. Participants’ funds held by the Plan Administrator will not bear interest. Participants may request a refund of their entire optional cash investment by written notice received by the Plan Administrator not less than two business days before such amount is to be invested. Checks must be in U.S. funds and drawn on a U.S. bank. Money orders or third party checks are not accepted.

• If any optional cash investment, including payments by check or automatic withdrawal, is returned for any reason, the Plan Administrator will remove from the participant’s account any shares purchased upon prior credit of such funds, and will sell these shares. The Plan Administrator may sell other shares in the account to recover a returned funds fee for each optional cash investment returned unpaid for any reason and may sell additional shares as necessary to cover any market loss incurred by the Plan Administrator. Following each purchase, the Plan Administrator will send to each participant whose funds have been applied to such purchase a statement of year to date transactions in the account since the last purchase, including the current shares in the account.

• During the period that an optional cash investment is pending, the collected funds in the possession of the Plan Administrator may be invested in certain Permitted Investments. For purposes of this Plan, “Permitted Investments” shall mean any money market mutual funds registered under the Investment Company Act (including those of an affiliate of the Plan Administrator or for which the Plan Administrator or any of its affiliates provides management advisory or other services) consisting entirely of (i) direct obligations of the United States of America; or (ii) obligations fully guaranteed by the United States of America. The risk of any loss from such Permitted Investments shall be the responsibility of the Plan Administrator. Investment income from such Permitted Investments shall be retained by the Plan Administrator.

• Participants may elect to deposit their original certificate(s) into the Plan account for safekeeping by sending the certificate(s) to the Plan Administrator together with instructions to deposit the

	certificate(s) into the Plan. The transaction will appear on the statement for that period, and shares will be held by the Plan Administrator in its name or nominee name. These shares will be held in the Plan account until such time as the participant requests a certificate, sale or termination from the Plan. Because participants bear the risk of loss in sending stock certificate(s), it is recommended that the participant sends them registered, insured for at least 2% of the current market value and request a return receipt. Certificate(s) should NOT be endorsed. Participants should note that a cost basis record for deposited shares can not be provided by the Plan Administrator. A record of purchase prices should be retained by the participant.
•	No certificates will be issued to a participant for shares in the participant’s account unless requested of the Plan Administrator in writing. No certificate for a fractional share will be issued, but dividends on a fractional interest in a share will be credited to the participant’s account.
•	It is understood that the reinvestment of dividends does not relieve the participant of any income tax that may be payable on such dividends. The Plan Administrator will report to all participants the amount of dividends credited to their accounts.
•	The Plan Administrator will vote all shares held in the participant’s account in the same way in which the participant votes shares of the Company standing of record in the participant’s name by regular proxy returned by participants to the Company, or, if the Plan Administrator sends to the participant a separate proxy covering the shares credited to the participant’s Plan account, then such shares will be voted as designated in such separate proxy. In the event the participant does not direct the voting of shares by either such regular or separate proxy, the shares credited to participant’s Plan account will not be voted.
•	Except as otherwise expressly provided herein, participants may not sell, pledge, hypothecate or otherwise assign or transfer the participant’s account, any interest therein or any cash or shares credited to the participant’s account. No attempt at any such sale, pledge, hypothecation or other assignment or transfer shall be effective. Nothing herein shall affect a shareholder’s rights in respect to shares for which certificates have been received.
•	A participant may terminate the account at any time by writing to the Plan Administrator. If the participant’s request to terminate from the Plan is received on or after a dividend record date, but before the dividend payment date, the participant’s termination will be processed as soon as practicable, and a separate dividend check will be mailed to the participant. Future dividends will be paid in cash, unless the participant rejoins the Plan. In addition, if a participant sends notice of termination or a request to sell to the Plan Administrator between the record date and payment date of a stock distribution, the request will be held until the stock distribution is credited to the participant’s account. The Plan Administrator may terminate the account at any time by notice in writing mailed to the participant. A participant requesting termination may elect to receive either stock or cash for all full shares in the account. If cash is elected, the Plan Administrator will sell such shares at the current market value and the Plan Administrator will send the net proceeds to the participant, after deducting brokerage commissions and service charges. If no election is made in the request for termination, full Plan shares will be converted to book-entry (DRS). In either case, the participant will receive a check, less brokerage commissions and service charges, at the current market value in lieu of any fractional interest in a share.
•	If a participant submits a request to sell all or part of their Plan shares, and the participant requests net proceeds to be automatically deposited to a U.S. bank checking or savings account, the participant must provide a voided blank check for a checking account or blank savings deposit slip for a savings account. If the participant is unable to provide a voided check or deposit slip, the participant’s written request must have the participant’s signature(s) medallion guaranteed by an eligible financial institution for direct deposit. Requests for automatic deposit of sale proceeds that do not provide the required documentation will not be processed and a check for the net proceeds will be issued.

• The Plan Administrator will make every effort to process a participant’s sale order on the next business day following receipt of the properly completed request (sale requests involving multiple transactions may experience a delay). The Plan Administrator shall not be liable for any claim arising out of failure to sell stock on a certain date or at a specific price. This risk should be evaluated by the participant and is a risk that is borne solely by the participant.

• If a participant requests to transfer all shares in their Plan account between a dividend record date and payable date, the participant’s transfer request will be processed; however, the participant’s Plan account will not be terminated. The participant may receive additional dividend reinvestment shares which will require the participant to submit a written request to transfer the additional shares.

• It is understood that any stock dividends or stock splits distributed by the Company on shares held by the Plan Administrator for the participant will be credited to the participant’s account. If a participant sends notice of termination or a request to sell to the Plan Administrator between the record date and the payable date for a stock distribution, the request will not be processed until the stock distribution is credited to the participant’s account.

• In the event that the Company makes available to its shareholders rights to purchase additional shares or other securities, the Plan Administrator will sell such rights accruing to shares held by the Plan Administrator for the participant and will combine the resultant funds with the next regular dividend or optional cash investment for reinvestment at that time. If a participant desires to exercise such rights, the participant should request that certificates be issued for full shares.

• The Plan Administrator, its nominee and the Company shall have no responsibility beyond the exercise of ordinary care for any action taken or omitted pursuant to the Plan, nor shall they have any duties, responsibilities or liabilities except such as are expressly set forth herein.

• In administering the Plan, neither the Company, the Plan Administrator nor any broker selected by the Plan Administrator shall be liable for any good faith act or omission to act, including but not limited to any claim of liability (i) arising out of the failure to terminate a participant’s account upon such participant’s death prior to receipt of a notice in writing of such death, (ii) with respect to the prices or times at which shares are purchased or sold, or (iii) as to the value of the shares acquired for participants. Selling participants should be aware that the share price may fall or rise during the period between a request for sale, its receipt by the Plan Administrator, and the ultimate sale in the open market. Participants should evaluate these possibilities while deciding whether and when to sell any shares through the Plan. The price risk will be borne solely by the participant.

• The Plan Administrator is acting solely as agent of the Company and owes no duties, fiduciary or otherwise, to any other person by reason of this Plan, and no implied duties, fiduciary or otherwise, shall be read into this Plan. The Plan Administrator undertakes to perform such duties and only such duties as are expressly set forth herein, to be performed by it, and no implied covenants or obligations shall be read into this Plan against the Plan Administrator or the Company.

• In the absence of negligence or willful misconduct on its part, neither the Plan Administrator nor the Company, whether acting directly or through agents or attorneys, shall be liable for any action taken, suffered, or omitted or for any error of judgment made by the Plan Administrator in the performance of its duties hereunder. In no event shall the Plan Administrator or the Company be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profit), even if the Plan Administrator has been advised of the likelihood of such loss or damage and regardless of the form of action.

• The Plan Administrator shall: (i) not be required to and shall make no representations and have no responsibilities as to the validity, accuracy, value or genuineness of any signatures or endorsements, other than its own; and (ii) not be obligated to take any legal action hereunder that might, in its judgment, involve any expense or liability, unless it has been furnished with reasonable indemnity.

• Neither the Plan Administrator or the Company shall be responsible or liable for any failure or delay in the performance of its obligations under this Plan arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of God; earthquakes; fires; floods; wars; civil or military disturbances; sabotage; epidemics; riots; interruptions, loss or malfunctions of utilities; computer (hardware or software) or communications services; accidents; labor disputes; acts of civil or military authority or governmental actions; it being understood that the Plan Administrator shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

• The Plan Administrator is authorized to choose a broker, including an affiliated broker, at its sole discretion to facilitate purchases and sales of Common Stock by Plan participants. The Plan Administrator will furnish the name of the registered broker, including any affiliated broker, utilized in share transactions within a reasonable time upon written request from the participant.

• The Company and the Plan Administrator may agree from time to time to amendments and modifications of the Plan.

• Any notice, instruction, request, election or direction that is required or permitted under the Plan shall become effective when received by the Plan Administrator. Such notice, instruction, request, election or direction shall be mailed to the address set forth in this brochure.

• Your participation in the Plan will be terminated if you do not have at least one full share registered in your name or in your Plan account.

• The terms and conditions of the Plan and the authorization form shall be governed by the laws of the State of Ohio.

FEE DISCLOSURE TABLE

Transaction or Plan Service Fees
Certificate Deposit	Company paid
Certificate Issuance	Company paid
Investment Fees
Dividend Reinvestment Service Fee	Company paid
Optional Cash Investment Service Fee	Company paid
Automatic Withdrawal Service Fee	Company paid
Purchase Commission	Company paid
Sale Fees
Service Fee	$15.00 per transaction
Sale Commission	$0.10 per share
Direct Deposit of Net Sale Proceeds	$5.00 per transaction
Fee for Returned Checks or Rejected Automatic Bank Withdrawals	$25.00 per item
Prior Year Duplicate Statements	$15.00 per year

EX-31.1

Exhibit 31.1

PRINCIPAL EXECUTIVE OFFICER’S CERTIFICATIONS
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Charles A. Ratner, certify that:

1.	I have reviewed this quarterly report for the three and nine months ended October 31, 2009 on Form 10-Q of Forest City Enterprises, Inc.;
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.

Date:  December 8, 2009	/s/ CHARLES A. RATNER
	Name: Charles A. Ratner
	Title: President and Chief Executive Officer

EX-31.2

Exhibit 31.2

PRINCIPAL FINANCIAL OFFICER’S CERTIFICATIONS
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert G. O’Brien, certify that:

1.	I have reviewed this quarterly report for the three and nine months ended October 31, 2009 on Form 10-Q of Forest City Enterprises, Inc.;
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.

Date:  December 8, 2009	/s/ ROBERT G. O’BRIEN
	Name: Robert G. O’Brien
	Title: Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Forest City Enterprises, Inc. (the “Company”) on Form 10-Q for the three and nine months ended October 31, 2009, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:

(1)	The Report 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.

Date:    December 8, 2009	/s/ CHARLES A. RATNER
	Name:	Charles A. Ratner
	Title:	President and Chief Executive Officer
	/s/ ROBERT G. O’BRIEN
	Name:	Robert G. O’Brien
	Title:	Executive Vice President and Chief Financial Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.