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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
PRENTISS PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
Maryland 75-2261588
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(State of incorporation or organization) (IRS employer
identification no.)
3890 West Northwest Highway
Suite 400 75220
Dallas, Texas -----
- ---------------------------------------- (Zip code)
(Address of principal executive offices)
If this form relates to the If this form relates to the
registration of a class of registration of a class of
securities pursuant to Section securities pursuant to Section
12(b) of the Exchange Act and is 12(g) of the Exchange Act and
effective pursuant to General is effective pursuant to
Instruction A.(c), please check General Instruction A.(d),
the following box. [_] please check the following
box. [X]
Securities Act registration statement file number to which this
form relates: None
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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None N/A
Securities to be registered pursuant to Section 12(g) of the Act:
Preferred Share Purchase Rights
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(Title of class)
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Item 1. Description of Registrant's Securities to be Registered.
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On February 6, 1998, the Board of Trustees of Prentiss Properties Trust, a
real estate investment trust organized under the laws of Maryland (the
"Company"), approved a Rights Agreement, dated as of and to be effective on
February 6, 1998 (the "Rights Agreement") between the Company and First Chicago
Trust Company of New York, as Rights Agent, having the principal terms
summarized below. In accordance with the Rights Agreement, the Board also
authorized a dividend distribution of one Right for each outstanding common
share of beneficial interest, $.01 par value, (the "Common Shares"), of the
Company to shareholders of record at the close of business on February 17, 1998
(the "Record Date").
Each Right entitles the registered holder to purchase from the Company one
one-thousandth of a share of the Company's Junior Participating Cumulative
Preferred Shares, Series B ("Series B Preferred Shares"). Each one one-
thousandth of a share (a "Unit") of a Series B Preferred Share is structured to
be the equivalent of one Common Share of the Company. Shareholders will receive
one Right per Common Share held of record at the close of business on the Record
Date. The exercise price of the Right will be $85.00 subject to adjustment (the
"Purchase Price").
Rights will also attach to Common Shares issued after the Record Date but
prior to the Distribution Date unless the Board of Trustees determines otherwise
at the time of issuance. The description and terms of the Rights are set forth
in the Rights Agreement.
The Rights will trade with the Common Shares and will be evidenced by
Common Share certificates, and no separate certificates evidencing the Rights
(the "Rights Certificates") will be distributed initially. The Rights will
separate from the Common Shares and a distribution of the Rights Certificates
will occur (the "Distribution Date") upon the earlier of (i) 10 business days
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 10% or more of the outstanding Common Shares
(or, in the case of Security Capital Preferred Growth Incorporated ("SCPG") and
its affiliates, 11% or more of the outstanding Common Shares) (the "Share
Acquisition Date"), or (ii) 10 business days following the commencement of a
tender offer or exchange offer that would result in a person or group
beneficially becoming an Acquiring Person. Until the Distribution Date, (i) the
Rights will be evidenced by the Common Share certificates and will be
transferred with and only with such Common Share certificates, (ii) any Common
Share certificates issued will contain a notation incorporating the Rights
Agreement by reference and (iii) the surrender for transfer of any certificates
for Common Shares outstanding will also constitute the transfer of the Rights
associated with the Common Shares represented by such certificates.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on February 17, 2008, unless earlier redeemed or
exchanged by the Company as described below. As soon as practicable after the
Distribution Date, Rights Certificates will be mailed to holders of record of
the Common Shares as of the close of business on the Distribution Date, and
thereafter such separate Rights Certificates alone will represent the Rights.
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The Agreement provides that if any person becomes an Acquiring Person,
proper provision shall be made so that each holder of a Right (except as set
forth below) will thereafter have the right to receive, upon exercise and
payment of the Purchase Price, Series B Preferred Shares or, at the option of
the Company, Common Shares (or, in certain circumstances, cash, property or
other securities of the Company) having a value equal to twice the amount of the
Purchase Price.
In the event that, at any time following the Share Acquisition Date, (i)
the Company is acquired in a merger, statutory share exchange, or other business
combination in which the Company is not the surviving person, or (ii) 50% or
more of the Company's assets or earning power is sold or transferred, each
holder of a Right (except as set forth below) shall thereafter have the right to
receive, upon exercise and payment of the Purchase Price, Common Shares of the
acquiring company having a value equal to twice the Purchase Price. The events
set forth in this paragraph and in the immediately preceding paragraph are
referred to as the "Triggering Events."
Upon the occurrence of a Triggering Event that entitles Rights holders to
purchase securities or assets of the Company, Rights that are or were owned by
the Acquiring Person, or any affiliate or associate of such Acquiring Person, on
or after such Acquiring Person's Share Acquisition Date shall be null and void
and shall not thereafter be exercised by any person (including subsequent
transferees). Upon the occurrence of a Triggering Event that entitles Rights
holders to purchase Common Shares of a third party, or upon the authorization of
an Exchange, Rights that are or were owned by any Acquiring Person or any
affiliate or associate of any Acquiring Person on or after such Acquiring
Person's Share Acquisition Date shall be null and void and shall not thereafter
be exercised by any person (including subsequent transferees).
The Purchase Price payable, and the number of Series B Preferred Shares,
Common Shares or other securities or property issuable upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution.
At any time after any person becomes an Acquiring Person, the Company may
exchange all or part of the Rights (except as set forth below) for Common Shares
(an "Exchange") at an exchange ratio of one share per Right, as appropriately
adjusted to reflect any share split or similar transaction.
At any time until ten business days following the Share Acquisition Date or
ten business days following the commencement of a tender offer or exchange offer
that would result in a person or group becoming an Acquiring Person, the Company
may redeem the Rights in whole, but not in part, at a price of $.001 per Right
(the "Redemption Price"). Under certain circumstances set forth in the Rights
Agreement, the decision to make an Exchange or to redeem the Rights shall
require the concurrence of a majority of the Continuing Trustees (as defined
below). Additionally, the Company may thereafter but prior to the occurrence of
a Triggering Event redeem the Rights in whole, but not in part, at the
Redemption Price provided that such redemption is incidental to a merger or
other business combination transaction involving the Company that is approved by
a majority of the Continuing Trustees, and does not involve an Acquiring Person,
and is one in which all holders of Common Shares are treated alike. After the
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redemption period has expired, the Company's right of redemption may be
reinstated if an Acquiring Person reduces his beneficial ownership to less than
10% (or, in the case of SCPG and its affiliates, 11%) of the outstanding Common
Shares in a transaction or series of transactions not involving the Company.
Immediately upon the action of the Board ordering redemption of the Rights,
with, where required, the concurrence of the Continuing Trustees, the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
The term "Continuing Trustees" means any member of the Board who was a
member of the Board immediately before the adoption of the Rights Agreement and
any person who is subsequently elected to the Board if such person is
recommended or approved by a majority of the Continuing Trustees, but does not
include an Acquiring Person, or an affiliate or associate of an Acquiring
Person, or any representative of the foregoing.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to shareholders or to the Company, shareholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Series B Preferred Shares (or other consideration) of the
Company or for Common Shares of the acquiring company as set forth above.
Other than certain provisions relating to the principal economic terms of
the Rights, any of the provisions of the Rights Agreement may be amended by the
Board prior to the Distribution Date. After the Distribution Date, the
provisions of the Rights Agreement may be amended by the Board (in certain
circumstances, only with the concurrence of the Continuing Trustees) in order to
cure any ambiguity, to make certain other changes that do not adversely affect
the interests of holders of Rights (excluding the interests of any Acquiring
Person), or to shorten or lengthen any time period under the Rights Agreement;
provided, however, no amendment to adjust the time period governing redemption
may be made at such time as the Rights are not redeemable.
At the same time that it approved the Rights Agreement, the Board of
Trustees designated 1,000,000 shares of the Company's Preferred Shares of
Beneficial Interest, par value $.01 per share, as the "Series B Junior
Participating Cumulative Redeemable Preferred Shares." The Company will not
issue any shares of Series B Preferred Shares except upon the exercise of
Rights. The Series B Preferred Shares are junior to the Company's Series A
Cumulative Redeemable Preferred Shares in respect of rights to receive dividends
and to participate in distributions or payments in the event of any liquidation,
dissolution or winding up of the Company, and is senior to the Common Shares and
any other shares of beneficial interest of the Company ranking, as to dividends
and upon liquidation, junior to the Series B Preferred Shares.
Holders of the Series B Preferred Shares are be entitled to receive
cumulative preferential cash dividends payable quarterly in an amount per share
equal to the greater of (i) $.01 and (ii) 1,000 times the aggregate per share
amount of all cash dividends, and 1,000 times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions (other than
dividends payable in Common Shares), declared on the Common Shares since the
immediately
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preceding quarterly dividend payment date, or, with respect to the first
quarterly dividend payment date, since the first issuance of any share or
fraction of a Series B Preferred Share.
In the event of any liquidation, dissolution or winding up of the Company,
the holders of Series B Preferred Shares are entitled to be paid out of the
assets of the Company legally available for distribution to its shareholders a
liquidation preference of $1,000.00 per share, plus accrued and unpaid dividends
thereon to the date of payment (the "Series B Preferred Liquidation
Preference"). After the payment to the holders of the Series B Preferred Shares
of the full Series B Preferred Liquidation Preference, the holders of the Series
B Preferred Shares as such shall have no right or claim to any of the remaining
assets of the corporation until the holders of Common Shares shall have received
an amount per share (the "Common Adjustment") equal to the quotient obtained by
dividing (i) the Series B Preferred Liquidation Preference by (ii) 1,000. In
the event that there are not sufficient assets available after payment in full
of the Series B Preferred Liquidation Preference to permit payment in full of
the Common Adjustment, then the remaining assets shall be distributed ratably to
the holders of the Common Shares.
The outstanding Series B Preferred Shares may be redeemed at the option of
the Board as a whole, but not in part, at any time, or from time to time, at a
price per share (the "Series B Preferred Redemption Price") equal to (i) 1,000
times the Average Market Value of the Common Shares, plus (ii) all accrued and
unpaid dividends to and including the date fixed for redemption. The "Average
Market Value" is the average of the closing sale prices of a Common Share during
the 30-day period immediately preceding the date before the redemption date
quoted on the Composite Tape for New York Stock Exchange Listed Stocks, or, if
the Common Shares are not quoted on the Composite Tape, on The New York Stock
Exchange, or, if the Common Shares are not listed on such exchange, on the
principal United States registered securities exchange on which the Common
Shares are listed, or, if the Common Shares are not listed on any such exchange,
the average of the closing bid quotations with respect to a Common Share during
such 30-day period on The Nasdaq Stock Market, or if no such quotations are
available, the fair market value of a Common Share as determined by the Board in
good faith.
Each Series B Preferred Share shall entitle the holder thereof to 1,000
votes on all matters submitted to a vote of the shareholders of the Company. The
holders of Series B Preferred Shares and the holders of Common Shares shall vote
together as one voting group on all such matters. Whenever dividends on any
Series B Preferred Shares shall be in arrears for six or more consecutive
quarterly periods, the holders of such shares (voting separately as a class with
all other series of Preferred Shares having like voting rights) will be entitled
to vote for the election of two additional directors of the Company until all
dividends accumulated on shares of Series B Preferred Shares for the past
dividend periods and the then current dividend period shall have been fully
paid. In such case, the entire Board of Directors of the Company will be
increased by two directors.
The dividend rate on the Series B Preferred Shares, the Series B
Preferred Liquidation Preference, the Common Adjustment, the Series B Preferred
Redemption Price and the number of votes per Series B Preferred Share are all
subject to adjustment upon the declaration of
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<PAGE>
any dividend payable in Common Shares, subdivision of the outstanding Common
Shares or combination of the outstanding Common Shares into a smaller number of
shares.
The Rights Agreement (which includes as Exhibit A the form of Rights
Certificate) and the Articles Supplementary designating the Series B Preferred
Shares are attached to this Form 8-A as exhibits and are incorporated herein by
reference. The foregoing description of the Rights and the Series B Preferred
Shares is qualified in its entirety by reference to the Rights Agreement and its
exhibits and the Articles Supplementary.
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Item 2. Exhibits.
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The following exhibits are filed as a part hereof:
1. Rights Agreement, dated as of February 6, 1998 between the Company
and First Chicago Trust Company of New York, as Rights Agent.
2. Form of Rights Certificate (included as Exhibit A to the Rights
Agreement).
3. Articles Supplementary to the Amended and Restated Declaration of
Trust of Prentiss Properties Trust
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<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereto duly authorized.
PRENTISS PROPERTIES TRUST
(Registrant)
By: /s/ Gregory S. Imhoff
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Name: Gregory S. Imhoff
Title: Vice President and Secretary
Dated: February 17, 1998
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EXHIBIT INDEX
Sequentially
Exhibit No. Description Numbered
Pages
- ---------- ---------------------------------------------- ------------
1 Rights Agreement, dated as of February 6,
1998 between the Company and First Chicago
Trust Company of New York, as Rights Agent
2 Form of Rights Certificate (included as
Exhibit A to the Rights Agreement)
3 Articles Supplementary to the Amended and
Restated Declaration of Trust of Prentiss
Properties Trust
<PAGE>
EXHIBIT 1
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- -------------------------------------------------------------------------------
PRENTISS PROPERTIES TRUST
AND
FIRST CHICAGO TRUST COMPANY OF NEW YORK
RIGHTS AGENT
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RIGHTS AGREEMENT
DATED AS OF FEBRUARY 6, 1998
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Section 1. Certain Definitions...................................................................................1
Section 2. Appointment of Rights Agent...........................................................................5
Section 3. Issue of Rights and Rights Certificates...............................................................6
Section 4. Form of Rights Certificates...........................................................................7
Section 5. Countersignature and Registration.....................................................................8
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed,
Lost or Stolen Rights Certificates..........................................................9
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights; Restriction on Transfer of
Rights.....................................................................................10
Section 8. Cancellation and Destruction of Rights Certificates..................................................12
Section 9. Reservation and Availability of Series C Preferred Stock.............................................12
Section 10. Series C Preferred Stock Record Date.................................................................13
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights..........................14
Section 12. Certificates of Adjusted Purchase Price or Number of Shares..........................................21
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.................................21
Section 14. Fractional Rights and Fractional Shares..............................................................24
Section 15. Rights of Action.....................................................................................25
Section 16. Agreement of Rights Holders..........................................................................25
Section 17. Rights Certificate Holder Not Deemed a Shareholder...................................................26
Section 18. Concerning the Rights Agent..........................................................................26
Section 19. Merger or Consolidation or Change of Name of Rights Agent............................................26
Section 20. Duties of Rights Agent...............................................................................27
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 21. Change of Rights Agent...............................................................................29
Section 22. Issuance of New Rights Certificates..................................................................30
Section 23. Redemption and Termination...........................................................................30
Section 24. Exchange ............................................................................................32
Section 25. Notice of Certain Events.............................................................................33
Section 26. Notices .............................................................................................34
Section 27. Supplements and Amendments...........................................................................34
Section 28. Successors...........................................................................................35
Section 29. Determinations and Actions by the Board of Directors, etc............................................35
Section 30. Benefits of this Agreement...........................................................................35
Section 31. Severability.........................................................................................36
Section 32. Governing Law........................................................................................36
Section 33. Counterparts.........................................................................................36
Section 34. Descriptive Headings.................................................................................36
</TABLE>
EXHIBIT A -- Form of Rights Certificate
EXHIBIT B -- Form of Summary of Rights
(ii)
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RIGHTS AGREEMENT
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This Agreement, dated as of February 6, 1998 (the "Agreement"), between
PRENTISS PROPERTIES TRUST, a Maryland real estate investment trust (the
"Company"), and FIRST CHICAGO TRUST COMPANY OF NEW YORK, a New York corporation
(the "Rights Agent"), provides as follows:
W I T N E S S E T H
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WHEREAS, the Board of Trustees of the Company has authorized and
declared a dividend distribution of one Right (as hereinafter defined) for each
outstanding Common Share of the Company to shareholders of record at the Close
of Business (as hereafter defined) on the Record Date (as hereinafter defined)
and has authorized the issuance of one Right (as such number may hereinafter be
adjusted as provided herein) for each Common Share that shall be issued between
the Record Date and the earliest of the Distribution Date, the Redemption Date
or the Expiration Date (as such terms are hereinafter defined) unless the Board
of Trustees provides to the contrary before or at the time of issuance of any
such Common Shares, each Right initially representing the right to purchase one
Unit of Series B Preferred Shares (as hereinafter defined), and being evidenced
by a Rights Certificate in the form attached hereto as Exhibit A, upon the terms
and subject to the conditions hereof (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
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following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, alone
or together with all Affiliates and Associates of such Person, shall at any time
be the Beneficial Owner of either or both of (i) 10% or more of the Common
Shares then outstanding or (ii) 10% or more of the Rights then outstanding, but
shall not include: (a) the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan; (b) Security Capital Preferred Growth Incorporated
("SCPG"), including its Affiliates and Associates, provided that SCPG and its
Affiliates and Associates shall be an Acquiring Person if and when SCPG and its
Affiliates and Associates shall become the Beneficial Owner of either or both of
(i) 11% or more of the Common Shares then outstanding or (ii) 11% or more of the
Rights then outstanding; or (c) any such Person who has become and is such a
Beneficial Owner solely because (1) of a reduction in the aggregate number of
Common Shares outstanding due to a repurchase of Common Shares by the Company
since the last date on which such Person acquired Beneficial Ownership of any
Common Shares or (2) it acquired such Beneficial Ownership in the good faith
belief that such acquisition would not (A) cause such Beneficial Ownership to
equal or exceed 10% (or, in the case of SCPG and its Affiliates and Associates,
11%) of the Common Shares then outstanding and such Person relied in good faith
in computing the percentage of its Beneficial Ownership on publicly filed
reports or documents of the Company that are inaccurate or out-of-date or (B)
otherwise cause a Distribution Date or the adjustment provided for in Section
11(a) to occur. Notwithstanding
<PAGE>
clause (c)(2) of the preceding sentence, if any Person that is not an Acquiring
Person due to such clause (c)(2) does not reduce its percentage of Beneficial
Ownership of Common Shares to less than 10% (or, in the case of SCPG and its
Affiliates and Associates, 11%) by the Close of Business on the fifth Business
Day after notice from the Company (the date of notice being the first day) that
such Person's Beneficial Ownership of Common Shares so equals or exceeds 10%
(or, in the case of SCPG and its Affiliates and Associates, 11%), such Person
shall, at the end of such five Business Day period, become an Acquiring Person
(and such clause (c)(2) shall no longer apply to such Person). For purposes of
this definition, the determination whether any Person acted in "good faith"
shall be conclusively determined by the Board of Trustees of the Company, acting
by a vote of those trustees of the Company whose approval would be required to
redeem the Rights under Section 23.
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act.
(c) A Person shall be deemed the "Beneficial Owner" of, and shall
be deemed to "beneficially own," any securities:
(i) that such Person or any of such Person's Affiliates or
Associates is deemed to "beneficially own" within the meaning of Rule 13d-3 of
the General Rules and Regulations under the Exchange Act;
(ii) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such right
is exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed to be the
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"Beneficial Owner" of, or to "beneficially own," (A) securities tendered
pursuant to a tender or exchange offer made by such Person or any of such
Person's Affiliates or Associates until such tendered securities are accepted
for purchase or exchange or (B) securities issuable upon exercise of the Rights;
(iii) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote, including pursuant to
any agreement, arrangement or understanding, whether or not in writing;
provided, however, that a Person shall not be deemed the "Beneficial Owner" of,
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or to "beneficially own," any security under this subparagraph (iii) as a result
of an agreement, arrangement or understanding to vote such security if such
agreement, arrangement or understanding: (A) arises solely from a revocable
proxy given in response to a public proxy solicitation made pursuant to, and in
accordance with, the applicable provisions of the General Rules and Regulations
under the Exchange Act, and (B) the beneficial ownership of such security is not
also then reportable by such Person on Schedule 13D under the Exchange Act (or
any comparable or successor report); or
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<PAGE>
(iv) that are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which such Person
(or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing), for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy as described in
the proviso to subparagraph (iii) of this paragraph (c)) or disposing of any
voting securities of the Company; provided, however, that notwithstanding any
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provision of this Section 1(c), any Person engaged in business as an underwriter
of securities who acquires any securities of the Company through such Person's
participation in good faith in a firm commitment underwriting registered under
the Securities Act of 1933, as amended (the "Act"), shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," such securities until the
expiration of 40 days after the date of acquisition; and provided, further, that
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in no case shall an officer or trustee of the Company be deemed (x) the
beneficial owner of any securities beneficially owned by another officer or
trustee of the Company solely by reason of actions undertaken by such persons in
their capacity as officers or trustees of the Company or (y) the beneficial
owner of securities held of record by the trustee of any employee benefit plan
of the Company or any Subsidiary of the Company for the benefit of any employee
of the Company or any Subsidiary of the Company, other than the officer or
trustee, by reason of any influence that such officer or trustee may have over
the voting of the securities held in the plan.
(d) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which national banking institutions in the State of Maryland
or State of New York are authorized or obligated by law or executive order to
close.
(e) "Close of Business" on any given date shall mean 5:00 P.M.,
Dallas, Texas time, on such date; provided, however, that if such date is not a
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Business Day it shall mean 5:00 P.M., Dallas, Texas time, on the next succeeding
Business Day.
(f) "Common Shares" shall mean the common shares of beneficial
interest the Company, $.01 par value, except that "Common Shares" when used with
reference to any Person other than the Company, if such Person is a corporation,
shall mean the capital stock of such Person with the greatest voting power, or
the equity securities or other equity interest in such Person having power to
control or direct the management of such Person, or any shares of capital stock
or other equity interests into which the foregoing shall be reclassified or
changed.
(g) "Continuing Trustee" shall mean any member of the Board of
Trustees of the Company, while a member of the Board, who is not an Acquiring
Person, or an Affiliate or Associate of an Acquiring Person, or a representative
of an Acquiring Person or of any such Affiliate or Associate, and (i) who is a
member of the Board on the date of this Agreement or (ii) whose subsequent
nomination for election or election to the Board was recommended or approved by
a majority of the Continuing Trustees serving at the time of such nomination or
election.
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(h) "Distribution Date" shall mean the earlier of (i) the close
of business on the tenth business day after the Share Acquisition Date (as
hereinafter defined) or (ii) the close of business on the tenth business day
after the date that a tender or exchange offer by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms of any such
plan) is first published or sent or given within the meaning of Rule 14d-2(a) of
the General Rules and Regulations under the Exchange Act if, upon consummation
thereof, such Person would be an Acquiring Person (irrespective of whether any
shares were actually purchased pursuant to any such offer).
(i) "Equivalent Shares" shall mean Series B Preferred Shares (as
hereinafter defined) and any other class or series of beneficial interest of the
Company that is entitled to participate in dividends and other distributions,
including distributions upon the liquidation, dissolution or winding up of the
Company, on a proportional basis with the Common Shares. In calculating the
number of any class or series of Equivalent Shares for purposes of Section 11
hereof, the number of shares, or fractions of a share, of such class or series
of beneficial interest that is entitled to the same dividend or distribution as
a whole Common Share shall be deemed to be one share.
(j) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended and in effect on the date of this Agreement, unless a different
date is otherwise specifically provided herein.
(k) "Exchange Date" shall mean the date on which the Board of
Trustees authorizes the exchange of Rights for Common Shares pursuant to Section
24 hereof.
(l) "Expiration Date" shall mean the earliest of (i) the close of
business on the Final Expiration Date, or (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof, or (iii) the Exchange Date.
(m) "Final Expiration Date" shall mean February 17, 2008.
(n) "Person" shall mean any individual, firm, corporation,
partnership or other entity and any particular Person shall include any "group"
acting as described in Section 13(d)(3) of the Exchange Act.
(o) "Purchase Price" shall have the meaning set forth in Section
4(a) hereof, as adjusted in accordance with this Agreement and as in effect from
time to time.
(p) "Record Date" shall mean the Close of Business on February
17, 1998.
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(q) "Rights" shall mean the rights to purchase Series B Preferred
Shares (or other securities) as provided in this Agreement.
(r) "Rights Certificate" shall have the meaning set forth in
Section 3(a) hereof.
(s) "Section 11(a)(ii) Event" shall mean any occurrence of the
event described in the first sentence of Section 11(a)(ii) hereof.
(t) "Section 13 Event" shall mean any event described in clause
(w), (x), (y) or (z) of Section 13(a) hereof.
(u) "Series B Preferred Shares" shall mean shares of Series B
Junior Participating Preferred Shares, without par value, of the Company.
(v) "Share Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the
Company or an Acquiring Person that an Acquiring Person has become such.
(w) "Subsidiary" shall mean, with reference to any Person, any
corporation or other entity of which an amount of voting securities sufficient
to elect a majority of the directors, trustees or Persons having similar
authority of such corporation or other entity is beneficially owned, directly or
indirectly, by such Person, or otherwise controlled by such Person.
(x) "Triggering Event" shall mean any Section 11(a)(ii) Event or
any Section 13 Event.
(y) "Unit" shall mean one one-thousandth of one Series B
Preferred Share.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
---------------------------
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be holders of Common Shares) in accordance with the terms and conditions hereof,
and the Rights Agent hereby accepts such appointment. The Company may from time
to time appoint such Co-Rights Agents as it may deem necessary or desirable.
5
<PAGE>
Section 3. Issue of Rights and Rights Certificates.
---------------------------------------
(a) Until the Distribution Date, (x) the Rights shall be evidenced
(subject to the provisions of paragraphs (b) and (c) of this Section 3) by the
certificates for the Common Shares registered in the names of the holders of the
Common Shares (which certificates for Common Shares shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the Rights
shall be transferable only in connection with the transfer of the underlying
Common Shares (including a transfer to the Company). Subject to the provisions
of Section 7(e) hereof, as soon as practicable after the Company has notified
the Rights Agent of the occurrence of a Distribution Date, the Rights Agent
shall send by first-class, insured, postage prepaid mail, to each such record
holder of shares of the Common Shares as of the close of business on the
Distribution Date, at the address of such holder shown on the records of the
Company, one or more rights certificates, in substantially the form of Exhibit A
hereto (the "Rights Certificates"), evidencing one Right for each Common Share
so held, subject to adjustment as provided herein. In the event that an
adjustment in the number of Rights per Common Share has been made pursuant to
Section 11(n) hereof, at the time of distribution of the Rights Certificates,
the Company shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights Certificates evidencing
only whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights shall be
evidenced solely by such Rights Certificates.
(b) A Summary of Rights, in substantially the form attached hereto
as Exhibit B (the "Summary of Rights"), shall be sent by the Company by
first-class, postage prepaid mail, to each record holder of the Common Shares as
of the Record Date, at the address of each such holder shown on the records of
the Company. Until the Distribution Date, the Rights shall be evidenced by such
certificates evidencing the Common Shares, and the registered holders of the
Common Shares shall also be the registered holders of the associated Rights.
Until the earlier of the Distribution Date or the Expiration Date, the transfer
of any certificates evidencing Common Shares in respect of which Rights have
been issued shall also constitute, subject to the provisions of Section 7(e)
hereof, the transfer of the Rights associated with such Common Shares.
(c) Unless the Board of Trustees by resolution adopted at or before
the time of the issuance (including pursuant to the exercise of rights under the
Company's benefit plans) of any Common Shares specifies to the contrary, Rights
shall be issued in respect of all Common Shares that are issued after the Record
Date but prior to the earlier of the Distribution Date or the Expiration Date.
Certificates representing Common Shares outstanding prior to the Record Date
that are issued upon transfer or exchange of such Common Shares, shall also be
deemed to be certificates for Rights, and shall bear substantially the following
legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between Prentiss
Properties Trust (the "Company") and First Chicago Trust Company of New
York (the "Rights Agent")
6
<PAGE>
dated as of February 6, 1998 (the "Rights Agreement"), the terms of
which are hereby incorporated herein by reference and a copy of which
is on file at the principal offices of the Company. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will
be evidenced by separate certificates and will no longer be evidenced
by this certificate. The Company will mail to the holder of this
certificate a copy of the Rights Agreement, as in effect on the date
of mailing, without charge promptly after receipt of a written request
therefor. Under certain circumstances set forth in the Rights
Agreement, Rights that are owned or that were previously owned by a
Person who is, was or becomes an Acquiring Person or any Affiliate or
Associate of an Acquiring Person may become null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Shares represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Shares
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute, subject to the provisions of
Section 7(e) hereof, the transfer of the Rights associated with the Common
Shares represented by such certificates.
In the event that the Company purchases or acquires any Common Shares after
the Record Date but prior to the Distribution Date, any Rights associated with
such Common Shares shall be deemed canceled and retired so that the Company
shall not be entitled to exercise any Rights associated with the Common Shares
that are no longer outstanding.
Section 4. Form of Rights Certificates.
---------------------------
(a) The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit A hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 11
and Section 22 hereof, the Rights Certificates, whenever distributed, shall be
dated as of the Distribution Date, and on their face shall entitle the holders
thereof to purchase such number of Units of Series B Preferred Shares as shall
be set forth therein at the price set forth therein (such exercise price per
unit, being hereinafter referred to as the "Purchase Price"), but the amount and
type of securities purchasable upon the exercise of each Right and the Purchase
Price thereof shall be subject to adjustment as provided herein.
7
<PAGE>
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that evidences Rights beneficially owned by: (i) an Acquiring
Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee
of an Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer that the Board of Trustees of the Company has
determined is part of a plan, arrangement or understanding which has a primary
purpose to avoid or effects the avoidance of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer,
exchange, replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall contain (to the extent feasible) substantially the
following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a person who was or became an Acquiring Person or
an Affiliate or an Associate of an Acquiring Person. Accordingly, this
Rights Certificate and the Rights represented hereby may become void in
the circumstances specified in Section 7(e) of the Rights Agreement.
The Company shall notify the Rights Agent, and, if such notification is given
orally, the Company shall confirm promptly the same in writing, at such time as
the Company has notice that any Person constitutes an Acquiring Person or an
Affiliate or Associate of an Acquiring Person, and until such notice is received
by the Rights Agent the Rights Agent may conclusively presume for all purposes
that the foregoing legend need be imprinted only on Right Certificates
beneficially owned by Persons that the Company has previously identified to the
Rights Agent as constituting an Acquiring Person or an Affiliate or Associate of
an Acquiring Person and transferees of any such Persons.
Section 5. Countersignature and Registration.
---------------------------------
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chief Executive Officer, its President or any Vice President,
either manually or by facsimile signature, and shall have affixed thereto the
Company's seal or a facsimile thereof which shall be attested by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature. The Rights Certificates shall be countersigned manually or by
facsimile by the Rights Agent and shall not be valid for any purpose unless so
countersigned. The Rights Certificates shall be countersigned by an authorized
signatory of the Rights Agent but it shall not be necessary for the same
signatory to countersign all of the Rights Certificates issued hereunder. In
case any officer of the Company who shall have signed any of the Rights
Certificates shall
8
<PAGE>
cease to be such officer of the Company before countersignature by the Rights
Agent and issuance and delivery by the Company, such Rights Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and delivered
by the Company with the same force and effect as though the person who signed
such Rights Certificates had not ceased to be such officer of the Company; and
any Rights Certificates may be signed on behalf of the Company by any person
who, at the actual date of the execution of such Rights Certificate, shall be a
proper officer of the Company to sign such Rights Certificate, although at the
date of the execution of this Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
------------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
- -----------------------------------------------------------------------
(a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof, at any time after the close of business on the Distribution
Date, and at or prior to the close of business on the Expiration Date, any
Rights Certificate or Certificates may be transferred, split up, combined or
exchanged for another Rights Certificate or Certificates (other than Rights
Certificates that have become void pursuant to Section 7(e) hereof or that have
been exchanged pursuant to Section 24 hereof) entitling the registered holder to
purchase a like number of Units of Series B Preferred Shares (or, following a
Triggering Event, Common Shares, other securities, cash or other assets, as the
case may be) as the Rights Certificate or Certificates surrendered then entitle
such holder (or former holder in the case of a transfer) to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any Rights
Certificate or Certificates shall make such request in writing delivered to the
Rights Agent, and shall surrender the Rights Certificate or Certificates to be
transferred, split up, combined or exchanged at the principal office or offices
of the Rights Agent designated for such purpose. Neither the Rights Agent nor
the Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate until the registered holder
shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon the Rights Agent shall countersign and
deliver to the Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company may require
payment from the holder of the Rights of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Rights Certificates.
9
<PAGE>
(b) Subject to Section 7(c) hereof, upon receipt by the Company and
the Rights Agent of evidence reasonably satisfactory to them of the loss, theft,
destruction or mutilation of a Rights Certificate, and, in case of loss, theft
or destruction, of indemnity or security reasonably satisfactory to them, and
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Rights Certificate if mutilated, the Company will execute and deliver a new
Rights Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered owner in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights;
--------------------------------------------------------------
Restriction on Transfer of Rights.
- ---------------------------------
(a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(ii), Section 11(a)(iii),
Section 13, Section 23(a), and Section 24 hereof) in whole or in part at any
time after the Distribution Date upon surrender of the Rights Certificate, with
the form of election to purchase and the certificate on the reverse side thereof
duly executed, to the Rights Agent at the principal office or offices of the
Rights Agent designated for such purpose, together, except as otherwise provided
in Section 11(a)(ii) hereof, with payment of the aggregate Purchase Price with
respect to the total number of Units of Series B Preferred Shares (or Common
Shares or other securities or property, as the case may be) as to which
surrendered Rights are then exercisable, at or prior to the Expiration Date.
(b)The Purchase Price for each Unit of Series B Preferred Shares
pursuant to the exercise of a Right shall initially be $85.00 and shall be
subject to adjustment from time to time as provided in Section 11 hereof and
shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per Unit of Series B Preferred Shares (or Common Shares, other securities
or property, as the case may be) to be purchased as set forth below and an
amount equal to any applicable transfer tax, the Rights Agent shall, subject to
Section 20(k) hereof, thereupon promptly, (i) (A) requisition from any transfer
agent of the Units of Series B Preferred Shares (or make available, if the
Rights Agent is the transfer agent for such shares) certificates for the total
number of Units of Series B Preferred Shares to be purchased and the Company
hereby irrevocably authorizes its transfer agent to comply with all such
requests, or (B) if the Company shall have elected to deposit the total number
of Units of Series B Preferred Shares issuable upon exercise of the Rights
hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of Units of Series B Preferred
Shares as are to be purchased (in which case certificates for the Units of
Series B Preferred
10
<PAGE>
Shares represented by such receipts shall be deposited by the transfer agent
with the depositary agent) and the Company will direct the depositary agent to
comply with such request, (ii) requisition from the Company the amount of cash,
if any, to be paid in lieu of fractional shares in accordance with Section 14
hereof, (iii) after receipt of such certificates or depositary receipts, cause
the same to be delivered to or upon the order of the registered holder of such
Rights Certificate, registered in such name or names as may be designated by
such holder, and (iv) after receipt thereof, deliver such cash, if any, to or
upon the order of the registered holder of such Rights Certificate. The payment
of the Purchase Price (as such amount may be reduced (including to zero)
pursuant to Section 11(a)(iii) hereof) may be made in cash or by certified bank
check or bank draft payable to the order of the Company. In the event that the
Company is obligated to issue other securities of the Company, pay cash and/or
distribute other property pursuant to Section 11(a) hereof, the Company will
make all arrangements necessary so that such other securities, cash and/or other
property are available for distribution by the Rights Agent, if and when
appropriate.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to, or upon the order of, the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any Person with whom
the Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Trustees
of the Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effects the avoidance of this Section 7(e),
shall become null and void without any further action and no holder of such
Rights shall have any rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise. The Company shall use all
reasonable efforts to ensure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but shall have no liability to any holder
of Rights Certificates or any other Person as a result of its failure to make
any determinations with respect to an Acquiring Person or its Affiliates or
Associates, or any transferee thereof, hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a
11
<PAGE>
registered holder upon the occurrence of any purported exercise as set forth in
this Section 7 unless such registered holder shall have (i) completed and signed
the certificate contained in the form of election to purchase set forth on the
reverse side of the Rights Certificate surrendered for such exercise and (ii)
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All Rights
---------------------------------------------------
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Rights Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Series B Preferred Shares.
---------------------------------------------------------
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued Series B
Preferred Shares (or, following the occurrence of a Triggering Event, out of its
authorized and unissued Series B Preferred Shares or other securities, as the
case may be), the number of Series B Preferred Shares (or such other securities)
that, except as provided in Section 11(a)(iii) hereof, will be sufficient from
time to time to permit the exercise in full of all outstanding Rights and all
Rights that are at the time issuable, in accordance with the provisions of this
Agreement.
(b) So long as the Series B Preferred Shares (and, following the
occurrence of a Triggering Event, any other securities) issuable and deliverable
upon the exercise of the Rights may be listed on any national securities
exchange, the Company shall use its best efforts to cause, from and after such
time as the Rights become exercisable, all shares reserved for such issuance to
be listed on such exchange upon official notice of issuance.
(c) The Company shall use its best efforts (i) to file, as soon as
practicable following the earliest date after the first occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(ii)
and (iii) hereof, or as soon as is required by law following the Distribution
Date, as the case may be, a registration statement under the Act on an
appropriate form, with respect to the securities purchasable upon exercise of
the Rights, (ii) to cause such registration statement to become effective as
soon as practicable after such filing, and
12
<PAGE>
(iii) to cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act) until the earlier
of (A) the date as of which the Rights are no longer exercisable for such
securities, and (B) the Expiration Date. The Company will also take such action
as may be appropriate under, or to ensure compliance with, the securities or
"blue sky" laws of the various states in connection with the exercisability of
the Rights. The Company may temporarily suspend, for a period of time not to
exceed ninety days after the date set forth in clause (i) of the first sentence
of this Section 9(c), the exercisability of the Rights in order to prepare and
file such registration statement and permit it to become effective. Upon any
such suspension, the Company shall issue a public announcement stating, and
notify the Rights Agent, that the exercisability of the Rights has been
temporarily suspended. The Company shall also issue a public announcement at
such time as the suspension is no longer in effect. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be exercisable
in any jurisdiction unless the requisite qualification in such jurisdiction
shall have been obtained.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that Series B Preferred Shares (or other
securities, as the case may be) delivered upon exercise of the Rights shall, at
the time of delivery of the certificates for such shares (subject to payment of
the Purchase Price), be duly authorized, validly issued, fully paid and
nonassessable.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges that
may be payable in respect of the issuance or delivery of the Rights Certificates
and of any certificates for Series B Preferred Shares (or other securities, as
the case may be) upon the exercise of Rights. The Company shall not, however, be
required to pay any transfer tax that may be payable in respect of any transfer
or delivery of Rights Certificates to a Person other than, or the issuance or
delivery of a number of Series B Preferred Shares (or other securities, as the
case may be) in respect of a name other than that of, the registered holder of
the Rights Certificates evidencing Rights surrendered for exercise or to issue
or deliver any certificates for a number of Series B Preferred Shares (or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
Section 10. Series B Preferred Shares Record Date. Each person in whose
-------------------------------------
name any certificate for a number of Units of Series B Preferred Shares (or
other securities, as the case may be) is issued upon the exercise of Rights
shall for all purposes be deemed to have become the holder of record of such
Units of Series B Preferred Shares (or other securities, as the case may be)
represented thereby on, and such certificate shall be dated, the date upon which
the Rights Certificate evidencing such Rights was duly surrendered and payment
of the Purchase Price (and all applicable transfer taxes) was made; provided,
--------
however, that if the date of such surrender and payment is a date upon which the
Series B Preferred Shares (or other securities, as the case may
13
<PAGE>
be) transfer books of the Company are closed, such Person shall be deemed to
have become the record holder of such shares (fractional or otherwise) on, and
such certificate shall be dated, the next succeeding Business Day on which such
transfer books are open. Prior to the exercise of the Rights evidenced thereby,
the holder of a Rights Certificate as such shall not be entitled to any rights
of a shareholder of the Company with respect to shares for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
----------------------------------------------------------
Number of Rights. The Purchase Price, the number and kind of shares covered by
- ----------------
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Series B Preferred Shares
payable in Series B Preferred Shares, (B) subdivide the outstanding Series B
Preferred Shares, (C) combine the outstanding Series B Preferred Shares into a
smaller number of shares, or (D) issue any shares of beneficial interest in a
reclassification of the Series B Preferred Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a), the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of Series B Preferred
Shares or the number and kind of other shares of beneficial interest, as the
case may be, issuable on such date, shall be proportionately adjusted so that
the holder of any Right exercised after such time shall be entitled to receive,
upon payment of the Purchase Price then in effect, the aggregate number of
Series B Preferred Shares or the number and kind of other shares of beneficial
interest, as the case may be, that, if such Right had been exercised immediately
prior to such date and at a time when the Series B Preferred Shares transfer
books of the Company were open, he would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs that would require an adjustment under both
this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for
in this Section 11(a)(i) shall be in addition to, and shall be made prior to,
any adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) Subject to Section 23 and Section 24 hereof, in the
event any Person becomes an Acquiring Person, then, proper provision shall be
made by the Company so that each record holder of each Right (except as provided
in Section 7(e) hereof) shall thereafter have the right to receive, upon
exercise thereof for the Purchase Price in accordance with terms of this
Agreement, such number of Units of Series B Preferred Shares (or, in lieu of
Series B Preferred Shares, at the option of the Company and to the extent
available, such number of Common Shares) as shall equal the result obtained by
multiplying the Purchase Price by a fraction, the numerator of which is the
number of Units of Series B Preferred Shares for which a
14
<PAGE>
Right is then exercisable and the denominator of which is 50% of the current
market price of a Common Share (determined pursuant to Section 11(d) hereof) on
the date of the first occurrence of a Section 11(a)(ii) Event (such result being
hereinafter referred to as the "Adjustment Shares").
(iii) To the extent that the number of Series B Preferred
Shares that are authorized by the Company's Amended and Restated Declaration of
Trust but not outstanding or reserved for issuance for purposes other than upon
exercise of the Rights is not sufficient to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii) of this Section 11(a),
and subject to such limitations as are necessary to prevent a default under any
agreement for money borrowed as presently constituted to which the Company is a
party subject to any limitations contained in any applicable law, the Company
shall: (A) determine the excess of (1) the value of the Adjustment Shares
issuable upon the exercise of a Right (the "Current Value"), over (2) the
Purchase Price (such excess being hereinafter referred to as the "Spread"), and
(B) with respect to each Right, make adequate provision to substitute for such
unavailable Adjustment Shares, upon payment of the applicable Purchase Price,
(1) cash, (2) a reduction in the Purchase Price, (3) other equity securities of
the Company, (4) debt securities of the Company, (5) other assets, or (6) any
combination of the foregoing, having, together with the Adjustment Shares issued
upon exercise of such Right, an aggregate value equal to the Current Value,
where such aggregate value has been determined by the Board of Trustees of the
Company based upon the advice of a nationally recognized investment banking firm
selected by the Board of Trustees of the Company; PROVIDED, however, if the
Company shall not have made adequate provision to deliver value pursuant to
clause (B) above within 30 days following the first occurrence of a Section
11(a)(ii) Event, then the Company shall be obligated to deliver, upon the
surrender for exercise of a Right and without requiring payment of the Purchase
Price, preferred shares of beneficial interest, par value $.01 per share, of the
Company or Common Shares (to the extent such securities are available) and then,
if necessary, cash, which securities and/or assets in the aggregate are equal to
the Spread. If the Board of Trustees of the Company shall determine in good
faith that it is likely that sufficient additional preferred shares of
beneficial interest, $.01 par value, of the Company or Common Shares could be
authorized for issuance upon exercise in full of the Rights, the 30-day period
set forth above may be extended to the extent necessary, but not more than 90
days following the first occurrence of a Section 11(a)(ii) Event, in order that
the Company may seek shareholder approval for the authorization of such
additional shares (such period, as it may be extended, the "Substitution
Period"). To the extent that the Company determines that some action need be
taken pursuant to the first and/or second sentences of this Section 11(a)(iii),
the Company (x) shall provide, subject to Section 7(e) hereof, that such action
shall apply uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution Period in
order to seek any authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect. For purposes of this Section 11(a)(iii),
the value of the Common Shares shall be the current market price (as determined
pursuant to Section 11(d)
15
<PAGE>
hereof) per share of the Common Shares on the date of the first occurrence of a
Section 11(a)(ii) Event.
(b) If at any time after the date of this Agreement the Company
shall fix a record date for the issuance of rights, options or warrants to all
holders of Common Shares or of any class or series of Equivalent Shares
entitling such holders (for a period expiring within 45 calendar days after such
record date) to subscribe for or to purchase Common Shares or Equivalent Shares
(or securities convertible into Common Shares or Equivalent Shares) at a price
per share (or having a conversion price per share, if a security convertible
into Common Shares or Equivalent Shares) less than the current market price of
such Common Shares or Equivalent Shares on such record date, then, in each such
case, each Right outstanding immediately prior to such record date shall
thereafter evidence the right to purchase, for the Purchase Price, that number
of Units of Series B Preferred Shares or Equivalent Shares obtained by
multiplying the number of Units of Series B Preferred Shares issuable upon
exercise of a Right immediately prior to such record date by a fraction, the
numerator of which shall be the total number of Common Shares and Equivalent
Shares (if any) outstanding on such record date plus the number of additional
Common Shares and Equivalent Shares (if any) to be offered for subscription or
purchase (or into which the convertible securities so to be offered are
initially convertible) and the denominator of which shall be the total number of
Common Shares and Equivalent Shares (if any) outstanding on such record date
plus the number of Common Shares or Equivalent Shares, as the case may be, that
the aggregate offering price of the total number of Common Shares or Equivalent
Shares, as the case may be, so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current market price. In case such subscription price may be paid in a
consideration, part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board of
Trustees of the Company, whose determination shall be described in a statement
filed with the Rights Agent. Common Shares and Equivalent Shares owned by or
held for the account of the Company or any Subsidiary of the Company shall not
be deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed; and in the
event that such rights, options or warrants are not so issued, each Right shall
be adjusted to evidence the right to receive that number of Units of Series B
Preferred Shares that such Right would have entitled the holder to receive, for
the Purchase Price, if such record date had not been fixed.
(c) If at any time after the date of this Agreement the Company
shall fix a record date for the making of a distribution to all holders of
Common Shares or of any class or series of Equivalent Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of cash (other than a
regular quarterly cash dividend of the Company in compliance with any applicable
law), evidences of indebtedness, assets, securities (other than Common Shares or
any Equivalent Shares) or subscription rights, options or warrants (excluding
those referred to in Section 11(b) hereof), then, in each such case, each Right
outstanding immediately prior to such record date shall thereafter evidence the
right to purchase, for the Purchase Price, that number of Units of Series B
Preferred Shares obtained by multiplying the number of Units of Series B
16
<PAGE>
Preferred Shares issuable upon exercise of a Right immediately prior to such
record date by a fraction, the numerator of which shall be the current market
price of a Common Share or an Equivalent Share on the record date and the
denominator of which shall be the current market price of a Common Share or an
Equivalent Share on such record date less the fair market value (as determined
in good faith by the Board of Trustees of the Company, whose determination shall
be described in a statement filed with the Rights Agent) of the portion of the
cash, evidences of indebtedness, assets or securities so to be distributed or of
such subscription rights, options or warrants applicable to a Common Share or an
Equivalent Share, as the case may be. Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, each Right shall be adjusted to evidence the right
to receive that number of Units of Series B Preferred Shares that such Right
would have entitled the holder to receive, for the Purchase Price, if such
record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the "current market
price" per Common Share on any date shall be deemed to be the average of the
daily closing prices per share of such Common Shares for the 30 consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date, and for purposes of computations made pursuant to Section 11(a)(iii)
hereof, the "current market price" per Common Share on any date shall be deemed
to be the average of the daily closing prices per share of such Common Shares
for the ten consecutive Trading Days immediately following such date; provided,
--------
however, that in the event that the current market price per share of the Common
Shares is determined during a period following the announcement by the issuer of
such Common Shares of (A) a dividend or distribution on such Common Shares
payable in shares of such Common Shares or securities convertible into shares of
such Common Shares (other than the Rights), or (B) any subdivision, combination
or reclassification of such Common Shares, and prior to the expiration of the
requisite 30 Trading Day or ten Trading Day period, as set forth above, after
the ex-dividend date for such dividend or distribution, or the record date for
such subdivision, combination or reclassification, then, and in each such case,
the "current market price" shall be properly adjusted to take into account
ex-dividend trading. The closing price for each day shall be the last sale
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Common Shares are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Common Shares are listed or admitted to trading or, if the Common
Shares are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices quoted on the Nasdaq Stock Market, as reported by the
National Association of Securities Dealers, Inc. ("Nasdaq") or such other
quotation system then in use, or, if on any such date the Common Shares are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Common Shares
selected by the Board of Trustees of the Company. If on any such date no market
maker is making a market in the Common Shares, the fair value of such shares on
such date as determined in good faith by the Board of Trustees of the Company
shall be used. The
17
<PAGE>
term "Trading Day" shall mean a day on which the principal national securities
exchange on which the Common Shares are listed or admitted to trading is open
for the transaction of business or, if the Common Shares are not listed or
admitted to trading on any national securities exchange, a Business Day. If the
Common Shares is not publicly held or not so listed or traded, "current market
price" per share shall mean the fair value per share as determined in good faith
by the Board of Trustees of the Company, whose determination shall be described
in a statement filed with the Rights Agent and shall be conclusive for all
purposes.
(ii) For the purpose of any computation hereunder, the
"current market price" per share of the Series B Preferred Shares shall be
determined in the same manner as set forth above for the Common Shares in
Section 11(d)(i) hereof (other than the last sentence thereof). If the current
market price per share of Series B Preferred Shares cannot be determined in the
manner provided above or if the Series B Preferred Shares are not publicly held
or listed or traded in a manner described in clause (i) of this Section 11(d),
the "current market price" per share of the Series B Preferred Shares shall be
conclusively deemed to be an amount equal to 1000 (as such number may be
appropriately adjusted for such events as stock splits, stock dividends and
recapitalizations with respect to the Common Shares and Series B Preferred
Shares occurring after the date of this Agreement) multiplied by the current
market price per share of the Common Shares. If neither the Common Shares nor
the Series B Preferred Shares are publicly held or so listed or traded, "current
market price" per share of the Series B Preferred Shares shall mean the fair
value per share as determined in good faith by the Board of Trustees of the
Company, whose determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes. For all purposes of this
Agreement, the "current market price" of one one-thousandth of a share of Series
B Preferred Shares shall be equal to the "current market price" of one share of
Series B Preferred Shares divided by 1000.
(e) Anything herein to the contrary notwithstanding, no adjustment
in the number of Units of Series B Preferred Shares for which a Right is
exercisable or in the Purchase Price shall be required unless such adjustment
would require an increase or decrease of at least one percent in such number of
shares or in the Purchase Price; provided, however, that any adjustments that by
--------
reason of this Section 11(e) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 11 shall be made to the nearest cent or to the nearest
ten-thousandth of a Unit of Series B Preferred Shares, as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
years from the date of the transaction that mandates such adjustment, or (ii)
the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)
or 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of beneficial interest other than Series B
Preferred Shares, thereafter the number of such other shares so receivable upon
exercise of any Right and, if required, the Purchase Price thereof shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Series B
Preferred Shares contained in Section
18
<PAGE>
11(a), (b), (c), (e), (g), (h), (i), (k) and (l) hereof, and the provisions of
Sections 7, 9, 10, 13 and 14 hereof with respect to the Series B Preferred
Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the number or kind of shares purchasable upon exercise of the
Rights or to the Purchase Price hereunder shall evidence the right to purchase,
at the adjusted Purchase Price, the adjusted number of Units of Series B
Preferred Shares or other securities purchasable from time to time hereunder
upon exercise of the Rights, all subject to further adjustment as provided
herein.
(h) Unless the Company shall have exercised its election as
provided below in this Section 11(h), upon each adjustment of the Purchase Price
as a result of the calculations made in Section 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
Units of Series B Preferred Shares obtained by (i) multiplying (x) the number of
Units of Series B Preferred Shares covered by a Right immediately prior to this
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment and (ii) dividing the product so obtained by the Purchase Price in
effect immediately after such adjustment of the Purchase Price. On or after the
date of any adjustment of the Purchase Price, in lieu of any adjustment in the
number of Units of Series B Preferred Shares or any other shares of beneficial
interest purchasable upon the exercise of a Right, the Company may elect to
adjust the number of Rights. Each of the Rights outstanding after the adjustment
in the number of Rights shall be exercisable for the number of Units of Series B
Preferred Shares for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest
one-ten-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten days later than the date of
the public announcement. If Rights Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(h), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Rights Certificates on such record date Rights Certificates evidencing,
subject to Section 14 hereof, the additional Rights to which such holders shall
be entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Rights Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Rights Certificates so to be distributed shall
be issued, executed and countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Purchase Price) and shall be
registered in the names of the holders of record of Rights Certificates on the
record date specified in the public announcement.
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<PAGE>
(i) Irrespective of any adjustment or change in the Purchase Price
or the number of Units of Series B Preferred Shares or the number and kind of
other securities issuable upon the exercise of the Rights, the Rights
Certificates theretofore and thereafter issued may continue to express the
Purchase Price per Unit, the number of Units and the other terms that were
expressed in the initial Rights Certificates issued hereunder.
(j) In any case in which this Section 11 shall require that an
adjustment be made effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such event the issuance to
the holder of any Right exercised after such record date of the number of Units
of Series B Preferred Shares and other shares of beneficial interest or
securities of the Company, if any, issuable upon such exercise over and above
the number of Units of Preferred Shares and other shares of beneficial interest
or securities of the Company, if any, issuable upon such exercise before giving
effect to such adjustment; provided, however, that the Company shall deliver to
--------
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares (fractional or otherwise) or securities
upon the occurrence of the event requiring such adjustment.
(k) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in its good faith judgment the Board of Trustees of the Company
shall determine to be advisable in order that any (i) consolidation or
subdivision of the Series B Preferred Shares, (ii) issuance wholly for cash of
any Series B Preferred Shares at less than the current market price, (iii)
issuance wholly for cash of Series B Preferred Shares or securities that by
their terms are convertible into or exchangeable for Series B Preferred Shares,
(iv) share dividend or (v) issuance of rights, options or warrants referred to
in this Section 11, hereafter made by the Company to holders of its Series B
Preferred Shares shall not be taxable to such shareholders.
(l) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction that complies with Section 11(m)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction that complies with Section 11(m) hereof), (iii)
effect a statutory share exchange with any Person (other than a Subsidiary of
the Company in a transaction that complies with Section 11(m) hereof), or (iv)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(m) hereof), if at the time of or immediately after such
consolidation, merger, statutory share exchange or sale there are any rights,
warrants or other instruments or securities outstanding or agreements in effect
that would substantially diminish or otherwise eliminate the benefits intended
to be afforded by the Rights.
20
<PAGE>
(m) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 27 hereof, take
(or permit any Subsidiary to take) any action if at the time such action is
taken it is reasonably foreseeable that such action will diminish substantially
or otherwise eliminate the benefits intended to be afforded by the Rights.
(n) Anything in this Agreement to the contrary notwithstanding, in
the event that the Company shall at any time after the Record Date and prior to
the Distribution Date (i) declare a dividend on the outstanding Common Shares
payable in Common Shares, (ii) subdivide the outstanding Common Shares, or (iii)
combine the outstanding Common Shares into a smaller number of shares, the
number of Rights associated with each Common Share then outstanding, or issued
or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each Common Share following any such event shall equal the result obtained by
multiplying the number of Rights associated with each Common Share immediately
prior to such event by a fraction the numerator of which shall be the total
number of Common Shares outstanding immediately prior to the occurrence of the
event and the denominator of which shall be the total number of Common Shares
outstanding immediately following the occurrence of such event.
Section 12. Certificates of Adjusted Purchase Price or Number of Shares.
-----------------------------------------------------------
Whenever an adjustment is made as provided in Section 11 or Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Series B Preferred Shares or the Common Shares, a copy of such certificate, and
(c) mail a brief summary thereof to each holder of a Rights Certificate (or, if
prior to the Distribution Date, to each holder of a certificate representing
Common Shares) in accordance with Section 25 hereof. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment therein
contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
--------------------------------------------------------------
Power.
- -----
(a) In the event that, following the Share Acquisition Date,
directly or indirectly, (w) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company in a
transaction that complies with Section 11(m) hereof), and the Company shall not
be the continuing or surviving person as a result of such consolidation or
merger, (x) any Person (other than a Subsidiary of the Company in a transaction
that complies with Section 11(m) hereof) shall consolidate with, or merge with
or into, the Company, and the Company shall be the continuing or surviving
person as a result of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding Common Shares shall be
changed into or exchanged for shares of beneficial interest or other securities
of any other Person or cash or any other property, (y) the Company shall be a
party to a statutory share exchange with any other Person (other than a
Subsidiary of the
21
<PAGE>
Company in a transaction that complies with Section 11(m) hereof) after which
the Company is a Subsidiary of any other Person, or (z) the Company shall sell
or otherwise transfer (or one or more of its Subsidiaries shall sell or
otherwise transfer), in one transaction or a series of related transactions,
assets or earning power aggregating more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any Person or Persons
(other than the Company or any Subsidiary of the Company in one or more
transactions each of which complies with Section 11(m) hereof), then, and in
each such case, proper provision shall be made so that: (i) each record holder
of a Right, except as provided in Section 7(e) hereof, shall thereafter have the
right to receive, upon the exercise thereof at the then current Purchase Price
in accordance with the terms of this Agreement, such number of validly
authorized and issued, fully paid, nonassessable and freely tradable Common
Shares of the Principal Party (as hereinafter defined), not subject to any
liens, encumbrances, rights of first refusal or other adverse claims, as shall
be equal to the result obtained by (1) multiplying the then current Purchase
Price by the number of Common Shares for which a Right is exercisable
immediately prior to the first occurrence of a Section 13 Event (or, if a
Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section
13 Event, multiplying the number of such shares for which a Right was
exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event by the Purchase Price in effect immediately prior to such first
occurrence), and (2) dividing that product (which, following the first
occurrence of a Section 13 Event, shall be referred to as the "Purchase Price"
for each Right for all purposes of this Agreement) by 50% of the current market
price (determined pursuant to Section 11(d)(i) hereof) per share of the Common
Shares of such Principal Party on the date of consummation of such Section 13
Event; and (ii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such Section 13 Event, all the obligations and duties of
the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a Section 13 Event; (iv) such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of shares of its common stock) in connection
with the consummation of any such transaction as may be necessary to ensure that
the provisions hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to its Common Shares thereafter deliverable upon the
exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall
be of no effect following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (w),
(x) or (y) of the first sentence of Section 13(a) hereof, the Person that is the
issuer of any securities into which the Common Shares of the Company are
converted in such merger, consolidation or statutory share exchange, and if no
securities are so issued, the Person that is the other party to such merger,
consolidation or statutory share exchange; and
22
<PAGE>
(ii) in the case of any transaction described in clause (z)
of the first sentence of Section 13(a) hereof, the Person that is the party
receiving the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Shares of such
- --------
Person is not at such time and has not been continuously over the preceding
twelve-month period registered under Section 12 of the Exchange Act, and such
Person is a direct or indirect Subsidiary of another Person the Common Shares of
which is and has been so registered, "Principal Party" shall refer to such other
Person; and (2) in case such Person is a Subsidiary, directly or indirectly, of
more than one Person, the Common Shares of two or more of which are and have
been so registered, "Principal Party" shall refer to whichever of such Persons
is the issuer of the Common Shares having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation,
merger, statutory share exchange, sale or transfer unless the Principal Party
shall have a sufficient number of authorized Common Shares that have not been
issued or reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraphs (a) and
(b) of this Section 13 and further providing that, as soon as practicable after
the date of any consolidation, merger, statutory share exchange or sale of
assets mentioned in paragraph (a) of this Section 13, the Principal Party will
(i) prepare and file a registration statement under the Act
on an appropriate form with respect to the Rights and the securities purchasable
upon exercise of the Rights on an appropriate form, and will use its best
efforts to cause such registration statement to (A) become effective as soon as
practicable after such filing and (B) remain effective (with a prospectus at all
times meeting the requirements of the Act) until the Expiration Date and
similarly comply with applicable state securities laws; and
(ii) deliver to record holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates that
comply in all respects with the requirements for registration on Form 10 under
the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or statutory share exchanges or sales or other transfers. In the
event that a Section 13 Event shall occur at any time after the occurrence of a
Section 11(a)(ii) Event, the Rights that have not theretofore been exercised
shall thereafter become exercisable in the manner described in Section 13(a)
hereof.
23
<PAGE>
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(n) hereof, or to
distribute Rights Certificates that evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this Section 14(a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any day shall be
the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading, or if the Rights
are not listed or admitted to trading on any national securities exchange, the
last quoted price, or, if not so quoted, the average of the high bid and low
asked prices on the Nasdaq Stock Market, as reported by Nasdaq or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Trustees of the Company. If on any such date no such market maker is making a
market in the Rights, the fair value of the Rights on such date as determined in
good faith by the Board of Trustees of the Company shall be used.
(b) The Company shall not be required to issue fractions of Series
B Preferred Shares (other than fractions that are integral multiples of one
one-thousandth of a Series B Preferred Share) upon exercise of the Rights or to
distribute certificates that evidence fractional Series B Preferred Shares
(other than in such integral multiples). In lieu of fractional Series B
Preferred Shares that are not in such integral multiples, the Company may pay to
the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one one-thousandth of a Series B Preferred Share. For
purposes of this Section 14(b), the current market value of one one-thousandth
of a Series B Preferred Share shall be one one-thousandth of the current market
price of a Series B Preferred Share (as determined pursuant to Section 11(d)
hereof) for the Trading Day immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Right or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
24
<PAGE>
Section 15. Rights of Action. All rights of action in respect of this
----------------
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares in respect of which Rights have been issued); and any registered
holder of any Rights Certificate (or, prior to the Distribution Date, of such
Common Shares), without the consent of the Rights Agent or of the holder of any
other Rights Certificate (or, prior to the Distribution Date, of such Common
Shares), may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his right to exercise the Rights
evidenced by such Rights Certificate in the manner provided in such Rights
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and shall be entitled to specific performance of the
obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right by
---------------------------
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Shares;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company
and the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common Shares
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificate or the associated Common Shares certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company, subject to the last sentence of Section 7(e) hereof, nor
the Rights Agent shall be required to be affected by any notice to the contrary;
and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental
25
<PAGE>
authority, prohibiting or otherwise restraining performance of such obligation;
PROVIDED, however, the Company must use its best efforts to have any such order,
decree or ruling lifted or otherwise overturned as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Shareholder. No holder,
--------------------------------------------------
as such, of any Rights Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of Units of Series B Preferred Shares or
any other securities of the Company that may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Rights Certificate be construed to confer upon the holder of any
Rights Certificate, as such, any of the rights of a shareholder of the Company
or any right to vote for the election of trustees or upon any matter submitted
to shareholders at any meeting thereof, or to give or withhold consent to any
action, or to receive notice of meetings or other actions affecting shareholders
(except as provided in Section 25 hereof), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Rights Certificate shall have been exercised in accordance with the provisions
hereof.
Section 18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Shares or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, instruction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
---------------------------------------------------------
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a
26
<PAGE>
party, or any corporation succeeding to the corporate trust business or stock
transfer business of the Rights Agent or any successor Rights Agent, shall be
the successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto;
provided, however, that such corporation would be eligible for appointment as a
- --------
successor Rights Agent under the provisions of Section 21 hereof. In case at the
time such successor Rights Agent shall succeed to the agency created by this
Agreement, any of the Rights Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of a
predecessor Rights Agent and deliver such Rights Certificates so countersigned;
and in case at that time any of the Rights Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Rights
Certificates either in the name of the predecessor or in the name of the
successor Rights Agent; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties
----------------------
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "current market price") be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by the
Chairman of the Board, any Vice-Chairman, the President, any Vice President, the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of
the Company and delivered to the Rights Agent; and such certificate shall be
full authorization to the Rights Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
27
<PAGE>
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Section 11 or Section 13 hereof or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after actual notice of any such adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any Series B Preferred Shares
to be issued pursuant to this Agreement or any Rights Certificate or as to
whether any Series B Preferred Shares will, when so issued, be duly authorized,
validly issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman, the President, any Vice President, the Secretary, any Assistant
Secretary, the Treasurer or any Assistant Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such officer. At any time the
Rights Agent may apply to the Company for written instructions with respect to
any matter arising in connection with the Rights Agent's duties and obligations
arising under this Agreement. Such application by the Rights Agent for written
instructions from the Company may, at the option of the Rights Agent, set forth
in writing any action proposed to be taken or omitted by the Rights Agent with
respect to its duties or obligations under this Agreement and the date on and/or
after which such action shall be taken and the Rights Agent shall not be liable
for any action taken or omitted in accordance with a proposal included in any
such application on or after the date specified therein (which date shall be not
less than one Business Day after the Company receives such application, without
the Company's consent) unless, prior to taking or initiating any such action,
the Rights Agent has
28
<PAGE>
received written instructions in response to such application specifying the
action to be taken or omitted.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; provided, however, reasonable care was exercised in the
--------
selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its rights
if there shall be reasonable grounds for believing that repayment of such funds
or adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise of transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
----------------------
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days notice in writing mailed to the Company, and to each transfer agent
of the Series B Preferred Shares or Common Shares, by registered or certified
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
30 days' notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the Series B Preferred
Shares or Common Shares, by registered or certified mail, and to the holders of
the Rights Certificates by first-class mail. If the Rights Agent shall resign or
be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Rights Certificate
(who shall, with such notice, submit his Rights Certificate for inspection by
the Company), then any registered
29
<PAGE>
holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be (a) a
corporation organized and doing business under the laws of the United States or
of any other state of the United States so long as such corporation is
authorized to do business as a banking institution in the States of Texas and
Maryland, in good standing, having a principal office in the States Texas and
Maryland, that is authorized under such laws to exercise corporate trust or
stock transfer powers and is subject to supervision or examination by federal or
state authority and that has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $100,000,000, or (b) an affiliate of a
corporation described in clause (a). After appointment, the successor Rights
Agent shall be vested with the same powers, rights, duties and responsibilities
as if it had been originally named as Rights Agent without further act or deed;
but the predecessor Rights Agent shall deliver and transfer to the successor
Rights Agent any property at the time held by it hereunder, and execute and
deliver any further assurance, conveyance, act or deed necessary for the
purpose. Not later than the effective date of any such appointment, the Company
shall file notice thereof in writing with the predecessor Rights Agent and each
transfer agent of the Common Shares, and mail a notice thereof in writing to the
registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of the
-----------------------------------
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by its Board of Trustees to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Rights Certificates made in accordance with
the provisions of this Agreement. In addition, the Company may, if deemed
necessary or appropriate by the Board of Trustees of the Company, issue Rights
Certificates representing the appropriate number of Rights in connection with
the issuance or sale of Common Shares following the Distribution Date.
Section 23. Redemption and Termination.
--------------------------
(a) (i) The Company may, at its option, at any time prior to the
earlier of (A) the close of business on the tenth day following the Share
Acquisition Date, or (B) the Final Expiration Date, redeem all but not less than
all the then outstanding Rights (which shall not include any rights that have
become void pursuant to Section 7(e) hereof) at a redemption price of $.001 per
Right, as it may be appropriately adjusted by the Board of Trustees of the
Company to reflect any share split or combination, share dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price") and the Company may, at its
option, pay the Redemption Price either in Common Shares (based on the current
market price (as determined pursuant to Section 11(d) hereof) per share of the
Common Shares at the time of redemption) or cash; provided, however, that if the
--------
Board of Trustees of the Company authorizes redemption of the Rights in either
of the circumstances set
30
<PAGE>
forth in clauses (x) and (y) below, then there must be Continuing Trustees in
office and such authorization shall require the concurrence of a majority of
such Continuing Trustees: (x) such authorization occurs on or after the date a
Person becomes an Acquiring Person, or (y) such authorization occurs on or after
the date of a change (resulting from a proxy solicitation) in a majority of the
trustees in office at the commencement of such solicitation if any Person who is
a participant in such solicitation has stated (or, if upon the commencement of
such solicitation, a majority of the Board of Trustees of the Company has
determined in good faith) that such Person (or any of its Affiliates or
Associates) intends to take, or may consider taking, any action that would
result in such Person becoming an Acquiring Person or that would cause the
occurrence of a Triggering Event.
(ii) In addition, if there are Continuing Trustees then in
office, the Board of Trustees may redeem all, but not less than all, of the then
outstanding Rights at the Redemption Price with the concurrence of a majority of
such Continuing Trustees, following the occurrence of a Share Acquisition Date
and following the expiration of the right of redemption hereunder, if either
(A)(1) a Person who is an Acquiring Person shall have transferred or otherwise
disposed of a number of Common Shares in one transaction or a series of
transactions not directly or indirectly involving the Company or any of its
Subsidiaries, such that such Person is thereafter a Beneficial Owner of less
than 10% (or, in the case of SCPG and its Affiliates and Associates, 11%) of the
outstanding Common Shares and (2) there are no other Persons, immediately
following the occurrence of the event described in clause (1), who are Acquiring
Persons, or (B) in connection with the type of transaction specified in Section
13(a) hereof in which all holders of Common Shares are treated alike and not
involving an Acquiring Person or an Affiliate or Associate of an Acquiring
Person or any other Person in which such Acquiring Person, Affiliate or
Associate has any interest, or any other Person acting directly or indirectly on
behalf of or in association with any such Acquiring Person, Affiliate or
Associate.
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a Triggering Event until
such time as the Company's right of redemption hereunder is not exercisable.
(b) Immediately upon the action of the Board of Trustees of the
Company authorizing the redemption of the Rights pursuant to subsection (a) of
this Section 23 and without any further action and without any notice, the right
to exercise the Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive the Redemption Price for each Right so held.
Promptly after the action of the Board of Trustees authorizing the redemption of
the Rights, the Company shall give notice of such redemption to the Rights Agent
and to the holders of such Rights by mailing such notice to all such holders at
each holder's last address as it appears upon the registry books of the Rights
Agent or, prior to the Distribution Date, on the registry books of the transfer
agent for the Common Shares. Any notice that is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of redemption shall state the method by which the payment of
the Redemption Price will be effected.
31
<PAGE>
Section 24. Exchange.
--------
(a) The Company may, at its option, by resolution of its Board of
Trustees, at any time after any Person becomes an Acquiring Person, exchange all
or part of the then outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to Section 7(e) hereof) for Common Shares
at an exchange ratio of one Common Share per Right, appropriately adjusted to
reflect any share split, share dividend or similar transaction occurring with
respect to the Common Shares after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"); provided, however, under the
--------
circumstances described in the proviso to Section 23(a)(i) hereof, an Exchange
shall be effective only if there are Continuing Trustees and shall require the
concurrence of a majority of such Continuing Trustees.
(b) Immediately upon the action of the Board of Trustees of the
Company authorizing the exchange of the Rights pursuant to subsection (a) of
this Section 24 and without any further action and without any notice, the right
to exercise the Rights will terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of Common Shares equal to the
number of Rights held by such holder multiplied by the Exchange Ratio. Promptly
after the action of the Board of Trustees authorizing the exchange of the
Rights, the Company shall give notice of such exchange to the Rights Agent and
to the holders of such Rights by mailing such notice to all such holders at each
holder's last address as it appears upon the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the transfer agent
for the Common Shares. Any notice that is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each such
notice of exchange will state the method by which the exchange of the Common
Shares for Rights will be effected.
(c) In the event that there shall not be sufficient Common Shares
authorized but unissued to permit the exchange in full of such Rights in
accordance with this Section 24, the Company shall take all such action as may
be necessary to authorize additional Common Shares for issuance upon exchange of
the Rights. In the event the Company shall, after good faith effort, be unable
to take all such action as may be necessary to authorize such additional Common
Shares, the Company shall substitute, for each Common Share that would otherwise
be issuable upon exchange of a Right, a number of shares of other equity
securities of the Company or fraction thereof such that the current per share
market price of one share of such other equity securities multiplied by such
number or fraction is equal to the current per share market price of one Common
Share as of the date of issuance of such shares of such other equity securities
or fraction thereof.
(d) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates that evidence fractional Common Shares. In
lieu of such fractional Common Shares, there shall be paid to the registered
holders of the Right Certificates with regard
32
<PAGE>
to which such fractional Common Shares would otherwise be issuable, an amount in
cash equal to the same fraction of the current market value of a whole Common
Share. For the purposes of this subsection (d), the current market value of a
whole Common Share shall be the closing price of a Common Share (as determined
pursuant to Section 11(d) hereof) for the Trading Day immediately prior to the
Exchange Date.
Section 25. Notice of Certain Events.
------------------------
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Series B Preferred Shares or to make any other distribution to the
holders of Series B Preferred Shares (other than a regular quarterly cash
dividend of the Company in compliance with any applicable law, or (ii) to offer
to the holders of Series B Preferred Shares rights or warrants to subscribe for
or to purchase any additional Series B Preferred Shares or other shares of
beneficial interest of any class or any other securities, rights or options, or
(iii) to effect any reclassification of its Series B Preferred Shares (other
than a reclassification involving only the subdivision of outstanding Series B
Preferred Shares), or (iv) to effect any consolidation or merger into or with
any other Person (other than a Subsidiary of the Company in a transaction that
complies with Section 11(m) hereof), or to effect a statutory share exchange
with any Person (other than a Subsidiary of the Company in a transaction that
complies with Section 11(m) hereof), or to effect any sale or other transfer (or
to permit one or more of its Subsidiaries to effect any sale or other transfer),
in one transaction or a series of related transactions, of more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to any other Person or Persons (other than a Subsidiary of the Company in one or
more transactions each of which complies with Section 11(m) hereof), or (v) to
effect the liquidation, dissolution or winding up of the Company, then, in each
such case, the Company shall give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, statutory share exchange, sale,
transfer, liquidation, dissolution, or winding up is to take place and the date
of participation therein by the holders of the Series B Preferred Shares, if any
such date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least 20 days prior to the record
date for determining holders of the Series B Preferred Shares for purposes of
such action, and in the case of any such other action, at least 20 days prior to
the date of the taking of such proposed action or the date of participation
therein by the holders of the Series B Preferred Shares whichever shall be the
earlier.
(b) In case any Section 11(a)(ii) Event shall occur, then, in any
such case, (i) the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate, to the extent feasible and in accordance with
Section 26 hereof, a notice of the occurrence of such event, which shall specify
the event and the consequences of the event to holders of Rights under Section
11(a)(ii) hereof, and (ii) all references in the preceding paragraph to Series B
Preferred
33
<PAGE>
Shares shall be deemed thereafter to refer, if appropriate, not only to Series B
Preferred Shares but also to Common Shares or other securities.
Section 26. Notices. Notices or demands authorized by this Agreement to be
-------
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Prentiss Properties Trust
3890 W. Northwest Highway, Suite 4660
Dallas, Texas 75220
Attention: Corporate Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Rights Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
First Chicago Trust Company of New York
525 Washington Boulevard, Suite 4660
Jersey City, NJ 07310
Attention: Tenders and Exchanges Administration
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
Common Shares) shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as shown
on the registry books of the Company.
Section 27. Supplements and Amendments. Prior to the Distribution Date and
--------------------------
subject to the penultimate sentence of this Section 27, the Company may, and the
Rights Agent shall, if the Company so directs, supplement or amend any provision
of this Agreement without the approval of any holders of certificates
representing Common Shares. From and after the Distribution Date and subject to
the penultimate sentence of this Section 27, the Company and the Rights Agent
shall, if the Company so directs, supplement or amend this Agreement without the
approval of any holders of Rights Certificates in order (i) to cure any
ambiguity, (ii) to correct or supplement any provision contained herein that may
be defective or inconsistent with any other provisions herein, (iii) to shorten
or lengthen any time period hereunder (which lengthening or shortening, under
the circumstances described in the proviso to Section 23(a)(i) hereof, shall be
effective only if there are Continuing Trustees and shall require the
concurrence of a majority of such Continuing Trustees), or (iv) to change or
supplement the provisions hereunder in any manner that the Company may deem
necessary or desirable and that shall not adversely affect the
34
<PAGE>
interests of the holders of Rights Certificates (other than an Acquiring Person
or an Affiliate or Associate of an Acquiring Person); provided, that this
--------
Agreement may not be supplemented or amended to lengthen, pursuant to clause
(iii) of this sentence, (A) a time period relating to when the Rights may be
redeemed at such time as the Rights are not then redeemable, or (B) any other
time period unless such lengthening is for the purpose of protecting, enhancing
or clarifying the rights of, and/or the benefits to, the holders of Rights. Upon
the delivery of a certificate from an appropriate officer of the Company that
states that the proposed supplement or amendment is in compliance with the terms
of this Section 27, the Rights Agent shall execute such supplement or amendment.
No supplement or amendment shall be made that changes the Redemption Price, the
Final Expiration Date, the Purchase Price or the number of Common Shares for
which a Right is exercisable; provided, however, that at any time prior to the
--------
Distribution Date, the Board of Trustees of the Company may amend this Agreement
to increase the Purchase Price or extend the Final Expiration Date. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Shares.
Section 28. Successors. All the covenants and provisions of this Agreement
----------
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Trustees, Etc. For
--------------------------------------------------------
all purposes of this Agreement, any calculation of the number of Common Shares
outstanding at any particular time, including for purposes of determining the
particular percentage of such outstanding Common Shares of which any Person is
the Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The
Board of Trustees of the Company (and, where specifically provided for herein,
the Continuing Trustees) shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board, or the Company (or, where specifically provided for
herein, the Continuing Trustees), or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board (or, where
specifically provided for herein, by the Continuing Trustees) in good faith,
shall (x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other parties, and (y) not subject the Board or
the Continuing Trustees to any liability to the holders of the Rights.
Section 30. Benefits of this Agreement. Nothing in this Agreement shall be
--------------------------
construed to give to any Person other than the Company, the Rights Agent, the
registered holders from time to time of the Rights Certificates (and, prior to
the Distribution Date, registered holders of the Common Shares) any legal or
equitable right, remedy or claim under this Agreement; and this
35
<PAGE>
Agreement shall be for the sole and exclusive benefit of the Company and the
Persons specified above.
Section 31. Severability. If any term, provision, covenant or restriction
------------
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
- --------
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Trustees of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth day following the date of such determination by the Board of Trustees.
Section 32. Governing Law. This Agreement, each Right and each Rights
-------------
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Maryland and for all purposes shall be governed by and
construed in accordance with the laws of such state applicable to contracts made
and to be performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
---------------------
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
36
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
PRENTISS PROPERTIES TRUST
By: /s/ Gregory S. Imhoff
--------------------------------------
Name: Gregory S. Imhoff
---------------------------------
Title: Vice President and Secretary
--------------------------------
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By: /s/ Joanne Gorostiola
--------------------------------------
Name: Joanne Gorostiola
---------------------------------
Title: Assistant Vice President
---------------------------------
37
<PAGE>
EXHIBIT A
[FORM OF RIGHTS CERTIFICATE]
Certificate No. R- _________ Rights
NOT EXERCISABLE AFTER FEBRUARY 17, 2008, OR EARLIER IF REDEEMED OR EXCHANGED BY
THE COMPANY. THE COMPANY, AT ITS OPTION, MAY REDEEM THE RIGHTS EVIDENCED BY THIS
CERTIFICATE AT A REDEMPTION PRICE OF $.01 PER RIGHT OR EXCHANGE THE RIGHTS FOR
COMMON SHARES ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS
DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON. ACCORDINGLY, THIS RIGHTS
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME VOID IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.]/(1)/
Rights Certificate
This certifies that ________________________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement, dated as of February 6, 1998 (the "Rights
Agreement"), between Prentiss Properties Trust, a Maryland real estate
investment trust (the "Company"), and First Chicago Trust Company of New York, a
New York corporation (the "Rights Agent"), to purchase from the Company at
any time prior to 5:00 P.M. (Dallas, Texas time) on February 17, 2008 at the
office or offices of the Rights Agent designated for such purpose, or its
successors as Rights Agent, one one-hundredth of a fully paid, non-assessable
share (a "Unit") of Junior Participating Cumulative Preferred Shares, Series B
(the "Series B Preferred Shares") or other securities of the Company, at a
purchase price of $85.00 per Unit (the "Purchase Price"), upon presentation and
surrender of this Rights Certificate with the Form of Election to Purchase and
related Certificate duly executed. (All capitalized terms not defined herein
shall have the meaning set forth in the Rights Agreement.) The Purchase Price
may be paid in cash or by certified bank check or bank draft payable to the
order of the Company. The number of Rights evidenced by this Rights Certificate
(and the number of shares which may be purchased upon exercise thereof) set
forth above, and the Purchase Price per share set forth above, are the number
and Purchase Price as of ______ __, based on the Series B Preferred Shares as
constituted at such date.
A-1
<PAGE>
As provided in the Rights Agreement, the Purchase Price and the number
and kind of Series B Preferred Shares or other securities that may be purchased
upon the exercise of the Rights evidenced by this Rights Certificate are subject
to modification and adjustment upon the happening of certain events, including
Triggering Events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Under certain circumstances specified in Section 7(e) of the Rights Agreement,
Rights that are or were owned by an Acquiring Person or an Affiliate or
Associate of an Acquiring Person may become null and void and no longer
exercisable by any Person (including any subsequent transferee). Copies of the
Rights Agreement are on file at the above-mentioned office of the Rights Agent
and are also available upon written request to the Secretary of the Corporation.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of Units of Series B Preferred Shares as the
Rights evidenced by the Rights Certificate or Rights Certificates surrendered
then entitle such holder to purchase. If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender hereof
another Rights Certificate or Rights Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the Company, at its
option, may redeem the Rights evidenced by this Certificate at a redemption
price of $.001 per Right or exchange the Rights for Common Shares.
No fractional Series B Preferred Shares will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions that are
integral multiples of one one-hundredth of a share of Series B Preferred
Shares), but in lieu thereof a cash payment will be made, as provided in the
Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of Series B Preferred
Shares or of any other securities of the Company that may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of trustees or upon any matter submitted to shareholders at any meeting
thereof, or to give or withhold consent to
A-2
<PAGE>
any action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signatures of the proper officers of the Company
and its corporate seal.
Dated as of ,
----------- -- ------
[SEAL]
ATTEST: PRENTISS PROPERTIES TRUST
By:
- -------------------------------- -------------------------------------
Secretary Title:
-----------------------------
Countersigned:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By
--------------------------
Authorized Signature
A-3
<PAGE>
[FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE]
FORM OF ASSIGNMENT
- ------------------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED ________________________ hereby sells, assigns and transfers
unto
-------------------------------------------------------------------------
(Please print name and address of transferee)
- ------------------------------------------------------------------------------
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _________________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.
Dated: ,
-------------------- ----
----------------------------------------
Signature
Signature Guaranteed:
A-4
<PAGE>
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [ ] is [ ] is not being sold,
assigned and transferred by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of any such Acquiring
Person (as such terms are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by
this Rights Certificate from any Person who is, was or subsequently
became an Acquiring Person or an Affiliate or Associate of an Acquiring
Person.
Dated: ,
-------------------- ---- -----------------------------------------
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
A-5
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate.)
To: PRENTISS PROPERTIES TRUST:
The undersigned hereby irrevocably elects to exercise ____________
Rights represented by this Rights Certificate to purchase the Series B Preferred
Shares issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person that may be issuable upon the exercise of the
Rights) and requests that certificates for such shares (or other securities) be
issued in the name of and delivered to:
Please insert social security or other identifying number
- ------------------------------------------------------------------------------
(Please print name and address)
- ------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number
- ------------------------------------------------------------------------------
(Please print name and address)
- ------------------------------------------------------------------------------
(Please print name and address)
Date: ,
--------------- ----
--------------------------------
Signature
Signature Guaranteed:
A-6
<PAGE>
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ]
are not being exercised by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of any such Acquiring
Person (as such terms are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did
[ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person.
Dated: ,
----------------------- ---- -----------------------------------------
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
/(1)/ The bracketed language shall be inserted only if applicable.
A-7
<PAGE>
EXHIBIT B
SUMMARY OF RIGHTS TO PURCHASE SERIES B PREFERRED SHARES
-------------------------------------------------------
On February 6, 1998, the Board of Trustees of Prentiss Properties
Trust, a real estate investment trust organized under the laws of Maryland (the
"Company"), approved a Rights Agreement, dated as of and to be effective on
February 6, 1998 (the "Rights Agreement") between the Company and First Chicago
Trust Company of New York, as Rights Agent, having the principal terms
summarized below. In accordance with the Rights Agreement, the Board also
authorized a dividend distribution of one Right for each outstanding common
share of beneficial interest, $.01 par value, (the "Common Shares"), of the
Company to shareholders of record at the close of business on February 17, 1998
(the "Record Date").
Each Right entitles the registered holder to purchase from the Company
one one-thousandth of a share of the Company's Junior Participating Cumulative
Preferred Shares, Series B ("Series B Preferred Shares"). Each one
one-thousandth of a share (a "Unit") of a Series B Preferred Share is structured
to be the equivalent of one Common Share of the Company. Shareholders will
receive one Right per Common Share held of record at the close of business on
the Record Date. The exercise price of the Right will be $85.00 subject to
adjustment (the "Purchase Price").
Rights will also attach to Common Shares issued after the Record Date
but prior to the Distribution Date unless the Board of Trustees determines
otherwise at the time of issuance. The description and terms of the Rights are
set forth in the Rights Agreement.
The Rights will trade with the Common Shares and will be evidenced by
Common Shares certificates, and no separate certificates evidencing the Rights
(the "Rights Certificates") will be distributed initially. The Rights will
separate from the Common Shares and a distribution of the Rights Certificates
will occur (the "Distribution Date") upon the earlier of (i) 10 business days
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 10% or more of the outstanding Common Shares
(or, in the case of Security Capital Preferred Growth Incorporated ("SCPG") and
its affiliates, 11% or more of the outstanding Common Shares) (the "Share
Acquisition Date"), or (ii) 10 business days following the commencement of a
tender offer or exchange offer that would result in a person or group
beneficially becoming an Acquiring Person. Until the Distribution Date, (i) the
Rights will be evidenced by the Common Shares certificates and will be
transferred with and only with such Common Shares certificates, (ii) any Common
Shares certificates issued will contain a notation incorporating the Rights
Agreement by reference and (iii) the surrender for transfer of any certificates
for Common Shares outstanding will also constitute the transfer of the Rights
associated with the Common Shares represented by such certificates.
B-1
<PAGE>
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on February 17, 2008, unless earlier redeemed or
exchanged by the Company as described below. As soon as practicable after the
Distribution Date, Rights Certificates will be mailed to holders of record of
the Common Shares as of the close of business on the Distribution Date, and
thereafter such separate Rights Certificates alone will represent the Rights.
The Agreement provides that if any person becomes an Acquiring Person,
proper provision shall be made so that each holder of a Right (except as set
forth below) will thereafter have the right to receive, upon exercise and
payment of the Purchase Price, Series B Preferred Shares or, at the option of
the Company, Common Shares (or, in certain circumstances, cash, property or
other securities of the Company) having a value equal to twice the amount of the
Purchase Price.
In the event that, at any time following the Share Acquisition Date,
(i) the Company is acquired in a merger, statutory share exchange, or other
business combination in which the Company is not the surviving person, or (ii)
50% or more of the Company's assets or earning power is sold or transferred,
each holder of a Right (except as set forth below) shall thereafter have the
right to receive, upon exercise and payment of the Purchase Price, Common Shares
of the acquiring company having a value equal to twice the Purchase Price. The
events set forth in this paragraph and in the immediately preceding paragraph
are referred to as the "Triggering Events."
Upon the occurrence of a Triggering Event that entitles Rights holders
to purchase securities or assets of the Company, Rights that are or were owned
by the Acquiring Person, or any affiliate or associate of such Acquiring Person,
on or after such Acquiring Person's Share Acquisition Date shall be null and
void and shall not thereafter be exercised by any person (including subsequent
transferees). Upon the occurrence of a Triggering Event that entitles Rights
holders to purchase Common Shares of a third party, or upon the authorization of
an Exchange, Rights that are or were owned by any Acquiring Person or any
affiliate or associate of any Acquiring Person on or after such Acquiring
Person's Share Acquisition Date shall be null and void and shall not thereafter
be exercised by any person (including subsequent transferees).
The Purchase Price payable, and the number of Series B Preferred
Shares, Common Shares or other securities or property issuable upon exercise of
the Rights are subject to adjustment from time to time to prevent dilution.
At any time after any person becomes an Acquiring Person, the Company
may exchange all or part of the Rights (except as set forth below) for Common
Shares (an "Exchange") at an exchange ratio of one share per Right, as
appropriately adjusted to reflect any share split or similar transaction.
B-2
<PAGE>
At any time until ten business days following the Share Acquisition
Date or ten business days following the commencement of a tender offer or
exchange offer that would result in a person or group becoming an Acquiring
Person, the Company may redeem the Rights in whole, but not in part, at a price
of $.001 per Right (the "Redemption Price"). Under certain circumstances set
forth in the Rights Agreement, the decision to make an Exchange or to redeem the
Rights shall require the concurrence of a majority of the Continuing Trustees
(as defined below). Additionally, the Company may thereafter but prior to the
occurrence of a Triggering Event redeem the Rights in whole, but not in part, at
the Redemption Price provided that such redemption is incidental to a merger or
other business combination transaction involving the Company that is approved by
a majority of the Continuing Trustees, and does not involve an Acquiring Person,
and is one in which all holders of Common Shares are treated alike. After the
redemption period has expired, the Company's right of redemption may be
reinstated if an Acquiring Person reduces his beneficial ownership to less than
10% (or, in the case of SCPG and its affiliates, 11%) of the outstanding Common
Shares in a transaction or series of transactions not involving the Company.
Immediately upon the action of the Board ordering redemption of the Rights,
with, where required, the concurrence of the Continuing Trustees, the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
The term "Continuing Trustees" means any member of the Board who was a
member of the Board immediately before the adoption of the Rights Agreement and
any person who is subsequently elected to the Board if such person is
recommended or approved by a majority of the Continuing Trustees, but does not
include an Acquiring Person, or an affiliate or associate of an Acquiring
Person, or any representative of the foregoing.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to shareholders or to the Company, shareholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Series B Preferred Shares (or other consideration) of the
Company or for Common Shares of the acquiring company as set forth above.
Other than certain provisions relating to the principal economic terms
of the Rights, any of the provisions of the Rights Agreement may be amended by
the Board prior to the Distribution Date. After the Distribution Date, the
provisions of the Rights Agreement may be amended by the Board (in certain
circumstances, only with the concurrence of the Continuing Trustees) in order to
cure any ambiguity, to make certain other changes that do not adversely affect
the interests of holders of Rights (excluding the interests of any Acquiring
Person), or to shorten or lengthen any time period under the Rights Agreement;
provided, however, no amendment to adjust the time period governing redemption
- --------
may be made at such time as the Rights are not redeemable.
B-3
<PAGE>
Exhibit 3
---------
PRENTISS PROPERTIES TRUST
ARTICLES SUPPLEMENTARY
JUNIOR PARTICIPATING CUMULATIVE PREFERRED SHARES
OF BENEFICIAL INTEREST, SERIES B
Prentiss Properties Trust, a Maryland real estate investment trust, (the
"Trust"), hereby certifies to the State Department of Assessments and Taxation
of Maryland, pursuant to section 8-203(b) of the Corporations and Associations
Article of the Annotated Code of Maryland, that:
FIRST: Pursuant to the authority granted by the Amended and Restated
Declaration of Trust of the Trust (the "Declaration of Trust"), on February 6,
1998, the Board of Trustees adopted a resolution designating and classifying
1,000,000 unissued and unclassified preferred shares of beneficial interest, par
value $.01 per share, of the Trust as Junior Participating Cumulative Preferred
Shares of Beneficial Interest, Series B, with the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends and other
distributions, qualifications, and terms and conditions of redemption thereof,
which, upon any restatement of the Declaration of Trust, may be made a part of
Article VI of the Declaration of Trust, with any appropriate changes in
enumeration or lettering of any section or subsections thereof:
Section 1. Number of Shares and Designation. The class of preferred
--------------------------------
shares of beneficial interest shall be designated as Junior Participating
Cumulative Preferred Shares of Beneficial Interest, Series B (the "Series B
Preferred Shares"), and the number of shares which shall constitute such series
shall be 1,000,000, which number may be decreased (but not below the aggregate
number thereof then outstanding and or which have been reserved for issuance) or
increased from time to time by the Board of Trustees.
Section 2. Dividends.
---------
(A) The holders of the then outstanding Series B Preferred Shares
shall be entitled to receive, when and as authorized and declared by the Board
of Trustees out of any funds legally available therefor, cumulative preferential
cash dividends payable quarterly on March 31, June 30, September 30 and December
31 (each such date being referred to herein as a "Quarterly Dividend Payment
Date" and each period beginning on the day next following a Quarterly Dividend
Payment date and ending on the next following Quarterly Dividend Payment date
being referred to herein as a "Dividend Period"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of the Series B Preferred Shares, in an amount per share (rounded to
the nearest cent) equal to the greater of (i) $.01 and (ii) subject to
adjustment hereinafter set forth, 1,000 times the aggregate per share amount of
all cash dividends, and 1,000 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions (other than dividends
payable in the Trust's common shares of beneficial interest, par value $.01 per
share (the "Common Shares"), as constituted on the date of such payment),
authorized on the Common Shares since the
<PAGE>
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series B Preferred Shares.
(B) In the event the Trust shall at any time after February 17,
1998 (the "Rights Dividend Declaration Date") (i) authorize and declare any
dividend on the Common Shares payable in Common Shares, (ii) subdivide the
outstanding Common Shares, or (iii) combine the outstanding Common Shares into a
smaller number of shares, then in each such case the amount to which holders of
shares of the Series B Preferred Shares were entitled immediately prior to such
event under clause (ii) of the preceding paragraph shall be adjusted by
multiplying such amount by a fraction (the "Adjustment Factor"), the numerator
of which is the number of Common Shares outstanding immediately after such event
and the denominator of which is the number of Common Shares outstanding
immediately prior to such event.
(C) The Trust shall authorize and declare a dividend or
distribution on the Series B Preferred Shares immediately after it authorizes
and declares a dividend or distribution on the Common Shares (other than a
dividend payable in Common Shares); provided that, in the event no dividend or
distribution shall have been authorized and declared on the Common Shares during
the period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend at the rate of $.01 per share on the
Series B Preferred Shares shall nevertheless be authorized and declared payable
on such subsequent Quarterly Dividend Payment Date.
(D) Dividends on the Series B Preferred Shares shall accrue and be
cumulative from and including the Quarterly Dividend Payment Date next preceding
the date of issue of such Series B Preferred Shares, unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which event dividends on such shares shall accrue and be cumulative
from and including the date of issue of such shares, or unless the date of issue
is a Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of Series B Preferred Shares entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in either of
which events such dividends shall accrue and be cumulative from and including
such Quarterly Dividend Payment Date, whether or not (i) the Trust has earnings,
(ii) dividends on such shares are authorized and declared or (iii) on any
Quarterly Dividend Payment Date there shall be funds legally available for the
payment of such dividends. When dividends are not paid in full upon the Series B
Preferred Shares and the shares of any other series of preferred shares ranking
on a parity as to dividends with the Series B Preferred Shares (or a sum
sufficient for such full payment is not set apart therefor), all dividends
declared upon the Series B Preferred Shares and any other series of preferred
shares ranking on a parity as to dividends with the Series B Preferred Shares
shall be declared pro rata so that the amount of dividends declared per share on
the Series B Preferred Shares and such other series of preferred shares shall in
all cases bear to each other the same ratio that accrued dividends per share on
the Series B Preferred Shares and such other series of preferred shares bear to
each other.
(E) Except as provided in the immediately preceding paragraph,
unless full cumulative dividends on the Series B Preferred Shares have been or
contemporaneously are
-2-
<PAGE>
authorized and declared and paid or authorized and declared and a sum sufficient
for the payment thereof set apart for payment on the Series B Preferred Shares
for all past dividend periods and the then current dividend period, (i) no
dividends shall be authorized or declared or paid or set apart for payment on
the preferred shares of the Trust ranking, as to dividends, on a parity with or
junior to the Series B Preferred Shares for any period, and (ii) no dividends
(other than in Junior Shares (as defined herein)) shall be authorized or
declared or paid or set aside for payment or other distribution or shall be
authorized or declared or made upon the Junior Shares or any other shares of
beneficial interest of the Trust ranking on a parity with the Series B Preferred
Shares as to dividends or upon liquidation ("Parity Shares"), nor shall any
Junior Shares or any Parity Shares be redeemed, purchased or otherwise acquired
for any consideration (or any moneys be paid to or made available for a sinking
fund for the redemption of any Junior Shares or Parity Shares) by the Trust
(except by conversion into or exchange for Junior Shares).
(F) Any dividend payment made on the Series B Preferred Shares
shall first be credited against the earliest accrued but unpaid dividend due
with respect to such shares which remains payable.
(G) No dividends on Series B Preferred Shares shall be authorized
or declared by the Board of Trustees of the Trust or paid or set apart for
payment by the Trust at such time as the terms and provisions of any agreement
of the Trust, including any agreement relating to its indebtedness, prohibits
such authorization, declaration, payment or setting apart for payment or
provides that such declaration, payment or setting apart for payment would
constitute a breach thereof or a default thereunder, or if such authorization,
declaration or payment shall be restricted or prohibited by law.
(H) Accrued but unpaid dividends on the Series B Preferred Shares
will not bear interest. Holders of the Series B Preferred Shares will not be
entitled to any dividends in excess of full cumulative dividends as described
above.
(I) Except as provided in these Articles, the Series B Preferred
Shares shall not be entitled to participate in the earnings or assets of the
Trust.
(J) The Board of Trustees may fix a record date for the
determination of holders of Series B Preferred Shares entitled to receive
payment of a dividend or distribution declared thereon, which record date shall
be no more than 30 days prior to the date fixed for the payment thereof.
Section 3. Liquidation Preference.
----------------------
(A) Upon the voluntary or involuntary dissolution, liquidation or
winding up of the Trust, the holders of the Series B Preferred Shares then
outstanding shall be entitled to receive and to be paid out of the assets of the
Trust legally available for distribution to its shareholders, before any
distribution shall be made to the holders of the Common Shares or any other
shares of beneficial interest of the Trust ranking junior to the Series B
Preferred Shares upon liquidation, a liquidation preference of $1,000.00 per
share, plus accrued and unpaid
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<PAGE>
dividends thereon to the date of payment (the "Series B Preferred Shares
Liquidation Preference").
(B) After the payment to the holders of the Series B Preferred
Shares of the full Series B Preferred Shares Liquidation Preference, the holders
of the Series B Preferred Shares as such shall have no right or claim to any of
the remaining assets of the Trust until the holders of the Common Shares shall
have received an amount per share (the "Common Adjustment") equal to the
quotient obtained by dividing (i) the Series B Preferred Shares Liquidation
Preference by (ii) 1,000 (as appropriately adjusted as set forth in subsection
3(D) below to reflect such events as share splits, share dividends and
recapitalizations with respect to the Common Shares) (the number determined
pursuant to clause (ii) being hereinafter referred to as the "Adjustment
Number"). Following the payment of the full amount of the Series B Preferred
Shares Liquidation Preference in respect of all outstanding Series B Preferred
Shares, the full amount of any liquidation preference payable to holders of any
other shares of beneficial interest of the Trust ranking as to any distribution
upon any voluntary or involuntary dissolution, liquidation or winding up of the
Trust on a parity with the Series B Preferred Shares and the full amount of the
Common Adjustment, respectively, holders of Series B Preferred Shares, holders
of such other shares and holders of the Common Shares shall receive their
ratable and proportionate share of the remaining assets with the number of
shares of Series B Preferred being deemed to be the product of the number of
shares of Series B Preferred then outstanding and the Adjustment Number, and the
distributable amount per share of Series B Preferred being the amount
distributable to the holders of shares of Series B Preferred as a class,
determined as aforesaid, divided by the number of shares of Series B Preferred
then outstanding.
(C) In the event, however, that there are not sufficient assets
legally available for distribution to shareholders to permit payment in full of
the Series B Preferred Shares Liquidation Preference and the liquidation
preferences of all other series of preferred shares ranking on a parity as to
liquidation with the Series B Preferred Shares, if any, then such remaining
assets shall be distributed ratably to the holders of the Series B Preferred
Shares and shares of such other series in proportion to their respective
liquidation preferences. In the event, however, that there are not sufficient
assets available after payment in full of the Series B Preferred Shares
Liquidation Preference and such other liquidation preferences to permit payment
in full of the Common Adjustment, then the remaining assets shall be distributed
ratably to the holders of the Common Shares.
(D) In the event the Trust shall at any time after the Rights
Dividend Declaration Date (i) declare any dividend on the Common Shares payable
in Common Shares, (ii) subdivide the outstanding Common Shares, or (iii) combine
the outstanding Common Shares into a smaller number of shares, then in each such
case the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by the Adjustment Factor.
(E) If, upon any voluntary or involuntary dissolution, liquidation
or winding up of the Trust, the amounts payable with respect to the Series B
Preferred Shares Liquidation Preference and the liquidation preference of any
other shares of beneficial interest of the Trust ranking as to any such
distribution on a parity with the Series B Preferred Shares are not paid in
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full, the holders of the Series B Preferred Shares and of such other shares will
share ratably in any such distribution of assets of the Trust in proportion to
the full respective liquidation preferences to which they are entitled.
(F) Neither the sale, lease, transfer or conveyance of all or
substantially all the property or business of the Trust, nor the merger or
consolidation of the Trust into or with any other corporation or the merger or
consolidation of any other corporation into or with the Trust, shall be deemed
to be a dissolution, liquidation or winding up, voluntary or involuntary, for
the purposes of this subsection 3(F).
Section 4. Redemption.
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(A) Right of Optional Redemption. The outstanding Series B
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Preferred Shares may be redeemed at the option of the Board of Trustees as a
whole, but not in part, at any time, or from time to time, at a price per share
(the "Series B Redemption Price") equal to (i) 100% of the product of the
Adjustment Number times the Average Market Value (as such term is hereinafter
defined) of the Common Shares, plus (ii) all accrued and unpaid dividends to and
including the date fixed for redemption (the "Series B Redemption Date"). The
"Average Market Value" is the average of the closing sale prices of a Common
Share during the 30-day period immediately preceding the date before the
redemption date quoted on the Composite Tape for New York Stock Exchange Listed
Stocks, or, if the Common Shares are not quoted on the Composite Tape, on The
New York Stock Exchange, or, if the Common Shares are not listed on such
exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934, as amended, on which the Common Shares are
listed, or, if the Common Shares are not listed on any such exchange, the
average of the closing bid quotations with respect to a Common Share during such
30-day period on The Nasdaq Stock Market, or if no such quotations are
available, the fair market value of a Common Share as determined by the Board of
Trustees in good faith.
(B) Procedures for Redemption.
-------------------------
(i) Notice of any redemption will be (a) given by publication
in a newspaper of general circulation in the City of New York, New York, such
publication to be made once a week for two successive weeks commencing not less
than 30 nor more than 60 days prior to the Series B Redemption Date, and (b)
mailed by the Trust, postage prepaid, not less than 30 nor more than 60 days
prior to the Series B Redemption Date, addressed to the respective holders of
record of the Series B Preferred Shares to be redeemed at their respective
addresses as they appear on the stock transfer records of the Trust. No failure
to give such notice or any defect therein or in the mailing thereof shall affect
the validity of the proceedings for the redemption of any Series B Preferred
Shares except as to the holder to whom the Trust has failed to give notice or
except as to the holder to whom notice was defective. In addition to any
information required by law or by the applicable rules of any exchange upon
which Series B Preferred Shares may be listed or admitted to trading, such
notice shall state: (a) the Series B Redemption Date; (b) the Series B
Redemption Price; (c) the place or places where certificates for Series B
Preferred Shares are to be surrendered for payment of the Series B Redemption
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Price; and (d) that dividends on the Series B Preferred Shares will cease to
accumulate on the Series B Redemption Date.
(ii) If notice of redemption of the Series B Preferred Shares
has been published and mailed in accordance with subsection (4)(B)(i) above and
provided that on or before the Series B Redemption Date specified in such notice
all funds necessary for such redemption shall have been irrevocably set aside by
the Trust, separate and apart from its other funds in trust for the benefit of
the holders of the Series B Preferred Shares, so as to be, and to continue to be
available therefor, then, from and after the Series B Redemption Date, dividends
on the Series B Preferred Shares shall cease to accrue, and the Series B
Preferred Shares shall no longer be deemed to be outstanding and all rights of
the holders thereof as shareholders of the Trust (except the right to receive
the Series B Redemption Price) shall terminate. Upon surrender, in accordance
with said notice, of the certificates for the Series B Preferred Shares
(properly endorsed or assigned for transfer, if the Trust shall so require and
the notice shall so state), the Series B Preferred Shares shall be redeemed by
the Trust at the Series B Redemption Price.
(iii) The deposit of funds with a bank or trust company for
the purpose of redeeming Series B Preferred Shares shall be irrevocable except
that:
(a) the Trust shall be entitled to receive from such
bank or trust company the interest or other earnings, if any, earned on any
money so deposited in trust, and the holders of any shares redeemed shall have
no claim to such interest or other earnings; and
(b) any balance of moneys so deposited by the Trust and
unclaimed by the holders of the Series B Preferred Shares entitled thereto at
the expiration of two years from the applicable Series B Redemption Date shall
be repaid, together with any interest or other earnings earned thereon, to the
Trust, and after any such repayment, the holders of the shares entitled to the
funds so repaid to the Trust shall look only to the Trust for payment without
interest or other earnings.
(C) Rights to Dividends on Shares Called for Redemption. If the
---------------------------------------------------
Series B Redemption Date is after a record date for payment of dividends on the
Series B Preferred Shares and before the related Quarterly Dividend Payment
Date, the dividend payable on such Quarterly Dividend Payment Date shall be paid
to the holders in whose name the Series B Preferred Shares are registered at the
close of business on such record date notwithstanding the redemption thereof
between such record date and the related Quarterly Dividend Payment Date or the
Trust's default in the payment of the dividend due. Except as provided in this
Section 4, the Trust will make no payment or allowance for unpaid dividends,
whether or not in arrears, on called Series B Preferred Shares.
Section 5. Conversion of Series B Preferred Shares. The Series B
---------------------------------------
Preferred Shares are not convertible into or exchangeable for any other property
or securities of the Trust.
Section 6. Ranking. In respect of rights to receive dividends and to
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participate in distributions or payments in the event of any liquidation,
dissolution or winding up of the Trust,
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the Series B Preferred Shares shall rank junior to the series of preferred
shares heretofore established, designated as the Series A Cumulative Convertible
Redeemable Preferred Shares of Beneficial Interest (the "Series A Preferred
Shares") and senior to the Common Shares and any other shares of beneficial
interest of the Trust ranking, as to dividends and upon liquidation, junior to
the Series B Preferred Shares (collectively, "Junior Shares").
Section 7. Voting Rights.
-------------
(A) Subject to the provision for adjustment hereinafter set forth,
each Series B Preferred Share shall entitle the holder thereof to 1,000 votes on
all matters submitted to a vote of the shareholders of the Trust. In the event
the Trust shall at any time after the Rights Declaration Date (i) declare any
dividend on the Common Shares payable in Common Shares, (ii) subdivide the
outstanding Common Shares, or (iii) combine the outstanding Common Shares into a
smaller number of shares, then in each such case the number of votes per share
to which holders of Series B Preferred Shares were entitled immediately prior to
such event shall be adjusted by multiplying such number by the Adjustment
Factor. Except as otherwise provided herein, in the Declaration of Trust or
under applicable law, the holders of Series B Preferred Shares and the holders
of Common Shares shall vote together as one voting group on all matters
submitted to a vote of shareholders of the Trust.
(B) Whenever dividends on any Series B Preferred Shares shall be in
arrears for six or more consecutive quarterly periods, the holders of such
Series B Preferred Shares (voting separately as a class with all other series of
preferred shares upon which like voting rights have been conferred and are
exercisable) will be entitled to vote for the election of two additional
directors of the Trust at a special meeting called by the holders of record of
at least 10% of the Series B Preferred Shares or the holders of any other series
of preferred shares so in arrears (unless such request is received less than 90
days before the date fixed for the next annual or special meeting of the
shareholders) or at the next annual meeting of shareholders, and at each
subsequent annual meeting until all dividends accumulated on such Series B
Preferred Shares for the past Dividend Periods and the then current Dividend
Period shall have been fully paid or declared and a sum sufficient for the
payment thereof set aside for payment. In such case, the entire Board of
Trustees of the Trust will be increased by two directors.
(C) The foregoing voting provisions will not apply if, at or prior
to the time when the act with respect to which such vote would otherwise be
required shall be effected, all outstanding Series B Preferred Shares shall have
been redeemed or called for redemption upon proper notice and sufficient funds
shall have been deposited in trust to effect such redemption.
(D) In the event that the Series B Preferred Shares are listed or
admitted to trading on The New York Stock Exchange, then, notwithstanding
anything to the contrary in these Articles, including without limitation Section
8, approval by the holders of at least two-thirds of the outstanding Series B
Preferred Shares shall be required for adoption of any amendment of these
Articles or of the bylaws of the Trust that would materially affect the existing
terms of the Series B Preferred Shares.
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Section 8. Consolidation, Merger, Share Exchange, etc. In case the Trust
-------------------------------------------
shall enter into any consolidation, merger, share exchange, combination or other
transaction in which the Common Shares are exchanged for or changed into other
stock or securities, cash and/or any other property, then in any such case the
Series B Preferred Shares shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each Common Share is changed or exchanged. In the
event the Trust shall at any time after the Rights Dividend Declaration Date (i)
declare any dividend on the Common Shares payable in Common Shares, (ii)
subdivide the outstanding Common Shares, or (iii) combine the outstanding Common
Shares into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of Series
B Preferred Shares shall be adjusted by multiplying such amount by the
Adjustment Factor.
Section 9. Fractional Shares. The Series B Preferred Shares may be
-----------------
issued in fractions of one one-thousandth of a share (and integral multiples
thereof) which shall entitle the holder, in proportion to such holder's
fractional shares, to exercise voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights of holders of Series B
Preferred Shares.
SECOND: Each of the undersigned acknowledges these Articles Supplementary
to be the trust act of the Company and, as to all matters or facts required to
be verified under oath, the undersigned acknowledges that to the best of his or
her knowledge, information and belief, these matters and facts are true in all
material respects and that this statement is made under the penalties for
perjury.
IN WITNESS WHEREOF, the Trust has caused these Articles Supplementary to be
duly executed by Michael A. Ernst, its Vice President and Treasurer, and
attested by Gregory S. Imhoff, its Vice President and Secretary, this 15th day
of February, 1998.
PRENTISS PROPERTIES TRUST
By: /s/ Michael A. Ernst
--------------------------------------
Name: Michael A. Ernst
Title: Vice President and Treasurer
Attest:
By: /s/ Gregory S. Imhoff
------------------------------------
Name: Gregory S. Imhoff
Title: Vice President and Secretary
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