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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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DATE OF REPORT: JANUARY 8, 1998
HRE PROPERTIES, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
MARYLAND 1-6309 04-2458042*
(State or Other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation or Organization) Number) Identification Number)
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321 RAILROAD AVENUE
GREENWICH, CONNECTICUT 06830
203-863-8200
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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* I.R.S. Employer Identification Number of HRE Properties, the predecessor to
the registrant prior to the Reorganization described in Registration
Statement No. 333-19113-01.
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ITEM 5. OTHER EVENTS.
Private Placement of Preferred Stock.
On January 8, 1998, HRE Properties, Inc., a Maryland corporation (the
"Company"), privately sold, in reliance on Section 4(2) of the Securities Act of
1933, as amended (the "Securities Act"), and Regulation D ("Regulation D")
promulgated thereunder, 350,000 shares of 8.99% Series B Senior Cumulative
Preferred Stock (the "Preferred Stock") to three "accredited investors" (the
"Initial Purchasers"), as that term is defined under Rule 501 of Regulation D,
for an aggregate purchase price of $35,000,000, pursuant to that certain
Subscription Agreement, dated January 8, 1998 (the "Subscription Agreement"), by
and among the Company and the Initial Purchasers. A commission of 3.15% of the
aggregate purchase price of the Preferred Stock, aggregating $1,102,500, was
paid by the Company to its placement agent in connection with the sale of the
Preferred Stock. Of the approximately $33,700,000 in net proceeds from the sale
of the Preferred Stock, approximately $24,000,000 will be used to retire
outstanding mortgage indebtedness. The Company intends to use any remaining net
proceeds from the offering for working capital and general corporate purposes,
including the acquisition of one or more additional properties.
The Preferred Stock was issued pursuant to the terms of an Articles
Supplementary filed with the State Department of Taxation and Assessments of the
State of Maryland on January 8, 1998 (the "Articles Supplementary"). Under the
Articles Supplementary, the Preferred Stock (i) accrues dividends from the date
of original issue at the rate of 8.99% per annum of the liquidation preference
($100) of each share; (ii) is not redeemable, subject to certain exceptions,
prior to the tenth anniversary of the date of issuance of the Preferred Stock
(the "Tenth Anniversary Date"), after which the Preferred Stock will be
redeemable for cash at the option of the Company at a redemption price of $100
per share, plus dividends accrued and unpaid at the redemption date, without
interest; (iii) will have no voting rights unless dividends on any shares of the
Preferred Stock are in arrears for three or more quarterly periods within any
five-year period, at which time the holders of such shares will be entitled to
elect two additional directors of the Company until all dividends accumulated on
such shares of Preferred Stock have been fully paid; and (iv) is not convertible
into or exchangeable for any other securities or property of the Company.
Upon a Change of Control (as defined in the Articles Supplementary) of
the Company, (i) each holder of shares of Preferred Stock shall have the right,
at such holder's option, to require the Company to repurchase all or any part of
such holder's shares of Preferred Stock for cash at a repurchase price of $100
per share, plus all accrued and unpaid dividends thereon, if any, up to the date
fixed for repurchase, without interest, and (ii) the Company shall have the
right, at the Company's option, to redeem all or any part of the shares of each
holder of Preferred Stock at (a) prior to the Tenth Anniversary Date, the Make-
Whole Price (as defined in the Articles Supplementary) and (b) on or subsequent
to the Tenth Anniversary Date, the redemption price of $100 per share, plus all
accrued and unpaid dividends thereon, if any, up to the date fixed for
redemption.
Pursuant to the terms of the Subscription Agreement, the Company and
the Initial Purchasers have agreed that if, at any time prior to the Listing
Date (as defined in the Articles Supplementary), the Company should determine
that it intends to revoke the exemption granted to a certain initial holder of
Preferred Stock which permits such holder to own shares of Preferred Stock in
excess of the Ownership Limit (as defined in the Articles Supplementary), (i)
the Company shall have an obligation to purchase from such holder, and such
holder shall have an obligation to sell to the Company, such shares of Preferred
Stock in excess of the Ownership Limit at the Make-Whole Price, and (ii) the
Company shall have an obligation to purchase from each other holder of Preferred
Stock, and each such other holder
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shall have an obligation to sell to the Company, a pro rata number of the shares
of Preferred Stock held by each such other holder at such time.
Pursuant to the terms of that certain Registration Rights Agreement,
dated January 8, 1998, by and among the Company and the Initial Purchasers, the
Company intends to use its reasonable best efforts to file a shelf registration
statement with the Securities and Exchange Commission under the Secuities Act to
register the Preferred Stock within no more than one year from the date of
issuance.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
Listed below is the exhibit furnished in accordance with Item
601 of Regulation S-K.
4.1. Articles Supplementary of the Company's Preferred
Stock.
4.2 Subscription Agreement, dated January 8, 1998, by and
among the Company and the Initial Purchasers.
4.3. Registration Rights Agreement, dated January 8, 1998,
by and among the Company and the Initial Purchasers.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Greenwich, State
of Connecticut on Janaury 22, 1998.
HRE PROPERTIES, INC.
By: /s/ James R. Moore
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James R. Moore,
Executive Vice President - Chief
Financial Officer
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EXHIBIT 4.1
ARTICLES SUPPLEMENTARY
OF
HRE PROPERTIES, INC.
HRE Properties, Inc., a Maryland corporation (the "Company"),
hereby certifies to the Maryland State Department of Assessments and Taxation
that:
FIRST: Pursuant to authority contained in Article 7 of the
Charter of the Company (the "Charter"), 350,000 shares of authorized but
unissued shares of the Company's preferred stock have been duly classified by
the Board of Directors of the Company on December 17, 1997, as authorized but
unissued shares of the Company's 8.99% Series B Senior Cumulative Preferred
Stock and the Board of Directors of the Company has set the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption thereof.
SECOND: A description of the 8.99% Series B Senior Cumulative
Preferred Stock including the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption, as set by Board of Directors of the Company is as
follows:
1. Designation and Number. A series of preferred stock,
designated the 8.99% Series B Senior Cumulative Preferred Stock (the "Series B
Preferred Stock"), is hereby established. The number of shares constituting the
Series B Preferred Stock shall be 350,000.
2. Defined Terms. The terms defined in this Section, whenever
used herein, shall, unless the context otherwise requires, have the respective
meanings hereinafter specified:
"Calculation Period" means, as of any date of determination,
the period comprised of the two most recently completed fiscal quarters of the
Company immediately preceding the fiscal quarter of the Company in which such
date of determination occurs.
"Capitalization Ratio" means, as of any date of determination,
the ratio obtained by dividing (i) the sum of (A) the aggregate amount of Debt
of the Company and (B) the aggregate amount of Preferred Stock of the Company by
(ii) the sum of (A) the aggregate amount of Debt of the Company, (B) the
aggregate amount of Preferred Stock of the Company, (C) the aggregate amount of
capital (including surplus) which in accordance with generally accepted
accounting principles would be reflected on a balance sheet of the Company in
connection with the Common Stock of the Company as of the end of the quarter
immediately preceding the fiscal quarter of the Company in which such date of
determination occurs and (D) accumulated depreciation of the Company as set
forth on the Company's balance sheet as of the end of the quarter immediately
preceding the fiscal quarter of the Company in which such date of determination
occurs.
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"Capitalized Lease Obligations" of a person means any
obligation that is required to be classified and accounted for as a capital
lease on the face of a balance sheet of such person prepared in accordance with
generally accepted accounting principles; the amount of such obligation shall be
the capitalized amount thereof determined in accordance with generally accepted
accounting principles; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease.
"Change of Control" means either (i) the occurrence of any
merger or other acquisition with or by any person, entity or group as a
consequence of which a majority of the outstanding shares of Common Stock of the
Company shall be owned or acquired by such person, entity or group or (ii) the
occurrence of any event or transaction as a consequence of which the persons,
entities or organizations set forth in (A), (B) and (C), below, shall, in the
aggregate, cease to own, beneficially or of record, or cease to control the
voting or disposition or the power to direct the voting or disposition of, at
least 75% of the number of shares of Common Stock of the Company which the
persons, entities or organizations set forth in (A), (B) or (C), below, in the
aggregate, own, beneficially or of record, or control the voting or disposition
or have the power to direct the voting or disposition of, as of the date hereof
(excluding, for the avoidance of doubt, any stock options or other stock rights
which any such person, entity or organization may now own or hereafter acquire
for purposes of this definition): (A) Charles J. Urstadt; (B) any Immediate
Relative of Charles J. Urstadt (defined as his spouse, any of his children or
any of their spouses, any of his grandchildren or any of their spouses); or (C)
any trust, corporation, partnership, limited liability company or other entity
or organization controlled by Charles J. Urstadt or any Immediate Relative of
Charles J. Urstadt or in which Charles J. Urstadt or any Immediate Relative of
Charles J. Urstadt has any economic, beneficial or other interest.
"Common Stock" means the common stock, par value $.01 per
share, of the Company, any stock into which such common stock shall have been
changed or any stock resulting from any capital reorganization or
reclassification of such common stock, and all other stock of any class or
classes (however designated) of the Company the holders of which have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions of any shares entitled to preference.
"De Minimis Series B Preferred Stock" means up to 100 shares
of Series B Preferred Stock to be issued at the sole discretion of the Company
subsequent to the original issuance of the Series B Preferred Stock pursuant to
the consent of the holders of the Series B Preferred Stock contained in the
Subscription Agreement.
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"Debt" of any person means, without duplication:
(i) the principal of and premium (if any) in respect
of (A) indebtedness of such person for money borrowed and (B) other
indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such person is responsible or
liable;
(ii) all Capitalized Lease Obligations of such
person;
(iii) all obligations of such person issued or
assumed as the deferred purchase price of property, all conditional
sale obligations of such person and all obligations of such person
under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business);
(iv) all obligations of such person for the
reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction (other than obligations with
respect to letters of credit securing obligations (other than
obligations described in (i) through (iii) above) entered into in the
ordinary course of business of such person to the extent such letters
of credit are not drawn upon or, if and to the extent drawn upon, such
drawing is reimbursed no later than the third business day following
receipt by such person of a demand for reimbursement following payment
on the letter of credit);
(v) the amount of all obligations of such person with
respect to the redemption, repayment or other repurchase of any
redeemable stock (but excluding any accrued dividends);
(vi) all obligations of the type referred to in
clauses (i) through (v) of other persons and all dividends of other
persons for the payment of which, in either case, such person is
responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise, including by means of any agreement that has the economic
effect of a guarantee; and
(vii) all obligations of the type referred to in
clauses (i) through (vi) of any other person secured by any Lien on any
property or asset of such person (whether or not such obligation is
assumed by such person), the amount of such obligation being deemed to
be the lesser of the value of such property or assets and the amount of
the obligation so secured.
"Discount Rate" means, as of any date of determination, the
yield to maturity implied by (i) the yields reported, as of 10:00 A.M. (New York
City time) on the second business day preceding such date of determination on
the display designated as "Page 678" on the Telerate Access Service (or such
other display as may replace Page 678 on Telerate Access Service) for actively
traded U.S. Treasury securities having a 30-year maturity as of such date
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of determination, or (ii) if such yields are not reported as of such time or the
yields reported as of such time are not ascertainable, the Treasury Constant
Maturity Series Yields reported, for the latest day for which such yields have
been so reported as of the second business day preceding the date of
determination in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S. Treasury securities
having a 30-year constant maturity as of such date of determination.
"Fixed Charge Coverage Ratio" means, as of any date of
determination, the ratio obtained by dividing (i) the sum (A) of Interest
Expense for the Calculation Period and (B) Funds From Operations for the
Calculation Period by (ii) the sum of (A) Interest Expense for the Calculation
Period and (B) Preferred Dividends for the Calculation Period; provided,
however, that (x) if the Company has issued any Debt or Preferred Stock since
the beginning of the Calculation Period that remains outstanding or (y) if the
transactions giving rise to the need to calculate the Fixed Charge Coverage
Ratio is an issuance of Debt or Preferred Stock, or both (x) and (y), Interest
Expense and Preferred Dividends for the Calculation Period shall be calculated
after giving effect on a pro forma basis to such Debt or Preferred Stock as if
such Debt or Preferred Stock had been issued on the first day of the Calculation
Period and the discharge of any other Debt or Preferred Stock refinanced,
refunded, exchanged or otherwise discharged with the proceeds of such new Debt
or Preferred Stock as if any such discharge had occurred on the first day of the
Calculation Period.
"Funds From Operations" means, with respect to any fiscal
quarter, (a) the net income of the Company for that quarter, plus (b) any loss
resulting from the restructuring of Debt, or sale of property during that
period, minus (c) any gain resulting from the restructuring of Debt, or sale of
property during that period, plus (d) depreciation and amortization of
properties (including with respect to trade fixtures and tenant allowances or
improvements which are a part thereof and capitalized leasing expenses, such as
leasing commissions), and adjusted to take into account (i) the results of
operations of any unconsolidated joint venture or partnership calculated to
reflect funds from operations on the same basis and (ii) any unusual and
non-recurring items which otherwise would materially distort the comparative
measurement of Funds From Operations for different fiscal periods. Funds From
Operations shall be determined in accordance with the March 1995 White Paper on
Funds From Operations approved by the Board of Governors of the National
Association of Real Estate Investment Trusts, as in effect on the date of
issuance of the Series B Preferred Stock.
"Interest Expense" means, for any period, the total interest
expense of the Company, including (i) interest expense attributable to capital
leases, (ii) amortization of debt discount and debt issuance cost, (iii)
capitalized interest, (iv) non-cash interest payments, (v) commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, (vi) net costs under hedging obligations
(including amortization of fees), (vii) interest actually paid by the Company
under any guarantee of Debt or other obligation of any other person.
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"Lien" means any mortgage, pledge, security interest,
conditional sale or other title retention agreement or other similar lien.
"Make-Whole Price" means, for any share of Series B Preferred
Stock as of any date of determination, the sum of (i) the present value as of
such date of determination of all remaining scheduled dividend payments of such
share of Series B Preferred Stock until the Tenth Anniversary Date, discounted
by the Discount Rate, (ii) the Liquidation Preference (as defined in Section 6)
and (iii) all accrued and unpaid dividends thereon to such date of
determination.
"Preferred Dividends" means dividends accrued in respect of
all Preferred Stock held by persons other than the Company.
"Preferred Stock" means, as applied to the capital stock of
the Company, capital stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of capital stock of any other class of the Company.
"Regulated Person" means any bank holding company, subsidiary
of a bank holding company or other person or entity that is subject to the Bank
Holding Company Act of 1956, as amended from time to time.
"Senior Obligations" means any (i) Debt other than accounts
payable incurred in the ordinary course of the Company's business and (ii) any
equity securities of the Company which rank senior to the Series B Preferred
Stock with respect to the payment of dividends or the distribution of assets
upon liquidation, dissolution or winding up of the Company.
"Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency).
"Subscription Agreement" means that certain Subscription
Agreement, by and among the Company and certain holders of the Series B
Preferred Stock, dated as of January 8, 1998, as the same may be amended,
modified or supplemented from time to time in accordance with the provisions
thereof.
"Tenth Anniversary Date" means the date which is the tenth
anniversary of the date of issuance of the Series B Preferred Stock.
3. Maturity. The Series B Preferred Stock has no stated
maturity and will not be subject to any sinking fund or mandatory redemption.
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4. Rank. The Series B Preferred Stock will, with respect to
dividend rights and rights upon liquidation, dissolution or winding up of the
Company, rank (i) senior to all classes or series of Common Stock of the
Company, and to all equity securities issued by the Company ranking junior to
the Series B Preferred Stock with respect to dividend rights or rights upon
liquidation, dissolution or winding up of the Company, (ii) on a parity with all
equity securities issued by the Company the terms of which specifically provide
that such equity securities rank on a parity with the Series B Preferred Stock
with respect to dividend rights or rights upon liquidation, dissolution or
winding up of the Company, and (iii) junior to all existing and future
indebtedness of the Company. Without the affirmative vote or consent of at least
two-thirds of the outstanding shares of Series B Preferred Stock, the Company
may not issue any additional shares of Series B Preferred Stock (other than
shares of De Minimis Series B Preferred Stock) or any equity securities which
rank senior to the Series B Preferred Stock with respect to dividend rights or
rights upon liquidation, dissolution or winding up of the Company. The term
"equity securities" does not include convertible debt securities, which will
rank senior to the Series B Preferred Stock prior to conversion.
5. Dividends.
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(a) Holders of shares of the Series B Preferred Stock are
entitled to receive, when and as declared by the Board of Directors, out of
funds legally available for the payment of dividends, preferential cumulative
cash dividends at the rate of 8.99% per annum of the Liquidation Preference (the
"Initial Dividend Yield"); provided, however, that if the Company should violate
the Fixed Charge Coverage Ratio Covenant (as defined in Section 10) or the
Capitalization Ratio Covenant (as defined in Section 10), and fails to cure such
violation on or prior to the second succeeding dividend payment date, the
Initial Dividend Yield shall be increased to the 200 basis points over the
Initial Dividend Yield (the "First Default Dividend Yield") as of such second
succeeding dividend payment date. If the Company remains in violation of either
the Fixed Charge Ratio Covenant or the Capitalization Ratio Covenant on four
consecutive dividend payment dates subsequent to the initial violation of either
such covenant, the Initial Dividend Yield shall increase to the greater of (i)
the Discount Rate plus 700 basis points or (ii) 15% (the "Second Default
Dividend Yield") as of such fourth consecutive dividend payment date. The First
Default Dividend Yield and the Second Default Dividend Yield will revert back to
the Initial Dividend Yield if the Company remains in compliance with the Fixed
Charge Coverage Ratio Covenant and the Capitalization Ratio Covenant on two
consecutive dividend payment dates after such First Default Dividend Yield or
Second Default Dividend Yield takes effect.
(b) Dividends on the Series B Preferred Stock shall be
cumulative from the date of original issue and shall be payable in arrears for
each quarterly period ended January 31, April 30, July 31 and October 31 on
January 31, April 30, July 31 and October 31, respectively, of each year, or, if
any such date shall not be a business day, the next succeeding business day
(each, a "Dividend Payment Date"). The first dividend will be payable on January
31, 1998 with respect to the period commencing on the date of issue and ending
January 31, 1998 and will be for less than a full quarterly period. Any
quarterly dividend payable on the Series B
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Preferred Stock for any partial dividend period will be computed on the basis of
a 360-day year consisting of twelve 30-day months. Dividends will be payable to
holders of record as they appear in the stock records of the Company at the
close of business on the applicable record date determined each quarter by the
Board of Directors, as provided by the Maryland General Corporation Law (the
"MGCL") (each, a "Dividend Record Date").
(c) No dividends on shares of Series B Preferred Stock shall
be declared by the Board of Directors or paid or set apart for payment by the
Company at such time as the terms and provisions of any agreement of the
Company, including any agreement relating to its indebtedness, prohibits such
declaration, payment or setting apart for payment or provides that such
declaration, payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or if such declaration or payment shall be
restricted or prohibited by law.
(d) Notwithstanding the foregoing, dividends on the Series B
Preferred Stock will accrue whether or not the Company has earnings, whether or
not there are funds legally available for the payment of such dividends and
whether or not such dividends are declared. Accrued but unpaid dividends on the
Series B Preferred Stock will not bear interest and holders of the Series B
Preferred Stock will not be entitled to any distributions in excess of full
cumulative distributions described above. Except as set forth in the next
sentence, no dividends will be declared or paid or set apart for payment on any
capital stock of the Company or any other series of preferred stock ranking, as
to dividends, on a parity with or junior to the Series B Preferred Stock (other
than a dividend in shares of the Company's Common Stock or in shares of any
other class of stock ranking junior to the Series B Preferred Stock as to
dividends and upon liquidation) for any period unless full cumulative dividends
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof is set apart for such payment on the Series B
Preferred Stock for all past dividend periods and the then current dividend
period. When dividends are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon the Series B Preferred Stock and the shares of
any other series of preferred stock ranking on a parity as to dividends with the
Series B Preferred Stock, all dividends declared upon the Series B Preferred
Stock and any other series of preferred stock ranking on a parity as to
dividends with the Series B Preferred Stock shall be declared pro rata so that
the amount of dividends declared per share of Series B Preferred Stock and such
other series of preferred stock, shall in all cases bear to each other the same
ratio that accrued dividends per share on the Series B Preferred Stock and such
other series of preferred stock (which shall not include any accrual in respect
of unpaid dividends for prior dividend periods if such preferred stock does not
have a cumulative dividend) bear to each other.
(e) Except as provided in the immediately preceding paragraph
(d), unless full cumulative dividends on the Series B Preferred Stock have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof is set apart for payment for all past dividend periods and
the then current dividend period, no dividends (other than in shares of Common
Stock or other shares of capital stock ranking junior to the Series B Preferred
Stock as to dividends and upon liquidation) shall be declared or paid or set
aside for payment nor shall any other distribution be declared or made upon the
Common Stock, or any
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other capital stock of the Company ranking junior to or on a parity with the
Series B Preferred Stock as to dividends or upon liquidation, nor shall any
shares of Common Stock, or any other shares of capital stock of the Company
ranking junior to or on a parity with the Series B Preferred Stock as to
dividends or upon liquidation 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 such shares) by the Company (except by conversion into
or exchange for other capital stock of the Company ranking junior to the Series
B Preferred Stock as to dividends and upon liquidation or redemption for the
purpose of preserving the Company's qualification as a real estate investment
trust (a "REIT") under the Internal Revenue Code of 1986, as amended (the
"Code")). Holders of shares of the Series B Preferred Stock shall not be
entitled to any dividend, whether payable in cash, property or stock, in excess
of full cumulative dividends on the Series B Preferred Stock as provided above.
Any dividend payment made on shares of the Series B Preferred Stock shall first
be credited against the earliest accrued but unpaid dividend due with respect to
such shares which remains payable.
6. Liquidation Preference.
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(a) Upon any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Company, the holders of shares of Series B
Preferred Stock are entitled to be paid out of the assets of the Company legally
available for distribution to its stockholders a liquidation preference of $100
per share (the "Liquidation Preference"), plus an amount equal to any accrued
and unpaid dividends to the date of payment, but without interest, before any
distribution of assets is made to holders of Common Stock or any other class or
series of capital stock of the Company that ranks junior to the Series B
Preferred Stock as to liquidation rights, but the holders of the shares of
Series B Preferred Stock will not be entitled to receive the Liquidation
Preference, plus any accrued and unpaid dividends, of such shares until the
liquidation preference of any other series or class of the Company's capital
stock hereafter issued which ranks senior as to liquidation rights to the Series
B Preferred Stock has been paid in full. The holders of Series B Preferred Stock
and all series or classes of the Company's capital stock hereafter issued which
rank on a parity as to liquidation rights with the Series B Preferred Stock are
entitled to share ratably, in accordance with the respective preferential
amounts payable on such capital stock, in any distribution (after payment of the
liquidation preference of any capital stock of the Company that ranks senior to
the Series B Preferred Stock as to liquidation rights) which is not sufficient
to pay in full the aggregate of the amounts payable thereon. Holders of Series B
Preferred Stock will be entitled to written notice of any event triggering the
right to receive such Liquidation Preference. After payment of the full amount
of the Liquidation Preference, plus any accrued and unpaid dividends to which
they are entitled, the holders of Series B Preferred Stock will have no right or
claim to any of the remaining assets of the Company. The consolidation or merger
of the Company with or into any other corporation, trust or entity or of any
other corporation with or into the Company, or the sale, lease or conveyance of
all or substantially all of the property or business of the Company, shall not
be deemed to constitute a liquidation, dissolution or winding up of the Company.
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(b) In determining whether a distribution to holders of Series
B Preferred Stock (other than upon voluntary or involuntary liquidation) by
dividend, redemption or other acquisition of shares of stock of the Company or
otherwise is permitted under the MGCL, no effect shall be given to amounts that
would be needed, if the Company were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon distribution of holders of
shares of stock of the Company whose preferential rights upon dissolution are
superior to those receiving the distribution.
7. Redemption.
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(a) Subject to a redemption of shares of Series B Preferred
Stock which shall be converted to Excess Stock (as defined in Section 12)
pursuant to the Charter and a Change of Control, the Series B Preferred Stock is
not redeemable prior to the Tenth Anniversary Date. However, in order to ensure
that the Company will continue to meet the requirements for qualification as a
REIT under the Code, the Company will have the right to purchase from the holder
of shares of Series B Preferred Stock at any time any shares of Series B
Preferred Stock in excess of 7.5% of the value of the outstanding capital stock
of the Company. On and after the Tenth Anniversary Date, the Company, at its
option, upon not less than 30 nor more than 60 days' written notice, may redeem
shares of the Series B Preferred Stock, in whole or in part, at any time or from
time to time, for cash at a redemption price of $100 per share, plus all accrued
and unpaid dividends thereon to the date fixed for redemption (except with
respect to shares of Series B Preferred Stock which shall have been converted
into shares of Excess Stock pursuant to the Charter), without interest. Holders
of Series B Preferred Stock which is to be redeemed shall surrender such Series
B Preferred Stock at the place designated in such notice and shall be entitled
to the redemption price and any accrued and unpaid dividends payable upon such
redemption following such surrender. If notice of redemption of any shares of
Series B Preferred Stock has been given and if the funds necessary for such
redemption have been set aside by the Company in trust for the benefit of the
holders of any shares of Series B Preferred Stock so called for redemption, then
from and after the redemption date dividends will cease to accrue on such shares
of Series B Preferred Stock, such shares of Series B Preferred Stock shall no
longer be deemed outstanding and all rights of the holders of such shares will
terminate, except the right to receive the redemption price. If less than all of
the outstanding shares of Series B Preferred Stock is to be redeemed, the Series
B Preferred Stock to be redeemed shall be selected pro rata (as nearly as may be
practicable without creating fractional shares) or by any other equitable method
determined by the Company.
(b) Unless full cumulative dividends on all shares of Series B
Preferred Stock shall have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment for
all past dividend periods and the then current dividend period, no shares of
Series B Preferred Stock shall be redeemed unless all outstanding shares of
Series B Preferred Stock are simultaneously redeemed and the Company shall not
purchase or otherwise acquire directly or indirectly any shares of Series B
Preferred Stock (except by exchange for capital stock of the Company ranking
junior to the Series B Preferred Stock as to dividends and upon liquidation);
provided, however, that the foregoing shall not
-9-
<PAGE>
prevent the purchase by the Company of Excess Stock in order to ensure that the
Company continues to meet the requirements for qualification as a REIT, or the
purchase or acquisition of shares of Series B Preferred Stock pursuant to the
Subscription Agreement or any other purchase or exchange offer made on the same
terms to holders of all outstanding shares of Series B Preferred Stock. So long
as no dividends are in arrears, the Company shall be entitled at any time and
from time to time to repurchase shares of Series B Preferred Stock in
open-market transactions duly authorized by the Board of Directors and effected
in compliance with applicable laws.
(c) Notice of redemption will be given by publication in a
newspaper of general circulation in the City of 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 redemption date. A similar notice will be mailed by
the Company, postage prepaid, not less than 30 nor more than 60 days prior to
the redemption date, addressed to the respective holders of record of the Series
B Preferred Stock to be redeemed at their respective addresses as they appear on
the stock transfer records of the Company. 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 shares of Series B Preferred Stock except
as to the holder to whom notice was defective or not given. Each notice shall
state: (i) the redemption date; (ii) the redemption price; (iii) the number of
shares of Series B Preferred Stock to be redeemed; (iv) the place or places
where the Series B Preferred Stock is to be surrendered for payment of the
redemption price; and (v) that dividends on the shares to be redeemed will cease
to accrue on such redemption date. If less than all of the Series B Preferred
Stock held by any holder is to be redeemed, the notice mailed to such holder
shall also specify the number of shares of Series B Preferred Stock held by such
holder to be redeemed.
(d) Immediately prior to any redemption of Series B Preferred
Stock, the Company shall pay, in cash, any accumulated and unpaid dividends
through the redemption date, unless a redemption date falls after a Dividend
Record Date and prior to the corresponding Dividend Payment Date, in which case
each holder of Series B Preferred Stock at the close of business on such
Dividend Record Date shall be entitled to the dividend payable on such shares on
the corresponding Dividend Payment Date notwithstanding the redemption of such
shares before such Dividend Payment Date.
8. Change of Control.
-----------------
(a) In the event of a Change of Control of the Company, each
holder of shares of Series B Preferred Stock shall have the right, at such
holder's option, to require the Company to repurchase all or any part of such
holder's Series B Preferred Stock for cash at a repurchase price of $100 per
share, plus all accrued and unpaid dividends thereon, if any, up to the date
fixed for repurchase (except with respect to shares of Series B Preferred Stock
which shall have been converted into shares of Excess Stock pursuant to the
Charter), without interest, pursuant to the procedures described below (the
"Change of Control Put Option"), subject to the MGCL.
-10-
<PAGE>
(b) In connection with any Change of Control, the Company will
be required to mail to each holder of shares of Series B Preferred Stock, not
later than the date of the occurrence of such Change of Control, a notice of
such occurrence (the "Change of Control Notice"), which shall specify the
purchase price and the purchase date, which shall be no fewer than 30 business
days and no more than 40 business days from the date such notice is mailed (the
"Put Option Payment Date"), and describe the procedure that must be followed by
such holder to tender such holder's shares of Series B Preferred Stock. The
Company will be required to deliver a copy of the Change of Control Notice to
each record and known beneficial holder of shares of Series B Preferred Stock as
of the date that is 15 days prior to the date such Change of Control Notice is
mailed. To exercise the Change of Control Put Option, a holder of shares of
Series B Preferred Stock must deliver, on or before the third business day
preceding the Put Option Payment Date, written notice to the Company (or to a
paying agent designated by the Company for such purpose) of such holder's
exercise of the Change of Control Put Option, indicating the number of shares of
Series B Preferred Stock to be repurchased by the Company. Holders of shares of
Series B Preferred Stock will be entitled to withdraw, in whole or in part, any
tender of shares of Series B Preferred Stock pursuant to an exercise of the
Change of Control Put Option by delivering to the Company (or to a paying agent
designated by the Company for such purpose), on or before the second business
day preceding the Put Option Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the holder, the number of
shares of Series B Preferred Stock initially to be delivered for purchase, and a
statement that such holder is withdrawing its exercise of the Change of Control
Put Option as to all or part of such tendered shares of Series B Preferred
Stock.
(c) In the event of a Change of Control of the Company, the
Company shall have the right, at the Company's option, to redeem all or any part
of the shares of each holder of Series B Preferred Stock at (i) prior to the
Tenth Anniversary Date, the Make-Whole Price as of the date fixed for redemption
(except with respect to shares of Series B Preferred Stock which shall have been
converted into shares of Excess Stock pursuant to the Charter) and (ii) on or
subsequent to the Tenth Anniversary Date, the redemption price of $100 per
share, plus all accrued and unpaid dividends thereon, if any, without interest,
up to the date fixed for redemption (except with respect to shares of Series B
Preferred Stock which shall have been converted into shares of Excess Stock
pursuant to the Charter), in each case pursuant to the procedures applicable to
other redemptions of shares of Series B Preferred Stock.
9. Voting Rights.
-------------
(a) Holders of the Series B Preferred Stock will not have any
voting rights, except as set forth below.
(b) Whenever dividends on any shares of Series B Preferred
Stock shall be in arrears for three or more quarterly periods within any five
year period, whether or not such quarterly periods are consecutive (a "Preferred
Dividend Default"), the number of directors then constituting the Board of
Directors shall be increased by two (if not already increased by reason of a
similar arrearage with respect to any Parity Preferred (as hereinafter
defined)), and the
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<PAGE>
holders of such shares of Series B Preferred Stock (subject to certain
restrictions in case of any Regulated Person) will be entitled to vote
separately as a class with all other series of preferred stock ranking on a
parity with the Series B Preferred Stock as to dividends or upon liquidation and
upon which like voting rights have been conferred and are exercisable ("Parity
Preferred"), in order to fill the vacancies thereby created, for the election of
a total of two additional directors of the Company (the "Preferred Stock
Directors") at a special meeting called by the Company at the request of holders
of record of at least 20% of the Series B Preferred Stock or the holders of
record of at least 20% of any series of Parity Preferred so in arrears (unless
such request is received less than 90 days before the date fixed for the next
annual meeting of stockholders) or at the next annual meeting of stockholders,
and at each subsequent annual meeting until all dividends accumulated on such
shares of Series B Preferred Stock and Parity Preferred for the past dividend
periods and the dividend for 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 the event the directors of the Company are divided into classes,
each such vacancy shall be apportioned among the classes of directors to prevent
stacking in any one class and to insure that the number of directors in each of
the classes of directors, are as nearly equal as possible. Each Preferred Stock
Director, as a qualification for election as such (and regardless of how
elected) shall submit to the Board of Directors of the Company a duly executed,
valid, binding and enforceable letter of resignation from the Board of
Directors, to be effective upon the date upon which all dividends accumulated on
such shares of Series B Preferred Stock and Parity Preferred for the past
dividend periods and the dividend for the then current dividend period shall
have been fully paid or declared and a sum sufficient for the payment thereof
set aside for payment, whereupon the terms of office of all persons elected as
Preferred Stock Directors by the holders of the Series B Preferred Stock and any
Parity Preferred shall, upon the effectiveness of their respective letters of
resignation, forthwith terminate, and the number of directors then constituting
the Board of Directors shall be reduced accordingly. A quorum for any meeting
shall exist if at least a majority of the outstanding shares of Series B
Preferred Stock and shares of Parity Preferred upon which like voting rights
have been conferred and are exercisable are represented in person or by proxy at
such meetings. Such Preferred Stock Directors shall be elected upon the
affirmative vote of a plurality of the shares of Series B Preferred Stock and
such Parity Preferred present and voting in person or by proxy at a duly called
and held meeting at which a quorum is present. If and when all accumulated
dividends and the dividend for the then current dividend period on the Series B
Preferred Stock shall have been paid in full or declared and set aside for
payment in full, the holders thereof shall be divested of the foregoing voting
rights (subject to revesting in the event of each and every Preferred Dividend
Default). Any Preferred Stock Director may be removed at any time with or
without cause by, and shall not be removed otherwise than by the vote of, the
holders of record of a majority of the outstanding shares of the Series B
Preferred Stock when they have the voting rights described above (voting
separately as a class with all series of Parity Preferred upon which like voting
rights have been conferred and are exercisable). So long as a Preferred Dividend
Default shall continue, any vacancy in the office of a Preferred Stock Director
may be filled by written consent of the Preferred Stock Director remaining in
office, or if none remains in office, by a vote of the holders of record of a
majority of the outstanding shares of Series B Preferred Stock when they have
the voting rights described above (voting separately
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<PAGE>
as a class with all series of Parity Preferred upon which like voting rights
have been conferred and are exercisable). The Preferred Stock Directors shall
each be entitled to one vote per director on any matter properly coming before
the Board of Directors.
(c) So long as any shares of Series B Preferred Stock remain
outstanding, the Company will not, without the affirmative vote or consent of
the holders of at least two-thirds of the shares of the Series B Preferred Stock
outstanding at the time, given in person or by proxy, either in writing or at a
meeting (voting separately as a class):
(i) voluntarily terminate the status of the company as a
REIT;
(ii) amend, alter or repeal the provisions of the Charter or
these Articles Supplementary, whether by merger,
consolidation or otherwise (an "Event"), so as to
materially and adversely affect any preferences,
conversion and other rights, voting powers,
restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption
of the Series B Preferred Stock or the holders thereof
(including, without limitation, the issuance of any
additional shares of Series B Preferred Stock (other
than shares of De Minimis Series B Preferred Stock));
provided, however, that without the affirmative vote or
consent of each holder of shares of the Series B
Preferred Stock outstanding at the time, no amendment,
alteration or repeal of the provisions of the Charter or
of these Articles Supplementary may be made that will
(w) reduce the number of shares of the Series B
Preferred Stock required to consent to an amendment,
alteration or repeal of the Charter or these Articles
Supplementary pursuant to this Section 9(c)(ii), (x)
reduce the Initial Dividend Yield or the Liquidation
Preference or change the method of calculation of the
First Default Dividend Yield, the Second Default
Dividend Yield, or the Make-Whole Price, (y) change the
payment date for payment of dividends with respect to
the Series B Preferred Stock or change the period with
respect to which such dividends are paid, or (z) alter
or modify the rights of any holder of Series B Preferred
Stock pursuant to Section 8 of these Articles
Supplementary. With respect to the occurrence of any
Event set forth above, so long as the Series B Preferred
Stock (or any equivalent class or series of stock issued
by the surviving corporation in any merger or
consolidation to which the Company became a party)
remains outstanding with the terms thereof materially
unchanged, the occurrence of any such Event shall not be
deemed to materially and adversely affect any
preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption
of holders of the Series B Preferred Stock. Any increase
in the amount of the authorized Preferred Stock or the
creation or issuance of any other series of Preferred
Stock, or any increase in the amount of the authorized
shares of such
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<PAGE>
series, in each case ranking on a parity with, or junior
to the Series B Preferred Stock with respect to payment
of dividends or the distribution of assets upon
liquidation, dissolution or winding up, shall not be
deemed to materially and adversely affect any
preferences, conversion and other rights, voting power,
restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption;
or
(iii) enter into or undertake any Senior Obligations at any
time during which the Company is in violation of the
Fixed Charge Coverage Ratio Covenant or the
Capitalization Ratio Covenant.
(d) So long as any shares of Series B Preferred Stock remain
outstanding and any holder of the Series B Preferred Stock as of the date of its
issuance continues to hold, beneficially or of record, at least 75% of the
number of shares of Series B Preferred Stock which such holder owns,
beneficially or of record, as of such date, the Company will not, without the
affirmative vote or consent of the holders of at least 85% of the shares of the
Series B Preferred Stock outstanding at the time, given in person or by proxy,
either in writing or at a meeting (voting separately as a class), amend Section
10 of these Articles Supplementary.
(e) 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 shares of Series B Preferred
Stock shall have been redeemed or called for redemption upon proper notice and
sufficient funds shall have been deposited in trust to effect such redemption.
(f) Notwithstanding Section 9(b), any and all shares of Series
B Preferred Stock owned by a Regulated Person which exceed 4.9% (the "Excess
Regulated Person Shares") of the total issued and outstanding shares of Series B
Preferred Stock shall not be entitled to vote for the election of Preferred
Stock Directors (and shall not be counted for purposes of determining the
percentage of holders of Series B Preferred Stock necessary to call the special
meeting described in Section 9(b) or whether a quorum is present at such a
meeting or for any other analogous purpose described in Section 9(b)) so long as
such Excess Regulated Person Shares are owned by a Regulated Person.
(g) Except as expressly stated in these Articles
Supplementary, the Series B Preferred Stock will not have any relative,
participating, optional or other special voting rights and powers, and the
consent of the holders thereof shall not be required for the taking of any
corporate action, including but not limited to, any merger or consolidation
involving the Company, the liquidation or dissolution of the Company, or a sale
of all or substantially all of the assets of the Company, or the liquidation or
dissolution of the Company, irrespective of the effect that such merger,
consolidation, sale, liquidation or dissolution may have upon the rights,
preferences or voting power of the holders of the Series B Preferred Stock.
-14-
<PAGE>
10. Covenants.
---------
(a) The Company agrees that so long as any share of Series B
Preferred Stock shall remain outstanding:
(i) The Company shall not permit the Fixed Charge
Coverage Ratio to be less than 1.30 (the "Fixed Charge Coverage Ratio
Covenant") or the Capitalization Ratio to exceed 0.55 (the
"Capitalization Ratio Covenant").
(ii) The Company shall not enter into or undertake
any Senior Obligation which results in a violation of the Fixed Charge
Coverage Ratio Covenant or the Capitalization Ratio Covenant,
compliance with such covenants being determined (A) in the case of the
Fixed Charge Coverage Ratio Covenant, after giving effect on a pro
forma basis to any such Senior Obligation as if such Senior Obligation
had been issued on the first day of the Calculation Period and (B) in
the case of the Capitalization Ratio Covenant, as of the end of the
fiscal quarter of the Company immediately preceding the fiscal quarter
of the Company in which such Senior Obligation is issued and
undertaken, after giving effect on a pro forma basis to any such Senior
Obligation as if such Senior Obligation had been issued on the first
day of such immediately preceding quarter.
(b) The covenants set forth in Section 10(a) are for the
exclusive benefit of the holders of the Series B Preferred Stock and may be
waived by such percentage of the shares of Series B Preferred Stock outstanding
at the time as may be required to amend such covenants pursuant to Section 9(d),
without the consent, approval or vote of any other class of stock of the
Company.
11. Conversion. The Series B Preferred Stock is not
convertible into or exchangeable for any other securities or property of the
Company.
THIRD: The classification of authorized but unissued shares as
set forth in these Articles Supplementary does not increase the authorized
capital of the Company or the aggregate par value thereof.
FOURTH: These Articles Supplementary have been approved by the
majority of the Board of Directors of the Company in the manner prescribed by
the MGCL.
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<PAGE>
IN WITNESS WHEREOF, the undersigned, the President of the
Company acknowledges these Articles Supplementary to be the corporate 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 knowledge, information and
belief, these matters and facts set forth herein are true in all material
respects and that this statement is made under the penalties for perjury.
These Articles Supplementary have been executed under seal in
the name of the Company and on its behalf by its President and attested to by
its Secretary on this 19th day of December, 1997.
ATTEST HRE PROPERTIES, INC.
By: By:
------------------------- ------------------------- (SEAL)
James R. Moore Willing L. Biddle
Secretary President
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EXHIBIT 4.2
[EXECUTION COPY]
HRE PROPERTIES, INC.
8.99% SERIES B SENIOR CUMULATIVE PREFERRED STOCK
350,000 SHARES
----------------
SUBSCRIPTION AGREEMENT
January 8, 1998
Cobalt Capital LLC
c/o CGA Investment Management, Inc.,
as Asset Manager
17 State Street, 40th Fl.
New York, NY 10004
Wells Fargo & Company
555 Montgomery, 10th Floor
San Francisco, CA 94111
Retirement Plan of The Bank of New York
Company, Inc.
c/o The Bank of New York, as
Trustee for the Retirement
Plan of The Bank of New York Company, Inc.
1 Wall Street, 17th Floor
New York, NY 10286
Ladies and Gentlemen:
HRE Properties Inc., a Maryland corporation (the "Company"),
proposes to issue and sell to the purchasers named in Schedule A hereto
(collectively, the "Initial Purchasers" and individually, an "Initial
Purchaser") in the respective amounts set forth on Schedule A hereto, an
aggregate of 350,000 shares of 8.99% Series B Senior Cumulative Preferred Stock,
$.01 par value, of the Company (the "Preferred Stock").
The sale of the Preferred Stock to the Initial Purchasers will
be made without registration of the Preferred Stock under the Securities Act of
1933, as amended (the "Securities Act"), in reliance upon exemptions from the
registration requirements of the Securities Act.
1. Representations and Warranties of the Company. The Company
represents and warrants to the Initial Purchasers that:
<PAGE>
(a) A preliminary offering memorandum dated July 14,
1997 (the "Preliminary Offering Memorandum") and a final offering
memorandum dated January 6, 1998 (the "Final Offering Memorandum," and
together with the Preliminary Offering Memorandum, the "Offering
Memoranda"), in respect of the Preferred Stock have been prepared in
connection with the offering of the Preferred Stock. Any reference
herein to the Offering Memoranda shall be deemed to refer to and
include (i) the Company's Proxy Statement/Prospectus, dated January 28,
1997 (the "Proxy Statement"), (ii) the Company's Annual Report on Form
10-K for the fiscal year ended October 31, 1996 (the "Annual Report"),
(iii) its Quarterly Reports on Form 10-Q for each of the quarters ended
January 31, 1997, April 30, 1997 and July 31, 1997, (iv) its Current
Report on Form 8-K, dated March 12, 1997 and (v) the Company's audited
financial statements as at, and for the fiscal years ended, October 31,
1996, 1995, 1994, 1993 and 1992, including the notes thereto, each as
attached to and made a part of the Offering Memoranda. The documents
referred to in (i), (ii), (iii) and (iv) above are hereinafter called
the "Exchange Act Reports." The Exchange Act Reports, when they were
filed with the United States Securities and Exchange Commission (the
"Commission"), conformed in all material respects to the applicable
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the applicable rules and regulations of the
Commission thereunder. The Exchange Act Reports, when they were so
filed, did not contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made when
such documents were so filed, not misleading. The Offering Memoranda
and any amendments or supplements thereto did not and will not, at and
as of their respective dates, contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with any written information furnished
to the Company by Deutsche Morgan Grenfell Inc., as Placement Agent for
the Preferred Stock (the "Placement Agent"), or any of its affiliates
expressly for use therein. The Company hereby confirms that it has
authorized the use of the Preliminary Offering Memorandum and the Final
Offering Memorandum, and any amendment or supplement thereto, in
connection with the offering of the Preferred Stock to the Initial
Purchasers. Unless stated to the contrary, all references herein to the
Final Offering Memorandum are to the Final Offering Memorandum at the
date hereof and are not meant to include any amendment or supplement,
or any information incorporated by reference therein, subsequent to the
date hereof and any references herein to the terms "amended",
"amendment" or "supplement" with respect to the Final Offering
Memorandum shall be deemed to refer to and include any information
filed under the Exchange Act subsequent to the date hereof which is
incorporated by reference therein.
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<PAGE>
(b) Pursuant to a Plan of Reorganization, dated as of
December 30, 1996 (attached as Exhibit A to the Proxy Statement), the
Company was organized on December 30, 1996 by HRE Properties, the
predecessor of the Company, an unincorporated business trust under the
laws of the Commonwealth of Massachusetts (the "Trust"), to acquire and
succeed to, and to continue the business of, the Trust upon the
consummation of a merger of the Trust with and into the Company
pursuant to the Plan of Reorganization. On March 12, 1997, the Trust
was merged with and into the Company (the "Merger"), the separate
existence of the Trust ceased, the Company was the surviving entity of
the Merger and each issued and outstanding common share of beneficial
interest of the Trust was converted into one share of Common Stock, par
value $.01 per share, of the Company. Pursuant to the Merger, all
properties, assets, liabilities and obligations of the Trust became the
properties, assets, liabilities and obligations of the Company. All
financial data, reports, filings and other documents and transactions
of the Company prior to March 12, 1997 were reported, made or
consummated by the Trust, the Company's predecessor in interest, to
whose assets, liabilities and obligations the Company succeeded
pursuant to the Merger.
(c) Neither the Company nor any of its subsidiaries
has sustained, since the date of the latest audited consolidated
financial statements of the Company included in the Offering Memoranda,
any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the
Final Offering Memorandum; and, since the respective dates as of which
information is given in the Final Offering Memorandum, there has not
been any change in the capital stock (other than upon the exercise of
options pursuant to the Company's stock option plans and stock awards
granted pursuant to the Company's stock award plan) or long-term debt
of the Company or any of its subsidiaries or any material adverse
change in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company
and its subsidiaries taken as a whole, otherwise than as set forth or
contemplated in the Final Offering Memorandum. Except as set forth in
the Final Offering Memorandum, there have been no transactions entered
into by the Company or its subsidiaries, since the date of the latest
audited financial statements of the Company included in the Offering
Memoranda, other than those in the ordinary course of business, which
are material with respect to the Company and its subsidiaries taken as
a whole.
(d) Each of the Company and its subsidiaries has been
duly incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation, with
requisite power and authority (corporate and other) to own its
properties and conduct its business, and has been duly qualified as a
foreign corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it owns or
leases properties or conducts any business so as to
-3-
<PAGE>
require such qualification, or is subject to no material liability or
disability by reason of the failure to be so qualified in any such
jurisdiction.
(e) The Company has an authorized capitalization as
set forth in the Final Offering Memorandum, and all of the issued
shares of capital stock of the Company have been duly and validly
authorized and issued and are fully paid and non-assessable; and all of
the issued shares of capital stock of each subsidiary of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable and the shares of each such subsidiary owned by the
Company are owned directly or indirectly, free and clear of all liens,
encumbrances, equities or claims.
(f) The Preferred Stock has been duly authorized by
the Company and, when issued and delivered in accordance with this
Agreement against payment of the consideration described herein and
therein, will have been duly issued and fully paid and non-assessable
shares of capital stock of the Company, will be entitled to the
benefits of the Amended and Restated Articles of Incorporation of the
Company (the "Articles") and the Articles Supplementary relating to the
Preferred Stock (the "Articles Supplementary", and together with the
Articles, the "Charter"), will conform to all statements relating
thereto contained in the Final Offering Memorandum and will not be
subject to preemptive or other similar rights.
(g) The execution and delivery of, and the
performance by the Company of its obligations under, each of this
Agreement and that certain Registration Rights Agreement, dated January
8, 1998, by and among the Company and the Initial Purchasers (the
"Registration Rights Agreement", and together with this Agreement, the
"Company Agreements") have been duly and validly authorized and,
assuming due authorization, execution and delivery by each of the other
parties thereto, each of the Company Agreements is a legal, valid,
binding and enforceable instrument of the Company, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally, and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law) and, with respect to rights to
indemnity and contribution, to federal or state securities laws or the
public policy underlying such laws.
(h) The issue and sale of the Preferred Stock, and
the compliance by the Company with all of the provisions of the
Preferred Stock and the Company Agreements and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument (after giving effect to
any amendment or waiver of the terms thereof) to which the Company or
any of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound or to which any of the property or assets of
-4-
<PAGE>
the Company or any of its subsidiaries is subject, nor will such action
result in any violation of the provisions of the Articles or By-laws of
the Company (the "By-laws") or any statute or, to the best knowledge of
the Company, any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their properties; and to the best knowledge of
the Company, no consent, approval, authorization, order, registration
or qualification of or with any such court or governmental agency or
body is required for the issuance and sale of the Preferred Stock or
the consummation by the Company of the transactions contemplated by the
Company Agreements, including the issuance, sale and delivery of the
Preferred Stock, except such consents, approvals, authorizations,
registrations or qualifications (i) as may be required under state
securities or "Blue Sky" laws in connection with the distribution of
the Preferred Stock by the Placement Agent and any Form D that may be
filed pursuant to Regulation D under the Securities Act, (ii) which
shall have been obtained or made on or prior to the Closing Date, (iii)
the failure to obtain which would not have a material adverse effect on
the ability of the Company to perform its obligations under the
Preferred Stock or the Company Agreements and (iv) as may be required
to be obtained or made under the Securities Act and applicable state
securities laws as provided in the Registration Rights Agreement.
(i) Other than as set forth in the Final Offering
Memorandum, there are no legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or of which any
property of the Company or any of its subsidiaries is the subject
which, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a material
adverse effect on the consolidated financial position, stockholders'
equity or results of operations of the Company and its subsidiaries
taken as a whole; and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities
or by others.
(j) When the Preferred Stock is issued and delivered
as contemplated in the Final Offering Memorandum, such Preferred Stock
will not be of the same class (within the meaning of Rule 144A under
the Securities Act) as securities which are listed on a national
securities exchange registered under Section 6 of the Exchange Act, or
quoted in an automated interdealer quotation system.
(k) None of the Company or any of its affiliates (as
such term is defined in Rule 501(b) under the Securities Act) or any
person (other than the Placement Agent, as to which no representation
is made) acting on the Company's behalf has engaged, in connection with
the offering of the Preferred Stock, (A) in any form of general
solicitation or general advertising within the meaning of Rule 502(c)
under the Securities Act, (B) in any action involving a public offering
within the meaning of Section 4(2) of the Securities Act or (C) in any
action which would require the
-5-
<PAGE>
registration of the offering and sale of the Preferred Stock pursuant
to this Agreement or which would violate applicable state "blue sky"
laws.
(l) Neither the Company nor any of its subsidiaries
is in violation of its charter or, except for such claims and
litigation as may be disclosed in the Final Offering Memorandum, in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
loan agreement, note, lease or other instrument to which the Company or
any of its subsidiaries is a party or by which it or any of them may be
bound, or to which any of the property or assets of the Company or any
of its subsidiaries is subject, which default would have a material
adverse effect on the consolidated fiscal position, stockholders'
equity or results of operations of the Company and its subsidiaries
taken as a whole.
(m) The Company is not an "investment company" as
such term is defined in the Investment Company Act of 1940, as amended.
(n) The Company is subject to and in compliance in
all material respects with the reporting requirements of Section 13 or
Section 15(d) of the Exchange Act.
(o) The Company has not paid or agreed to pay to any
person any compensation for soliciting another to purchase any
securities of the Company (except for the fees of the Placement Agent
as disclosed in the Offering Memoranda).
(p) The Company has determined that the purchase of
shares of Preferred Stock by the Initial Purchasers in the amounts set
forth opposite their respective names in Schedule A hereto would not,
directly or indirectly, or by virtue of the attribution provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), result in
the disqualification of the Company as a REIT; provided, however, that
the foregoing shall not in any way be deemed to limit the Company's
rights under the relevant provisions of its Charter to redeem all or
any of such shares if the Company should determine that the Company
shall be in risk of losing its REIT status due to a concentration of
ownership among its shareholders.
2. Representations and Warranties of the Initial Purchasers.
Each of the Initial Purchasers represents and warrants to and agrees
with the Company that:
(a) It (or if it is an employee benefit plan governed
under the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the fiduciary signing on its behalf) has been duly organized
and is validly existing as a corporation or limited liability company,
as the case may be, in good standing under the laws of its
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<PAGE>
jurisdiction of organization, with requisite power and authority
(corporate and other) to own its properties and conduct its business.
(b) (Check appropriate box.)
[ ] It is not, nor are any of the underlying assets
with respect to which the purchase is being made, a "benefit plan
investor" (as defined below).
[ ] It, or any of the underlying assets with respect
to which the purchase is being made, is a "benefit plan investor," and
Schedule B attached hereto sets forth in detail the criteria according
to which it is a "benefit plan investor."
As used herein, "benefit plan investor" shall mean
any (i) employee benefit plan (as defined in Section 3(3) of ERISA,
whether or not such plan is subject to the provision of Title I of
ERISA, (ii) any plan described in Section 4975(e)(1) of the Code, or
(iii) any entity whose underlying assets include plan assets by reason
of a plan's investment in the entity.
(c) The execution and delivery of, and the
performance by such Initial Purchaser of its obligations under, this
Agreement have been duly and validly authorized, and, assuming due
authorization, execution and delivery by each of the other parties
hereto, this Agreement is a legal, valid, binding and enforceable
instrument of such Initial Purchaser, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally, and
subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity
or at law).
(d) The purchase of the Preferred Stock, and the
compliance by such Initial Purchaser with this Agreement and the
consummation of the transactions herein contemplated will not conflict
with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument (after
giving effect to any amendment or waiver of the terms thereof) to which
such Initial Purchaser is a party or by which such Initial Purchaser is
bound or to which any of the property or assets of such Initial
Purchaser is subject, nor will such action result in any violation of
the provisions of the Articles or By-laws of such Initial Purchaser or
any statute or, to the best knowledge of such Initial Purchaser, any
order, rule or regulation of any court or governmental agency or body
having jurisdiction over such Initial Purchaser or any of its
properties; and to the best knowledge of such Initial Purchaser, no
consent, approval, authorization, order, registration or qualification
of or with any such court or governmental agency or body is required
for the purchase by such Initial Purchaser of the Preferred Stock or
the consummation by such Initial Purchaser of the transactions
contemplated by this Agreement.
-7-
<PAGE>
(e) It (i) is a qualified institutional buyer (as
such term is defined in Rule 144A under the Securities Act) ("Qualified
Institutional Buyer") or an "accredited investor" (as such term is
defined in Regulation D under the Securities Act), (ii) is aware that
the sale of Preferred Stock to it is being made in reliance on the
exemption from the registration requirements provided by Section 4(2)
of the Securities Act and the regulations promulgated thereunder and
(iii) is acquiring such Preferred Stock for its own account or the
account of an "accredited investor" or a Qualified Institutional Buyer,
as the case may be.
(f) Neither it nor any person acting on its behalf
has made or will make offers of shares of Preferred Stock by means of
any form of general solicitation or general advertising (within the
meaning of Regulation D).
(g) It understands that the Preferred Stock is being
offered in a transaction not involving any public offering within the
meaning of the Securities Act, that such Preferred Stock has not been
registered under the Securities Act and that (A) if in the future it
decides to resell, pledge or otherwise transfer any such Preferred
Stock, such Preferred Stock may, absent an effective registration
statement under the Securities Act, be resold, pledged or transferred
only (i) to a person who the seller reasonably believes is a Qualified
Institutional Buyer in a transaction meeting the requirements of Rule
144A, (ii) in an offshore transaction complying with the provisions of
Regulation S, or (iii) pursuant to an exemption from registration under
the Securities Act provided by Rule 144 thereunder (if available), and
in each of cases (i) through (iii) in accordance with any applicable
securities laws of the States and other jurisdictions of the United
States, and that (B) it will, and each subsequent holder of such
Preferred Stock is required to, notify any purchaser of such Preferred
Stock from it of the resale restrictions referred to in (A) above.
(h) It understands that the Preferred Stock will bear
a legend to the following effect unless the Company determines
otherwise in compliance with applicable law:
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND
THIS SECURITY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED
THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
ACT PROVIDED BY RULE 144A THEREUNDER.
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<PAGE>
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF HRE
PROPERTIES, INC. THAT (A) THIS SECURITY MAY, ABSENT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (i) TO A PERSON
WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (ii) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
REGULATION S UNDER THE SECURITIES ACT, OR (iii) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED
BY RULE 144 THEREUNDER (IF AVAILABLE), AND IN EACH OF CASES
(i) THROUGH (iii) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF THE STATES AND OTHER JURISDICTIONS OF THE UNITED
STATES, AND THAT (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY
OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.
(i) Its purchase of Preferred Stock will not to the
best of its knowledge result in any of the following types of persons
owning, or being considered to own under the constructive ownership
rules of the Code, Section 544 (as modified by Code Sections
856(h)(1)(B) and 856(h)(3)(A)), a direct or indirect beneficial
interest of 10 percent or more in the Preferred Stock (as a class): (i)
an individual; (ii) an organization described in Code Section
501(c)(17) or Code Section 509(a); (iii) a trust described in Code
Section 401(a), exempt from tax under Code Section 501(a) and described
in Code Section 856(h)(3)(A)(ii); or (iv) a trust any portion of which
is permanently set aside or is to be used exclusively for the purposes
described in Code Section 642(c) or a corresponding provision of prior
income tax law. Each Initial Purchaser shall disclose to the Company to
the best of its knowledge, from time to time upon request of the
Company, the identity of and number of Preferred Stock directly or
indirectly beneficially owned by, actually or constructively under such
Code rules, any trust described in Code Section 401(a) and exempt from
tax under Code Section 501(a).
3. Purchase and Sale; Payment and Delivery. Subject to the
terms and conditions and in reliance upon the representations and warranties
herein set forth, the Company agrees to sell to the Initial Purchasers, and each
of the Initial Purchasers agree, severally and not jointly, to purchase from the
Company, at purchase price of $100 per share, the number of shares of Preferred
Stock set forth opposite the name of such Initial Purchasers on Schedule A
hereto.
Subject to the terms and conditions set forth herein, delivery
of the Preferred Stock and payment of the purchase price for the shares of
Preferred Stock shall be made at
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<PAGE>
the offices of Coudert Brothers, 1114 Avenue of the Americas, New York, New York
10036 or at such other location as may be mutually acceptable. Such delivery and
payment shall be made at 10:00 A.M., New York time, on January 8, 1998. The time
and date of such delivery and payment are herein called the "Closing Date" or
the "Closing." Delivery of certificates for the shares of the Preferred Stock
being purchased shall be made to the Initial Purchasers or for the account of
the Initial Purchasers against receipt of payment of the purchase price of such
Preferred Stock. Such certificates of shares of Preferred Stock shall be in such
denominations and registered in such names as the Initial Purchasers may
request.
If the Initial Purchasers so request, shares of Preferred
Stock will be delivered by the Company to the Initial Purchasers in the form of
a temporary global certificate which will be deposited on behalf of the Initial
Purchasers with The Bank of New York as custodian for, and registered in the
name of a nominee of, The Depository Trust Company in New York, New York, for
credit to the respective accounts of the Initial Purchasers.
4. Covenants. The Company agrees with the Initial Purchasers:
(a) To furnish each Initial Purchaser, without
charge, such number of copies of the Offering Memoranda and any
amendments or supplements thereto as the Placement Agent may reasonably
request;
(b) Not to solicit any offer to buy or offer to sell
the Preferred Stock by means of any form of general solicitation or
general advertising (as such terms are used in Regulation D under the
Securities Act), or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act;
(c) Not to offer, sell or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the
Securities Act) which could be integrated with the sale of the
Preferred Stock in a manner that would require the registration of the
Preferred Stock under the Securities Act;
(d) Subject to Section 4(i), to place upon each share
of Preferred Stock the legend set forth in Section 2(h) hereof and the
following legend until such legends shall no longer be necessary or
advisable:
IN ORDER TO ENSURE THAT THE COMPANY WILL CONTINUE TO MEET THE
REQUIREMENTS FOR QUALIFICATION AS A "REAL ESTATE INVESTMENT
TRUST" UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"), THE COMPANY HAS THE RIGHT TO REDEEM ALL OR ANY
PORTION OF THIS SECURITY FROM THE HOLDER AT ANY TIME SUBJECT
TO THE TERMS AND CONDITIONS OF THE COMPANY'S CHARTER.
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<PAGE>
THIS SECURITY IS SUBJECT TO THE TERMS AND CONDITIONS OF (I) A
REGISTRATION RIGHTS AGREEMENT, DATED AS OF JANUARY 8, 1998, BY
AND AMONG THE COMPANY AND CERTAIN OTHER PARTIES THERETO AND
(II) A SUBSCRIPTION AGREEMENT, DATED AS OF JANUARY 8, 1998, BY
AND AMONG THE COMPANY AND CERTAIN OTHER PARTIES THERETO. THE
REGISTRATION RIGHTS AGREEMENT AND THE SUBSCRIPTION AGREEMENT
PROVIDE, AMONG OTHER THINGS, THAT ANY TRANSFER OR ASSIGNMENT
OF ALL OR ANY PORTION OF THIS SECURITY IS SUBJECT TO THE
CONDITION THAT THE TRANSFEREE OR ASSIGNEE AGREE IN WRITING TO
BE BOUND BY CERTAIN OF THE TERMS AND CONDITIONS CONTAINED IN
THE REGISTRATION RIGHTS AGREEMENT AND THE SUBSCRIPTION
AGREEMENT. IN ADDITION, THE SUBSCRIPTION AGREEMENT PROVIDES
THAT THIS SECURITY IS SUBJECT TO THE RIGHT OF THE COMPANY TO
REPURCHASE THE SHARES REPRESENTED HEREBY UNDER THE
CIRCUMSTANCES SET FORTH IN THE SUBSCRIPTION AGREEMENT. COPIES
OF THE SUBSCRIPTION AGREEMENT AND THE REGISTRATION RIGHTS
AGREEMENT ARE ON FILE AND AVAILABLE FROM THE COMPANY.
(e) To use the net proceeds received from the sale of
the Preferred Stock pursuant to this Agreement in the manner specified
in the Final Offering Memorandum under the caption "Use of Proceeds";
(f) At any time when the Company is not subject to
Section 13 or 15(d) of the Exchange Act, for the benefit of holders
from time to time of the Preferred Stock, to furnish at its expense,
upon request, to holders of Preferred Stock, and prospective purchasers
designated by such holders, information satisfying the requirement of
subsection (d)(4)(i) of Rule 144A;
(g) To use its best efforts to cause the Preferred
Stock to be eligible for the Private Offerings, Resales and Trading
Through Automated Linkages ("PORTAL") trading system of the National
Association of Securities Dealers, Inc.;
(h) To cooperate with the Placement Agent and use its
best efforts to permit the Preferred Stock to be eligible for clearance
and settlement through The Depository Trust Company;
(i) In connection with any disposition of Preferred
Stock pursuant to a transaction made in compliance with applicable
State securities laws and (A) satisfying the requirements of Rule
144(k) under the Securities Act, (B) made pursuant to an effective
registration statement under the Securities Act or (C) disposed of in
any other
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<PAGE>
transaction that does not require registration under the Securities Act
(and the Company has received an opinion of counsel or other
documentation satisfactory to it to such effect), to reissue
certificates evidencing such Preferred Stock without the legend
referred to in Section 4(d) (provided, in the case of a transaction
specified in clause (C) above, that the legal opinion referred to
therein so permits);
(j) To furnish to each Investor within 15 days after
the filing with the Commission of each of the Company's annual report
on Form 10-K and the Company's quarterly reports on Form 10-Q a
certificate of an appropriate officer of the Company setting forth in
reasonable detail the calculations required to establish whether the
Company is in compliance with any financial covenants contained in the
Articles Supplementary; and
(k) To comply, to the extent applicable, with
Sections 13 and 14 of the Exchange Act and the provisions of Regulation
14E promulgated thereunder and any other securities laws and
regulations applicable to a repurchase of the Preferred Stock pursuant
to a Change of Control (as defined in the Articles Supplementary).
5. Revocation of Exemption from Certain Provisions of the
Charter. (a) No earlier than 30 days prior to, and no later than the day prior
to, any revocation by the Company of the exemption from the ownership
restrictions set forth in Section 9.2 of the Charter (the "Ownership Limit")
granted to Cobalt Capital LLC ("Cobalt") pursuant to Section 9.6.1 of the
Charter, the Company shall purchase from Cobalt, and Cobalt shall sell to the
Company (the "Cobalt Repurchase"), all such shares of Preferred Stock held by
Cobalt, beneficially or of record, which constitute shares of Preferred Stock in
excess of the Ownership Limit at the Make-Whole Price (as defined in the
Articles Supplementary), pursuant to the procedures applicable to redemptions of
Preferred Stock as set forth in Section 7 of the Articles Supplementary;
provided, however, that the Company shall have no such obligation to purchase
such shares of Preferred Stock from Cobalt, and Cobalt shall have no such
obligation to sell such shares of Preferred Stock to the Company, on or
subsequent to the Listing Date (as defined in the Registration Rights
Agreement).
(b) Simultaneous with any Cobalt Repurchase, the Company shall
purchase from each Initial Purchaser other than Cobalt, and each such Initial
Purchaser shall sell to the Company, such number of shares of Preferred Stock as
may be proportionately (as a percentage of the total number of shares owned by
such Initial Purchaser) equal to the number of shares purchased by the Company
from Cobalt in connection with the Cobalt Repurchase (as a percentage of the
total number of shares owned by Cobalt prior to the Cobalt Repurchase), in each
case at the Make-Whole Price and pursuant to the same procedures applicable to
the Cobalt Repurchase; provided, however, that the Company shall have no such
obligation to purchase such shares of Preferred Stock from such Initial
Purchasers, and such Initial Purchasers shall
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<PAGE>
have no such obligation to sell such shares of Preferred Stock to the Company,
on or subsequent to the Listing Date.
(c) Until the Listing Date, each Initial Purchaser (i) may
transfer or assign all or any portion of its shares of Preferred Stock only
subject to the condition that the transferee or assignee agrees in writing with
the Company to be bound by this Section 5 as if it were an Initial Purchaser,
and (ii) agrees that the Company shall have the right to refuse to register a
proposed transfer or assignment of shares of Preferred Stock unless and until
the transferee or assignee satisfies the foregoing condition in clause (i).
(d) Any purchase obligation of the Company pursuant to this
Section 5 is subject to any applicable provisions of the Maryland General
Corporation Law.
6. (a) Until the first anniversary of the issuance of the
Preferred Stock, each Initial Purchaser shall (i) cause any proposed transferee
or assignee of such Initial Purchaser's shares of Preferred Stock to provide to
the Company a written representation, at least 20 days prior to any proposed
transfer or assignment, as to whether such transferee or assignee is a "benefit
plan investor" (as defined in Section 2(b)), in substantially the form set forth
in Section 2(b) and (ii) otherwise provide notice in writing to the Company of
any such transfer or assignment, at least 20 days prior thereto, regarding the
amount of shares of Preferred Stock to be sold, the price therefor, and the
expected closing date.
(b) Until the first anniversary of the issuance of the
Preferred Stock, each Initial Purchaser (i) may transfer or assign all or any
portion of its shares of Preferred Stock only subject to the condition that the
transferee or assignee agrees in writing with the Company to be bound by this
Section 6 as if it were an Initial Purchaser, and (ii) agrees that the Company
shall have the right to refuse to register a proposed transfer or assignment of
shares of Preferred Stock unless and until the transferee or assignee satisfies
the foregoing condition in clause (i).
7. The several obligation of each Initial Purchaser to
purchase shares of Preferred Stock, and the obligation of the Company to issue
shares of Preferred Stock, shall be subject to the condition that (i) all
representations and warranties and other statements herein of the Company or the
Initial Purchasers, as the case may be, are, at and as of the Closing Date, true
and correct, and (ii) that the Company or the Initial Purchasers, as the case
may be, shall have performed all of its/their obligations hereunder theretofore
to be performed. The obligations of the Initial Purchasers to purchase shares of
Preferred Stock are further subject to the condition that counsel for the
Company shall have furnished to the Initial Purchasers their written opinion or
opinions, dated the Closing Date, in such form and as to such matters as may be
agreed upon between the Initial Purchasers, the Company and counsel to the
Company. The obligations of the Company to issue any shares of Preferred Stock
to any Initial Purchaser are further subject to the condition that each of the
Initial Purchasers shall have purchased and paid for the number of shares of
Preferred Stock set forth opposite its name on Schedule A hereto.
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<PAGE>
8. (a) The Company will indemnify and hold harmless the
Initial Purchasers and the officers and directors of, and each person who
controls, the Initial Purchasers against any losses, claims, damages or
liabilities, joint or several, to which the Initial Purchasers may become
subject insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in the Offering Memoranda, or any
amendment or supplement thereto, at and as of their respective dates, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact necessary to make the statements therein, in the light of the
circumstances under which they are made, not misleading (at and as of their
respective dates).
(b) The obligations of the Company under this Section 8 shall
be in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
the Initial Purchasers within the meaning of the Securities Act.
9. The respective indemnities, agreements, representations,
warranties and other statements of the Company and the Initial Purchasers, as
set forth in this Agreement or made by or on behalf of them, respectively, shall
remain in full force and effect, regardless of any investigation (or any
statement as to the results thereof) made by or on behalf of the Initial
Purchasers or any controlling person of the Initial Purchasers or the Company or
any officer or director or controlling person of the Company, and shall survive
delivery of and payment for the Preferred Stock.
10. (a) Each Initial Purchaser hereby consents, pursuant to
Section 9(c)(ii) of the Articles Supplementary, to the issuance by the Company
of up to 100 shares of Preferred Stock to be issued at the sole discretion of
the Company subsequent to the original issuance of the Preferred Stock.
(b) Until the Listing Date, each Initial Purchaser (i) may
transfer or assign all or any portion of its shares of Preferred Stock only
subject to the condition that the transferee or assignee agrees in writing with
the Company to be bound by this Section 10 as if it were an nitial Purchaser,
and (ii) agrees that the Company shall have the right to refuse to register a
proposed transfer or assignment of shares of Preferred Stock unless and until
the transferee or assignee satisfies the foregoing condition in clause (i).
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<PAGE>
11. All statements, requests, notices and agreements hereunder
shall be in writing, and shall be delivered or sent by mail, telex or facsimile
transmission to the Initial Purchasers at
Cobalt Capital LLC
c/o CGA Investment Management,
as Asset Manager
17 State Street, 40th Fl.
New York, NY 10004
Attn: Christine C. Stanton, Vice President
Tel: 212-655-5426
Fax: 212-655-5802
with a copy to:
Orrick, Herrington & Sutcliffe, LLP
Washington Harbor
3050 K Street, N.W., 2nd Fl.
Washington, D.C. 20007
Attn: David Katz, Esq.
Tel: 202-330-8497
Fax: 202-339-8500
Wells Fargo & Company
555 Montgomery, 10th Fl.
San Francisco, CA 94111
Attn: Gunther Stein, Vice President
Tel: 415-396-0442
Fax: 415-975-7235
with a copy to:
Sheppard, Mullin, Richter & Hampton
333 South Hope, 48th Fl.
Los Angeles, CA 90071
Attn: Charles McCormick, Esq.
Tel: 213-617-4128
Fax: 213-620-1398
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<PAGE>
Retirement Plan of The Bank of New York Company, Inc.
c/o The Bank of New York, as Trustee for the Retirement Plan
of the Bank of New York Company, Inc.
1 Wall Street, 17th Fl.
New York, NY 10286
Attn: Mark Hemenetz, Executive Vice President, Fixed Income
Management
Tel: 212-635-8757
Fax: 212-635-7932
with a copy to:
The Bank of New York, as Trustee for the Retirement Plan of
the Bank of New York
1 Wall Street, 15th Fl.
New York, N.Y. 10286
Attn: Chief Legal Officer
Tel: 212-635-1643
Fax: 212-635-1698
and to the Company at
HRE Properties, Inc.
321 Railroad Avenue
Greenwich, CT 06830
Attn: James R. Moore, Chief Financial Officer, Executive Vice
President,
Secretary and Treasurer
Tel: 203-861-8214
Fax: 203-861-6755
with a copy to:
Coudert Brothers
1114 Avenue of the Americas.
New York, N.Y. 10036
Attn: Thomas J. Drago, Esq.
Tel: 212-626-4400
Fax: 212-626-4120.
Any such statements, requests, notices or agreements shall take effect upon
receipt thereof.
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<PAGE>
12. This Agreement shall be binding upon, and inure solely to
the benefit of, the Initial Purchasers and the Company and, to the extent
provided in Sections 8 and 9 hereof, the officers and directors of, and each
person who controls, the Initial Purchasers, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement, except as may
otherwise be specifically provided for herein. No purchaser of any of the
Preferred Stock from the Initial Purchasers shall be deemed a successor or
assign by reason merely of such purchase.
13. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
principles of conflicts of law.
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<PAGE>
14. This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
HRE PROPERTIES, INC.
By:
-----------------------------------
Name:
Title:
Accepted as of the date hereof
at New York, New York:
COBALT CAPITAL LLC
By: CGA Investment Management, Inc., as Manager
By:
-------------------------------
Name:
Title:
WELLS FARGO & COMPANY
By:
-------------------------------
Name:
Title:
RETIREMENT PLAN OF THE BANK OF
NEW YORK COMPANY, INC.
By: The Bank of New York, as Trustee
By:
-------------------------------
Name:
Title:
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<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of Shares of
Preferred Stock to be
Initial Purchasers Purchased
------------------ ---------------------
<S> <C>
Cobalt Capital LLC............................................................ 200,000
Wells Fargo & Company......................................................... 87,500
Retirement Plan of The Bank of New York Company, Inc. 62,500
-------
Total............................................................... 350,000
</TABLE>
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<PAGE>
SCHEDULE B
Benefit Plan Investor Criteria
The Retirement Plan of The Bank of New York Company, Inc. is
an "employee benefit plan," as defined in Section 3(3) of ERISA.
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EXHIBIT 4.3
[EXECUTION COPY]
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of this 8th day of
January, 1998 (this "Agreement"), by and among HRE Properties, Inc., a Maryland
corporation (the "Company"), and each person executing a counterpart of the
signature page to this Agreement (each individually an "Initial Purchaser" and
collectively the "Initial Purchasers").
W I T N E S S E T H :
WHEREAS, upon the terms and subject to the conditions of the
Subscription Agreement dated as of January 8, 1998, by and among each of the
Initial Purchasers and the Company (the "Subscription Agreement"), the Company
has agreed to issue and sell to the Initial Purchasers, and the Initial
Purchasers have agreed to purchase from the Company, an aggregate of 350,000
shares, par value $.01 per share, of the Company's 8.99% Series B Senior
Cumulative Preferred Stock (the "Preferred Stock") on the terms and conditions
set forth therein; and
WHEREAS, in order to induce the Initial Purchasers to enter
into the Subscription Agreement and to consummate the transactions contemplated
thereby, the Company has agreed to provide the Initial Purchasers with certain
registration rights with respect to the Preferred Stock as more fully set forth
herein.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Definitions.
As used in this Agreement, the following terms shall have the
following meanings:
(a) "Affiliate" of any specified Person means any other Person
who directly, or indirectly through one or more intermediaries, is in control
of, is controlled by, or is under common control with, such specified Person.
For purposes of this definition, control of a Person means the power, directly
or indirectly, to direct or cause the direction of the management and policies
of such Person whether by contract or otherwise; and the terms "controlling" and
"controlled" have the respective meanings correlative to the foregoing.
(b) "Commission" means the Securities and Exchange Commission.
(c) "Exchange Act" means the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission thereunder, or any
similar successor statute.
<PAGE>
(d) "Purchasers" mean the Initial Purchasers and any
transferee or assignee of Registrable Securities who agrees to become bound by
all of the terms and provisions of this Agreement by executing a counterpart to
this Agreement.
(e) "Person" means any individual, partnership, corporation,
limited liability company, joint stock company, association, trust,
unincorporated organization, or a government or agency or political subdivision
thereof.
(f) "Prospectus" means the prospectus (including, without
limitation, any preliminary prospectus and any final prospectus filed pursuant
to Rule 424(b) under the Securities Act, including any prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance on Rule 430A under the Securities Act)
included in the Registration Statement, as amended or supplemented by any
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Securities covered by the Registration Statement and by all
other amendments and supplements to such prospectus, including all material
incorporated by reference in such prospectus and all documents filed after the
date of such prospectus by the Company under the Exchange Act and incorporated
by reference therein.
(g) "Registrable Securities" mean the shares of Preferred
Stock, or any other securities issued in respect of such securities upon any
stock split, stock dividend, recapitalization, merger or other reorganization,
issued to or held by each Purchaser; provided, however, that a share of
Preferred Stock, or of such other securities issued in respect thereof, shall
cease to be a Registrable Security for purposes of this Agreement when it no
longer is a Restricted Security.
(h) "Registration Statement" means a registration statement of
the Company filed on an appropriate form under the Securities Act providing for
the registration of, and the sale on a continuous or delayed basis by the
holders of, all of the Registrable Securities pursuant to Rule 415 under the
Securities Act, including the Prospectus contained therein and forming a part
thereof, any amendments to such registration statement and supplements to such
Prospectus, and all exhibits and other material incorporated by reference in
such registration statement.
(i) "Restricted Security" means any share of Preferred Stock,
or any other security issued in respect of such security upon any stock split,
stock dividend, recapitalization, merger or other reorganization, except any
such share that (i) has been registered pursuant to an effective registration
statement under the Securities Act and sold in a manner contemplated by the
Prospectus included in the Registration Statement, (ii) has been transferred in
compliance with the resale provisions of Rule 144 under the Securities Act (or
any successor provision thereto) or is transferable pursuant to paragraph (k) of
Rule 144 under the Securities Act (or any successor provision thereto), or (iii)
otherwise has been transferred and a new share of Preferred Stock not subject to
transfer restrictions under the Securities Act has been delivered by or on
behalf of the Company.
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<PAGE>
(j) "Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, or any
similar successor statute.
2. Registration.
(a) The Company shall prepare and file with the Commission a
Registration Statement under the Securities Act relating to the offer and sale
of the Registrable Securities and shall use its reasonable best efforts to cause
the Commission to declare such Registration Statement to be effective under the
Securities Act on or prior to January 8, 1999, all in accordance with the terms
of this Agreement.
(b) If the offering pursuant to a Registration Statement
contemplated by Section 2(a) involves an underwritten offering, the Purchasers
who hold at least 66-2/3% of the Registrable Securities subject to such
underwritten offering shall have the right to select one legal counsel to
represent their interests, and a managing underwriter to administer the
offering, which managing underwriter shall be reasonably satisfactory to the
Company. The Purchasers who hold the Registrable Securities to be included in
such underwriting shall pay all underwriting discounts and commissions of such
managing underwriter (and any other underwriter) and all legal fees and expenses
of the Purchasers' legal counsel with respect to their Registrable Securities.
3. Obligations of the Company. In connection with the
registration of the Registrable Securities, the Company shall:
(a) promptly (i) prepare and file with the Commission such
amendments (including post-effective amendments) to the Registration Statement
and supplements to the Prospectus as may be necessary to keep the Registration
Statement continuously effective and in compliance with the provisions of the
Securities Act applicable thereto so as to permit the Prospectus forming a part
thereof to be current and useable by Purchasers for resales of the Registrable
Securities for a period of two years from the date on which the Registration
Statement is first declared effective by the Commission (the "Effective Time")
or such shorter period that will terminate when all the Registrable Securities
covered by the Registration Statement have been (A) sold pursuant thereto in
accordance with the plan of distribution provided in the Prospectus, (B)
transferred pursuant to Rule 144 under the Securities Act or (C) otherwise
transferred in a manner that results in the delivery of new securities not
subject to transfer restrictions under the Securities Act (the "Registration
Period"), and (ii) take all lawful action such that each of (A) the Registration
Statement and any amendment thereto does not, when it becomes effective, contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, not
misleading, and (B) the Prospectus forming part of the Registration Statement,
and any amendment or supplement thereto, does not at any time during the
Registration Period include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Notwithstanding the foregoing provisions of this Section 3(a),
the
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<PAGE>
Company may, during the Registration Period, suspend the use of the Prospectus
for a period not to exceed 60 days (whether or not consecutive) in any 12-month
period if the Board of Directors of the Company determines in good faith that
because of valid business reasons, including pending mergers or other business
combination transactions, planned acquisitions or divestitures of assets, or
pending material corporate developments and similar events, it is in the best
interests of the Company to suspend such use, and prior to or contemporaneously
with suspending such use the Company provides the Purchasers with written notice
of such suspension, which notice need not specify the nature of the event giving
rise to such suspension. At the end of any such suspension period, the Company
shall provide the Purchasers with written notice of the termination of such
suspension;
(b) during the Registration Period, comply with the provisions
of the Securities Act with respect to the disposition of all Registrable
Securities of the Company covered by the Registration Statement until such time
as all of such Registrable Securities have been disposed of in accordance with
the intended methods of disposition by the Purchasers as set forth in the
Prospectus forming part of the Registration Statement;
(c) (i) prior to the filing with the Commission of the
Registration Statement (including any amendments thereto) and the distribution
or delivery of any Prospectus (including any supplements thereto), provide draft
copies thereof to the Purchasers and reflect in such documents all such comments
as the Purchasers (and their counsel) reasonably may propose and (ii) furnish to
each Purchaser whose Registrable Securities are included in the Registration
Statement and its legal counsel identified to the Company, (A) promptly after
the same is prepared and publicly distributed, filed with the Commission, or
received by the Company, one copy of the Registration Statement, each
Prospectus, and each amendment or supplement thereto, and (B) such number of
copies of the Prospectus and all amendments and supplements thereto, and such
other documents, as such Purchaser may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Purchaser;
(d) (i) register and qualify the Registrable Securities
covered by the Registration Statement under such securities or "blue sky" laws
of such jurisdictions as the Purchasers who hold at least 66-2/3% of the
Registrable Securities being offered may reasonably request, (ii) prepare and
file in such jurisdictions such amendments (including post-effective amendments)
and supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all such other lawful actions as may be reasonably
necessary or advisable to qualify the Registrable Securities for sale in such
jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (A) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (B) subject itself to general taxation in any such
jurisdiction or (C) file a general consent to service of process in any such
jurisdiction;
-4-
<PAGE>
(e) as promptly as practicable after becoming aware of such
event, notify each Purchaser of the occurrence of any event, as a result of
which the Prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
promptly prepare an amendment to the Registration Statement and supplement to
the Prospectus to correct such untrue statement or omission, and deliver such
number of copies of such supplement and amendment to each Purchaser as such
Purchaser may reasonably request;
(f) as promptly as practicable after becoming aware of such
event, notify each Purchaser who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriter) of the issuance
by the Commission of any stop order or other suspension of the effectiveness of
the Registration Statement at the earliest possible time and take all lawful
action to effect the withdrawal, recession or removal of such stop order or
other suspension;
(g) at any time after January 8, 2001, upon receipt of a
written request from the Purchasers holding at least 66-2/3% of the outstanding
Preferred Stock that the Company apply for listing of the Preferred Stock, use
its reasonable best efforts to cause the listing of the Preferred Stock on the
New York Stock Exchange, Inc. (the "NYSE") or, if the Preferred Stock shall not
then be eligible for listing on the NYSE, to apply for listing of the Preferred
Stock on the American Stock Exchange, Inc. (the "AMEX") or, if the Preferred
Stock shall not then be eligible for listing on the AMEX, to apply for quotation
of the Preferred Stock through the National Association of Securities Dealers,
Inc. Automated Quotation System (the date of any such listing, the "Listing
Date");
(h) subsequent to the Listing Date, maintain a transfer agent
and registrar, which may be a single entity, for the Preferred Stock;
(i) cooperate with the Purchasers who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts, as the case may be, as the
Purchasers reasonably may request and registered in such names as the Purchasers
may request; and, at the Effective Time, deliver and cause legal counsel
selected by the Company to deliver to the transfer agent for the Registrable
Securities (with copies to the Purchasers whose Registrable Securities are
included in the Registration Statement) an appropriate instruction and opinion
of such counsel;
(j) take all such other lawful actions necessary to expedite
and facilitate the disposition by the Purchasers of their Registrable Securities
in accordance with the intended methods therefor provided in the Prospectus;
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<PAGE>
(k) make generally available to its securityholders as soon as
practicable, but in any event not later than 18 months after (i) the effective
date (as defined in Rule 158(c) under the Securities Act) of the Registration
Statement, (ii) the effective date of each post-effective amendment to the
Registration Statement, and (iii) the date of each filing by the Company with
the Commission of its Annual Report on Form 10-K, an earnings statement of the
Company and its subsidiaries complying with Section 11(a) of the Securities Act
and the rules and regulations of the Commission thereunder (including, at the
option of the Company, Rule 158);
(l) in the event of an underwritten offering, promptly include
or incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managing underwriter may
reasonably request to be included therein and to which the Company does not
reasonably object and make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after it is notified of the
matters to be included or incorporated in such Prospectus supplement or
post-effective amendment;
(m) enter into such customary agreements (including an
underwriting agreement in customary form in the event of an underwritten
offering) and take all such other lawful action to expedite and facilitate the
registration and disposition of the Registrable Securities, and in connection
therewith, if an underwriting agreement is entered into, cause the same to
contain indemnification provisions and procedures substantially identical to
those set forth in this Agreement;
(n) (i) make reasonably available for inspection by
Purchasers, any underwriter participating in any disposition pursuant to the
Registration Statement, and any attorney, accountant or other agent retained by
such Purchasers or any such underwriter all relevant financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries, and (ii) cause the Company's officers, directors and employees to
supply all information reasonably requested by such Purchasers or any such
underwriter, attorney, accountant or agent in connection with the Registration
Statement, in each case, as is customary for similar due diligence examinations;
provided, however, that all records, information and documents that are
designated in writing by the Company as confidential, proprietary or containing
any material non-public information shall be kept confidential by such
Purchasers and any such underwriter, attorney, accountant or agent, unless such
disclosure is made pursuant to judicial process in a court proceeding (after
first giving the Company an opportunity promptly to seek a protective order or
otherwise limit the scope of the information sought to be disclosed) or is
required by law, or such records, information or documents become available to
the public generally or through a third party not in violation of an
accompanying obligation of confidentiality; and provided further that, if the
foregoing inspection and information gathering would otherwise disrupt the
Company's conduct of its business, such inspection and information gathering
shall, to the maximum extent possible, be coordinated on behalf of the
Purchasers and the other parties entitled thereto by one legal counsel
designated by and on behalf of the Purchasers;
-6-
<PAGE>
(o) in connection with any underwritten offering, make such
representations and warranties to the Purchasers participating in such
underwritten offering and to the underwriters in form, substance and scope as
are customarily made by issuers to underwriters in secondary underwritten
offerings;
(p) in connection with any underwritten offering, obtain
opinions of counsel to the Company (which counsel and opinions (in form, scope
and substance) shall be reasonably satisfactory to the managing underwriter)
addressed to the underwriters, covering such matters as are customarily covered
in opinions requested in secondary underwritten offerings and such other matters
as may be reasonably requested by the managing underwriter (it being agreed that
the matters to be covered by such opinions shall include, without limitation, as
of the date of the opinion and as of the Effective Time of the Registration
Statement or the most recent post-effective amendment thereto, as the case may
be, the absence from the Registration Statement and the Prospectus, including
any documents incorporated by reference therein, of untrue statements of
material facts or omissions of material facts required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not misleading, subject
to customary limitations;
(q) in connection with any underwritten offering, obtain "cold
comfort" letters and updates thereof from the independent public accountants of
the Company (and, if necessary, from the independent public accountants of any
subsidiary of the Company or of any business acquired by the Company, in each
case for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each underwriter
participating in such underwritten offering (if such underwriter has provided
such letter, representations or documentation, if any, required for such cold
comfort letter to be so addressed), in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
secondary underwritten offerings; and
(r) in connection with any underwritten offering, deliver such
documents and certificates as may be reasonably requested by the managing
underwriter.
4. Obligations of the Purchasers. In connection with the
registration of the Registrable Securities, the Purchasers shall have the
following obligations:
(a) It shall be a condition precedent to the obligations of
the Company to use its reasonable best efforts to complete the registration
pursuant to this Agreement with respect to the Registrable Securities of a
holder of Registrable Securities that (i) such holder has executed a counterpart
of this Agreement and is, in every other respect, a Purchaser, as such term is
defined and used herein, (ii) such holder has executed a written agreement to be
bound by Sections 5, 6 and 10 of the Subscription Agreement and (iii) such
Purchaser shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities, and shall execute such documents in
connection with such registration as the Company may reasonably request. At
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<PAGE>
least 20 days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Purchaser of the information the
Company requires from each such Purchaser (the "Requested Information"), if such
Purchaser shall elect to have any of its Registrable Securities included in the
Registration Statement. If, at least five business days prior to the anticipated
filing date of the Registration Statement, the Company has not received the
Requested Information from a Purchaser (a "Non-Responsive Purchaser"), then the
Company may file the Registration Statement without including the Registrable
Securities of such Non-Responsive Purchaser.
(b) Each Purchaser by its acceptance of the Registrable
Securities agrees to cooperate with the Company in connection with the
preparation and filing of the Registration Statement hereunder, unless such
Purchaser has notified the Company in writing of its election to exclude all of
its Registrable Securities from the Registration Statement or is otherwise a
Non- Responsive Purchaser.
(c) Each Purchaser agrees that, upon receipt of any notice
from the Company of the occurrence of any event of the kind described in Section
3(e) or 3(f), it shall immediately discontinue its disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Purchaser's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(e) and, if so directed by the
Company, such Purchaser shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Purchaser's possession of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
5. Holdback Agreements. In the event of an underwritten
offering, the Company and each Purchaser agrees not to effect any public sale or
distribution, including any sale pursuant to Rule 144 under the Securities Act,
of any Registrable Securities, and to use such Purchaser's best efforts not to
effect any such public sale or distribution of any other equity security of the
Company, or of any security convertible into or exchangeable or exercisable for
any equity security of the Company (in each case, other than as part of such
underwritten offering), within 7 days before or 90 days after the effective date
of such underwritten offering.
6. Expenses of Registration. All expenses other than
underwriting discounts and commissions, incurred in connection with
registrations, filings or qualifications pursuant to Section 3, including,
without limitation, all registration, listing, and qualification fees, printing
and engraving and accounting fees, the fees and disbursements of counsel for the
Company (but excluding the fees of any legal counsel selected by the
Purchasers), shall be borne by the Company.
7. Indemnification and Contribution.
(a) Indemnification by the Company. The Company shall
indemnify and hold harmless each Purchaser and each underwriter, if any, which
facilitates the disposition of
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<PAGE>
Registrable Securities, and each of their respective officers and directors and
each Person who controls such Purchaser or underwriter within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act (each such
Person being sometimes hereinafter referred to as an "Indemnified Party") from
and against any losses, claims, damages or liabilities, joint or several, to
which such Indemnified Party may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
an omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, not misleading, or
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Prospectus or an omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and the Company hereby agrees to
reimburse such Indemnified Party for all reasonable legal and other expenses
incurred by them in connection with investigating or defending any such action
or claim as and when such expenses are incurred; provided, however, that the
Company shall not be liable to any such Indemnified Party in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon (i) an untrue statement or alleged untrue statement made in, or an
omission or alleged omission from, such Registration Statement or Prospectus in
reliance upon and in conformity with written information furnished to the
Company by such Indemnified Party expressly for use therein or (ii) in the case
of the occurrence of an event of the type specified in Section 3(e), the use by
the Indemnified Party of an outdated or defective Prospectus after the Company
has provided to such Indemnified Party the notice required by Section 3(e).
(b) Indemnification by the Purchasers and Underwriters. Each
Purchaser agrees, as a consequence of the inclusion of any of its Registrable
Securities in a Registration Statement, and each underwriter, if any, which
facilitates the disposition of Registrable Securities shall agree, as a
consequence of facilitating such disposition of Registrable Securities,
severally and not jointly, to (i) indemnify and hold harmless the Company, its
directors (including any person who, with his or her consent, is named in the
Registration Statement as a director nominee of the Company), its officers who
sign the Registration Statement and each Person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act, against any losses, claims, damages or liabilities to
which the Company or such other Persons may become subject, under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in such Registration
Statement or Prospectus or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein (in light of the circumstances under
which they were made, in the case of the Prospectus), not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
holder or underwriter expressly for use therein, and (ii) reimburse the Company
for any
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<PAGE>
reasonable legal or other expenses incurred by the Company in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) Notice of Claims, etc. Promptly after receipt by an
Indemnified Party of written notice of any investigation, claim, proceeding or
other action in respect of which indemnification is being sought (each, a
"Claim"), the Indemnified Party promptly shall notify the party against whom
indemnification pursuant to this Section 7 is being sought (the "Indemnifying
Party") of the commencement thereof; but the omission to so notify the
Indemnifying Party shall not relieve Indemnifying Party from any liability that
it otherwise may have to the Indemnified Party, except to the extent that the
Indemnifying Party is materially prejudiced and forfeits substantive rights and
defenses by reason of such omission. In connection with any Claim as to which
both the Indemnifying Party and the Indemnified Party are parties, the
Indemnifying Party shall be entitled to assume the defense thereof.
Notwithstanding the assumption of the defense of any Claim by the Indemnifying
Party, the Indemnified Party shall have the right to employ separate legal
counsel and to participate in the defense of such Claim, and the Indemnifying
Party shall bear the reasonable fees, out-of-pocket costs and expenses of such
separate legal counsel to the Indemnified Party if (and only if): (x) the
Indemnifying Party shall have agreed to pay such fees, costs and expenses; (y)
the Indemnified Party and the Indemnifying Party shall reasonably have concluded
that representation of the Indemnified Party by the legal counsel to the
Indemnifying Party would not be appropriate due to actual or, as reasonably
determined by legal counsel to the Indemnified Party, potentially differing
interests between such parties in the conduct of the defense of such Claim, or
if there may be legal defenses available to the Indemnified Party that are in
addition to or disparate from those available to the Indemnifying Party; or (z)
the Indemnifying Party shall have failed to employ legal counsel reasonably
satisfactory to the Indemnified Party within a reasonable period of time after
notice of the commencement of such Claim. If the Indemnified Party employs
separate legal counsel in circumstances other than as described in clauses (x),
(y) or (z) above, the fees, costs and expenses of such legal counsel shall be
borne exclusively by the Indemnified Party. Except as provided above, the
Indemnifying Party shall not, in connection with any Claim in the same
jurisdiction, be liable for the fees and expenses of more than one legal counsel
for the Indemnified Party. The Indemnified Party shall not, without the prior
written consent of the Indemnifying Party (which consent shall not unreasonably
be withheld), settle or compromise any Claim or consent to the entry of any
judgment that does not include an unconditional release of the Indemnifying
Party from all liabilities with respect to such Claim or judgment.
(d) Contribution. If the indemnification provided for in this
Section 7 is unavailable to or insufficient to hold harmless an Indemnified
Party under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein, then
each Indemnifying Party shall contribute to the amount paid or payable to such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof) as
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<PAGE>
well as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by such Indemnifying Party or by such Indemnified Party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The parties hereto
agree that it would not be just and equitable if contribution pursuant to this
Section 7(d) were determined by pro rata allocation (even if the Purchasers and
the underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to in this Section 7(d). The amount paid or payable by an Indemnified
Party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such Indemnified Party in connection
with investigating or defending any such action or claim. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. The obligations of the Purchasers
and any underwriters in this Section 7(d) to contribute shall be several, not
joint, and in proportion to the percentage of Registrable Securities registered
or underwritten by the Purchasers or underwriters, respectively.
(e) Notwithstanding any other provision of this Section 7, (i)
in no event shall any Purchaser be liable to any Person under this Section 7 for
any amounts in excess of the dollar amount of the proceeds to be received by
such Purchaser from the sale of such Purchaser's Registrable Securities (after
deducting any fees, discounts and commissions applicable thereto) pursuant to
the Registration Statement under which such Registrable Securities are to be
registered under the Securities Act, and (ii) in no event shall any underwriter
be required to undertake liability to any Person hereunder for any amounts in
excess of the aggregate discounts, commissions or other compensation payable to
such underwriter with respect to the Registrable Securities underwritten by it
and distributed pursuant to the Registration Statement.
(f) The obligations of the Company under this Section 7 shall
be in addition to any liability which the Company may otherwise have to any
Indemnified Party and the obligations of any Purchaser under this Section 7
shall be in addition to any liability which such Purchaser may otherwise have to
any Indemnified Party. The remedies provided in this Section 7 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
an Indemnified Party at law or in equity.
8. Rule 144. With a view to making available to the Purchasers
the benefits of Rule 144 under the Securities Act or any other similar rule or
regulation of the Commission that may at any time permit the Purchasers to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to:
(a) comply with the provisions of paragraph (c)(1) of Rule
144; and
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<PAGE>
(b) file with the Commission in a timely manner all reports
and other documents required to be filed by the Company pursuant to Section 13
or 15(d) under the Exchange Act.
9. Assignment. Notwithstanding anything to the contrary
contained in this Agreement, the rights to have the Company register Registrable
Securities pursuant to this Agreement will not be transferred to a transferee of
Registrable Securities unless: (a) the Purchaser agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company as soon as practicable after such assignment; (b) the
Company is, as soon as practicable after such transfer or assignment, furnished
with written notice of (i) the name and address of such transferee or assignee
and (ii) the securities with respect to which such registration rights are being
transferred or assigned; (c) immediately following such transfer or assignment,
the securities so transferred or assigned to the transferee or assignee
constitute Restricted Securities; and (d) at or before the time the Company
receives the written notice contemplated by clause (b) of this sentence, the
transferee or assignee signs a counterpart of this Agreement or otherwise agrees
in writing with the Company to be bound by all of the provisions contained
herein.
10. Restrictions on Transferability. Each Purchaser
acknowledges and agrees that the Registrable Securities are subject to certain
transfer restrictions set forth in the Subscription Agreement, and each
Purchaser further acknowledges and agrees that certificates representing shares
of Registrable Securities shall be stamped or otherwise imprinted with legends
restricting the transferability thereof, in substantially the form set forth in
the Subscription Agreement.
11. Amendment and Waiver. Any provision of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Purchasers who hold at least 66-2/3% of
the Registrable Securities. Any amendment or waiver effected in accordance with
this Section 11 shall be binding upon each Purchaser and the Company.
12. Miscellaneous.
(a) A Person shall be deemed to be a holder of Registrable
Securities whenever such Person owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more Persons with respect to the same Registrable Securities, the Company shall
act upon the basis of instructions, notice or election received from the
registered owner of such Registrable Securities.
(b) Notices required or permitted to be given hereunder shall
be in writing and shall be deemed to be sufficiently given when personally
delivered (by hand, by courier, by facsimile transmission, receipt confirmed) or
sent by certified mail, return receipt requested, properly addressed and with
proper postage pre-paid (i) if to the Company, to HRE Properties,
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<PAGE>
Inc., 321 Railroad Avenue, Greenwich Connecticut 06830 Attn: Secretary, with a
copy to Coudert Brothers, 1114 Avenue of the Americas, New York, NY 10036, Attn:
Thomas J. Drago, Esq., (ii) if to the Initial Purchasers, at the respective
addresses set forth in the Subscription Agreement and (iii) if to any other
Purchaser, at such address as such Purchaser shall have provided in writing to
the Company, or at such other address as each such party furnishes by notice
given in accordance with this Section 12(b), and shall be effective, when
personally delivered, upon receipt and, when so sent by certified mail, four
calendar days after deposit with the United States Postal Service.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York, without regard to applicable
conflict of laws principles. Each of the parties consents to the jurisdiction of
the federal courts whose districts encompass any part of the City of New York or
the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection including any objection based
on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceabil-2ity of this Agreement in any other jurisdiction.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and undertakings among the parties hereto with respect to the
subject matter hereof.
(f) Subject to all conditions herein, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement.
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<PAGE>
A facsimile transmission of this signed Agreement shall be legal and binding on
all parties hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered as of the date first above written.
HRE PROPERTIES, INC.
By:
----------------------------------
Name:
Title:
COBALT CAPITAL LLC
By: CGA Investment Management, Inc.,
as Manager
By:
----------------------------------
Name:
Title:
WELLS FARGO & COMPANY
By:
----------------------------------
Name:
Title:
RETIREMENT PLAN OF THE BANK
OF NEW YORK COMPANY, INC.
By: The Bank of New York, as Trustee
By:
----------------------------------
Name:
Title:
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