AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 6, 1997
REGISTRATION NO. 333-33977
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 3
TO
FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
OF SECURITIES OF CERTAIN REAL ESTATE COMPANIES
---------------
EQUITY ONE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS GOVERNING INSTRUMENTS)
---------------
<TABLE>
<S> <C>
CHAIM KATZMAN
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
EQUITY ONE, INC.
777 17TH STREET, PENTHOUSE 777 17TH STREET, PENTHOUSE
MIAMI BEACH, FLORIDA 33139 MIAMI BEACH, FLORIDA 33139
(305) 538-5488 (305) 538-5488
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (NAME AND ADDRESS OF AGENT FOR SERVICE)
</TABLE>
---------------
WITH COPIES TO:
<TABLE>
<S> <C> <C>
GARY EPSTEIN, ESQ. JUDITH D. FRYER, ESQ. THOMAS W. DOBSON, ESQ.
GREENBERG TRAURIG HOFFMAN GREENBERG TRAURIG HOFFMAN LATHAM & WATKINS
LIPOFF ROSEN & QUENTEL, P.A. LIPOFF ROSEN & QUENTEL, 633 WEST FIFTH STREET, SUITE 4000
1221 BRICKELL AVENUE A PARTNERSHIP OF LOS ANGELES, CALIFORNIA 90071-2007
MIAMI, FLORIDA 33131 PROFESSIONAL CORPORATIONS (213) 485-1234
(305) 579-0500 153 EAST 53RD STREET
NEW YORK, NEW YORK 10021
(212) 801-9200
</TABLE>
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
============================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT BEING OFFERING PRICE AGGREGATE AMOUNT OF
BEING REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE REGISTRATION FEE(3)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value. 5,405,000 Shares $16.00 $86,480,000.00 $26,206.06
============================================================================================================
<FN>
(1) Includes 705,000 shares of Common Stock which may be purchased by the
Underwriters pursuant to an over-allotment option.
(2) Estimated solely for purposes of calculating the registration fee.
(3) The Company has previously paid a registration fee in the aggregate amount
of $25,796.59.
</FN>
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER 6, 1997
[EQUITY ONE LOGO]
4,700,000 Shares
EQUITY ONE, INC.
Common Stock
($.01 par value)
-----------
Equity One, Inc., a Maryland corporation (together with its subsidiaries, the
"Company"), is a self-administered, self-managed real estate investment trust
("REIT") that principally acquires, renovates, develops and manages community
and neighborhood shopping centers anchored by national and regional
supermarket chains. The Company's portfolio consists of 15 shopping centers,
two mixed use (office/retail) properties, one office building, one
mini-warehouse facility and certain other properties acquired for renovation
or development.
All of the shares of Common Stock offered hereby (the "Offering") are being
sold by the Company. Prior to the Offering, there has been no public market for
the Common Stock. It is anticipated that the initial public offering price will
be between $13.00 and $16.00 per share. For information relating to the factors
considered in determining the initial public offering price, see
"Underwriting". Upon completion of the Offering, the shares of Common Stock
offered hereby will represent 40.5% of the outstanding Common Stock (43.9% if
the Underwriters' over-allotment option is exercised in full). To assist the
Company in maintaining its qualification as a REIT, ownership by any person is
limited to 5.0% of the then outstanding Common Stock, although the Company's
Board of Directors has previously exempted certain existing stockholders from
this ownership limitation. The Common Stock has been approved for listing on
the New York Stock Exchange, subject to official notice of issuance, under the
symbol "EQY". No assurance can be given that a public market for the Common
Stock will develop or if developed, will be maintained. The Company is in no
way related to, or affiliated with, Equity Inns, Inc., Equity Office Properties
Trust or Equity Residential Properties Trust, or any other publicly-traded
REIT. See "Glossary" beginning on page 105 for definitions of certain terms
used in this Prospectus.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS" COMMENCING ON PAGE
17, INCLUDING:
/bullet/ Dependence on key tenants, particularly Winn-Dixie and Publix
supermarkets, increases the potential impact on the Company of adverse
developments in the business of, or its relationship with, such tenants.
/bullet/ All but two of the Company's properties are located in Florida,
and therefore the Company may be adversely affected by a downturn in the
general economic conditions in such state.
/bullet/ The Company plans to develop and redevelop properties, despite no
experience as a developer and limited experience as a redeveloper, which
may increase the risk of loss in such activities.
/bullet/ Management and affiliates of the Company will own 59.1% of the
outstanding Common Stock after the Offering, and the public stockholders'
ability to influence the Company is limited by their minority positions,
the Company's organizational documents and Maryland law.
/bullet/ Certain members of management, particularly the Company's Chief
Executive Officer and Chief Operating Officer, are subject to conflicts of
interest in that they may engage in other activities, including other real
estate activities.
/bullet/ The Company would be subject to adverse tax consequences if it
fails to qualify as a REIT.
/bullet/ The Company's initial distribution is estimated at 101.8% of cash
available for distribution, increasing in the likelihood that the Company
will be required to fund distributions from working capital or borrowings
or reduce the amount of such distribution.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY(1)
------------ --------------- -------------
Per Share ...... $ $ $
Total(2) ...... $ $ $
(1) Before deduction of expenses payable by the Company estimated at $ .
(2) The Company has granted the Underwriters an option, exercisable for 30 days
from the date of this Prospectus, to purchase a maximum of 705,000
additional shares to cover over-allotments of shares. If the option is
exercised in full, the total Price to Public will be $ , Underwriting
Discounts and Commissions will be $ and Proceeds to Company will be
$ .
The Common Stock is offered by the several Underwriters when, as and if
issued by the Company, delivered to and accepted by the Underwriters, and
subject to their right to reject orders in whole or in part. It is expected
that the Common Stock will be ready for delivery on or about , 1997,
against payment therefor in immediately available funds.
CREDIT SUISSE FIRST BOSTON
THE ROBINSON-HUMPHREY COMPANY
SALOMON BROTHERS INC
Prospectus dated , 1997
<PAGE>
[PHOTOGRAPHS OF STORE FRONTS OF CERTAIN OF THE TENANTS
OF THE COMPANY'S LAKE MARY SHOPPING CENTRE, LAKE MARY, FLORIDA
FOUR CORNERS SHOPPING CENTER, TOMBALL, TEXAS
OAK HILL SHOPPING CENTER, JACKSONVILLE, FLORIDA
BIRD LUDLUM SHOPPING CENTER, MIAMI, FLORIDA
THE INSIDE FRONT COVER ALSO CONTAINS THE FOLLOWING CAPTION
"PHOTOGRAPHS DEPICT CERTAIN PROPERTIES, AND DO NOT INCLUDE ALL PROPERTIES,
OWNED BY THE COMPANY"]
[MAP OF FLORIDA INDICATING THE LOCATION OF THE COMPANY'S SHOPPING CENTERS]
[COMPANY LOGO]
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE
SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING".
<PAGE>
TABLE OF CONTENTS
PAGE
------
PROSPECTUS SUMMARY ........................... 1
The Company ................................. 1
Summary Risk Factors ........................ 2
Business and Growth Strategies ............ 5
Market Data ................................. 6
The Properties .............................. 8
Distributions .............................. 10
Mortgage Indebtedness and
Credit Facilities ..................... 11
Financing Policies ........................... 12
Possible Conflicts of Interest ............... 12
Benefits of the Offering to Existing
Stockholders, Including
Management .............................. 13
Restrictions on Ownership of
Common Stock ........................... 13
Tax Status of the Company .................. 13
Company Information ........................ 14
The Offering .............................. 14
Summary Consolidated Financial Data 15
RISK FACTORS ................................. 17
The Company Is Dependent Upon
Certain Key Tenants ..................... 17
Geographic Concentration of the
Company's Properties Creates a Risk
of a Negative Impact as a Result of
Economic Downturns in Such Areas ........ 18
The Company Will Be Subject to
Risks Associated with its Entry into
New Markets ........................... 18
The Company Is Subject to Risks
Associated with Construction and
Development Activities .................. 18
The Company Relies on Key Personnel
Who Conduct Other Business
Activities .............................. 19
Directors, Executive Officers and
Affiliates Have the Ability to
Control the Company ..................... 19
The Company Is Subject to Possible
Conflicts of Interest .................. 20
REIT Distribution Requirements and
the Company's Financial Condition
Will Affect the Amount of
Distributions to Stockholders ......... 20
Estimated Initial Cash Available for
Distribution May Not Be Sufficient
to Make Distribution at Expected
Levels ................................. 20
PAGE
------
The Company Is Subject to Risks
Associated with the Real Estate
Industry .............................. 21
Failure to Qualify as a REIT Would
Cause the Company to Be Taxed as
a Regular Corporation .................. 22
Costs of Compliance with Laws Could
Have an Adverse Effect on the
Company ................................. 23
The Company's Use of Debt,
Refinancing Needs, Increases in
Interest Rates and an Absence of a
Limitation on Debt Could Adversely
Affect the Company ..................... 25
Management of the Company Has
Broad Discretion in Determining
How to Apply a Significant Portion
of the Proceeds of the Offering ......... 26
Stockholder Approval Is Not Required
to Engage in Investment Activity ...... 26
Changes in Interest Rates Could
Adversely Affect the Company ......... 26
The Purchasers of Common Stock Will
Experience Dilution ..................... 27
The Price of the Common Stock May
Be Adversely Affected by the Lack
of a Prior Public Market and
Fluctuations in the Stock Market;
The Offering Price Is Not Based
Upon Property Valuations ............... 27
The Company Could Be Affected by
Damage to Property Not Covered by
Insurance .............................. 27
Certain Indebtedness of the Company
May Be in Default ..................... 27
Availability of Shares of Common
Stock for Future Sale Could
Adversely Affect the Price of the
Common Stock ........................... 28
The Ability to Effect a Change of
Control of the Company Is Limited ...... 28
Supermajority Provisions for Director Action May
Inhibit the Company's Ability to Transact
Business.................................. 30
USE OF PROCEEDS .............................. 31
DISTRIBUTION POLICY ........................... 32
DILUTION .................................... 36
CAPITALIZATION .............................. 37
SELECTED CONSOLIDATED
FINANCIAL DATA ........................... 38
i
<PAGE>
PAGE
------
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS
OF OPERATIONS ........................... 40
Results of Operations ..................... 40
Mortgage Indebtedness ..................... 43
Liquidity and Capital Resources ......... 43
Impact of Accounting Pronouncements
Issued but not Adopted ............... 45
Inflation ................................. 45
BUSINESS ................................. 46
General ................................. 46
Business and Growth Strategies ............ 47
Market Data .............................. 51
The Properties ........................... 55
Redevelopment and Development
Properties ........................... 57
Major Tenants ........................... 58
Lease Expirations ........................ 58
Additional Information Concerning
the Existing Properties ............ 59
Property Management, Leasing and
Related Service Business ............ 63
Competition .............................. 63
Regulations and Insurance ............... 63
Environmental Matters ..................... 64
Employees ................................. 65
Legal Proceedings ........................ 65
MANAGEMENT ................................. 66
Directors and Executive Officers ......... 66
Management and Key Employees ............ 67
Directors' Compensation .................. 68
Committees of the Board of Directors . 68
Executive Compensation .................. 69
Employment Agreements ..................... 69
Insurance ................................. 70
Stock Option Plan ........................ 70
CERTAIN TRANSACTIONS ..................... 72
Investment Agreement ..................... 72
Agreement Among Stockholders ............ 72
Acquisition of Global Realty &
Management, Inc. ..................... 73
Loans to Executive Officers ............ 73
Consulting Agreements .................. 73
Managed Properties ........................ 73
Registration Rights ..................... 73
Benefits of Offering to Existing
Stockholders, Including
Management ........................... 74
Use Agreement ........................... 74
Service Agreement ........................ 74
PAGE
------
Other .................................... 74
POLICIES WITH RESPECT TO
CERTAIN ACTIVITIES ..................... 74
Investment Policies ..................... 74
Financing Policies ........................ 75
Conflicts of Interest Policies ............ 76
Redevelopment and Development
Policies ........................... 76
Policies with Respect to
Other Activities ..................... 76
PRINCIPAL STOCKHOLDERS ..................... 77
DESCRIPTION OF CAPITAL STOCK . 79
Common Stock .............................. 79
Preferred Stock ........................... 80
Warrants ................................. 80
Restrictions on Ownership and
Transfer of Common Stock ............ 80
Anti-Takeover Effects of Certain
Provisions of Maryland Law, and the
Company's Charter and Bylaws ......... 83
Advance Notice of Director
Nominations and New Business ...... 85
Indemnification of Directors and
Officers.............................. 86
Transfer Agent and Registrar ............ 87
SHARES ELIGIBLE FOR FUTURE
SALE ................................. 88
FEDERAL INCOME TAX
CONSIDERATIONS ........................ 89
Taxation of the Company .................. 89
Failure to Qualify for Taxation
as a REIT ........................... 94
Taxation of U.S. Stockholders ............ 94
Backup Withholding ..................... 96
Taxation of Certain Tax-Exempt
Stockholders ........................ 96
Taxation of Non-U.S. Stockholders ......... 97
Taxpayer Relief Act of 1997 ............... 99
Other Tax Consequences .................. 99
ERISA CONSIDERATIONS ..................... 100
Fiduciary Considerations ............... 100
Plan Assets Issue ........................ 100
UNDERWRITING .............................. 102
LEGAL MATTERS .............................. 103
EXPERTS ................................. 103
ADDITIONAL INFORMATION ..................... 104
GLOSSARY ................................. 105
INDEX TO FINANCIAL
STATEMENTS .............................. F-1
ii
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE FINANCIAL STATEMENTS AND THE NOTES THERETO APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, (I) THE "COMPANY"
REFERS TO THE BUSINESS AND PROPERTY OF EQUITY ONE, INC. AND ITS CONSOLIDATED
SUBSIDIARIES, (II) THE INFORMATION SET FORTH IN THIS PROSPECTUS GIVES EFFECT TO
THE TWO-FOR-ONE STOCK SPLIT THAT OCCURRED ON JULY 15, 1997, ASSUMES AN INITIAL
PUBLIC OFFERING PRICE OF $14.50 PER SHARE OF COMMON STOCK (REPRESENTING THE
MID-POINT OF THE RANGE SET FORTH ON THE COVER PAGE OF THIS PROSPECTUS) AND
ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED AND (III)
ALL REFERENCES TO SQUARE FOOTAGE REFER TO GROSS LEASABLE AREA ("GLA") AND
PERCENTAGES OF GLA AND SQUARE FOOTAGE ARE APPROXIMATE. SEE "GLOSSARY" BEGINNING
ON PAGE 105 FOR THE DEFINITIONS OF CERTAIN TERMS USED IN THIS PROSPECTUS,
INCLUDING CAPITALIZED TERMS USED HEREIN WITHOUT DEFINITION.
THE COMPANY
The Company is a self-administered, self-managed real estate investment
trust ("REIT") that principally acquires, renovates, develops and manages
community and neighborhood shopping centers anchored by national and regional
supermarket chains ("Supermarket Centers"). The Company's portfolio consists of
14 Supermarket Centers, one drug store anchored neighborhood shopping center,
two mixed-use (office/retail) properties, one office building and one
mini-warehouse facility (collectively, the "Existing Properties"). The Existing
Properties are located primarily in the Dade County (Miami), Orlando and
Jacksonville metropolitan areas of Florida, and in Texas, and contain an
aggregate of 2.0 million square feet of GLA which, as of June 30, 1997, were
93.0% leased. The Company also owns 10.0 acres of land in Southwest Dade
County, Florida ("Coral Way") on which it intends to develop a 100,000 square
foot Supermarket Center, and has recently acquired a shopping center in
Northeast Dade County, Florida which will be comprehensively redeveloped into a
300,000 square foot Supermarket Center ("Sky Lake"). In addition, the Company
has recently entered into agreements to purchase a Supermarket Center
consisting of an aggregate of 85,300 square feet of GLA located in Lantana,
Florida ("Lantana Village") and a Supermarket Center consisting of an aggregate
of 67,930 square feet of GLA located in Jacksonville, Florida ("Beauclerc
Village"), and has recently agreed to purchase a Supermarket Center consisting
of an aggregate of 110,200 square feet of GLA located in Fort Myers, Florida
("Summerlin Square"). The Company also owns an aggregate of 13.0 acres of land
adjacent to certain of the Existing Properties and recently agreed to purchase
4.4 acres of vacant land proximate to Coral Way, substantially all of which is
intended for retail development.
Supermarket Centers are anchored by national and regional supermarkets
such as Winn-Dixie (the fourth largest supermarket chain in the country),
Publix (the largest supermarket chain in Florida), Albertsons (the sixth
largest supermarket chain in the country) and Kroger (the largest supermarket
chain in the country). Additional tenants particularly responsible for drawing
tenants and shoppers to the Company's Supermarket Centers (including national
and regional supermarkets, "Anchor Tenants") include national retailers such as
K-Mart, Best Buy, Walgreens and Eckerd. Non-Anchor Tenants of the Supermarket
Centers include national and regional retailers and service providers, as well
as local businesses, and include such businesses as Einstein Bros. Bagels,
Rainbow Shops, Play It Again Sports, Video Avenue, General Nutrition Center,
Radio Shack, NationsBank, Burger King and Chili's. The Company believes that
supermarkets and other Anchor Tenants offering daily necessity items generate
regular consumer traffic and enhance the performance and stability of a center.
As of June 30, 1997, the Company's supermarket Anchor Tenants, other Anchor
Tenants and non-Anchor Tenants contributed 24.7%, 23.1% and 52.2%,
respectively, of the Company's aggregate annualized minimum rents and accounted
for approximately 31.1%, 22.2% and 46.7%, respectively, of GLA.
The Company was organized in June 1992 under the laws of the State of
Maryland to acquire Supermarket Centers in high growth, densely populated areas
throughout the Southeast generating
1
<PAGE>
stable cash flows and long-term value. The Company selects properties for
acquisition or development which have, or are suitable for, supermarket and
other Anchor Tenants, and are adaptable over time for expansion, renovation and
redevelopment. In order to take advantage of property management operating
efficiencies and present attractive leasing opportunities to tenants who seek
multiple locations in an area, the Company also targets properties proximate to
its other properties. All properties must be well located and have high
visibility, open air designs, ease of entry and exit and ample parking. The
Company acquires both Supermarket Centers that are substantially fully leased
(i.e., existing tenants occupy 85% or more of GLA), appropriately tenanted and
well maintained ("Performing Supermarket Centers"), and Supermarket Centers
which are not Performing Supermarket Centers which meet the Company's turnaround
criteria ("Underperforming Supermarket Centers"). In acquiring Performing
Supermarket Centers, the Company requires attractive and sustainable rates of
return, and in acquiring Underperforming Centers, the Company seeks
opportunities to increase revenues primarily through renovation and retenanting.
The Company believes that its management team possesses the experience and
expertise necessary to identify, acquire, renovate, develop and manage
additional Supermarket Centers. The Company's principal senior executives and
property managers average 15 years experience in the real estate industry and
have acquired and managed all the Existing Properties. Management believes that
it has cultivated strong relationships with supermarkets and other Anchor
Tenants which, in combination with its in-depth knowledge of the Company's
primary markets, has contributed substantially to the Company's success in
identifying, acquiring and operating its properties.
Since its formation, the Company has experienced sustained growth in its
real estate portfolio, revenues and net income. From January 1, 1994 to June
30, 1997, the Company increased total assets and GLA to $120.9 million and 2.0
million square feet, respectively, from $28.5 million and 600,000 square feet,
respectively. For the year ended December 31, 1996, total revenues and net
income increased to $16.7 million and $3.9 million, respectively, from $2.1
million and $49,000, respectively, for the year ended December 31, 1993.
Similarly, total revenues and net income increased to $9.7 million and $2.6
million, respectively, for the six months ended June 30, 1997 from $8.0 million
and $1.8 million, respectively, for the six months ended June 30, 1996. For a
discussion of the growth in the Company's funds from operations, see "Summary
Consolidated Financial Data" and "Selected Consolidated Financial Data".
SUMMARY RISK FACTORS
Prospective investors should carefully consider the matters discussed
under "Risk Factors" prior to making an investment in the Common Stock which,
individually or in the aggregate, could have a material adverse effect on the
Company's financial condition, results of operations, liquidity, funds from
operations and its ability to make distributions to stockholders. These risks
include:
/bullet/ The Company's results of operations are dependent on certain
key tenants, particularly Winn-Dixie and Publix supermarkets, which
represented approximately 12.5% and 3.8%, respectively, of the
Company's aggregate annualized minimum rental revenues for leases in
effect at June 30, 1997, thereby increasing the potential negative
impact to the Company of downturns in the business of, or its
relationship with, such tenants.
/bullet/ All but two of the Company's properties are located in the
State of Florida, increasing the risk that the Company will be
materially adversely affected by a downturn in the general economic
conditions in such state.
/bullet/ The Company plans to develop and redevelop properties,
despite no experience as a developer and limited experience as a
redeveloper, which may increase the risk of loss in development and
redevelopment.
2
<PAGE>
/bullet/ The Company is dependent on key personnel whose continued
service is not guaranteed, particularly Messrs. Katzman and Valero.
/bullet/ The affairs of the Company are controlled by its Board of
Directors and by certain affiliated stockholders who may change the
investment and other policies of the Company without the consent of
stockholders, which may adversely affect the Company.
/bullet/ Certain members of the Company's management, particularly
Messrs. Katzman and Valero, are subject to conflicts of interest in
that they may engage in other activities, including other real estate
activities.
/bullet/ The distribution requirements for REITs under federal income
tax laws may limit the Company's ability to finance future
acquisitions, redevelopments and developments without additional debt
or equity financing and may limit cash available for distribution (as
defined in the Glossary and described under "Distribution Policy") to
stockholders.
/bullet/ The Company's estimated annual distribution following the
Offering will represent 101.8% of the Company's estimated cash
available for distribution (107.9% of the Company's cash available
for distribution if the over-allotment option granted to the
Underwriters is exercised in full), without giving effect to the
interest earned on excess proceeds of the Offering to be used in
connection with development and redevelopment activities, potentially
requiring the Company to fund distributions from working capital or
borrowings. See "Distribution Policy".
/bullet/ The Company would be taxed as a corporation if it fails to
qualify as a REIT for federal income tax purposes in which event the
Company's liability for certain federal, state and local income taxes
would decrease cash available for distribution.
/bullet/ The value of the Company's real estate investments is
affected by economic and other conditions, the general lack of
liquidity of investments in real estate, the ability of tenants to
pay rents, the possibility that leases may not be renewed or will be
renewed on terms less favorable to the Company, the possibility of
uninsured losses, including losses associated with natural disasters,
the ability of the Company's Existing Properties to generate
sufficient cash flow to meet operating expenses, including debt
service, and competition in seeking properties for acquisition and in
seeking tenants, which factors, individually or in the aggregate, may
negatively impact the Company's ability to make distributions to
stockholders.
/bullet/ The Company is potentially liable for environmental matters
and the costs of compliance with certain governmental regulations,
which may have an adverse effect on the Company.
/bullet/ The Company is subject to risks associated with borrowing,
including: (i) the Company's possible inability to obtain new
financing on favorable terms, (ii) the required refinancing of
mortgage indebtedness of approximately $47.1 million at maturity
dates ranging from May 1999 to February 2015, (iii) the possibility
that indebtedness might be refinanced on less favorable terms, (iv)
the absence of limitations on the amount of indebtedness that the
Company may incur, (v) that interest rates might increase on any
variable rate or refinanced indebtedness and (vi) that the Company's
leverage may limit its ability to grow through additional debt
financing, which may have an adverse effect on the ability of the
Company to repay debt, particularly in the event of a downturn in the
Company's business.
3
<PAGE>
/bullet/ The Company is able to incur additional debt, thereby
increasing its debt service, which could adversely affect the
Company.
/bullet/ Management of the Company will have broad discretion as to
the application of a significant portion of the proceeds of the
Offering.
/bullet/ Purchasers of Common Stock in the Offering will incur
immediate and substantial dilution of $4.68 per share in the net
tangible book value per share of Common Stock.
/bullet/ There has been no prior public market for the Common Stock,
and an active trading market might not develop, or might not be
maintained, which may negatively impact the ability to sell Common
Stock and the price at which shares of Common Stock may be resold.
/bullet/ Fluctuations in interest rates or equity markets may
negatively impact the price at which shares of Common Stock may be
resold and may limit the Company's ability to raise additional
capital to finance future development.
/bullet/ The possible issuance of additional shares of Common Stock,
including (i) 1,306,124 shares issuable upon the exercise of
outstanding warrants to purchase Common Stock, (ii) 580,288 shares
issuable to an affiliate of the Company pursuant to a stock purchase
agreement and (iii) 1,000,000 shares reserved for issuance upon
exercise of stock options granted under the Company's 1995 Stock
Option Plan, pursuant to which options to purchase 614,000 shares
have been granted, may adversely affect the market price of the
Common Stock or result in additional dilution.
/bullet/ The possible inability of the Company to obtain a line of
credit may negatively impact the Company's ability to acquire,
develop and redevelop properties. In particular, the success of the
Company's redevelopment of Sky Lake is dependent on the Company's
obtaining an acquisition line of credit or other source of financing
in an amount necessary to complete the redevelopment project.
/bullet/ The Company's Bylaws require an affirmative vote of 80% of
the directors to approve any matter before the Board of Directors.
There can be no assurance that the supermajority provisions in the
Company's Bylaws will not lead to impasse and the inability of the
Board of Directors to conduct the business of the Company, possibly
resulting in a petition for dissolution of the Company.
4
<PAGE>
BUSINESS AND GROWTH STRATEGIES
The Company intends to maximize total return to stockholders by increasing
cash flow per share and maximizing the value of its real estate portfolio. The
Company believes it can achieve this objective primarily through the
acquisition, renovation, development and management of Supermarket Centers and
other properties which meet the Company's investment criteria. The Company
believes it has certain competitive advantages which enhance its ability to
capitalize on acquisition opportunities, including: (i) management's
significant local market experience and expertise; (ii) the Company's long-
standing relationships with real estate brokers, tenants and institutional and
other real estate owners in its current target markets; (iii) a streamlined
acquisition process; (iv) access to capital; and (v) the ability to offer cash
and tax advantaged structures to sellers. The Company's principal business and
growth strategies include:
/bullet/ ACQUISITION OF PERFORMING SUPERMARKET CENTERS. The Company
intends to acquire Performing Supermarket Centers that offer attractive
and sustainable rates of return in areas throughout the Southeast
having demographic characteristics similar to those of its present
markets. Examples of acquisitions of Performing Supermarket Centers
include, (i) West Lake Plaza Shopping Center ("West Lake") and Forest
Edge Shopping Center ("Forest Edge") in 1996, (ii) Lake Mary Shopping
Centre ("Lake Mary") and Pointe Royale Shopping Center ("Pointe
Royale") in 1995 and (iii) Bird Ludlum Shopping Center ("Bird Ludlum")
in 1994. The Company will target Performing Supermarket Centers which
are adaptable to expansion, renovation and redevelopment, and, in order
to maximize property management efficiencies and present attractive
leasing opportunities to tenants who seek multiple locations in one
area, are located proximate to other Company owned Supermarket Centers
or to one another. When entering new markets, the Company considers its
ability to increase and concentrate holdings in order to achieve
economies of scale. See "Business-- Business and Growth Strategies".
The Company has recently entered into an agreement to acquire Lantana
Village, subject to satisfaction of certain conditions, for
approximately $7.0 million. Lantana Village is a Performing Supermarket
Center located in Lantana, Florida which contains 85,300 square feet of
GLA, represents aggregate annualized minimum rental revenues of
approximately $800,000 and is anchored by a Winn-Dixie. The Company has
also entered into an agreement to acquire Beauclerc Village, subject to
satisfaction of certain conditions, for approximately $3.0 million.
Beauclerc Village is a Performing Supermarket Center located in
Jacksonville, Florida which contains 67,930 square feet of GLA,
represents aggregate annualized minimum rental revenues of
approximately $300,000 and is anchored by a Walgreens and an Old
America. Additionally, the Company has recently agreed to acquire
Summerlin Square, subject to satisfaction of certain conditions, for
approximately $10.0 million. Summerlin Square is a Performing
Supermarket Center located in Fort Myers, Florida, which contains
110,200 square feet of GLA, represents aggregate annualized minimum
rental revenues of approximately $1.1 million and is anchored by a
Winn-Dixie. The Company anticipates that each of these acquisitions
will be consummated prior to December 31, 1997; however there is no
assurance that the acquisitions will be consummated.
/bullet/ ACQUISITION OF UNDERPERFORMING SUPERMARKET CENTERS. The Company
intends to acquire Underperforming Supermarket Centers that meet the
Company's turnaround criteria, which includes having the potential to
increase revenues and operating cash flows through renovation and
retenanting. Underperforming Supermarket Centers are typically
undercapitalized, poorly managed and/or poorly maintained and may
require significant capital improvements. The Company also requires
attractive location and market demographics, availability on favorable
terms, and willingness of supermarket and other Anchor Tenants to
commit to lease space. Examples of the Company's enhancement of
Underperforming Supermarket Centers include East Bay Plaza ("East
Bay"), Four Corners Shopping Center ("Four Corners"), Fort Caroline
Trading Post ("Fort Caroline") and Parker Towne Centre ("Parker
Towne"). East Bay, which was acquired in July 1993 at a 48.0%
occupancy
5
<PAGE>
rate, was 82.6% occupied at June 30, 1997; Four Corners, which was acquired in
January 1993 at a 76.0% occupancy rate, was 94.2% occupied at June 30, 1997;
Fort Caroline, which was acquired in January 1994 at a 83.0% occupancy rate,
was 95.9% occupied at June 30, 1997 (including an additional 7,200 square feet
of Company developed GLA); and Parker Towne, which was acquired in December
1993 at a 40.0% occupancy rate, was 60.0% occupied at June 30, 1997. While the
Company has increased occupancy by 50.0% and redeveloped space since its
acquisition, the retenanting of Parker Towne is proceeding at a slower pace
than anticipated. The Company believes that its market knowledge, strong
relationships with supermarkets and other Anchor Tenants and its capabilities
in renovation and redevelopment, are particularly integral to its ability to
acquire and reposition Underperforming Supermarket Centers. See
"Business--Business and Growth Strategies".
/bullet/ REDEVELOPMENT AND DEVELOPMENT OF SUPERMARKET CENTERS. The Company will
redevelop existing and develop new Supermarket Centers with
characteristics similar to those of the Existing Properties. The
Company will consider development only if the overall economics of
developing a property appear to be more favorable than acquiring
and/or redeveloping an existing property. For example, the Company has
recently acquired Sky Lake, which will be comprehensively redeveloped
into a 300,000 square foot Supermarket Center. In addition, the
Company owns (i) Coral Way on which it intends to develop a 100,000
square foot Supermarket Center and (ii) 13.0 acres of land adjacent to
certain of the Existing Properties, substantially all of which is
intended for retail development. The Company has not previously
developed shopping centers and has not had extensive experience in
redeveloping properties, although it has done so on both a whole
property basis, such as the redevelopment of the Company's mixed use
(office/retail) property located in West Palm Beach, Florida ("Diana
Building"), as well as on an individual basis in order to meet
specific tenant needs, including at Parker Towne, where more than
100,000 square feet have been redeveloped as leased. In addition,
certain members of management have extensive experience in development
and redevelopment activities. The Company has recently hired a
licensed architect and general contractor to head its development
department and is in the process of retaining at least one additional
full-time employee to support its construction and development
operations. See "Management" and "Business--Business and Growth
Strategies".
/bullet/ INCREASING REVENUES AND INCREASING OPERATING MARGINS. The Company will
continue to seek to improve the financial performance of its portfolio
by increasing revenues (through increased occupancy and/or rental
rates), maintaining high tenant retention rates (i.e., the percentage
of tenants who renew their leases upon expiration), replacing certain
existing tenants with more creditworthy tenants and aggressively
managing operating expenses. Most of the Company's lease agreements
provide for percentage rents, indexed rent increases (based on CPI or
other criteria) and/or scheduled rent escalations. See
"Business-Business and Growth Strategies".
MARKET DATA
GENERAL
The Company retained Robert Charles Lesser & Co. ("Lesser"), nationally
recognized experts in real estate consulting and urban economics, to assess the
economic and demographic characteristics of the State of Florida, as well as
the three metropolitan areas in Florida (Miami, Jacksonville and Orlando) in
which 17 of the Existing Properties (representing 83.6% of total GLA) are
located. The discussion of these markets set forth below is derived from the
findings set forth in a market overview prepared by Lesser (the "Lesser Market
Overview"). The selected economic and demographic characteristics (population,
employment, retail sales and food store sales) are key factors which indicate
the strength of a market for owning and operating Supermarket Centers. While
the Company believes that Lesser's views of economic and demographic trends in
these areas are reasonable, there can be no assurance that these trends will in
fact continue.
6
<PAGE>
POPULATION
Florida represented approximately 5.4% of the total population of the
United States or 14.6 million people, ranking it as the fourth largest state in
the nation. For the period 1990 to 1997, the total population of Florida
increased by approximately 1.7% annually, as compared to an approximately 1.0%
increase nationwide. Orlando, Jacksonville and Miami, which are the Company's
key sub-markets in Florida, have experienced annual population growth rates of
2.3%, 1.7% and 1.1%, respectively, each of which is higher than the national
average. Orlando was the sixth fastest growing major metropolitan area in the
United States between 1990 and 1997. For the period 1997 to 2002, population in
Florida is expected to increase annually by 1.4%, as compared to an annual
population growth rate nationwide of 0.9%. In the submarkets of Orlando,
Jacksonville and Miami, population is expected to increase annually by 2.0%,
1.8% and 1.1%, respectively.
EMPLOYMENT
For the period 1990 to 1997, employment in Florida increased annually by
2.5%, as compared to an annual growth rate of 1.6% nationwide. In the
submarkets of Orlando, Jacksonville and Miami, employment increased annually by
3.7%, 2.8% and 1.3%, respectively. For the period 1997 to 2002, employment in
Florida is expected to increase annually by 1.9%, as compared to an annual
employment growth rate nationwide of 1.3%. In the submarkets of Orlando,
Jacksonville and Miami, employment is expected to increase annually by 2.2%,
1.3% and 1.5%, respectively.
RETAIL SALES
For the period 1990 to 1997, retail sales in Florida increased annually by
6.2%, as compared to an annual growth rate of 4.8% nationwide. In the
submarkets of Orlando, Jacksonville and Miami, retail sales increased annually
by 7.1%, 5.8% and 5.3%, respectively, each of which is higher than the national
average. For the period 1997 to 2002, retail sales in Florida are expected to
increase annually by 6.4%, as compared to 5.5% nationwide. In the submarkets of
Orlando, Jacksonville and Miami, retail sales are expected to increase annually
by 6.7%, 5.1% and 5.0%, respectively.
FOOD STORE SALES
For the period 1990 to 1997, food store sales in Florida increased
annually by 3.4%, as compared to an annual growth rate of 2.3% nationwide. In
the submarkets of Orlando, Jacksonville and Miami, food store sales increased
annually by 6.6%, 4.1% and 2.5%, respectively.
7
<PAGE>
THE PROPERTIES
EXISTING PROPERTIES
The Existing Properties, consisting primarily of Supermarket Centers,
contain an aggregate of 2.0 million square feet of GLA. All of the Company's
Supermarket Centers were developed after 1982. Management believes that the
location and quality of its Existing Properties have enabled the Company to
develop and retain an attractive and diverse tenant base. As of June 30, 1997,
the Existing Properties were 93.0% leased to approximately 360 tenants (not
including 535 tenants of the Company's mini-warehouse facility). With the
exception of Winn-Dixie, which represented approximately 12.5% of the Company's
aggregate annualized minimum rental revenues (i.e., the annualized fixed monthly
base rental amount in effect under each lease executed as of June 30, 1997,
excluding amounts paid by tenants to the Company for operating and other
expenses and percentage rents), no tenant accounted for more than 4.3% of such
tenant rent as of June 30, 1997. The following table provides a brief
description of each of the Existing Properties:
<TABLE>
<CAPTION>
NET OPERATING NET OPERATING
GLA INCOME FOR THE INCOME FOR
(SQ. FT.) SIX MONTHS THE YEAR
AT ENDED ENDED
DATE JUNE 30, JUNE 30, DECEMBER 31,
PROPERTY(1) ACQUIRED 1997 1997 1996
- -------------------------- ---------- ----------- ------------------- ---------------
<S> <C> <C> <C> <C>
NORTH FLORIDA
Atlantic Village June 100,559 $ 374,172 $ 731,461
Shopping Center(2) 1995
Atlantic Beach, FL
Commonwealth February 71,021 $ 210,939 $ 460,541
Shopping Center 1994
Jacksonville, FL
Fort Caroline Trading January 74,546 $ 228,201 $ 472,879
Post(3) 1994
Jacksonville, FL
Monument Pointe January 75,328 $ 190,985 (4) --
Shopping Center 1997
Jacksonville, FL
Oak Hill Shopping Center December 78,492 $ 229,012 $ 448,219
Jacksonville, FL 1995
Mandarin Mini-Storage May 52,880 $ 96,680 $ 208,239
Jacksonville, FL 1994
CENTRAL FLORIDA
East Bay Plaza July 85,426 $ 152,716 $ 230,077
Shopping Center 1993
Largo, FL
Eustis Square October 126,791 $ 349,246 $ 703,518
Shopping Center 1993
Eustis, FL
Forest Edge December 68,631 $ 182,190 --
Shopping Center 1996
Orlando, FL
Lake Mary November 288,450 $ 1,447,409 $2,787,759
Shopping Centre 1995
Lake Mary, FL
SOUTH FLORIDA
Bird Ludlum August 192,477 $ 1,167,993 $2,223,722
Shopping Center 1994
Miami, FL
<CAPTION>
AVERAGE
MINIMUM
RENT PER PERCENT
SQ. FT. AS PERCENT LEASED
OF JUNE 30, LEASED AT AT JUNE 30, CERTAIN
PROPERTY(1) 1997 ACQUISITION 1997 TENANTS
- -------------------------- ------------- ------------- ------------- ------------------------
<S> <C> <C> <C> <C>
NORTH FLORIDA
Atlantic Village $ 7.73 100% 98% Publix, Blockbuster
Shopping Center(2) Music, Village Shoe
Atlantic Beach, FL Box
Commonwealth $ 6.83 100% 95% Winn-Dixie, Subway
Shopping Center
Jacksonville, FL
Fort Caroline Trading $ 6.93 83% 96% Winn-Dixie, Eckerd,
Post(3) McDonalds
Jacksonville, FL
Monument Pointe $ 5.93 94% 94% Winn-Dixie, Eckerd
Shopping Center First Union Bank
Jacksonville, FL
Oak Hill Shopping Center $ 6.53 96% 100% Publix, Walgreens,
Jacksonville, FL Blockbuster Video,
Little Caesars
Mandarin Mini-Storage $ 5.58 98% 95% --
Jacksonville, FL
CENTRAL FLORIDA
East Bay Plaza $ 6.89 48% 83% Scotty's, Hollywood
Shopping Center Video, Albertsons(5)
Largo, FL
Eustis Square $ 6.89 95% 92% Publix, Bealls,
Shopping Center Walgreens, US Pak
Eustis, FL N Ship
Forest Edge $ 6.70 100% 99% Winn-Dixie, Auto
Shopping Center Zone
Orlando, FL
Lake Mary $10.98 97% 100% K-Mart, Albertsons,
Shopping Centre General Cinema,
Lake Mary, FL Play It Again
Sports, Chili's
Einstein Bros. Bagels,
NationsBank,
Swim N Fun
SOUTH FLORIDA
Bird Ludlum $12.68 96% 100% Winn-Dixie, Eckerd,
Shopping Center Vision Works,
Miami, FL Rainbow Shops,
Radio Shack, Boat
US Marine,
Barnett Bank, GNC
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
NET OPERATING NET OPERATING
GLA INCOME FOR THE INCOME FOR
(SQ. FT.) SIX MONTHS THE YEAR
AT ENDED ENDED
DATE JUNE 30, JUNE 30, DECEMBER 31,
PROPERTY(1) ACQUIRED 1997 1997 1996
- --------------------- ---------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Plaza Del Rey December 50,146 $ 283,981 $ 572,143
Shopping Center 1992
Miami, FL
Pointe Royale July 199,068 $ 477,851 $ 1,080,640
Shopping Center(6) 1995
Miami, FL
Pointe Royale July 18,000 -- --
Office Building 1995
Miami, FL
West Lake Plaza November 100,747 $ 412,268 $ 129,984
Shopping Center(6) 1996
Miami, FL
Diana Building February 18,707 $ 41,234 $ 1,266(7)
West Palm Beach, FL 1995
Equity One April 28,980(8) $ 145,545 $ 259,373
Office Building 1992
Miami Beach, FL
TEXAS
DALLAS AREA
Parker Towne Centre December 205,792 $ 217,069 $ 407,766
Plano, TX 1993
HOUSTON AREA
Four Corners January 115,178 $ 427,255 $ 775,874
Shopping Center 1993
Tomball, TX
TOTAL/WEIGHTED
AVERAGE 1,951,219 $6,634,746 $11,493,461
========== =========== ============
<CAPTION>
AVERAGE
MINIMUM
RENT PER PERCENT
OF JUNE 30, PERCENT AT JUNE 30,
SQ. FT. AS LEASED AT LEASED CERTAIN
PROPERTY(1) 1997 ACQUISITION 1997 TENANTS
- --------------------- ------------- ------------- ------------- --------------------
<S> <C> <C> <C> <C>
Plaza Del Rey $11.95 82% 98% Navarro,
Shopping Center Rent A Center
Miami, FL
Pointe Royale $ 5.59 96% 99% Winn-Dixie, Best
Shopping Center(6) Buy, Dollar Bills,
Miami, FL Household Finance
Company
Pointe Royale -- -- -- --
Office Building
Miami, FL
West Lake Plaza $ 9.67 96% 99% Winn-Dixie, Burger
Shopping Center(6) King, United
Miami, FL Consumer Club
Diana Building $14.13 -- 60% Fat Tuesday's
West Palm Beach, FL
Equity One $10.94 -- 100% City of Miami
Office Building Beach Parking
Miami Beach, FL Department
TEXAS
DALLAS AREA
Parker Towne Centre $ 5.23 40% 60% Minyards,
Plano, TX Blockbuster
Video, Dollar
General
HOUSTON AREA
Four Corners $ 9.03 76% 94% Kroger, Eckerd,
Shopping Center Wendy's,
Tomball, TX Mailboxes Etc.,
Rent A Center
TOTAL/WEIGHTED
AVERAGE $ 8.35 84% 93%
======= === ====
</TABLE>
- ----------------
(1) Does not include Lantana Village, Beauclerc Village or Summerlin Square
which the Company has agreed to purchase, or any redevelopment and
development properties.
(2) Walgreens has vacated the site, but continues to make lease payments.
(3) Since its acquisition in 1994, Winn-Dixie's space has been increased by an
aggregate of 7,200 square feet.
(4) Represents net operating income for the five months ended June 30, 1997.
(5) Albertsons is located on property contiguous to the Company's property
which is not owned by the Company. Accordingly, Albertsons does not pay
base rent or make payments to the Company for common area maintenance and
similar charges at this location.
(6) Eckerd has vacated the site, but continues to make lease payments.
(7) Represents net operating income for the two months ended December 31, 1996.
(8) Includes 3,000 square feet of GLA which is occupied by the Company.
See "Business--Existing Properties", "--Major Tenants", "--Lease
Expirations", and "--Additional Information Concerning the Existing
Properties".
9
<PAGE>
REDEVELOPMENT AND DEVELOPMENT PROPERTIES
SKY LAKE. In August 1997 the Company acquired Sky Lake, an existing
community shopping center, for $11.8 million. Sky Lake is located in the North
Miami Beach, Florida area. Approximately 150,000 residents with household
incomes averaging $51,000 are located within a three mile radius of Sky Lake.
The Company will conduct a comprehensive redevelopment program at Sky Lake in
order to create a Supermarket Center containing 300,000 square feet of GLA. The
Company expects that the redevelopment will cost approximately $18.0 million
and will occur in several phases which are expected to be completed by May
1999. The Company has entered into a non-binding letter of intent with
Albertsons for the lease of 60,000 square feet of GLA at Sky Lake. During the
redevelopment, the Company expects to receive certain rental revenue from
tenants who will continue operations during the redevelopment process.
CORAL WAY. In June 1997 the Company acquired 10.0 acres of vacant land at
Coral Way for $1.5 million for development of a 100,000 square foot Supermarket
Center. Coral Way is located in a newly rezoned high growth area of Southwest
Dade County, Florida. The Company does not expect to commence development at
Coral Way earlier than November 1998 or complete such development in less than
one year. The Company anticipates that the costs of development will
approximate $10.0 million. In addition, the Company has agreed to acquire 4.4
acres of land proximate to Coral Way for future development contingent upon,
among other things, the rezoning of such property for commercial use.
LAND FOR DEVELOPMENT. The Company owns 13.0 acres of land adjacent to
certain of the Existing Properties, substantially all of which the Company
intends to develop as retail space. The Company expects to commence
construction on 5.0 acres adjacent to Lake Mary and 0.5 acres adjacent to its
Commonwealth Shopping Center ("Commonwealth") within three months following the
Offering. The Company expects to complete these projects by December 1998, at a
cost of approximately $3.0 million and $450,000, respectively.
There can be no assurance that Sky Lake, Coral Way or any other
redevelopment or development project will be completed or, if completed, will
be successful. See "Business--Redevelopment and Development Properties",
"Policies with Respect to Certain Activities--Redevelopment and Development
Policies" and "Use of Proceeds".
DISTRIBUTIONS
In general, qualification as a REIT requires the annual distribution to
stockholders of at least 95.0% of the REIT's taxable income. Following the
consummation of the Offering, the Company intends to continue to pay regular
quarterly dividends to its stockholders. The Company anticipates that the first
dividend to stockholders purchasing Common Stock in the Offering will be paid
with respect to the quarterly period ended December 31, 1997, and is anticipated
to be in a prorated amount based upon a quarterly distribution of $0.262 per
share (which if annualized, would be $1.05 per share or an annual distribution
rate of approximately 7.2% based on an initial public offering price of $14.50
per share). Additionally, the Company anticipates that its Board of Directors
will declare a distribution immediately prior to the consummation of the
Offering for stockholders of record with respect to a prorata portion of the
anticipated quarterly distribution of $0.262 per share based on the number of
days between and including October 1, 1997 and the day immediately preceding the
closing date. The Company does not intend to reduce the expected dividend per
share if the Underwriters' over-allotment option is exercised in full. The
Company has established its initial dividend based on information and certain
assumptions described herein. See "Distribution Policy". The Company intends to
maintain its initial distribution rate for the first 12 months following the
Offering, unless actual results of operations, economic conditions or other
factors differ from the assumptions used in its estimate, and to review the
dividend rate on a quarterly basis.
10
<PAGE>
The Company currently expects to distribute approximately 101.8% of its
estimated cash available for distribution for the 12 months following the
consummation of the Offering (107.9% if the over-allotment option granted to
the Underwriters is exercised in full). Cash available for distribution is
funds from operations (as defined in footnote 4 to the "Summary Consolidated
Financial Data" set forth below) as adjusted for capital expenditures and
scheduled principal payments ("Cash Available for Distribution"). The Company's
intended distributions are based on an estimate of the cash flow that will be
available to it for distributions for the 12-month period following
consummation of the Offering. This estimate is based on pro forma cash flows
provided by operations for the 12 months ended November 30, 1998, as adjusted
for certain events and contractual commitments described in "Distribution
Policy". This calculation is made solely for the purpose of setting the
distribution amount and is not intended to be a projection or prediction of the
Company's actual results of operations nor is the methodology upon which such
adjustments are made intended to be a basis for determining future
distributions. Future distributions by the Company will be at the discretion of
the Board of Directors. However, the Company has adopted a policy pursuant to
which it intends to limit distributions to no more than 94.0% of its Cash
Available for Distribution for periods subsequent to the 12 months following
the Offering. There can be no assurance that any distributions will be made by
the Company or that the expected level of distributions will be maintained.
In general, distributions by the Company to the extent of its current or
accumulated earnings and profits, other than capital gain dividends, will be
taxable to stockholders as ordinary income for federal income tax purposes. The
Company anticipates that approximately 7.5% of the distributions intended to be
paid by the Company for the 12-month period following the consummation of the
Offering will represent a return of capital for federal income tax purposes.
For a discussion of the tax treatment of distributions to stockholders, see
"Federal Income Tax Considerations-Taxation of U.S. Stockholders".
For a discussion of dividends paid by the Company since January 1, 1995,
see "Distribution Policy".
MORTGAGE INDEBTEDNESS AND CREDIT FACILITIES
As of June 30, 1997, the Company had total indebtedness of $64.9 million,
all of which was fixed rate mortgage indebtedness bearing interest at a
weighted average annualized rate of 8.1% and collateralized by 14 of the
Existing Properties. As of such date, the percentage of the net book value of
the Company's rental properties that were encumbered by debt was 61.0%. None of
the existing mortgages is subject to cross default provisions of mortgages on
other properties or is cross collateralized. However, in connection with the
Company's acquisition of Lake Mary, the Company has provided a $1.5 million
letter of credit to secure certain obligations, which letter of credit is
collateralized by the Diana Building. At June 30, 1997, no amount was drawn
under this letter of credit. The Company's mortgage indebtedness contains
customary terms and conditions typically found in mortgages including, among
others, the requirement to preserve and maintain the properties, the
requirement to maintain insurance on the properties, and restrictions upon the
incurrence of liens on the properties and upon changes in control of the
Company. See "Risk Factors--Certain Indebtedness of the Company May Prohibit
the Sale of Shares of Common Stock" for a discussion of other restrictions.
The Company is currently negotiating a commitment for a revolving line of
credit of up to $35.0 million to finance the acquisition, development and
redevelopment of properties and for general corporate purposes (the
"Acquisition Line of Credit"), to be secured by certain of the Company's
unencumbered Existing Properties (including Existing Properties which will
become unencumbered following the application of the net proceeds from the
Offering) and other properties to be acquired by the Company. See "Use of
Proceeds". Receipt of a commitment is contingent on City National Bank of
Florida entering into a participation agreement with one or more participating
lenders to provide at least $19.25 million under the proposed Acquisition Line
of Credit. The Company anticipates that borrowings under the Acquisition Line
of Credit will bear interest at 225 basis points over the London
11
<PAGE>
Interbank Offered Rate ("LIBOR") and be due three years after the execution of
a definitive loan document. The Acquisition Line of Credit is expected to
provide a revolving line of credit for three years with interest due and
payable each month and the outstanding principal balance together with any
accrued, unpaid interest due upon maturity. In addition, the proposed terms of
the commitment for the Acquisition Line of Credit allow the lender to cease
funding and/or accelerate the maturity date of the Acquisition Line of Credit
if neither Chaim Katzman, the Company's Chairman of the Board, President and
Chief Executive Officer, nor Doron Valero, the Company's Executive Vice
President and Chief Operating Officer, remains as the executives in control of
the Company. The Company expects that the Acquisition Line of Credit will be
subject to customary conditions, including, among other things, the payment of
commitment fees and the required delivery of various title, insurance, zoning
and environmental assurances on the secured properties, and will contain
various covenants, such as a prohibition on secondary financing on any of the
secured properties and a 70.0% loan to value requirement. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources".
The Company has a line of credit from City National Bank of Florida in the
amount of $2.5 million collateralized by its mixed office and retail property
located in Miami Beach, Florida ("Equity One Office Building"). The Company
anticipates that this line of credit will be terminated upon the effectiveness
of the Acquisition Line of Credit. At June 30, 1997, no amount was outstanding
under this line of credit. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources".
FINANCING POLICIES
Subject to economic conditions, the Company intends to maintain a policy
limiting its total indebtedness to 50.0% of its total market capitalization
(defined as total debt plus the market value of outstanding Common Stock). Such
objective may be altered without the consent of the Company's stockholders, and
the Company's organizational documents do not limit the amount of indebtedness
that the Company may incur. Upon application of the estimated net proceeds of
the Offering set forth herein, total debt will constitute approximately 21.8%
of the Company's total market capitalization (assuming an initial public
offering price of $14.50 per share and no exercise of the Underwriters
over-allotment option). The Company intends to utilize various sources of
capital, including the proceeds of the Offering, the Acquisition Line of
Credit, other credit facilities, mortgage indebtedness, the issuance of debt or
equity securities in public or private capital markets when appropriate, and
reserves, for future acquisitions, capital improvements and development
activities. See "Policies with Respect to Certain Activities--Financing
Policies", "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Indebtedness", "--Liquidity and Capital Resources" and
Note 5 of Notes to Consolidated Financial Statements.
POSSIBLE CONFLICTS OF INTEREST
The Company is subject to possible conflicts of interest. Pursuant to his
employment agreement with the Company, Chaim Katzman, the Company's Chairman of
the Board, President and Chief Executive Officer, is required to devote only so
much of his business time, attention, skill and efforts as shall be required
for the faithful performance of his duties. Presently, his significant other
activities consist primarily of serving as the President and Chief Executive
Officer of Gazit Inc., a public company whose securities are traded on the Tel
Aviv Stock Exchange and whose primary activity is its substantial investment in
the Company. Mr. Katzman intends to continue to focus his primary business
activities on the Company and, accordingly, devotes substantially all of his
time to the affairs of the Company. Mr. Katzman also currently invests in and
serves as the non-executive chairman of the board of real estate companies
whose holdings include commercial properties in Canada and Israel and may have
other interests in the future. Additionally, although Mr. Katzman presently
resides in the United States, Mr. Katzman is not required under his employment
agreement to reside and perform his duties within
12
<PAGE>
the United States. Doron Valero, the Company's Executive Vice President, Chief
Operating Officer and director, currently serves as the President and director
of, or has an ownership interest in, several entities which own apartment
properties in Florida. Although the Company does not currently engage in
activities outside the United States or acquire residential properties, no
assurance can be given that it will not do so in the future or that its
interests will not conflict with those of Messrs. Katzman or Valero. See "Risk
Factors--The Company Is Subject to Possible Conflicts of Interest" and
"Management-- Employment Agreements".
BENEFITS OF THE OFFERING TO EXISTING STOCKHOLDERS, INCLUDING MANAGEMENT
Existing stockholders, including certain members of management, are
expected to benefit from the Offering due to the anticipated improved liquidity
of their shares of Common Stock, an increase in the net tangible book value of
their shares of Common Stock and the potential increase in the value of any
options and/or warrants which they hold to purchase additional shares of Common
Stock.
RESTRICTIONS ON OWNERSHIP OF COMMON STOCK
Due to limitations on the concentration of ownership of stock of a REIT
imposed by the Internal Revenue Code of 1986, as amended (the "Code"), the
Company's charter prohibits any stockholder from actually or constructively
owning more than 5.0% in value or number of the outstanding shares of Common
Stock, whichever is more restrictive (the "Ownership Limit"); the Board of
Directors has waived the Ownership Limit with respect to Gazit (1995), Inc.,
Globe Reit Investments, Ltd., Dan Overseas, Ltd. and M.G.N. (USA), Inc.,
affiliates of the Company. See "Risk Factors--The Ability to Effect a Change in
Control of the Company is Limited" and "Description of Capital Stock--
Restrictions on Ownership and Transfer of Common Stock".
TAX STATUS OF THE COMPANY
The Company elected to be taxed as a REIT under Sections 856 through 860
of the Code, commencing with its taxable year ending December 31, 1995, and
believes that it has met and will continue to meet the requirements for
qualification as a REIT. Based on various assumptions and factual
representations made by the Company and others, in the opinion of Greenberg
Traurig Hoffman Lipoff Rosen & Quentel, P.A., tax counsel to the Company, the
Company has been organized in conformity with the requirements for
qualification as a REIT under the Code beginning with the taxable year of the
Company starting January 1, 1995, and the method of operation of the Company
and its subsidiaries since January 1, 1995 has enabled the Company, and the
proposed method of operation of the Company will enable the Company, to meet
the requirements for qualification and taxation as a REIT under the Code. The
opinion of counsel is not, however, binding on the Internal Revenue Service or
on any court.
To maintain REIT status, an entity must meet a number of organizational
and operational requirements, including a requirement that it currently
distribute at least 95.0% of its taxable income to its stockholders. See
"Federal Income Tax Considerations--Taxation of the Company--Annual
Distribution Requirements". As a REIT, the Company generally will not be
subject to federal income tax on net income it distributes currently to its
stockholders. If the Company fails to qualify as a REIT in any taxable year, it
will be subject to federal income tax at regular corporate rates, which would
adversely affect its funds from operations and its ability to make expected
distributions to its stockholders and could preclude the Company from
qualifying as a REIT for subsequent taxable years. See "Federal Income Tax
Considerations" and "Risk Factors--Failure to Qualify as a REIT Would Cause the
Company to Be Taxed as a Regular Corporation". Even if the Company qualifies
for taxation as a REIT, the Company may be subject to certain federal, state
and local taxes on its income and property.
13
<PAGE>
COMPANY INFORMATION
The Company was incorporated under the laws of the State of Maryland in
1992. The Company's principal executive offices are located at 777 17th Street,
Penthouse, Miami Beach, Florida 33139, and its telephone number is (305)
538-5488.
THE OFFERING
<TABLE>
<S> <C>
Issuer .................................... Equity One, Inc.
Offering ................................. 4,700,000 shares(1)
Shares outstanding after the Offering ...... 11,608,130 shares(1)(2)
Use of Proceeds ........................... The net proceeds will be used for the Acquisi-
tion and Development of the Redevelopment/
Development Properties, the Proposed Per-
forming Supermarket Center Acquisitions, the
Renovation of Existing Properties, the repay-
ment of the Mortgage Indebtedness.
See "Use of Proceeds".
Risks of Offering ........................... See "Risk Factors", beginning on page 17.
New York Stock Exchange symbol ............ "EQY"
</TABLE>
- ----------------
(1) Assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting".
(2) Does not include as of June 30, 1997 an aggregate of (i) 1,000,000 shares
of Common Stock reserved for issuance upon exercise of stock options
granted under the Company's 1995 Plan, pursuant to which options to
purchase 614,000 shares of Common Stock have been granted, (ii) 580,288
shares of Common Stock reserved for issuance to an affiliate of the
Company pursuant to a stock purchase agreement, and (iii) 1,306,124 shares
of Common Stock reserved for issuance upon exercise of outstanding Series
C Warrants. See "Management--Stock Option Plan" and "Certain
Transactions".
14
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PERCENTAGES AND PER SHARE DATA)
The summary consolidated financial data and balance sheet data set forth
below have been derived from the consolidated financial statements of the
Company, including the consolidated financial statements for the years ended
December 31, 1994, 1995 and 1996 and for the six months ended June 30, 1996 and
1997 contained elsewhere herein. The consolidated financial statements as of
and for the years ended December 31, 1992, 1993, 1994, 1995 and 1996 have been
audited by Deloitte & Touche LLP, independent auditors. The income statement
data for the six months ended June 30, 1996 and 1997 and the balance sheet data
as of June 30, 1997 have been derived from unaudited interim consolidated
financial statements contained elsewhere herein, which in the opinion of
management, include all adjustments (consisting of only normal recurring
adjustments) necessary for a fair presentation of the information set forth
therein. Results for the six months ended June 30, 1997 are not necessarily
indicative of the results for the entire year. The data set forth below should
be read in conjunction with the financial statements and related notes, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
The unaudited pro forma consolidated balance sheet data as of June 30,
1997 set forth below is presented as if the Offering and the application of the
net proceeds of the Offering all had occurred on June 30, 1997. The unaudited
pro forma consolidated statement of operations data for the six months ended
June 30, 1997 and the year ended December 31, 1996 are presented as if the
Offering and the application of the net proceeds of the Offering (and the
acquisitions of West Lake, Forest Edge, Monument Pointe Shopping Center
("Monument Pointe"), Lantana Village, Beauclerc Village and Summerlin Square)
all had occurred on January 1, 1996. See "Use of Proceeds". The pro forma
consolidated financial data should be read in conjunction with the Company's
pro forma consolidated financial statements and related notes and historical
consolidated financial statements and related notes included elsewhere in this
Prospectus.
Because the preponderance of proceeds are allocated to acquisition,
development, redevelopment and renovation projects which, for pro forma
statement of operations purposes, do not generate any revenue or expense, pro
forma results of operations reflect only the repayment of mortgage notes
payable and the proposed acquisitions of Lantana Village, Beauclerc Village and
Summerlin Square and omit any revenue or expense from other proceeds uses
(except for historical revenue and expense attributable to Sky Lake expected to
continue during the redevelopment process). Accordingly, the pro forma
consolidated financial statements do not purport to represent the Company's
financial position as of June 30, 1997 or the results of operations for the six
months ended June 30, 1997 or for the year ended December 31, 1996 that would
actually have occurred had the Offering (and the acquisitions listed above) and
the application of the net proceeds of the Offering all been completed on June
30, 1997 or at the beginning of the periods presented, or to project the
Company's financial position or results of operations as of any future date or
for any future period.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------------
PRO FORMA HISTORICAL
----------- -----------------
1997 1997 1996
----------- -------- --------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues ........................... $11,355 $9,673 $8,042
Operating expenses ........................ 3,008 2,743 2,341
Depreciation and amortization ............ 1,399 1,178 1,010
Interest ................................. 2,753 2,939 2,648
General and administrative expenses ...... 316 241 213
-------- ------- -------
Total expenses ........................ 7,476 7,101 6,212
-------- ------- -------
Net income (loss) ........................ $ 3,879 $2,572 $1,830
======== ======= =======
Net earnings (loss) per share(1) ......... $ 0.40 $ 0.37 $ 0.37
======== ======= =======
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------------------------------------------
PRO FORMA HISTORICAL
----------- ------------------------------------------------------
1996 1996 1995 1994 1993 1992
----------- --------- --------- ------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues ........................... $22,086 $16,714 $11,348 $ 6,198 $2,070 $ 666
Operating expenses ........................ 6,092 4,832 3,293 2,236 665 252
Depreciation and amortization ............ 2,734 2,067 1,496 996 298 107
Interest ................................. 5,216 5,380 3,498 2,099 734 301
General and administrative expenses ...... 665 515 549 504 324 167
-------- -------- -------- -------- ------- -------
Total expenses ........................ 14,707 12,794 8,836 5,835 2,021 827
-------- -------- -------- -------- ------- -------
Net income (loss) ........................ $ 7,379 $ 3,920 $ 2,512 $ 233(2) $ 49 ($ 161)
======== ======== ======== ======== ======= =======
Net earnings (loss) per share(1) ......... $ 0.84 $ 0.65 $ 0.51 $ 0.07 $ 0.03 $(0.99)
======== ======== ======== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31,
--------------------------- -------------------------------------------------
PRO FORMA(3) HISTORICAL 1996 1995 1994 1993 1992
-------------- ------------ ---------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total rental properties, before accumulated
depreciation ........................... $156,803 $112,406 $106,706 $92,770 $52,047 $22,491 $4,784
Total assets ........................... 164,957 120,873 111,822 94,470 63,644 28,526 7,439
Mortgage notes payable .................. 47,056 64,916 66,831 60,583 32,690 15,543 3,222
Total liabilities ........................ 49,519 67,379 68,727 64,331 33,846 15,922 3,388
Stockholders' equity ..................... 115,438 53,494 43,095 29,139 28,798 12,604 4,051
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------------------
PRO FORMA HISTORICAL
------------ -----------------------
1997 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
OTHER DATA:
Funds From Operations(4) ............ $ 5,899 $ 3,867 $ 2,815
Ratio of earnings to fixed charges(5) 2.41 1.88 1.69
Cash flows from:
Operating activities(6) ............... 5,278 3,492 3,980
Investing activities(7) ............... (44,447) (6,766) (3,495)
Financing activities(8) ............... (25,093) 5,881 7,013
Gross leasable area (square feet)
(at end of period) .................. -- 1,951 1,670
Occupancy (at end of period) ......... -- 93% 89%
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------------------------------------------------------------
PRO FORMA HISTORICAL
------------ ---------------------------------------------------------------
1996 1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Funds From Operations(4) ............ $ 10,765 $ 6,136 $ 3,973 $ 1,308 $ 347 $ (54)
Ratio of earnings to fixed charges(5) 2.41 1.73 1.72 1.11 1.07 0.47
Cash flows from:
Operating activities(6) ............... 10,113 6,680 3,469 2,433 (289) (46)
Investing activities(7) ............... (44,497) (18,277) (37,211) (29,755) (20,414) (1,995)
Financing activities(8) ............... (31,196) 12,778 27,441 32,726 20,671 3,728
Gross leasable area (square feet)
(at end of period) .................. -- 1,807 1,670 1,003 583 50
Occupancy (at end of period) ......... -- 91% 90% 80% 60% 92%
</TABLE>
- ----------------
(1) Based on the weighted average number of shares outstanding, excluding
shares attributable to development and redevelopment activities.
(2) Represents net income after income tax expense of $130,000.
(3) Adjusted to reflect the sale of 4,700,000 shares of Common Stock offered by
the Company at an estimated initial public offering price of $14.50 per
share and the application of the estimated net proceeds therefrom.
(4) In March 1995, the National Association of Real Estate Investment Trusts
("NAREIT") adopted the NAREIT White Paper on Funds from Operations (the
"White Paper") which provided additional guidance on the calculation of
funds from operations. The White Paper defines funds from operations as
net income (loss) (computed in accordance with generally accepted
accounting principles ("GAAP")), excluding gains (or losses) from debt
restructuring and sales of property, plus real estate related depreciation
and amortization and after adjustments for unconsolidated partnerships and
joint ventures ("FFO"). Management believes FFO is helpful to investors as
a measure of the performance of an equity REIT because, along with cash
flows from operating activities, financing activities and investing
activities, it provides investors with an understanding of the ability of
the Company to incur and service debt and make capital expenditures. The
Company computes FFO in accordance with standards established by the White
Paper, which may differ from the methodology for calculating FFO utilized
by other equity REITs, and, accordingly, may not be comparable to such
other REITs. Further, FFO does not represent amounts available for
management's discretionary use because of needed capital replacement or
expansion, debt service obligations, or other commitments and
uncertainties. The Company believes that in order to facilitate a clear
understanding of the consolidated historical operating results of the
Company, FFO should be examined in conjunction with the income (loss) as
presented in the audited consolidated financial statements and information
included elsewhere in this Prospectus. FFO should not be considered as an
alternative to net income (determined in accordance with GAAP) as an
indication of the Company's financial performance or to cash flows from
operating activities (determined in accordance with GAAP) as a measure of
the Company's liquidity, nor is it indicative of funds available to fund
the Company's cash needs, including its ability to make distributions. See
"Distribution Policy". FFO is derived from pro forma and historical net
income (loss) as follows:
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
----------------------------- ---------------------------------------------------------
PRO FORMA HISTORICAL PRO FORMA HISTORICAL
----------- ----------------- ----------- ---------------------------------------------
1997 1997 1996 1996 1996 1995 1994 1993 1992
----------- -------- -------- ----------- -------- -------- -------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss) ............ $3,879 $2,572 $1,830 $ 7,379 $3,920 $2,512 $ 233 $ 49 $ (161)
Add:
Real estate depreciation and
amortization ............... 1,374 1,172 985 2,684 2,037 1,461 945 298 107
Non-recurring items(*) ...... 646 123 -- 702 179 -- 130 -- --
FFO ........................... $5,899 $3,867 $2,815 $10,765 $6,136 $3,973 $1,308 $347 $ (54)
</TABLE>
- ----------------
(*) Reflects pre-payment penalties, write-offs of unamortized loan costs
related to repayment of debt and income tax expense as non-recurring.
(5) For the purposes of calculating the ratio of earnings to fixed charges,
earnings include pre-tax income plus interest expense, amortization of
interest previously capitalized, and amortization of financing costs.
Fixed charges include all interest costs consisting of interest expense,
interest capitalized, and amortization of financing costs.
(6) Pro forma cash flow from operating activities represents pro forma net
income plus depreciation and amortization. The pro forma amounts do not
include the results from changes in working capital resulting from changes
in current assets and current liabilities, or other changes.
(7) Pro forma cash flow used in investing activities represents estimated
capital expenditures for the six and 12 months subsequent to the Offering
and the application of the use of proceeds therefrom.
(8) Pro forma cash flow used in financing activities represents estimated
mortgage loan principal payments and estimated dividends and distributions
(based upon an initial annual distribution of $1.05 per share) for the six
and 12 months subsequent to the Offering and the application of the use of
proceeds therefrom.
16
<PAGE>
RISK FACTORS
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK, INCLUDING THE
RISKS DESCRIBED BELOW. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE
SPECIFIC FACTORS SET FORTH BELOW, AS WELL AS THE OTHER INFORMATION CONTAINED IN
THIS PROSPECTUS, BEFORE DECIDING TO INVEST IN THE COMMON STOCK OFFERED HEREBY.
THIS PROSPECTUS CONTAINS CERTAIN "FORWARD-LOOKING STATEMENTS" WHICH
REPRESENT THE COMPANY'S EXPECTATIONS OR BELIEFS, INCLUDING, BUT NOT LIMITED TO,
STATEMENTS CONCERNING INDUSTRY PERFORMANCE, THE COMPANY'S OPERATIONS,
PERFORMANCE, FINANCIAL CONDITION, PLANS, GROWTH AND STRATEGIES. FOR THIS
PURPOSE, ANY STATEMENTS CONTAINED IN THIS PROSPECTUS THAT ARE NOT STATEMENTS OF
HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, WORDS SUCH AS "MAY", "WILL",
"EXPECT", "ANTICIPATE", "INTEND", "COULD", "ESTIMATE" OR "CONTINUE" OR THE
NEGATIVE OR OTHER VARIATIONS THEREOF OR COMPARABLE TERMINOLOGY ARE INTENDED TO
IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS BY THEIR NATURE INVOLVE
SUBSTANTIAL RISKS AND UNCERTAINTIES, CERTAIN OF WHICH ARE BEYOND THE COMPANY'S
CONTROL, AND ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING ON A VARIETY OF
IMPORTANT FACTORS, INCLUDING THOSE DESCRIBED BELOW UNDER THIS "RISK FACTORS"
SECTION AND ELSEWHERE IN THIS PROSPECTUS.
THE COMPANY IS DEPENDENT UPON CERTAIN KEY TENANTS
ADVERSE DEVELOPMENTS IN THE BUSINESS OF WINN-DIXIE OR PUBLIX COULD HAVE A
NEGATIVE IMPACT ON THE COMPANY
As of June 30, 1997, 308,864 square feet and 118,110 square feet, or 15.8%
and 6.1% of the aggregate GLA owned by the Company, were leased to Winn-Dixie
and Publix, respectively, and these leases represented $1.9 million and
$567,080, or 12.5% and 3.8%, respectively, of the aggregate annualized minimum
rental revenues from the Existing Properties. The Company's financial
condition, results of operations, liquidity, FFO and its ability to make
expected distributions to stockholders could be adversely affected in the event
of the bankruptcy or insolvency of, or a downturn in the business of,
Winn-Dixie, Publix or any other Anchor Tenant such as, General Cinemas or
Eckerd, or in the event that any of such tenants is unable to pay its rent as
it becomes due or does not renew its lease as it expires or renews at lower
rental rates. Tenants may seek the protection of the bankruptcy laws, which
could result in the rejection and termination of their leases, or a
continuation of their leases on less advantageous terms. No assurance can be
given that any Anchor Tenants (or other tenants) will not file for bankruptcy
protection in the future, or if they file, that they will affirm their leases
and continue to make rental payments in a timely manner.
ANCHOR TENANTS ARE CENTRAL TO THE FINANCIAL SUCCESS OF THE COMPANY'S
SUPERMARKET CENTERS
Shopping centers generally rely on Anchor Tenants to attract customers to
the centers. Vacated Anchor Tenant space reduces rental revenues if not
re-rented promptly at the same rental rates and, even when the tenant continues
to make rental payments, tends to adversely affect the entire shopping center
because of the loss of the departed Anchor Tenant's power to draw customers to
the center. No assurances can be given that existing Anchor Tenants will renew
their leases as they expire or will not vacate their space prior to expiration.
The closing of one or more stores occupied by Anchor Tenants or lease
terminations by one or more Anchor Tenants could adversely affect that property
and result in lease terminations or rent reductions by other tenants whose
leases may permit termination or rent reduction in such circumstances. Each of
these developments could adversely affect the Company's financial condition,
results of operations, liquidity, FFO and its ability to make expected
distributions to stockholders. In three instances, drug store Anchor Tenants
have vacated their leased space; Eckerd has vacated its leased space at Pointe
Royale and West Lake, and Walgreens has vacated its leased space at Atlantic
Village. These leases represented approximately $300,000 and $150,000 of the
Company's revenues for the year ended December 31, 1996 and the six months
ended June 30, 1997, respectively. Although these tenants have vacated their
respective leased space, each tenant has continued to pay rent in accordance
with the terms of its lease. See "--Reliance on Tenants in Certain Industries"
and "Business--Additional Information Concerning the Existing Properties".
17
<PAGE>
IMPORTANT TENANTS ARE CONCENTRATED IN CERTAIN INDUSTRIES
As of June 30, 1997, 606,191 square feet and 108,669 square feet, or 31.1%
and 5.6% of the aggregate GLA owned by the Company was leased to Anchor Tenants
who are supermarkets and drugstores, respectively, and these leases represented
$3.6 million and $914,000, or 24.7% and 6.2%, respectively, of the aggregate
annualized minimum rental revenues from the Existing Properties. The Company's
financial condition, results of operations, liquidity, FFO and its ability to
make expected distributions to stockholders could be adversely affected by
having a tenant base concentrated in these or other industries in the event
that there is an economic downturn in these industries or if there is a change
in the manner in which these industries conduct business. For example, it has
recently become more common for drugstores to seek to rent freestanding
structures instead of space within shopping centers. During the last year,
before the expiration of its leases, Eckerd, a drugstore chain Anchor Tenant,
vacated the premises of two sites which it leased from the Company, and on
which it continues to make rental payments, in favor of nearby freestanding
structures. Eckerd presently leases and continues to occupy 3.1% of the
aggregate GLA owned by the Company, representing approximately 3.4% of the
aggregate annualized minimum rental revenues from Existing Properties.
Walgreens, another drugstore chain Anchor Tenant, has also vacated its leased
space in Atlantic Village to locate to nearby free standing space.
GEOGRAPHIC CONCENTRATION OF THE COMPANY'S PROPERTIES CREATES A RISK OF A
NEGATIVE IMPACT AS A RESULT OF ECONOMIC DOWNTURNS IN SUCH AREAS
The Existing Properties are located exclusively in Florida and Texas.
Approximately 83.6% of the Existing Properties (based on GLA) are located in
Florida and represented $13.1 million, or 89.0%, of annual minimum rental
revenues as of June 30, 1997. The Company's performance may therefore be linked
to economic conditions and especially the market for Supermarket Centers in
Florida. A decline in the economy in this market may adversely affect the
Company's financial condition, results of operations, liquidity, FFO and its
ability to make expected distributions to stockholders.
THE COMPANY WILL BE SUBJECT TO RISKS ASSOCIATED WITH ITS ENTRY INTO NEW MARKETS
Although the Company is seeking additional properties and sites in its
primary markets, it will also seek to locate properties in other areas with
similar demographic characteristics throughout the Southeast. In seeking
investment opportunities in other areas of the Southeast, the Company will not
initially possess the same level of familiarity as it possesses with respect to
its current markets, which could adversely affect its ability to acquire,
develop, manage or lease properties in new markets.
THE COMPANY IS SUBJECT TO RISKS ASSOCIATED WITH CONSTRUCTION AND DEVELOPMENT
ACTIVITIES
THE COMPANY'S INEXPERIENCE IN CONSTRUCTION AND DEVELOPMENT COULD ADVERSELY
AFFECT THE COMPANY'S FINANCIAL CONDITION
Until recently, the Company's growth strategy has focused primarily on the
acquisition and renovation of existing Supermarket Centers. In light of
changing market conditions, the Company plans to develop vacant land and
redevelop certain existing properties. See "Summary--Business and Growth
Strategies", "--Properties--Redevelopment and Development Properties" and "Use
of Proceeds". The Company has not developed any new Supermarket Centers,
although its management has undertaken and completed renovation, expansion and
redevelopment projects with respect to certain of the Existing Properties,
including (i) completion of renovation projects in connection with retenanting
activities at substantially all of the Existing Properties, (ii) expansion of
the space leased by Winn-Dixie at Fort Caroline by 7,200 square feet and (iii)
redevelopment of the Equity One Office Building, Diana Building and Parker
Towne. The Company has recently hired a licensed architect and general
contractor to head its development department and is in the process of
retaining at least one additional full-time employee to support its
construction and development operations. See "Management". The Company's
relative inexperience in these activities may make it more difficult for it to
develop and redevelop Supermarket Centers successfully.
18
<PAGE>
CONSTRUCTION COSTS AND OTHER CONTINGENCIES COULD AFFECT THE COMPANY'S
PERFORMANCE
The Company intends to pursue development activities as opportunities
arise. Such activities may include expanding and/or renovating properties or
developing new sites. See "Business-Business and Growth Strategies". Expansion,
renovation and development projects generally require expenditures of capital,
as well as various governmental and other approvals, which the Company may not
be able to obtain, or may only obtain after delay and at substantial costs.
While policies with respect to expansion, renovation and development activities
are intended to limit some of the risks otherwise associated with such
activities, such as initiating construction only after securing commitments
from Anchor Tenants, the Company will nevertheless be subject to risks that
construction costs of a property may exceed original estimates, possibly making
the property uneconomical; occupancy rates and rents at a newly completed
property may not be sufficient to make the property profitable; construction
and permanent financing may not be available on favorable terms for
development; and construction and lease-up may not be completed on schedule,
resulting in increased debt service expense and construction costs.
THE COMPANY RELIES ON KEY PERSONNEL WHO CONDUCT OTHER BUSINESS ACTIVITIES
The Company's ability to successfully execute its acquisition and growth
strategy depends to a significant degree upon the continued contributions of
Chaim Katzman, the Company's Chairman of the Board, President and Chief
Executive Officer, and Doron Valero, the Company's Executive Vice President and
Chief Operating Officer. Pursuant to Mr. Katzman's employment agreement with
the Company, Mr. Katzman is required to devote only so much of his business
time, attention, skill and efforts as shall be required for the faithful
performance of his duties. Additionally, although Mr. Katzman presently resides
in the United States, Mr. Katzman is not required under his employment
agreement to reside and perform his duties within the United States. The loss
of the services of either Mr. Katzman or Mr. Valero could have a material
adverse effect on the Company's financial condition, results of operations,
liquidity, FFO and its ability to make expected distributions to stockholders.
Neither Mr. Katzman nor Mr. Valero is a citizen of the United States. Although
Mr. Katzman and Mr. Valero each have resident alien cards, there can be no
assurance that changes in the immigration laws or policies of the Immigration
and Naturalization Service will permit each of Mr. Katzman and Mr. Valero to
remain in the country or continue to work in the United States. See "--The
Company Is Subject to Possible Conflicts of Interest".
DIRECTORS, EXECUTIVE OFFICERS AND AFFILIATES HAVE THE ABILITY TO CONTROL THE
COMPANY
Following the consummation of the Offering, directors and executive
officers of the Company and their affiliates will beneficially own 59.1% of the
outstanding Common Stock (55.7% if the over-allotment granted to the
Underwriters is exercised in full). Certain stockholders of the Company have
entered into agreements to control the Company. Such stockholders directly and
indirectly own and/or control an aggregate of 96.6% of the issued and
outstanding Common Stock of the Company before giving effect to the Offering.
The agreements provide that, in all matters affecting the Company (other than
the election of directors), the parties to the agreements will vote all of
their shares as they may agree, or if they cannot agree, will vote against any
such proposal. With respect to the election of directors, the parties have
granted an irrevocable power of attorney to Globe Reit, which is an affiliate
of Mr. Katzman and of Messrs. Makavy and Wulkan, directors of the Company.
Globe Reit has the power under an irrevocable power of attorney (the
"Irrevocable Proxy") to vote all of the shares of Common Stock owned by the
stockholders who are parties to the Irrevocable Proxy for the election of
directors through May 2001, with, effectively, four of the directors designated
by each of Gazit and Danbar Resources and the additional director designated by
agreement. The parties to these agreements may be deemed a "group" within the
meaning of Section 13(d) of the Exchange Act and may direct the business and
affairs of the Company. There can be no assurance that this group of
stockholders will control the Company in a manner that is favorable to either
the Company or the other stockholders. See "Principal Stockholders" and
"Certain Transactions".
19
<PAGE>
THE COMPANY IS SUBJECT TO POSSIBLE CONFLICTS OF INTEREST
Pursuant to his employment agreement with the Company, Mr. Katzman is
required to devote only so much of his business time, attention, skill and
efforts as shall be required for the faithful performance of his duties.
Presently, his significant other activities consist primarily of serving as the
President and Chief Executive Officer of Gazit, a public company whose
securities are traded on the Tel Aviv Stock Exchange and whose primary activity
is its substantial investment in the Company. Mr. Katzman intends to continue
to focus his primary business activities on the Company and, accordingly,
devotes substantially all of his time to the affairs of the Company. Mr.
Katzman currently also invests in and serves as the non-executive chairman of
the board of real estate companies whose holdings include commercial properties
in Canada and Israel and may have other interests in the future. Additionally,
although Mr. Katzman presently resides in the United States, Mr. Katzman is not
required under his employment agreement to reside and perform his duties within
the United States. Mr. Valero currently serves as the President and director
of, or has an ownership interest in, several entities which own apartment
properties in Florida. Although the Company does not currently engage in
activities outside the United States or acquire residential properties, no
assurance can be given that it will not do so in the future or that its
interests will not conflict with those of Messrs. Katzman or Valero.
REIT DISTRIBUTION REQUIREMENTS AND THE COMPANY'S FINANCIAL CONDITION WILL
AFFECT THE AMOUNT OF DISTRIBUTIONS TO STOCKHOLDERS
The Code requires a REIT to annually distribute to its stockholders 95.0%
of its taxable income (excluding capital gains). Subject to this requirement,
the amount of distributions by the Company will be dependent on a number of
other factors, including the Company's financial condition, results of
operations and cash flows, which in turn will be influenced by new investments
in properties, debt service, capital expenditures and construction and
development activities.
Distributions by the Company to its stockholders will be based principally
on Cash Available for Distribution, and for the 12-months following the
Offering are expected to be 101.8% of Cash Available for Distribution (107.9%
if the Underwriters' over-allotment option is exercised in full). See
"Distribution Policy". In addition, of the estimated initial distribution of
$1.05 per share, approximately $0.09 per share is expected to be generated from
the temporary investment of a significant portion of the Offering proceeds in
short term investments such as government and government agency securities,
mortgage backed securities, collateralized mortgage obligations, certificates
of deposit, commercial paper, money market funds or investment grade preferred
stock of other publicly traded REITs during the period prior to investment in
properties. Subject to changes in expenses, debt service and capital
requirements, increases in base rent from the Existing Properties and rents
from other properties owned or acquired by the Company in the future should
increase Cash Available for Distribution, while decreases in or cessations of
rents should decrease Cash Available for Distribution. Any such failure to make
expected distributions could result in a decrease in the market price of the
Common Stock.
ESTIMATED INITIAL CASH AVAILABLE FOR DISTRIBUTION MAY NOT BE SUFFICIENT TO MAKE
DISTRIBUTIONS AT EXPECTED LEVELS
The Company's estimated initial annual distributions represent 101.8% of
the Company's estimated initial Cash Available for Distribution for the 12
months ending November 30, 1998 (107.9% if the over-allotment option granted to
the Underwriters is exercised in full). Such percentages, however, were
determined without taking into account interest income the Company expects to
earn on excess proceeds of the Offering designated for the redevelopment of Sky
Lake. Accordingly, the Company may not be able to make its estimated initial
distribution of $1.05 per share to stockholders out of Cash Available for
Distribution as calculated under "Distribution Policy" below. Under such
circumstances, the Company could be required to fund distributions through
borrowings under available lines of credit, or to reduce the amount of such
distribution. Pending investment of the net proceeds and the production of
income therefrom or in the event the Underwriters' over-allotment option is
exercised, the Company's ability to pay such distribution out of Cash Available
for Distribution may be further
20
<PAGE>
adversely affected. See "--REIT Distribution Requirements and the Company's
Financial Condition Will Affect the Amount of Distributions to Stockholders".
THE COMPANY IS SUBJECT TO RISKS ASSOCIATED WITH THE REAL ESTATE INDUSTRY
THE VALUE OF THE COMPANY'S PROPERTIES IS AFFECTED BY NUMEROUS FACTORS
Real estate values are affected by a number of factors, including changes
in the general economic climate, local conditions (such as an over-supply of
space or a reduction in demand for real estate in an area), the quality and
policies of management, competition from other properties, the ability of the
owner to provide adequate maintenance and insurance, and variable operating
costs. Shopping centers, in particular, may be affected by changing perceptions
of retailers or shoppers of the safety, convenience and attractiveness of the
shopping center. Real estate values are also affected by such factors as
governmental regulations, interest rate levels, the availability of financing
and potential liability under and changes in environmental, zoning, tax and
other laws. Because substantially all of the Company's income and FFO will be
derived from rental income from real property, the Company's financial
condition, results of operations, liquidity, FFO and its ability to make
expected distributions to stockholders would be adversely affected if a number
of the Company's tenants were unable to meet their obligations to the Company,
or if the Company were unable to lease a significant amount of space in its
properties on economically favorable terms. In the event of a default by a
tenant, the Company may experience delays in enforcing, and incur substantial
costs to enforce, its rights as landlord. As a result of the above, or other
factors, including the cyclical nature of real estate markets, the value of the
Company's properties could decrease.
LEASE EXPIRATIONS AND UNLEASED SPACE COULD ADVERSELY AFFECT THE COMPANY'S
PERFORMANCE
The ability of the Company to rent unleased or vacated space will be
affected by many factors, including covenants found in certain leases with
tenants restricting the use of other space at a property. Of the leases for the
Existing Properties, leases covering 153,955 square feet, 134,148 square feet
and 166,975 square feet (representing 8.9%, 7.7% and 9.6%, respectively, of the
total occupied GLA), will expire in 1998, 1999 and 2000, respectively. Based
upon existing annualized minimum rental revenue, such leases will represent
$1.8 million, $1.5 million and $1.7 million of the Company's annualized minimum
rental revenue for the years ended December 31, 1998, 1999 and 2000,
respectively. No Anchor Tenant lease expires before 2004. If the Company is
able to re-let vacated space, there is no assurance that rental rates will be
equal to or in excess of current rental rates. In addition, the Company may
incur substantial costs in obtaining new tenants, including Leasing
Commissions, and the cost of making Tenant Improvements or repairs required by
a new tenant.
ALL EXISTING PROPERTIES ARE, AND FUTURE PROPERTIES ARE EXPECTED TO BE, SUBJECT
TO COMPETITION
All of the Company's Supermarket Centers are located in developed areas
that include other Supermarket Centers. The number of retail properties in a
particular area could materially adversely affect the Company's ability to
lease vacant space and maintain the rents charged at the Supermarket Centers or
at any newly acquired property or properties. One shopping center constructed
less than two years ago stands within a two-mile radius of Bird Ludlum. In
addition, several smaller and older strip centers are located along Bird Road
in Miami. Lake Mary is located on a retail thoroughfare which includes direct
and proximate competition from a freestanding Home Depot, a Target store and
two shopping centers anchored by Winn-Dixie and Publix, respectively. West Lake
and Four Corners each competes with nearby shopping centers anchored by
supermarkets. Pointe Royale is proximate to Cutler Ridge Mall and a
Publix-anchored shopping center. Freestanding retailers such as Circuit City
and Toys R' Us located within one mile of Point Royale compete directly with
tenants in such Supermarket Center. In addition, there are several strip
shopping centers in the vicinity. The Company's other properties are subject to
similar competition. Retailers at the Existing Properties face increasing
competition from outlet malls, discount shopping clubs, direct mail and
telemarketing sales.
The Company has determined that competitive factors have made it less
likely that the Company will be able to achieve its growth objectives
exclusively through acquisitions and that it will need to
21
<PAGE>
develop or redevelop properties to achieve these objectives. There can be no
assurance that it will be able to do so successfully. There can be no assurance
that the Company will be able to acquire suitable properties and tenants for
its properties in the future or that such properties will be profitable. See
"Business--Competition".
THE COMPANY FACES COMPETITION FROM LARGER, WELL-FUNDED DEVELOPERS WHO ARE ALSO
SEEKING TO ACQUIRE AND DEVELOP PROPERTIES WITHIN THE TARGET MARKETS
There are numerous commercial developers, real estate companies and other
owners of real estate in the areas in which the Existing Properties are
located, including financial institutions, pension funds and private owners,
that compete with the Company in seeking land for development, properties for
acquisition, financing and tenants. Many of such competitors have substantially
greater resources than the Company. Such competition may reduce the number of
suitable development and redevelopment properties and increase the bargaining
position of the owners of those properties.
THE ILLIQUIDITY OF REAL ESTATE INVESTMENTS COULD ADVERSELY AFFECT THE COMPANY'S
FINANCIAL CONDITION
Equity real estate investments are relatively illiquid and therefore tend
to limit the ability of the Company to vary its portfolio promptly in response
to changes in economic or other conditions. The Existing Properties are
primarily Supermarket Centers. The Company has no present intention to vary the
types of real estate in its portfolio.
FIXED COSTS DO NOT VARY WITH REVENUES
Certain significant expenditures associated with properties (such as
mortgage payments, real estate taxes and maintenance costs) are generally not
reduced when circumstances cause a reduction in income from the property.
Should such circumstances occur, they would adversely affect the Company's
financial condition, results of operations, liquidity, FFO and its ability to
pay expected distributions to stockholders. The Company may be unable to
increase revenues to the same extent that its fixed costs increase.
FAILURE TO QUALIFY AS A REIT WOULD CAUSE THE COMPANY TO BE TAXED AS A REGULAR
CORPORATION
Although the Company believes that it has operated so as to qualify as a
REIT under the Code since its REIT election in 1995, no assurance can be given
that the Company has qualified or will remain qualified as a REIT. In addition,
no assurance can be given that legislation, new regulations, administrative
interpretations or court decisions will not significantly change the tax laws
with respect to qualification as a REIT or the federal income tax consequences
of such qualification. Qualification as a REIT involves the application of
highly technical and complex Code provisions for which there are only limited
judicial and administrative interpretations. The determination of various
factual matters and circumstances not entirely within the Company's control may
affect the Company's ability to qualify as a REIT. For example, in order to
qualify as a REIT, at least 95.0% of the Company's gross income in any year
must be derived from qualifying sources and the Company must make distributions
to stockholders aggregating annually at least 95.0% of its REIT taxable income
(excluding capital gains). The Company intends to make distributions to its
stockholders to comply with the distribution provisions of the Code. Although
the Company anticipates that its cash flows from operating activities and FFO
will be sufficient to enable it to meet distribution requirements, no
assurances can be given in this regard.
If the Company were to fail to qualify as a REIT in any taxable year, the
Company would be subject to federal income tax (including any applicable
alternative minimum tax) on its taxable income at regular corporate rates, and
would not be allowed a deduction in computing its taxable income for amounts
distributed to its stockholders. Moreover, unless entitled to relief under
certain statutory provisions, the Company also would be ineligible for
qualification as a REIT for the four taxable years following the year during
which qualification was lost. Such disqualification would reduce the net
earnings of the Company available for investment or distribution to its
stockholders due to the
22
<PAGE>
additional tax liability of the Company for the years involved. See "Federal
Income Tax Considerations--Failure to Qualify for Taxation as a REIT".
COSTS OF COMPLIANCE WITH LAWS COULD HAVE AN ADVERSE EFFECT ON THE COMPANY
LIABILITY FOR ENVIRONMENTAL MATTERS COULD ADVERSELY AFFECT THE COMPANY
Under various federal, state and local laws, ordinances and regulations
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act of 1986 ("CERCLA"), Chapter 403 of the Florida Statutes,
the Florida Dry Cleaning Contamination Clean-Up Act and the Dade County
(Florida) Pollution Protection Ordinance, an owner or operator of real estate
may be required to investigate and clean up hazardous or toxic substances or
petroleum product releases at such property and may be held liable to a
governmental entity or to third parties for property damage and for
investigation and clean-up costs incurred by such parties in connection with
contamination. Many of such laws, including CERCLA, typically impose liability
without regard for whether the owner knew of, or was responsible for, the
presence of such hazardous or toxic substances and the liability under such
laws has been interpreted to be joint and several unless divisible and there is
a reasonable basis for allocation of responsibility. The cost of investigation,
remediation or removal of such substances may be substantial, and the presence
of such substances, or the failure to properly remediate such substances, may
adversely affect the owner's ability to sell or rent such property or to borrow
using such property as collateral. In connection with the ownership (direct or
indirect), operation, management and development of real properties, the
Company is generally considered an owner or operator of such properties or as
having arranged for the disposal or treatment of hazardous or toxic substances
and, therefore, potentially liable for removal or remediation costs, as well as
certain other related costs, including governmental fines and damages for
injuries to persons and property.
The Company believes that the environmental studies conducted to date have
not revealed significant environmental liabilities that would have a material
adverse effect on the Company's financial condition, results of operations,
liquidity and FFO; however, no assurance can be given that environmental
studies obtained by the Company reveal all environmental liabilities, that any
prior owner of land or a property owned or acquired by the Company did not
create any material environmental condition not known to the Company, or that a
material environmental condition does not otherwise exist (or may not exist in
the future). Tenants at the Existing Properties include plant-on-premises dry
cleaners, gasoline service stations and tire centers, photo development firms
and other retailers which use hazardous substances in their businesses.
Although leases with such tenants contain provisions intended to minimize the
environmental risks and to shift the financial risks to the tenants, there is
no assurance that the Company will not incur liability in this regard.
A limited monitoring program with respect to groundwater testing has been
implemented at Plaza Del Rey based on questions raised by environmental studies
conducted at the time of purchase. Groundwater impacts have also been detected
at Atlantic Village, which is located in an area where a former municipal
landfill was operated. Buried refuse consistent with known landfill parameters
has been identified by the Company's consultants on the Atlantic Village site.
While these sites are not regarded by management as significant environmental
risks, if a material environmental condition does in fact exist (or exists in
the future) at these or other properties, it could have a significant adverse
impact upon the Company's financial condition, results of operations, liquidity
and FFO. No assurance can be given that the environmental studies that were
performed at the properties would disclose all environmental liabilities
thereon, that any prior owner thereof did not create a material environmental
condition not known to the Company or that a material environmental condition
does not otherwise exist as to any of the Existing Properties.
As noted, tenants at the shopping centers include plant-on-premisis dry
cleaners. As a result of environmental site assessments conducted in the past
few months, low levels of perchloroethylene have been detected in soils at the
Commonwealth, Fort Caroline and Eustis Square properties. The Company
understands that
23
<PAGE>
the owners of these cleaners are applying to participate in state funded dry
cleaner's programs. In connection with the Company's acquisition of Sky Lake, a
Phase II Environmental Site Assessment dated July 15, 1997 revealed the
existence of perchloroethylene at levels above regulatory limits caused by a
dry cleaning business operated on the premises. The Company has learned that
this site is included in the Florida Dry Cleaners State Program. As a condition
to the Company's purchase of the property, the seller agreed to pay all
remediation costs, which environmental consultants have estimated will
approximate $250,000. In addition, $500,000 was placed into an escrow account
at closing to pay for the remediation. Based on the remediation cost estimates,
guarantees by the seller to pay for the cleanup and the establishment of the
escrow account, the Company has concluded that the property does not pose a
material liability to the Company. See "Business--Environmental Matters".
COMPLIANCE WITH LOCAL BUILDING CODES AND ORDINANCES COULD ADVERSELY AFFECT THE
COMPANY
In developing a project, the Company must obtain the approval of various
state and local government authorities such as county and municipal commissions
regarding land use and building permits, the State Department of Transportation
regarding driveway access, and county water and sewer authorities regulating
water use, waste disposal, and drainage permits on the Existing Properties.
Several local authorities in Florida have imposed impact fees as a means of
defraying the cost of providing certain governmental services to developing
areas and the amount of these fees has increased significantly during recent
years. Other Florida laws require the use of specific construction materials
which reduce the need for energy-consuming heating and cooling systems. In
addition, Broward and Palm Beach counties, adjacent to Dade County, have
attempted to impose restrictive zoning and density requirements in order to
limit the number of persons who live and work within their boundaries. As a
result of Hurricane Andrew, which struck Southern Florida in August 1992, Dade
and Broward counties in Florida enacted stringent building codes, such as the
South Florida Building Code, which have increased costs of construction. The
State of Florida has also, at times, declared moratoriums on the issuance of
building permits and imposed other restrictions in areas where the
infrastructure does not reach minimum standards. Other states and localities in
which the Company seeks to develop projects may have similar or other
government regulations. There is no assurance that these and other restrictions
will not adversely affect the Company in the future.
The ability of the Company to obtain necessary approvals and permits for
projects is often beyond the Company's control, and could restrict or prevent
the development of otherwise desirable property. The period of time necessary
to obtain permits and approvals increases the carrying costs of unimproved
property acquired for the purpose of development and construction. In addition,
the continued effectiveness of permits already granted is subject to factors
such as changes in policies, rules and regulations and their interpretation and
application.
Certain employees of the Company are required to maintain certain real
estate and mortgage brokers licenses in order for the Company to manage
properties and receive certain commissions. Changes in the requirements for
maintaining these licenses or failure of such employees to qualify for such
licenses could have an adverse affect on the Company.
THE COST OF COMPLYING WITH THE AMERICANS WITH DISABILITIES ACT COULD ADVERSELY
AFFECT THE COMPANY
Under the ADA, places of public accommodation or commercial facilities are
required to meet certain federal requirements related to access and use by
disabled persons. These requirements became effective after January 1, 1991.
Although management of the Company believes that the Existing Properties are
substantially in compliance with the present requirements of the ADA, the
Company may incur additional costs in connection with such compliance in the
future. Also, a number of additional federal, state and local laws and
regulations exist that may require modifications to the Company's properties,
or affect certain future renovations thereof, with respect to access by
disabled persons. Non-compliance with the ADA could result in the imposition of
fines, an award of damages to private litigants, or an order to correct any
non-complying feature. Under certain of the Company's leases, the tenant is
responsible for ensuring that the property complies with all laws and
regulations,
24
<PAGE>
including the ADA. Notwithstanding the foregoing, the Company may be required
to make substantial capital expenditures to comply with this law. In addition,
provisions of the ADA may impose limitations or restrictions on the completion
of certain renovations and thus may limit the overall returns on the Company's
investments.
THE COMPANY'S USE OF DEBT, REFINANCING NEEDS, INCREASES IN INTEREST RATES AND
AN ABSENCE OF A LIMITATION ON DEBT COULD ADVERSELY AFFECT THE COMPANY
The Company will be subject to the risks normally associated with debt
financing, including the risk that the Company's cash flow will be insufficient
to meet required payments of principal and interest, and the risk that
indebtedness on its properties will not be refinanced at maturity or that the
terms of such refinancing will not be as favorable as the terms of such
indebtedness. Most of the Company's existing mortgage indebtedness has an
amortization schedule which results in substantial payments being due at
maturity. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Indebtedness" and Note 5 of Notes to Consolidated
Financial Statements.
If the Company were unable to refinance its indebtedness on acceptable
terms, or at all, the Company might be forced to dispose of one or more of its
properties upon disadvantageous terms, which might result in losses to the
Company and might adversely affect Cash Available for Distribution. If
prevailing interest rates or other factors at the time of refinancing result in
higher interest rates on refinancings, the Company's interest expense would
increase, without a corresponding increase in its rental rates, which would
adversely affect the Company's financial condition, results of operations,
liquidity, FFO and its ability to pay expected distributions to stockholders.
Further, if one of the Company's properties is mortgaged to secure payment of
indebtedness and the Company is unable to meet mortgage payments, or is in
default under the related mortgage or deed of trust, such property could be
transferred to the mortgagee, or the mortgagee could foreclose upon the
property, appoint a receiver and receive an assignment of rents and leases or
pursue other remedies, all with a consequent loss of income and asset value to
the Company. Foreclosure could also create taxable income without accompanying
cash proceeds, thereby hindering the Company's ability to meet the REIT
distribution requirements under the Code.
The Company is currently negotiating a commitment for a $35.0 million
Acquisition Line of Credit from City National Bank of Florida. Receipt of a
commitment is contingent on City National Bank of Florida entering into a
participation agreement with one or more participating lenders to provide at
least $19.25 million under the proposed Acquisition Line of Credit. The Company
anticipates that borrowing under the Acquisition Line of Credit will bear
interest at 225 basis points over LIBOR and be due three years after the
execution of a definitive loan agreement. Changes in interest rates on the
Acquisition Line of Credit are unlikely to correspond with changes in rental
rates, and the Company has no present intention to (but may) purchase hedge
agreements against interest rate fluctuations. In addition, the proposed terms
of the commitment for the Acquisition Line of Credit allow the lender to cease
funding and/or accelerate maturity of the Acquisition Line of Credit if neither
Mr. Katzman nor Mr. Valero remain as the executives in control of the Company.
There can be no assurance that the Company will receive a commitment for, or
ultimately obtain the Acquisition Line of Credit. Nor can there be any
assurance that if the Company does receive the Acquisition Line of Credit, Mr.
Katzman and Mr. Valero will not cease to act as the executives in control of
the Company, which could accelerate the maturity date of and cease all future
financing under the Acquisition Line of Credit. The failure to obtain, or the
loss of, the Acquisition Line of Credit would adversely affect the Company's
ability to pursue acquisition and development and redevelopment of properties.
In particular, the success of the Company's redevelopment of Sky Lake is
dependent on the receipt of the Acquisition Line of Credit or other source of
financing in an amount necessary to complete the redevelopment project,
following the demolition of the property. If the Company is unable to secure
financing to complete the Sky Lake redevelopment, the Company may be unable to
recover its initial investment in such property. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources".
25
<PAGE>
As of June 30, 1997, the Company had total indebtedness of approximately
$64.9 million, all of which was fixed rate mortgage indebtedness collateralized
by 14 of the Existing Properties. The Company's existing mortgage indebtedness
contains customary terms and conditions typically found in mortgages including,
among others, the requirement to maintain insurance on the properties, the
requirement to preserve and maintain the properties and restrictions upon the
incurrence of liens on the properties and upon changes in control of the
Company See "Risk Factors--Certain Indebtedness of the Company May Prohibit the
Sale of Shares of Common Stock". As of June 30, 1997, the Company's mortgage
indebtedness to total stockholders' equity was approximately 54.8%.
Upon consummation of the Offering, the Company's debt as a percentage of
total market capitalization (i.e., the market value of the issued and
outstanding shares of Common Stock, plus total debt) will be approximately
21.8%. The Board of Directors has adopted a policy limiting the Company's
indebtedness to approximately 50.0% of its total market capitalization. The
organizational documents of the Company do not contain any limitation on the
amount or percentage of indebtedness that the Company may incur. The Board of
Directors, without the vote of the Company's stockholders, could alter or
eliminate its current policy on borrowing at any time at its discretion. If
this policy were changed, the Company could become more highly leveraged,
resulting in an increase in debt service costs that could adversely affect the
Company's financial condition, results of operations, liquidity, FFO and its
ability to make expected distributions to its stockholders and an increased
risk of default on the Company's obligations.
MANAGEMENT OF THE COMPANY HAS BROAD DISCRETION IN DETERMINING HOW TO APPLY A
SIGNIFICANT PORTION OF THE PROCEEDS OF THE OFFERING
The Company will have broad discretion as to the application of a
significant portion of net proceeds of the Offering, specifically those
proceeds that have been allocated to redevelopment and development activities.
This amount would be increased to the extent the Underwriters' over-allotment
is exercised, or to the extent any other proposed use of proceeds requires less
funds or becomes impracticable, and would be decreased to the extent any of
such proposed uses would require more funds than is currently forecast. An
investor will not have the opportunity to evaluate the economic, financial and
other relevant information which will be utilized by the Company in determining
the application of such proceeds and will be dependent on management's
determination how to deploy successfully these proceeds. See "Use of Proceeds".
STOCKHOLDER APPROVAL IS NOT REQUIRED TO ENGAGE IN INVESTMENT ACTIVITY
The Company's Board of Directors determines the Company's investment and
financing policies and its policies with respect to certain other activities,
including its debt capitalization, growth, distributions, REIT status, and
investment and operating policies. The Board of Directors has no present
intention to amend or revise these policies. However, the Board of Directors
may do so at any time without a vote of the Company's stockholders. A change in
these policies could adversely affect the Company's financial condition,
results of operations, liquidity, FFO and the Company's ability to make
expected distributions to its stockholders.
CHANGES IN INTEREST RATES COULD ADVERSELY AFFECT THE COMPANY
The market price of the Common Stock will be affected by the annual
distribution rate on the shares of Common Stock. Increasing market interest
rates may lead prospective purchasers of the Common Stock to seek a higher
annual distribution rate from their investments. Such an increase in market
expectations or requirements would likely adversely affect the market price of
the Common Stock. Likewise, increases in interest rates may have the effect of
depressing the value (including the collateral value) of retail properties such
as the Existing Properties.
26
<PAGE>
THE PURCHASERS OF COMMON STOCK WILL EXPERIENCE DILUTION
Purchasers of the Common Stock offered hereby will experience immediate
and significant dilution of $4.68 per share ($4.47 per share if the
Underwriters' over-allotment option is exercised in full) in the net tangible
book value of their shares. See "Dilution".
THE PRICE OF THE COMMON STOCK MAY BE ADVERSELY AFFECTED BY THE LACK OF A PRIOR
MARKET AND FLUCTUATIONS IN THE STOCK MARKET; THE OFFERING PRICE IS NOT BASED
UPON PROPERTY VALUATIONS
Prior to the Offering, there has been no public market for the Common
Stock. Although the Common Stock has been approved for listing on the New York
Stock Exchange, subject to official notice of issuance, there can be no
assurance that an active trading market for the Common Stock will develop or
that, if developed, will be sustained. In connection with the Offering, neither
the Company nor the Underwriters have obtained appraisals or other valuations
of the Company's properties. The initial public offering price of the Common
Stock has been determined by negotiation among the Representatives of the
several Underwriters and the Company and may not reflect the fair market value
of the Company's properties. The Offering price may not be indicative of the
market price for the Common Stock after the Offering. The market price of the
Common Stock could be subject to significant fluctuations in response to the
Company's operating results and other factors. In addition, the stock market in
recent years has experienced extreme price and volume fluctuations that often
have been unrelated or disproportionate to the operating performance of
individual companies. Such fluctuations, and general economic and market
conditions, may adversely affect the market price of the Common Stock. See
"Selected Consolidated Financial Data", "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Underwriting".
THE COMPANY COULD BE ADVERSELY AFFECTED BY DAMAGE TO PROPERTY NOT COVERED BY
INSURANCE
The Company believes that it carries (or causes its tenants to carry)
comprehensive liability, fire, flood, extended coverage and rental loss
insurance with respect to its properties with policy specifications and insured
limits customarily carried for similar properties. The Company believes that
the insurance currently carried on its properties is adequate and in accordance
with industry standards. There are, however, certain types of losses (such as
from hurricanes) which may be or become uninsurable, or the cost of insuring
against such losses may not be economically justifiable. Should an uninsured
loss occur, the Company could lose both its invested capital in and anticipated
revenues from the property, and would continue to be obligated to repay any
recourse mortgage indebtedness on the property. This risk may be intensified by
the fact that most of the Company's properties are clustered in certain
markets, making it likely that a natural disaster in any such market could
affect a number of the Existing Properties.
CERTAIN INDEBTEDNESS OF THE COMPANY MAY BE IN DEFAULT
Certain of the mortgages on the Existing Properties contain prohibitions
on transfers of ownership interests in the mortgagor without the prior written
consent of the lenders, which provisions may have been violated by previous
issuances of Common Stock and may be violated by the Offering. A violation
could serve as a basis for the lenders to accelerate amounts due under the
related mortgages. The Company is currently in the process of obtaining a
clarification, amendment or consent from each of the various lenders under such
mortgages, unless such mortgage is to be repaid by the Company with proceeds of
the Offering. See "Use of Proceeds". The outstanding amounts under the
mortgages on the affected Existing Properties covered by such restrictions on
transfer total approximately $11.0 million, of which approximately $8.0 million
of such mortgages will be repaid with the proceeds of the Offering. In the
event that the requested assurances or consents are not obtained and the
mortgage holders declare defaults under the mortgage documents, the Company
will either prepay the remaining mortgages from the net proceeds from the
Offering, or reserve the capacity to prepay the mortgages under the Acquisition
Line of Credit or other sources of financing. The repayment of these mortgages
would, among other things, offset the Company's ability to make distributions
in the anticipated amounts.
27
<PAGE>
AVAILABILITY OF SHARES OF COMMON STOCK FOR FUTURE SALE COULD ADVERSELY AFFECT
THE PRICE OF THE COMMON STOCK
Future sales of substantial amounts of Common Stock in the public market,
or the availability of such shares for future sale, could impair the Company's
ability to raise capital through an offering of securities and may adversely
affect the then-prevailing market prices. See "Shares Eligible for Future
Sale". The Company and holders of substantially all of the outstanding Common
Stock have agreed not to sell any shares of Common Stock for 180 days from the
date of this Prospectus without the prior written consent of Credit Suisse
First Boston. See "Underwriting". Following such 180-day period, approximately
5,300,000 shares held by current stockholders will be available for sale under
Rule 144 of the Act. Additionally, 1,000,000 shares of Common Stock have been
reserved for issuance under the Company's 1995 Plan, under which options to
purchase 614,000 shares have been granted. The Company intends to register
under the Act all shares reserved for issuance under the 1995 Plan. See
"Management--Stock Option Plan". Shares covered by such registration will, when
issued, be eligible for resale in the public market, subject to Rule 144
limitations applicable to affiliates. Pursuant to certain registration rights
agreements among the Company and certain stockholders, the Company has granted
various registration rights to such stockholders who have waived such rights
with respect to the Offering. See "Certain Transactions".
THE ABILITY TO EFFECT A CHANGE OF CONTROL OF THE COMPANY IS LIMITED
MARYLAND LAW AND THE CHARTER AND BYLAWS OF THE COMPANY MAY INHIBIT A
CHANGE OF CONTROL OF THE COMPANY. Certain provisions of the Maryland General
Corporation Law, as amended (the "MGCL"), and of the Company's Charter and
Bylaws may have the effect of delaying, deferring or preventing a change in
control of the Company or the removal of existing management and, as a result,
may prevent the stockholders of the Company from receiving a substantial
premium for their shares over then-current market prices.
CERTAIN BUSINESS COMBINATIONS ARE PROHIBITED UNDER MARYLAND LAW. Under the
MGCL, certain "business combinations" (including a merger, consolidation, share
exchange, or, in certain circumstances, an asset transfer or issuance or
reclassification of equity securities) between a Maryland corporation and any
person who beneficially owns ten percent or more of the voting power of the
corporation's shares or an affiliate of the corporation who, at any time within
the two-year period prior to the date in question, was the beneficial owner of
ten percent or more of the voting power of the then outstanding voting stock of
the corporation (an "Interested Stockholder") or an affiliate thereof are
prohibited for five years after the most recent date on which the Interested
Stockholder becomes an Interested Stockholder. Thereafter, any such business
combination must be recommended by the board of directors of such corporation
and approved by two supermajority stockholder votes unless, among other
conditions, the holders of Common Stock receive a minimum price (as defined in
the MGCL) for their shares of Common Stock and the consideration is received in
cash or in the same form as previously paid by the Interested Stockholder for
its Common Stock. These provisions of the MGCL do not apply, however, to
business combinations that are approved or exempted by the Board of Directors
prior to the time that the Interested Stockholder becomes an Interested
Stockholder. The Company's Board of Directors has previously exempted from such
provisions of the MGCL any business combination with an officer or director of
the Company or any affiliate of an officer or director of the Company.
THE CONTROL SHARE ACQUISITION STATUTE COULD INHIBIT CHANGES IN
CONTROL. The MGCL provides that "control shares" of a Maryland corporation
acquired in a "control share acquisition" have no voting rights except to the
extent approved by a vote of two-thirds of the votes entitled to be cast on the
matter, excluding shares of stock owned by the acquiror, by officers or by
directors who are employees of the corporation. "Control shares" are voting
shares of stock which, if aggregated with all other such shares of stock
previously acquired by such person, or in respect of which such person is able
to exercise or direct the exercise of voting power (except solely by virtue of
a revocable proxy), would entitle the acquirer to exercise voting power in
electing directors within one of the following ranges of voting
28
<PAGE>
power: (i) one-fifth or more but less than one-third, (ii) one-third or more
but less than a majority, or (iii) a majority of all voting power. Control
shares do not include shares the acquiring person is then entitled to vote as a
result of having previously obtained stockholder approval. A "control share
acquisition" means the acquisition of control shares subject to certain
exceptions.
The control share acquisition statute does not apply to shares acquired in
a merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or exempted by the charter or bylaws
of a corporation.
The Bylaws of the Company contain a provision exempting from the control
share acquisition statute any and all acquisitions by any person of the
Company's shares of Common Stock. Such provision of the Bylaws may be amended
by the Board of Directors without stockholder approval. There can be no
assurance that such provision will not be amended or eliminated at any time in
the future. As a result of the Company's decision to opt out of the control
share acquisition statute, stockholders who acquire a substantial block of
Common Stock are not precluded from exercising full voting rights with respect
to their shares on all matters without first obtaining the approval of other
stockholders entitled to vote. This may have the effect of making it easier for
any such control share stockholder to effect a business combination with the
Company.
In addition, certain provisions of the Company's Charter and Bylaws
summarized in the following paragraphs may be deemed to have anti-takeover
effects and may delay, defer or prevent a tender offer or takeover attempt that
a stockholder might consider in its best interest, including those attempts
that might result in a premium over the market price for the shares held by
stockholders. See "Description of Capital Stock--Anti-Takeover Effect of
Certain Provisions of Maryland Law and the Company's Charter and Bylaws".
THE BOARD OF DIRECTORS IS CLASSIFIED INTO THREE CLASSES. The Company's
Board of Directors is divided into three classes with staggered three-year
terms. The initial terms of the first, second and third classes will expire in
1998, 1999 and 2000, respectively. Beginning in 1998, directors of each class
will be chosen for three-year terms upon the expiration of their current terms,
with one class of directors elected annually by the stockholders. The staggered
terms of directors may have the effect of deterring certain potential
acquisitions of the Company because control of the Company's Board of Directors
could not be obtained at a single annual meeting of stockholders.
CAUSE AND A SUPERMAJORITY VOTE ARE REQUIRED TO REMOVE A DIRECTOR. The
Charter provides that one or more directors may be removed only for Cause (as
defined in the Charter) by the affirmative vote of at least 80% of the votes
cast at an annual or special meeting of stockholders (but in no event less than
a majority of all votes entitled to be cast at the meeting) in the election of
directors. This provision, when coupled with the provision in the Charter
authorizing the Board of Directors to fill vacant directorships, severely
limits the ability of stockholders to remove and replace incumbent directors.
STOCK OWNERSHIP LIMIT IN THE CHARTER COULD INHIBIT CHANGES IN CONTROL. The
Charter includes limitations on the actual or constructive ownership of
outstanding Common Stock by any single stockholder to 5.0% in value of the
outstanding Common Stock or number of shares, whichever is more restrictive, in
order to protect the Company against the loss of REIT status due to the
concentration of ownership among its stockholders. The Board of Directors has
waived such Ownership Limit with respect to certain of its affiliates, Gazit
(1995), Globe Reit, Dan Overseas, and M.G.N.
THE CHARTER PERMITS THE ISSUANCE OF ADDITIONAL STOCK. The Charter
authorizes the issuance of additional shares of stock and the classification or
reclassification of unissued shares of either Common Stock or preferred stock
with such preferences and conversion, voting and other rights as may be
determined from time to time by the Board of Directors. Accordingly, the Board
of Directors is empowered, without stockholder approval (unless otherwise
required by the rules of any stock exchange on which the Common Stock is then
traded), to issue preferred stock with dividend, liquidation, conversion,
voting or other rights which could adversely affect the voting power or other
29
<PAGE>
rights of the holders of the Common Stock. In the event of such issuance, the
preferred stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Company.
Although the Company has no present intention to issue any shares of its
preferred stock, there can be no assurance that the Company will not do so in
the future.
SPECIAL MEETINGS OF STOCKHOLDERS. The Bylaws provide that special meetings
of stockholders may be called only by the President, Chief Executive Officer,
or Chairman of the Board of Directors and must be called upon the written
demand of the holders of not less than a majority of all the votes entitled to
be cast at the meeting.
PROVISIONS IN THE CHARTER AND BYLAWS COULD PREVENT ACQUISITIONS AND
CHANGES IN CONTROL. Under the Bylaws of the Company, at least 662/3% of the
votes cast at a meeting of stockholders duly called at which a quorum is
present is required to approve any matter properly before the meeting unless a
greater percentage is required by statute or by the Charter. Under the MGCL, a
Maryland corporation generally cannot dissolve, amend its charter, merge, sell
all or substantially all of its assets, engage in a share exchange or engage in
similar transactions outside of the ordinary course of business unless approved
by the affirmative vote of stockholders holding at least two-thirds of the
shares entitled to vote on the matter unless a greater or lesser percentage
(but no less than a majority of all of the votes entitled to be cast on the
matter) is set forth in the corporation's charter. Any amendment to any
provision of the Charter requiring a vote of stockholders must be approved by
the affirmative vote of at least 662/3% of all votes entitled to be cast on the
matter, unless such provision requires a greater percentage of affirmative
votes.
SUPERMAJORITY PROVISIONS FOR DIRECTOR ACTION MAY INHIBIT THE COMPANY'S ABILITY
TO TRANSACT BUSINESS
Under the Company's Bylaws, the affirmative vote of at least 80% of the
entire Board of Directors is required to approve any matter before the Board.
The supermajority provisions in the Company's Bylaws require that, given the
current size of the Board, eight of nine directors must agree on any proposal
before the Board. This supermajority voting requirement creates a risk that the
Company will not be able to agree on any course of action, leading to a
impasse. Under the MGCL, under certain circumstances stockholders may petition
a court for dissolution of the Company on the grounds that the directors are so
divided respecting the management of the Company's affairs that the votes
required for action by the Board of Directors cannot be obtained. Although to
date no impasse has occurred on the Board, there can be no assurance that the
supermajority provisions in the Company's Bylaws will not prohibit the Board of
Directors from conducting the business of the Company, possibly resulting in a
petition for dissolution of the Company. See "Description of Capital
Stock--Anti-Takeover Effects of Certain Provisions of Maryland Law, and the
Company's Charter and Bylaws."
30
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of shares of
Common Stock offered hereby, based upon an assumed initial public offering
price of $14.50 per share and after deducting the underwriting discounts and
commissions and estimated Offering expenses, are estimated to be approximately
$62.8 million ($72.3 million if the Underwriters' over-allotment option is
exercised in full).
The Company intends to use the net proceeds from the Offering as follows:
<TABLE>
<CAPTION>
APPROXIMATE
APPROXIMATE PERCENTAGE OF
APPLICATION OF PROCEEDS DOLLAR AMOUNT NET PROCEEDS
- ----------------------- ------------- -------------
<S> <C> <C>
Proposed Acquisitions and Development of the Redevelopment/
Development Properties(1) .................................... $17,997,000 29%
Repayment of indebtedness(2) .................................... 18,383,000 29
Proposed Acquisitions of Performing Supermarket Centers(3) ...... 20,000,000 32
Renovation of and development at Existing Properties(4) ......... 6,400,000 10
------------ ----
Total(5) ...................................................... $62,780,000 100%
============ ====
</TABLE>
- ----------------
(1) Represents (i) $7.0 million related to the repayment of seller financing
of, and approximately $10.0 million for the renovation and/or development
of retail space at, Sky Lake and (ii) $1.0 million to acquire 4.4 acres of
vacant land in Miami, Florida which the Company has under contract
(collectively, the "Acquisition and Development of the Redevelopment/
Development Properties"). While the Company intends to designate
approximately $10.0 million of the proceeds for the renovation and/or
development of retail space at Sky Lake, such proceeds may be used by the
Company for the acquisition of additional properties or such other uses
where such use of proceeds would be more favorable than alternative
financings and provided that funds are available under then existing
credit facilities for the development of Sky Lake.
(2) Represents the repayment of approximately (i) $3.0 million outstanding
under a mortgage loan related to Four Corners obtained in 1993, which
accrues interest at an annual rate of 9.49% and is due and payable in
January 2003, (ii) $2.0 million outstanding under a mortgage loan related to
Forest Edge obtained in 1996, which accrues interest at an annual rate of
8.25% and is due and payable in October 2002, (iii) $4.0 million outstanding
under a mortgage loan related to Atlantic Village obtained in 1995 which
accrues interest at an annual rate of 8.15% and is due and payable in July
2002, (iv) $3.0 million outstanding under a mortgage loan related to Plaza
Del Rey obtained in 1996, which accrues interest at an annual rate of 8.125%
and is due and payable in September 2001, (v) $5.9 million outstanding under
a mortgage loan related to West Lake obtained in 1996, which accrues
interest at an annual rate of 7.875% and is due and payable in June 2006
(collectively, the "Mortgage Indebtedness") and (vi) $523,000 of prepayment
penalties related to the repayment of certain of the Mortgage Indebtedness.
See "Management's Discussion of Financial Condition and Results of
Operations--Indebtedness".
(3) Represents approximately (i) $7.0 million to acquire Lantana Village, which
the Company has an agreement to purchase, (ii) $3.0 million to acquire
Beauclerc Village, which the Company has an agreement to purchase and
(iii) $10.0 million to acquire Summerlin Square, which the Company has
agreed to purchase (collectively, the "Proposed Performing Supermarket
Center Acquisitions").
(4) Represents approximately (i) $850,000 to renovate Atlantic Village, (ii)
$1.75 million for Commonwealth, of which $1.3 million will be used to
expand retail space leased by Winn-Dixie and $450,000 will be used to
renovate and develop a pad site containing 6,000 square feet of GLA, (iii)
$3.0 million to develop approximately 50,000 square feet of additional GLA
at Lake Mary and (iv) $800,000 to renovate the 18,000 square foot office
building at Pointe Royale (collectively the "Renovation of Existing
Properties").
(5) To the extent the Underwriters' over-allotment is exercised, or to the
extent any proposed application of proceeds requires less funds or becomes
impracticable, such funds will be applied to working capital and general
corporate purposes.
Proceeds not immediately required for the purposes described above will be
invested by the Company in interest-bearing accounts and short-term,
interest-bearing securities, which are consistent with the Company's intention
to continue to qualify for taxation as a REIT. Such investments may include,
for example, government and government agency securities, mortgage backed
securities, collateralized mortgage obligations, certificates of deposit,
commercial paper, money market funds or investment grade preferred stock of
other publicly traded REITs.
31
<PAGE>
DISTRIBUTION POLICY
Subsequent to the Offering, the Company intends to make regular quarterly
distributions to the holders of its Common Stock. The first dividend, for the
period commencing upon the consummation of the Offering and ending December 31,
1997, is anticipated to be in a prorated amount based upon a quarterly
distribution of $0.262 per share (which, if annualized, would equal $1.05 per
share), or an annual yield of approximately 7.2% based on an assumed initial
public offering price per share of $14.50. See "--Dividends". The Company does
not intend to reduce the expected distribution per share if the Underwriters'
over-allotment option is exercised. The Company currently expects to distribute
approximately 101.8% of its estimated Cash Available for Distribution for the
12 months following the consummation of the Offering (107.9% if the
over-allotment option granted to the Underwriters is exercised in full). The
Company has adopted a policy pursuant to which it intends to limit
distributions to no more than 94.0% of its Cash Available for Distribution for
periods subsequent to 12 months following the consummation of the Offering.
Distribution amounts could change if actual results from operations, economic
conditions or other factors differ significantly from the assumptions used by
the Company in calculating estimated Cash Available for Distribution. See "Risk
Factors--Estimated Initial Cash Available for Distribution May Not Be
Sufficient to Make Distributions at Expected Levels".
The Company's intended annual distribution for the 12-month period
following the Offering is based on an estimate for such period. This estimate is
based on pro forma net income for the 12 months ended June 30, 1997, as adjusted
for certain events and contractual commitments that are not reflected in the
Company's historical or pro forma financial statements, as set forth in the
table below. The calculation of adjustments to pro forma FFO is being made
solely for the purpose of estimating the distribution amount for this period and
is not intended to be a projection or prediction of the Company's actual results
of operations or of its liquidity, nor is the methodology upon which such
adjustments are made intended to be a basis for determining future
distributions. Future distributions by the Company will be at the discretion of
the Board of Directors. There can be no assurance that any distributions will be
made or that the expected level of distributions will be maintained by the
Company. The actual return that the Company will realize will be affected by a
number of factors, including the revenue received from its properties, the
operating expenses of the Company, the interest expense incurred on its
borrowings, the ability of tenants to meet their contractual obligations,
general leasing activity and unanticipated capital expenditures. See "Risk
Factors--The Company's Performance and Value Are Subject to Risks Associated
with the Real Estate Industry".
32
<PAGE>
The following table illustrates the adjustments made by the Company to its
pro forma FFO for the 12 month period ended June 30, 1997 in order to calculate
estimated Cash Available for Distribution for the 12 month period ending
November 30, 1998:
<TABLE>
<CAPTION>
IN THOUSANDS
-----------------
<S> <C>
Pro forma net income for the year ended December 31, 1996 .............................. $ 7,379
Plus: Pro forma net income for the six months ended June 30, 1997 ..................... 3,879
Less: Pro forma net income for the six months ended June 30, 1996 ..................... (3,388)
Plus: Pro forma depreciation for the 12 months ended June 30, 1997 ..................... 2,723 (1)
-----------
Pro forma FFO for the 12 months ended June 30, 1997 .................................... 10,593
-----------
Adjustments:
Net increase in contractual rental income for months in effect ........................ 341 (2)
Net increase from new leases ......................................................... 1,931 (3)
Net effect of lease expirations, assuming no renewals ................................. (991)(4)
Net increase from reduced interest expense ............................................. 466 (5)
Plus: Non-recurring items ............................................................ 867 (6)
-----------
Estimated adjusted pro forma FFO for the 12 months ending November 30, 1998 ............ 13,207
Non-real estate amortization ............................................................ 111 (7)
-----------
Estimated adjusted pro forma cash flows from operating activities for the 12 months
ending November 30, 1998 ............................................................ 13,318
Estimated capital expenditures ......................................................... (100)(8)
Scheduled debt principal payments ...................................................... (1,240)(9)
-----------
Estimated Cash Available for Distribution for the 12 months ending November 30, 1998 . $ 11,978(10)
===========
Total estimated initial distributions ................................................... $ 12,189
===========
Estimated initial annual distributions per share ....................................... $ 1.05
===========
Payout ratio based on estimated Cash Available for Distribution ........................ 101.8 %
===========
</TABLE>
- ----------------
(1) Pro forma depreciation of $2.7 million for the year ended December 31,
1996 plus $1.4 million for the period ended June 30, 1997 less $1.4
million for the period ended June 30, 1996.
(2) This adjustment gives effect to the net increase in rental revenues for
contractual rental increases for the 12 month period ending November 30,
1998.
(3) Gives effect to the net increase in rental revenues attributable to leases
in effect on June 30, 1997, which were not in effect for the full 12 month
period from July 1, 1996 to June 30, 1997 and from new fully executed
leases commencing on or after July 1, 1997.
(4) This adjustment gives effect to the net decrease in rental revenues for
the 12 month period ending November 30, 1998 with respect to that portion
of the 12 month period that such leases are no longer in effect and which
are attributable to leases expiring on or after July 1, 1997, assuming no
renewals.
(5) Represents the incremental increase in FFO attributable to a net decrease
in interest expense, calculated in accordance with GAAP, from the pro
forma 12 months ended June 30, 1997 to the 12 months ending November 30,
1998.
(6) Includes prepayment fees and amortization of loan costs associated with
repayment of mortgage notes payable.
(7) Represents the amortization of financing costs for the 12 months ending
November 30, 1998.
(8) Assumes non-development related capital expenditures of $0.05 per square
foot of GLA.
(9) Calculations based on pro forma debt outstanding for the 12 months ending
November 30, 1998 and the principal payments related to such indebtedness.
(10) Does not include interest earned on $17.4 million of cash proceeds of the
Offering pending their final application in connection with proposed
acquisitions and development and/or redevelopment activities. See "Risk
Factors--Estimated Initial Cash Available For Distribution May Not Be
Sufficient to Make Distributions at Expected Levels".
In order to qualify to be taxed as a REIT, the Company must make annual
distributions to stockholders of at least 95.0% of its REIT taxable income
(determined without regard to the dividends received deduction and by excluding
any net capital gains). See "Federal Income Tax Considerations-- Taxation of
the Company--Annual Distribution Requirements". The Company anticipates that
its estimated Cash Available for Distribution will exceed its REIT taxable
income due to non-cash expenses,
33
<PAGE>
primarily depreciation and amortization, to be incurred by the Company. It is
possible, however, that the Company from time to time, may not have sufficient
cash or other liquid assets to meet these distribution requirements due to
timing differences between (i) the actual receipt of income and actual payment
of deductible expenses and (ii) the inclusion of such income and deduction of
such expenses in arriving at taxable income of the Company. In the event that
such timing differences occur, in order to meet the distribution requirements,
the Company may find it necessary to arrange for short-term, or possibly long-
term, borrowings. Distributions by the Company, to the extent of its current
and accumulated earnings and profits for federal income tax purposes, other
than capital gain dividends, will be taxable to stockholders as ordinary
dividend income. Capital gain distributions generally will be treated as gain
from the sale of an asset held for more than one year. Distributions in excess
of earnings and profits generally will be treated as non-taxable return of
capital to the extent of each stockholder's basis in his or her Common Stock
and thereafter as taxable gain. The non-taxable distributions will reduce each
stockholders' tax basis in the Common Stock and, therefore, the gain (or loss)
recognized on the sale of such Common Stock or upon liquidation of the Company
will be increased (or decreased) accordingly. For a discussion of the tax
treatment of distributions to holders of Common Stock, see "Federal Income Tax
Considerations-Taxation of U.S. Stockholders" and "--Taxation of Non-U.S.
Stockholders".
Financing activities such as repayment or refinancing of loans also may
affect the Company's assets and liabilities and the amount of Cash Available
for Distribution for future periods. Management will seek to control the timing
and nature of investing and financing activities in order to maximize the
Company's return on invested capital.
Future distributions by the Company will be subject to the requirements of
the MGCL and the annual distribution requirements under the REIT provisions of
the Code (see "Federal Income Tax Considerations--Taxation of the
Company--Annual Distribution Requirements") and will depend on the actual cash
flow of the Company, its financial condition, its capital requirements, and
such other factors as the Board of Directors deems relevant. There can be no
assurance that any distributions will be made or that the expected level of
distributions will be maintained by the Company. See "Risk Factors-- General
Risks Related to Real Estate Investments" and "--Estimated Initial Cash
Available for Distribution May Not Be Sufficient to Make Distributions at
Expected Levels ". If revenues generated by the Company's properties in future
periods decrease materially from current levels, the Company's ability to make
expected distributions would be materially adversely affected, which could
result in a decrease in the market price of the shares of Common Stock.
The Company may in the future implement a distribution reinvestment
program under which holders of shares of Common Stock may elect automatically
to reinvest distributions in additional shares of Common Stock. The Company
may, from time to time, repurchase shares of Common Stock in the open market
for purposes of fulfilling its obligations under this distribution reinvestment
program, if adopted, or may elect to issue additional shares of Common Stock.
If the Company adopts a distribution reinvestment program, it will solicit
participation in the program after the Offering by means of a separate
prospectus, and a purchase of shares of Common Stock in the Offering does not
entitle any investor to participate in any such program. There can be no
assurance that the Company will adopt such a program, and consequently, the
probable date of adoption or number of shares of Common Stock that would be
available under such program cannot be determined at this time.
DIVIDENDS
Since the Company's election of REIT status, the Company has paid cash
dividends to its stockholders in accordance with REIT distribution
requirements.
During 1997, the Company paid cash dividends of $0.215 per share, $0.225
per share and $0.2625 per share on March 31, June 18, and September 16,
respectively, to all stockholders of record on those dates. Gross dividends
paid by the Company for the nine months ended September 30, 1997 were $4.6
million.
The Company anticipates that its Board of Directors will declare a
distribution immediately prior to the consummation of the Offering for
stockholders of record with respect to a prorata portion of the
34
<PAGE>
anticipated quarterly distribution of $0.262 per share based on the number of
days between and including October 1, 1997 and the day immediately preceding the
closing date. In addition, the Company anticipates that the Board of Directors
will declare a distribution for the period from and including the closing date
to December 31, 1997, with stockholders of record as of a record date
established after the closing date receiving the appropriate prorata portion of
the anticipated quarterly distribution of $0.262 per share.
During 1996, the Company paid cash dividends of $0.375 per share, $0.20
per share and $0.225 per share on June 18, September 30, and December 31,
respectively, to all stockholders of record on those dates. Gross dividends
paid by the Company for the year ended December 31, 1996 were $4.2 million.
During 1995, the Company paid cash dividends of $0.25 per share, $0.125
per share and $0.25 per share on June 28, September 27, and December 28,
respectivley, to all stockholders of record on those dates. Gross dividends
paid by the Company for the year ended December 31, 1995 were $2.8 million.
The Company did not pay any dividends to its stockholders prior to January
1, 1995.
35
<PAGE>
DILUTION
The net tangible book value of the Company's Common Stock as of June 30,
1997 was $51.8 million, or approximately $7.50 per share. Net tangible book
value per share is determined by dividing net tangible book value (tangible
assets less liabilities) of the Company by 6,908,130 shares of Common Stock
outstanding.
Net tangible book value dilution per share represents the difference
between the amount per share paid by purchasers of shares of Common Stock in
the Offering and the pro forma net tangible book value per share of Common
Stock immediately after consummation of the Offering. After giving effect to
the sale by the Company of 4,700,000 shares of Common Stock in the Offering at
an assumed initial public offering price of $14.50 per share, and the
application of the estimated net proceeds therefrom, the pro forma net tangible
book value of the Company as of June 30, 1997 would have been $114.0 million,
or $9.82 per share. This would represent an immediate increase in net tangible
book value of $2.32 per share to the existing stockholders and an immediate
dilution in net tangible book value of $4.68 per share to purchasers of Common
Stock in the Offering, as illustrated in the following table.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share of Common Stock(1) ... $14.50
Net tangible book value at June 30, 1997 ........................... $7.50
------
Increase per share attributable to new investors ..................... $2.32
------
Pro forma net tangible book value after the Offering(2) ............... $ 9.82
-------
Net tangible book dilution per share to new investors(2)(3)(4)(5) ...... $ 4.68
=======
</TABLE>
- ----------------
(1) Before deducting the underwriting discounts and commissions and estimated
expenses of the Offering.
(2) If the Underwriters exercise their over-allotment option in full, the pro
forma net tangible book value per share would be $10.03 and dilution of
net tangible book value per share to new investors would be $4.47.
(3) Does not give effect to the issuance of shares of Common Stock issuable
upon exercise of stock options granted under the Company's 1995 Plan,
pursuant to which options to purchase 614,000 shares of Common Stock at
exercise prices ranging from $8.25 to $12.375 per share have been issued
and are outstanding as of the date of this Prospectus. If exercised, these
options would result in a decrease in dilution to new investors of $0.11
per share. See "Management--Stock Option Plan".
(4) Does not give effect to the issuance of up to 1,306,124 shares of Common
Stock pursuant to exercise of the Series C Warrants at an exercise price
of $8.25 per share. If exercised, these warrants would result in
additional dilution to new investors of $0.15 per share.
(5) Does not give effect to the issuance of 580,288 shares of Common Stock at a
price of $12.71 per share reserved for issuance to an affiliate of the
Company pursuant to a stock purchase agreement. If purchased, these shares
would result in a decrease in dilution to new investors of $0.14 per
share. See "Certain Transactions".
The following table sets forth as of June 30, 1997, the difference between
the existing stockholders and the purchasers of shares in the Offering with
respect to the number of shares purchased from the Company, the total
consideration paid and the average price per share paid at the assumed initial
offering price of $14.50 per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------------------ ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------------ --------------- ---------- --------- ---------------
<S> <C> <C> <C> <C> <C>
Existing stockholders ...... 6,908,130(1) 59.5%(2) $ 53,494 44.0% $ 7.74
New investors ............... 4,700,000 40.5 68,150 56.0 14.50
------------- --------- --------- ------
Total ..................... 11,608,130 100.0% $121,644 100.0%
============= ========= ========= ======
</TABLE>
- ----------------
(1) Does not include (i) 705,000 shares of Common Stock reserved for issuance
upon exercise of the Underwriters' over-allotment option, (ii) 614,000
shares of Common Stock reserved for issuance upon the exercise of
outstanding options under the 1995 Plan, (iii) 386,000 shares of Common
Stock reserved for issuance upon the exercise of options available for
future grant under the 1995 Plan, (iv) 580,288 shares of Common Stock
reserved for issuance to an affiliate pursuant to a stock purchase
agreement, and (v) 1,306,124 shares of Common Stock reserved for issuance
upon exercise of the Series C Warrants. See "Management--Stock Option
Plan", "Certain Transactions", "Description of Capital Stock" and
"Underwriting" and Note 9 of Notes to Financial Statements.
(2) If the Underwriters exercise their over-allotment option in full, the
Company's existing stockholders will own 56.1% of the shares of Common
Stock outstanding upon consummation of the Offering. See "Principal
Stockholders".
36
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
June 30, 1997 and as adjusted for the sale of the 4,700,000 shares of Common
Stock offered hereby (at an assumed initial public offering price of $14.50 per
share) and the application of the estimated net proceeds therefrom. See "Use of
Proceeds".
<TABLE>
<CAPTION>
JUNE 30, 1997
-----------------------------
ACTUAL AS ADJUSTED
---------- ----------------
(IN THOUSANDS)
<S> <C> <C>
Mortgage notes payable ................................................... $64,916 $ 47,056
-------- ---------
Stockholders' equity:
Preferred stock, $0.01 par value per share; 5,000,000 shares authorized; no
shares issued and outstanding .......................................... - -
Common Stock, $0.01 par value per share; 40,000,000 shares authorized;
6,908,130 shares issued and outstanding; 11,608,130 shares issued and
outstanding, as adjusted(1) ............................................. 69 116
Additional paid-in capital ................................................ 54,950 117,683
Notes receivable from stock sales .......................................... (1,525) (1,525)
Retained earnings (deficit) ................................................ -- (836)(2)
-------- ---------
Total stockholders' equity ............................................. $53,494 $ 115,438
======== =========
</TABLE>
- ----------------
(1) Does not include (i) 705,000 shares of Common Stock reserved for issuance
upon exercise of the Underwriters' over-allotment option, (ii) 614,000
shares of Common Stock reserved for issuance upon the exercise of
outstanding options under the 1995 Plan, (iii) 386,000 shares of Common
Stock reserved for issuance upon the exercise of options available for
future grant under the 1995 Plan, (iv) 580,288 shares of Common
Stock reserved for issuance to an affiliate pursuant to a stock purchase
agreement, and (v) 1,306,124 shares of Common Stock reserved for issuance
upon exercise of the Series C Warrants. See "Management--Stock Option
Plan", "Certain Transactions", "Description of Capital Stock" and
"Underwriting".
(2) Reflects the write-off of loan costs related to repayment of mortgage notes
payable.
37
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected consolidated financial data and balance sheet data set forth
below have been derived from the consolidated financial statements of the
Company, including the consolidated financial statements for the years ended
December 31, 1994, 1995 and 1996 and for the six months ended June 30, 1996 and
1997 contained elsewhere herein. The consolidated financial statements as of
and for the years ended December 31, 1992, 1993, 1994, 1995 and 1996 have been
audited by Deloitte & Touche LLP, independent auditors. The income statement
data for the six months ended June 30, 1996 and 1997 and the balance sheet data
as of June 30, 1997 have been derived from unaudited interim consolidated
financial statements contained elsewhere herein, which in the opinion of
management, include all adjustments (consisting of only normal recurring
adjustments) necessary for a fair presentation of the information set forth
therein. Results for the six months ended June 30, 1997 are not necessarily
indicative of the results for the entire year. The data set forth below should
be read in conjunction with the financial statements and related notes, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
The unaudited pro forma consolidated balance sheet data as of June 30,
1997 set forth below is presented as if the Offering and the application of the
net proceeds of the Offering all had occurred on June 30, 1997. The unaudited
pro forma consolidated statement of operations data for the six months ended
June 30, 1997 and the year ended December 31, 1996 are presented as if the
Offering and the application of the net proceeds of the Offering (and the
acquisitions of West Lake, Forest Edge, Monument Pointe, Lantana Village,
Beauclerc Village and Summerlin Square) all had occurred on January 1, 1996.
See "Use of Proceeds". The pro forma consolidated financial data should be read
in conjunction with the Company's pro forma consolidated financial statements
and related notes and historical consolidated financial statements and related
notes included elsewhere in this Prospectus.
Because the preponderance of proceeds are allocated to acquisition,
development, redevelopment and renovation projects which, for pro forma
statement of operations purposes, do not generate any revenue or expense, pro
forma results of operations reflect only the repayment of mortgage notes
payable and the proposed acquisitions of Lantana Village, Beauclerc Village and
Summerlin Square and omit any revenue or expense from other proceeds uses
(except for historical revenue and expense attributable to Sky Lake expected to
continue during the redevelopment process). Accordingly, the pro forma
consolidated financial statements do not purport to represent the Company's
financial position as of June 30, 1997 or the results of operations for the six
months ended June 30, 1997 or for the year ended December 31, 1996 that would
actually have occurred had the Offering (and the acquisitions listed above) and
the application of the net proceeds of the Offering all been completed on June
30, 1997 or at the beginning of the periods presented, or to project the
Company's financial position or results of operations as of any future date or
for any future period.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------------
PRO FORMA HISTORICAL
----------- -----------------
1997 1997 1996
----------- -------- --------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues ........................... $11,355 $9,673 $8,042
Operating expenses ........................ 3,008 2,743 2,341
Depreciation and amortization ............ 1,399 1,178 1,010
Interest ................................. 2,753 2,939 2,648
General and administrative expenses ...... 316 241 213
-------- ------- -------
Total expenses ........................ 7,476 7,101 6,212
-------- ------- -------
Net income (loss) ........................ $ 3,879 $2,572 $1,830
======== ======= =======
Net earnings (loss) per share(1) ......... $ 0.40 $ 0.37 $ 0.37
======== ======= =======
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------------------------------------------
PRO FORMA HISTORICAL
----------- ------------------------------------------------------
1996 1996 1995 1994 1993 1992
----------- --------- --------- ------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues ........................... $22,086 $16,714 $11,348 $ 6,198 $2,070 $ 666
Operating expenses ........................ 6,092 4,832 3,293 2,236 665 252
Depreciation and amortization ............ 2,734 2,067 1,496 996 298 107
Interest ................................. 5,216 5,380 3,498 2,099 734 301
General and administrative expenses ...... 665 515 549 504 324 167
-------- -------- -------- -------- ------- -------
Total expenses ........................ 14,707 12,794 8,836 5,835 2,021 827
-------- -------- -------- -------- ------- -------
Net income (loss) ........................ $ 7,379 $ 3,920 $ 2,512 $ 233(2) $ 49 ($ 161)
======== ======== ======== ======== ======= =======
Net earnings (loss) per share(1) ......... $ 0.84 $ 0.65 $ 0.51 $ 0.07 $ 0.03 $(0.99)
======== ======== ======== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31,
----------------------------- ---------------------------------------------------------
PRO FORMA(3) HISTORICAL 1996 1995 1994 1993 1992
-------------- ------------ ---------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total rental properties, before
accumulated depreciation ...... $156,803 $112,406 $106,706 $92,770 $52,047 $22,491 $4,784
Total assets .................. 164,957 120,873 111,822 94,470 63,644 28,526 7,439
Mortgage notes payable ......... 47,056 64,916 66,831 60,583 32,690 15,543 3,222
Total liabilities ............... 49,519 67,379 68,727 64,331 33,846 15,922 3,388
Stockholders' equity ............ 115,438 53,494 43,095 29,139 28,798 12,604 4,051
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------------------
PRO FORMA HISTORICAL
------------ -----------------------
1997 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
OTHER DATA:
Funds From Operations(4) .................. $ 5,899 $ 3,867 $ 2,815
Ratio of eanings to fixed charges (5) ...... 2.41 1.88 1.69
Cash flows from:
Operating activities(6) .................. 5,278 3,492 3,980
Investing activities(7) .................. (44,447) (6,766) (3,495)
Financing activities(8) .................. (25,093) 5,881 7,013
Gross leasable area (square feet)
(at end of period) ........................ -- 1,951 1,670
Occupancy (at end of period) ............... -- 93% 89%
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------------------------------------------------------------
PRO FORMA HISTORICAL
------------ ---------------------------------------------------------------
1996 1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Funds From Operations(4) .................. $ 10,765 $ 6,136 $ 3,973 $ 1,308 $ 347 $ (54)
Ratio of eanings to fixed charges (5) ...... 2.41 1.73 1.72 1.11 1.07 0.47
Cash flows from:
Operating activities(6) .................. 10,113 6,680 3,469 2,433 (289) (46)
Investing activities(7) .................. (44,497) (18,277) (37,211) (29,755) (20,414) (1,995)
Financing activities(8) .................. (31,196) 12,778 27,441 32,726 20,671 3,728
Gross leasable area (square feet)
(at end of period) ........................ -- 1,807 1,670 1,003 583 50
Occupancy (at end of period) ............... -- 91% 90% 80% 60% 92%
</TABLE>
- ----------------
(1) Based on the weighted average number of shares outstanding, excluding
shares attributable to development and redevelopment activities.
(2) Represents net income after income tax expense of $130,000.
(3) Adjusted to reflect the sale of 4,700,000 shares of Common Stock offered by
the Company at an estimated initial public offering price of $14.50 per
share and the application of the estimated net proceeds therefrom.
(4) The White Paper defines FFO as net income (loss) (computed in accordance
with GAAP), excluding gains (or losses) from debt restructuring and sales
of property, plus real estate related depreciation and amortization and
after adjustments for unconsolidated partnerships and joint ventures.
Management believes FFO is helpful to investors as a measure of the
performance of an equity REIT because, along with cash flows from
operating activities, financing activities and investing activities, it
provides investors with an understanding of the ability of the Company to
incur and service debt and make capital expenditures. The Company computes
FFO in accordance with standards established by the White Paper, which may
differ from the methodology for calculating FFO utilized by other equity
REITs, and, accordingly, may not be comparable to such other REITs.
Further, FFO does not represent amounts available for management's
discretionary use because of needed capital replacement or expansion, debt
service obligations, or other commitments and uncertainties. The Company
believes that in order to facilitate a clear understanding of the
consolidated historical operating results of the Company, FFO should be
examined in conjunction with the income (loss) as presented in the audited
consolidated financial statements and information included elsewhere in
this Prospectus. FFO should not be considered as an alternative to net
income (determined in accordance with GAAP) as an indication of the
Company's financial performance or to cash flows from operating activities
(determined in accordance with GAAP) as a measure of the Company's
liquidity, nor is it indicative of funds available to fund the Company's
cash needs, including its ability to make distributions. See "Distribution
Policy". FFO is derived from pro forma and historical net income (loss) as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
----------------------------- -----------------------------------------------------------
PRO FORMA HISTORICAL PRO FORMA HISTORICAL
----------- ----------------- ----------- -----------------------------------------------
1997 1997 1996 1996 1996 1995 1994 1993 1992
----------- -------- -------- ----------- -------- -------- -------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss) before extraordinary
items .............................. $3,879 $2,572 $1,830 $ 7,379 $3,920 $2,512 $ 233 $ 49 $ (161)
Add:
Real estate depreciation and
amortization ..................... 1,374 1,172 985 2,684 2,037 1,461 945 298 107
Non-recurring items(*) ............ 646 123 -- 702 179 -- 130 -- --
FFO ................................. $5,899 $3,867 $2,815 $10,765 $6,136 $3,973 $1,308 $347 $ (54)
</TABLE>
- ----------------
(*) Reflects the pre-payment penalties, loan cost amortization related to
repayment of debt and income tax expense as non-recurring.
(5) For the purpose of calculating the ratio of earnings to fixed charges,
earnings include pre-tax income plus interest expense, amortization of
interest previously capitalized, and amortization of financing costs.
Fixed charges include all interest costs consisting of interest expense,
interest capitalized, and amortization of financing costs.
(6) Pro forma cash flow from operating activities represents pro forma net
income plus depreciation and amortization. The pro forma amounts do not
include the results from changes in working capital resulting from changes
in current assets and current liabilities, or other changes.
(7) Pro forma cash flow used in investing activities represents estimated
capital expenditures for the six and 12 months subsequent to the Offering
and the application of the use of proceeds therefrom.
(8) Pro forma cash flow used in financing activities represents estimated
mortgage loan principal payments and estimated dividends and distributions
(based upon an initial annual distribution of $1.05 per share) for the six
and 12 months subsequent to the Offering and the application of the use of
proceeds therefrom.
39
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the Company's Consolidated Financial
Statements, and the notes thereto, appearing elsewhere in this Prospectus.
The Company receives income primarily from rental revenue (including
recoveries from tenants) from the Existing Properties. As a result of the
Company's acquisition and redevelopment programs, the financial data shows
increases in total revenue from year to year, largely attributable to the
acquisitions of properties placed into operation during the year and the
benefit of a full period of rental and other revenue for properties acquired or
placed into operation in the preceding year.
The following table sets forth as of June 30, 1997 and 1996 and as of
December 31, 1996, 1995 and 1994, respectively, information regarding the
nature and composition of the Company's revenues and expenses expressed as a
percentage of the Company's total revenues which are set forth in the financial
statements included elsewhere herein. For purposes of the following table,
"aggregate minimum rental revenue" is the fixed base rental amount in effect
throughout the relevant periods. "Percentage rent" is additional rent paid by
tenants based upon achievements of certain specified levels of gross sales.
Substantially all of the Company's tenants have leases providing for the
payment of percentage rent. "Recoveries from tenants" is the tenants' share of
real estate taxes, insurance and common area maintenance expenses. The
information set forth below presents an analysis of certain trends relating to
the components of the Company's revenues and expenses.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
------------------------- ----------------------------------------
1997 1996 1996 1995 1994
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Aggregate minimum rental revenue ......... 75.09% 77.37% 75.55% 73.44% 74.15%
Percentage rent ........................... 0.71% 1.13% 0.92% 1.15% 1.24%
Recoveries from tenants .................. 18.72% 18.81% 18.50% 17.99% 16.94%
Other income .............................. 5.48% 2.69% 5.03% 7.42% 7.67%
------- ------- ------- ------- -------
Total Revenues ........................... 100.00% 100.00% 100.00% 100.00% 100.00%
------- ------- ------- ------- -------
Operating expenses ........................ 28.36% 29.11% 28.91% 29.02% 36.08%
Depreciation and amortization ............ 12.18% 12.56% 12.37% 13.18% 16.07%
Interest ................................. 30.38% 32.93% 32.19% 30.82% 33.87%
General and administrative expenses ...... 2.49% 2.65% 3.08% 4.84% 8.13%
------- ------- ------- ------- -------
Total costs and expenses .................. 73.41% 77.25% 76.55% 77.86% 94.15%
------- ------- ------- ------- -------
Net income .............................. 26.59% 22.75% 23.45% 22.14% 5.85%
======= ======= ======= ======= =======
</TABLE>
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Total revenues increased by approximately $1.7 million, or 21.3%, to $9.7
million for the six months ended June 30, 1997 from $8.0 million for the
comparable period of 1996. The increase resulted primarily from the acquisition
of West Lake in November 1996, Forest Edge in December 1996 and Monument Pointe
in January 1997, which acquisitions represented approximately $600,000,
$300,000 and $300,000 of such increase, respectively.
Operating expenses increased by approximately $400,000, or 17.4%, to $2.7
million for the six months ended June 30, 1997 from $2.3 million for the
comparable period of 1996, as a result of operations at West Lake, Forest Edge
and Monument Pointe. However, for such periods, operating expenses as a percent
of revenues decreased to 28.4% from 29.1% due to operating efficiencies based,
in part, on owning more properties and in concentrated areas.
40
<PAGE>
Depreciation and amortization expense increased by approximately $200,000,
or 20.0%, to $1.2 million for the six months ended June 30, 1997 from $1.0
million for the comparable period of 1996 primarily as a result of an increase
in depreciable assets resulting from the Company's purchase of West Lake,
Forest Edge and Monument Pointe.
Interest expense increased by approximately $300,000, or 11.5%, to $2.9
million for the six months ended June 30, 1997 from $2.6 million for the
comparable period of 1996 primarily as a result of increased mortgage
indebtedness incurred by the Company in connection with its purchase of West
Lake, Forest Edge and Monument Pointe.
General and administrative expenses increased by approximately $28,000, or
13.1%, to $241,000 for the six months ended June 30, 1997 from $213,000 for the
comparable period of 1996, primarily as a result of the increase in the
Company's portfolio of Supermarket Centers. However, for such periods, general
and administrative expenses as a percent of revenues decreased to approximately
2.5% from approximately 2.7% due to operating efficiencies based in part on
owning more properties in a concentrated area.
As a result of the foregoing, net income increased approximately by
$800,000, or 44.4%, to $2.6 million in the six months ended June 30, 1997, from
$1.8 million in the comparable period of 1996, and FFO increased by $1.1
million, or 39.3%, to $3.9 million in the six months ended June 30, 1997 from
$2.8 million in the comparable period of 1996.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Total revenues increased $5.4 million, or 46.5%, in 1996 to $16.7 million
from $11.3 million in 1995 primarily due to the first full year of operations
for Atlantic Village, Oak Hill, Lake Mary and Pointe Royale, and the
acquisition of West Lake in November 1996. Of such increase, approximately
$500,000, $600,000, $3.1 million, $900,000 and $200,000 were attributable to
Atlantic Village, Oak Hill, Lake Mary, Pointe Royale and West Lake,
respectively.
Operating expenses increased by approximately $1.5 million, or 45.5%, to
$4.8 million in 1996 from $3.3 million in 1995, primarily as a result of a full
year of operations for Atlantic Village, Oak Hill, Lake Mary and Pointe Royale,
as well as the Company's acquisition of West Lake. However, for such periods,
operating expenses as a percent of revenues remained essentially flat at 29.0%.
Depreciation and amortization expense increased by approximately $600,000,
or 42.9%, to $2.0 million in 1996 from $1.4 million in 1995, primarily due to
an increase in depreciable assets resulting from the Company's purchase of
Atlantic Village, Oak Hill, Lake Mary and Pointe Royale and from capital
expenditures incurred by the Company in connection with tenant improvements at
each of such properties.
Interest expense increased by approximately $1.9 million, or 54.3%, to
$5.4 million in 1996 from $3.5 million in 1995, primarily as a result of
increased mortgage indebtedness incurred by the Company in connection with the
purchase of Atlantic Village, Oak Hill, Lake Mary and Pointe Royale in 1995 and
the acquisition of the West Lake in November 1996.
General and administrative expenses decreased by approximately $34,000, or
6.2%, to $515,000 in 1996 from $549,000 in 1995, primarily as a result of a
decrease in legal and accounting fees incurred in connection with the Company's
REIT status election, which election was effective as of January 1, 1995.
However, for such periods, general and administrative expenses as a percent of
revenues decreased to approximately 3.1% from approximately 4.8% due to
operating efficiencies based in part on owning more properties in a
concentrated area.
As a result of the foregoing, net income increased by $1.4 million, or
56.0%, to $3.9 million in 1996 from $2.5 million in 1995, and FFO increased by
$2.1 million, or 52.5%, to $6.1 million in 1996 from $4.0 million in 1995.
41
<PAGE>
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Total revenues increased $5.1 million, or 82.3%, in 1995 to $11.3 million
from $6.2 million in 1994 primarily due to the first full year of operations
for Commonwealth, Fort Caroline, Bird Ludlum and Mandarin and the acquisitions
of Atlantic Village, Oak Hill, Lake Mary and Pointe Royale during 1995. Of such
increase, approximately $100,000, $100,000, $2.1 million, $100,000, $500,000,
$100,000, $500,000 and $700,000 are attributable to Commonwealth, Fort
Caroline, Bird Ludlum, Mandarin, Atlantic Village, Oak Hill, Lake Mary and
Pointe Royale, respectively.
Operating expenses increased by approximately $1.1 million, or 50.0%, to
$3.3 million in 1995 from $2.2 million in 1994, reflecting a full year of
operations for Commonwealth, Fort Caroline, Bird Ludlum and Mandarin acquired
during 1994, as well as the acquisition of Atlantic Village, Oak Hill, Lake
Mary and Pointe Royale in 1995. However, for such periods, operating expenses
as a percent of revenues decreased to approximately 29.0% from approximately
36.1% due to operating efficiencies based, in part, on owning more properties
and in concentrated areas.
Depreciation and amortization expense increased by approximately $500,000,
or 55.6%, to $1.4 million in l995 from $900,000 in 1994 primarily due to the
Company's purchase of Commonwealth, Fort Caroline, Bird Ludlum and Mandarin, as
well as the acquisition of Atlantic Village, Oak Hill, Lake Mary and Pointe
Royale in 1995, and from capital expenditures incurred by the Company in
connection with tenant improvements at certain of these properties.
Interest expense increased by approximately $1.4 million, or 66.7%, to
$3.5 million in 1995 from $2.1 million in 1994 as a result of increased
mortgage indebtedness incurred by the Company in connection with the purchase
of Commonwealth, Fort Caroline, Bird Ludlum and Mandarin in 1994, as well as
the acquisition of Atlantic Village, Oak Hill, Lake Mary and Pointe Royale in
1995.
General and administrative expenses increased by approximately $45,000, or
8.9%, to $549,000 in 1995 from $504,000 in 1994 as a result of an increase in
legal and accounting fees incurred in connection with the Company's REIT status
election. However, for such periods, general and administrative expenses as a
percent of revenues decreased to approximately 4.8% from approximately 8.1% due
to operating efficiencies based, in part, on owning more properties in a
concentrated area.
As a result of the foregoing, the Company's net income increased by
approximately $2.3 million, or 97.8%, to $2.5 million in 1995 from $233,000 in
1994, and FFO increased by approximately $2.7 million, or 207.7%, to $4.0
million from $1.3 million for the same periods.
42
<PAGE>
MORTGAGE INDEBTEDNESS
The following table sets forth certain information regarding mortgage
indebtedness of the Company related to the Existing Properties as of June 30,
1997:
<TABLE>
<CAPTION>
BALANCE
INTEREST PROJECTED ANNUAL DUE AT
RATE AMOUNT INTEREST PAYMENTS MATURITY DATE MATURITY(2)
---------- --------- ------------------- ---------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NORTH FLORIDA
Atlantic Village(1) ......... 8.15 % $ 3,988 $ 321 July 2002 $3,294
Fort Caroline ............... 9.35 2,393 221 March 2002 2,078
Monument Pointe ............ 10.06 2,731 273 June 2001 2,564
Oak Hill .................. 7.625 2,415 182 February 2006 1,703
Mandarin Mini-Storage ...... 6.375 1,219 77 May 1999 1,172
CENTRAL FLORIDA
East Bay .................. 8.25 916 75 August 2000 859
Eustis Square ............... 9.00 5,399 480 July 2002 4,322
Forest Edge(1) ............ 8.25 2,031 165 October 2002 1,597
Lake Mary .................. 7.85 12,956 1,007 December 2010 5,569
SOUTH FLORIDA
Bird Ludlum ............... 7.68 13,281 1,007 February 2015 0
Plaza Del Rey(1) ............ 8.125 2,961 260 September 2011 0
Pointe Royale ............... 7.95 5,746 451 July 2010 2,502
West Lake(1) ............... 7.875 5,892 459 June 2006 4,157
TEXAS
Four Corners(1) ............ 9.49 2,988 283 February 2003 2,785
</TABLE>
- ----------------
(1) The Company intends to retire the mortgages on each of these properties,
except Forest Edge, from the net proceeds of the Offering immediately
following consummation of the Offering. The Company intends to retire the
mortgage on Forest Edge from net proceeds on or about April 1, 1998.
(2) With respect to the mortgage indebtedness to be repaid from the proceeds of
the Offering, the loan on Atlantic Village does not have any prepayment
penalty. Forest Edge and Four Corners loans have prepayment penalties of
1.0% and 2.0% of the outstanding principal, respectively. Plaza Del Rey
and West Lake each have prepayment penalties of 5.0% of the outstanding
principal. The prepayment penalty associated with Lake Mary mortgage
indebtedness is the greater of 1.0% of the outstanding principal balance
or the present value differences in interest rates at the time of
prepayment. The prepayment penalty associated with Bird Ludlum mortgage
indebtedness in the greater of 1.0% of the outstanding principal balance
or the present value differences in interest rates at the time of
prepayment.
The Company's mortgage indebtedness expected to be outstanding after the
application of the net proceeds of the Offering will require balloon payments
of approximately $1.2 million, $860,000, $2.6 million, $6.4 million, $1.7
million and $8.1 million in 1999, 2000, 2001, 2002, 2006 and 2010,
respectively. The Company may not have sufficient funds on hand to repay these
balloon amounts at maturity. Therefore, the Company expects to refinance such
debt either through additional debt financings secured by individual properties
or groups of properties, by unsecured private or public debt offerings or by
additional equity offerings. See "Risk Factors--The Company's Use of Debt,
Refinancing Needs, Increases in Interest Rates and an Absence of a Limitation
on Debt Could Adversely Affect the Company" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources".
LIQUIDITY AND CAPITAL RESOURCES
Historically, the principal sources of funding for the Company's
operations, including the renovation, expansion, development and acquisition of
shopping centers, have been operating cash flows, the issuance of equity
securities and mortgage loans.
From 1992 to the present, the Company raised proceeds from the private
placement of Common Stock and warrants and it used such proceeds to acquire the
Existing Properties, purchasing
43
<PAGE>
approximately $4.7 million of real property in 1992, approximately $17.2
million in 1993, approximately $29.0 million in 1994, approximately $39.6
million in 1995, approximately $11.0 million in 1996 and approximately $3.7
million in the first six months of 1997. Management recently determined that in
seeking to significantly expand its investment portfolio, the Company would
have greater flexibility if it had access to both public and private capital
markets and, accordingly, decided to publicly offer the Common Stock pursuant
to the Offering.
As of June 30, 1997, the Company had total indebtedness of approximately
$64.9 million, all of which was fixed rate mortgage indebtedness bearing
interest at a weighted average annualized rate of 8.3% and collateralized by 14
of the Existing Properties. As of such date, the percentage of the net book
value of the Company's rental properties that were encumbered by debt was
61.0%. None of the existing mortgages is subject to cross default provisions of
mortgages on other properties or is cross collateralized. However, in
connection with the Company's acquisition of Lake Mary, the Company has
provided a $1.5 million letter of credit to secure certain obligations, which
letter of credit is collateralized by the Diana Building. See "Risk
Factors--Certain Indebtedness May Prohibit the Sale of Shares of Common Stock"
for a discussion of certain other restrictions.
The Company is currently negotiating a commitment for a $35.0 million
Acquisition Line of Credit from City National Bank of Florida to be secured by
certain of the Company's unencumbered Existing Properties (including Existing
Properties which will become unencumbered following the application of the net
proceeds from the Offering) and other properties to be acquired by the Company.
See "Use of Proceeds". Receipt of a commitment to provide the Acquisition Line
of Credit is contingent on City National Bank of Florida entering into a
participation agreement with one or more participating lenders to provide at
least $19.25 million under the proposed Acquisition Line of Credit. The Company
anticipates that borrowings under the Acquisition Line of Credit will bear
interest at 225 basis points over LIBOR and be due three years after the
execution of a definitive loan document. The Acquisition Line of Credit is
expected to provide a revolving line of credit for three years with interest
due and payable monthly and outstanding principal balance together with any
accrued, unpaid interest due upon maturity. In addition, the proposed terms of
the commitment for the Acquisition Line of Credit allow the lender to cease
funding and/or accelerate the maturity date of the Acquisition Line of Credit
if neither Mr. Katzman nor Mr. Valero remains as the executives in control of
the Company. The Company expects that the Acquisition Line of Credit will be
subject to customary conditions, including, among other things, the payment of
commitment fees and the required delivery of various title, insurance, zoning
and environmental assurances on the secured properties, and will contain
various covenants, such as a prohibition on secondary financing on any of the
secured properties and a 70.0% loan to value requirement.
The Company has obtained a line of credit from City National Bank of
Florida in the amount of $2.5 million which expires in May 1998 and is
collateralized by the Equity One Office Building. At June 30, 1997, no amount
was outstanding under this line of credit. The Company anticipates that this
line of credit will be terminated upon the effectiveness of the Acquisition
Line of Credit. Additionally, in connection with the Company's acquisition of
Lake Mary in 1995, the Company obtained a $1.5 million letter of credit from
Barnett Bank in order to guarantee certain development obligations. At June 30,
1997, no amount was drawn under this letter of credit.
The Company's principal demands for cash are expected to be acquisition,
development and redevelopment activities, maintenance, repair and tenant
improvements related to the Existing Properties, debt service and repayment
obligations and distributions to its stockholders. In particular, the Company
intends to complete the initial phase of the redevelopment of Sky Lake,
estimated to cost approximately $8.0 million, primarily using available liquid
assets, cash from operations, then remaining proceeds of the Offering and
borrowings under available lines of credit.
The Company expects to meet certain long-term liquidity requirements such
as property acquisition and development, scheduled debt maturities,
renovations, expansions and other non-recurring capital improvements through
long-term secured and unsecured indebtedness and the
44
<PAGE>
issuance of debt or equity securities. The Company also expects to use funds
available under the Acquisition Line of Credit to finance acquisition and
development activities and capital improvements on an as needed basis.
In order to qualify as a REIT for federal income tax purposes, the Company
is required to pay dividends to its stockholders of at least 95.0% of its net
taxable income. See "Federal Income Tax Considerations". The Company intends to
pay these dividends from operating cash flows which are expected to increase
due to future purchases and reduction in debt service resulting from the
repayment of certain of the Company's mortgage indebtedness with the proceeds
of the Offering, and anticipated future growth in rental revenues.
The Company anticipates that the cash reserves and the cash flow available
after the consummation of the Offering, together with the estimated net
proceeds from the Offering, will be adequate to meet the capital and liquidity
needs of the Company for at least 12 months. The Company's short-term liquidity
will be enhanced by Offering proceeds which initially will be temporarily
invested and by the income earned on such proceeds. For information with
respect to Cash Available for Distribution, see "Distribution Policy".
For a discussion of certain contingencies which could affect the Company's
liquidity and capital resources, see "Risk Factors--The Company Is Dependent
upon Certain Key Tenants", "--The Company Is Subject to Risks Associated with
the Real Estate Industry ", "--Failure to Qualify as a REIT Would Cause the
Company to Be Taxed as a Regular Corporation", "--Costs of Compliance with Laws
Could Have an Adverse Effect on the Company" and "--The Company's Use of Debt,
Refinancing Needs, Increases in Interest Rates and an Absence of a Limitation
on Debt Could Adversely Affect the Company".
IMPACT OF ACCOUNTING PRONOUNCEMENTS ISSUED BUT NOT ADOPTED
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("Statement No. 128"), which establishes standards for computing and presenting
earnings per share ("EPS") and applies to entities with publicly held common
stock. Statement No. 128 simplifies the standards for computing earnings per
share previously found in APB Opinion No. 15, "Earnings Per Share", and makes
them comparable to international EPS standards. It replaces the presentation of
primary EPS with a presentation of basic EPS.
In February 1997, SFAS No. 129, DISCLOSURE OF INFORMATION ABOUT CAPITAL
STRUCTURE was issued. SFAS No. 129, which applies to all entities that have
issued securities, requires in summary form, the pertinent rights and
privileges of the various securities outstanding. Examples of information that
shall be disclosed are dividends and liquidation preferences, participation
rights, call prices and dates, conversion or exercise prices or rates and
pertinent dates, sinking-fund requirements, unusual voting rights, and
significant terms of contracts to issue additional shares. SFAS No. 129 is
effective for financial statements issued for periods ending after December 15,
1997.
INFLATION
Most of the Company's leases contain provisions designed to mitigate the
adverse impact of inflation. Such provisions include clauses enabling the
Company to receive percentage rents based on a tenant's gross sales above
predetermined levels, which rents generally increase as prices rise, or
escalation clauses which are typically related to increases in the CPI or
similar inflation indices. Most of the Company's leases require the tenant to
pay its share of operating expenses, including common area maintenance, real
estate taxes and insurance, thereby reducing the Company's exposure to
increases in costs and operating expenses resulting from inflation.
45
<PAGE>
BUSINESS
GENERAL
The Company is a self-administered, self-managed REIT that principally
acquires, renovates, develops and manages Community and Neighborhood Shopping
Centers anchored by national and regional supermarket chains ("Supermarket
Centers"). The Company's portfolio consists of 14 Supermarket Centers, one drug
store anchored Neighborhood Shopping Center, two mixed-use (office/ retail)
properties, one office building and one mini-warehouse facility (collectively,
the "Existing Properties"). The Existing Properties are located primarily in
the Dade County (Miami), Orlando and Jacksonville metropolitan areas of
Florida, and in Texas, and contain an aggregate of 2.0 million square feet of
GLA which, as of June 30, 1997, were 93.0% leased. The Company also owns Coral
Way on which it intends to develop a 100,000 square foot Supermarket Center,
and has recently acquired Sky Lake which will be comprehensively redeveloped
into a 300,000 square foot Supermarket Center. In addition, the Company has
recently agreed to purchase Lantana Village, a Performing Supermarket Center
consisting of 85,300 square feet of GLA located in Lantana, Florida, Beauclerc
Village, a Performing Supermarket Center consisting of 67,930 square feet of
GLA located in Jacksonville, Florida, and Summerlin Square, a Performing
Supermarket Center consisting of 110,200 square feet of GLA located in Fort
Myers, Florida. The Company also owns an aggregate of approximately 13.0 acres
of land adjacent to certain of the Existing Properties and recently agreed to
acquire 4.4 acres of vacant land proximate to Coral Way, substantially all of
which is intended for retail development.
Supermarket Centers are anchored by national and regional supermarkets
such as Winn-Dixie (the fourth largest supermarket chain in the country),
Publix (the largest supermarket chain in Florida), Albertsons (the sixth
largest supermarket chain in the country) and Kroger (the largest supermarket
chain in the country). Other Anchor Tenants of the Company's Supermarket
Centers include national retailers such as K-Mart, Best Buy, Walgreens and
Eckerd. Non-Anchor Tenants of the Supermarket Centers include national and
regional retailers and service providers, as well as local businesses, and
include such businesses as Einstein Bros. Bagels, Rainbow Shops, Play It Again
Sports, Video Avenue, General Nutrition Center, Radio Shack, NationsBank,
Burger King and Chili's. The Company believes that supermarkets and other
Anchor Tenants offering daily necessity items generate regular consumer traffic
and enhance the performance and stability of a center. As of June 30, 1997, the
Company's supermarket Anchor Tenants, other Anchor Tenants and other Non-Anchor
Tenants contributed 24.7%, 23.1% and 52.2%, respectively, of the Company's
aggregate annualized minimum rents and accounted for approximately 31.1%, 22.2%
and 46.7%, respectively, of GLA.
The Company was organized in June 1992 under the laws of the State of
Maryland to acquire Supermarket Centers in high growth, densely populated areas
throughout the Southeast generating stable cash flows and long-term value. The
Company selects properties for acquisition or development which have, or are
suitable for, supermarket and other Anchor Tenants, and are adaptable over time
for expansion, renovation and redevelopment. In order to take advantage of
property management operating efficiencies and present attractive leasing
opportunities to tenants who seek multiple locations in an area, the Company
also targets properties proximate to its other properties. All properties must
be well located and have high visibility, open air designs, ease of entry and
exit and ample parking. The Company acquires both Performing Supermarket
Centers, which typically are substantially fully leased, appropriately tenanted
and well maintained, and Underperforming Supermarket Centers which meet the
Company's turnaround criteria. In acquiring Performing Supermarket Centers, the
Company requires attractive and sustainable rates of return, and in acquiring
Underperforming Centers, the Company seeks opportunities to increase revenues
primarily through renovation and retenanting.
The Company believes that its management team possesses the experience and
expertise necessary to identify, acquire, renovate, develop and manage
additional Supermarket Centers. The Company's principal senior executives and
property managers average 15 years experience in the real estate industry and
have acquired and managed all the Existing Properties. Management believes that
it has cultivated strong relationships with supermarkets and other Anchor
Tenants which, in combination with
46
<PAGE>
its in-depth knowledge of the Company's primary markets, has contributed
substantially to the Company's success in identifying, acquiring and operating
its properties.
Since its formation, the Company has experienced sustained growth in its
real estate portfolio, revenues and net income. From January 1, 1994 to June
30, 1997, the Company increased total assets and GLA to $120.9 million and 2.0
million square feet, respectively, from $28.5 million and 600,000 square feet,
respectively. For the year ended December 31, 1996, total revenues and net
income increased to $16.7 million and $3.9 million, respectively, from $2.1
million and $49,000, respectively, for the year ended December 31, 1993.
Similarly, total revenues and net income increased to $9.7 million and $2.6
million, respectively, for the six months ended June 30, 1997 from $8.0 million
and $1.8 million, respectively, for the six months ended June 30, 1996. For a
discussion of the growth in the Company's FFO see "Selected Consolidated
Financial Data".
BUSINESS AND GROWTH STRATEGIES
GENERAL. The Company intends to maximize total return to stockholders by
increasing cash flow per share and maximizing the value of its real estate
portfolio. The Company believes it can achieve this objective primarily through
the acquisition, renovation, development and management of Supermarket Centers
and other properties which meet the Company's investment criteria. The Company
also believes it has certain competitive advantages which enhance its ability
to capitalize on acquisition opportunities, including: (i) management's
significant local market experience and expertise; (ii) the Company's
long-standing relationships with real estate brokers, tenants and institutional
and other real estate owners in its current target markets; (iii) a streamlined
acquisition process; (iv) access to capital; and (v) the ability to offer cash
and tax advantaged structures to sellers.
The Company intends to maintain significant flexibility with respect to
the form of its acquisition transactions, using cash available from operations
or lines of credit for sellers who seek immediate liquidity, as well as
tax-advantaged partnership structures to attract tax-motivated sellers. Such
structures may include entering into joint ventures or other types of
co-ownership with the sellers, whether in the form of limited partnership,
limited liability companies, or otherwise, with the Company expected to acquire
the controlling interests in such ventures. The sellers may be offered
interests in the ventures which are convertible or exchangeable for shares of
Common Stock or otherwise allow the seller to participate in the financial
condition of the Company. The Company may in the future acquire all or
substantially all of the securities of other REITs or similar entities when
such investments would be consistent with the Company's investment objectives.
The Company's principal business and growth strategies are as follows:
ACQUISITION OF PERFORMING SUPERMARKET CENTERS. The Company intends to
acquire Performing Supermarket Centers throughout the Southeast that offer
attractive and sustainable rates of return having demographic characteristics
similar to those of its present markets. Examples of the Company's acquisitions
of Performing Supermarket Centers include (i) West Lake and Forest Edge in
1996, (ii) Lake Mary and Point Royale in 1995 and (iii) Bird Ludlum in 1994.
The Company will target Performing Supermarket Centers which are adaptable to
expansion, renovation and redevelopment, and, in order to maximize property
management efficiencies and present attractive leasing opportunities to tenants
who seek multiple locations in one area, are located proximate to other Company
owned Supermarket Centers or to one another. The Company will seek Supermarket
Centers which offer daily necessities and value-oriented merchandise and have
high visibility, open-air designs, ease of entry and exit and ample parking.
Given the Company's relationship with certain Anchor Tenants, particularly
supermarkets, and its operational expertise, the Company anticipates that it
will be able to enhance the performance of properties satisfying its
acquisition criteria.
The Company has recently entered into an agreement to acquire Lantana
Village, a Performing Supermarket Center located in Lantana, Florida, subject
to the satisfaction of certain conditions, for approximately $7.0 million.
Lantana Village contains 85,300 square feet of GLA representing aggregate
47
<PAGE>
annualized minimum rental revenues of approximately $800,000 and is anchored by
a Winn-Dixie. The Company has also entered into an agreement to acquire
Beauclerc Village, a Performing Supermarket Center located in Jacksonville,
Florida, subject to the satisfaction of certain conditions, for approximately
$3.0 million. Beauclerc Village contains 67,930 square feet of GLA representing
aggregate annualized minimum rental revenues of approximately $300,000 and is
anchored by a Walgreens and an Old America. Additionally, the Company has
recently agreed to acquire Summerlin Square, subject to satisfaction of certain
conditions, for approximately $10.0 million. Summerlin Square is a Performing
Supermarket Center located in Fort Myers, Florida, which contains 110,200 square
feet of GLA representing aggregate annualized minimum rental revenues of
approximately $1.1 million and is anchored by a Winn-Dixie. The Company
anticipates that each of these acquisitions will be consummated prior to
December 31, 1997; however, there is no assurance that the acquisitions will be
consummated.
The Company has developed an integrated methodology for sourcing and
completing acquisitions, with legal and operational analyses efficiently
coordinated by in-house employees. The Company believes it has favorable access
to potential acquisition opportunities by virtue of its relationships with
brokers, tenants, financial institutions, development agencies, contractors,
and others involved in the real estate market. Additionally, the Company
believes that as institutional investors in real estate become less willing to
own and manage significant real estate assets and more comfortable with
indirect investments, such institutions will become significant sellers of
properties and the Company will be an attractive purchaser in its target
markets. The Company conducts its review procedures with the full participation
of the Company's senior officers, which, combined with the Company's access to
capital and knowledge of existing markets, allows the Company to make expedited
determinations and consummate transactions quickly.
When evaluating potential acquisitions and development projects, the
Company considers such factors as (i) economic, demographic, and regulatory and
zoning conditions in the property's local and regional market; (ii) the
location, construction quality, and design of the property; (iii) the current
and projected cash flow of the property and the potential to increase cash
flow; (iv) Anchor Tenants' and other tenants' gross sales per square foot
measured against industry standards; (v) the potential for capital appreciation
of the property; (vi) the terms of tenant leases, including the relationship
between the property's current rents and market rents and the ability to
increase rents upon lease rollover; (vii) the occupancy and demand by tenants
for properties of a similar type in the market area; (viii) the potential to
complete a strategic renovation, expansion, or retenanting of the property;
(ix) the property's current expense structure and the potential to increase
operating margins; (x) the ability of the Company to subsequently sell or
refinance the property; and (xi) competition from comparable retail properties
in the market area.
ACQUISITION OF UNDERPERFORMING SUPERMARKET CENTERS. The Company intends to
acquire Underperforming Supermarket Centers that meet the Company's turnaround
criteria, which includes having the potential to increase revenues and
operating cash flows through renovation and retenanting. Underperforming
Supermarket Centers are typically undercapitalized, poorly managed and/or
poorly maintained and may require significant capital improvements. The Company
also requires favorable location and market demographics, availability on
attractive terms, and willingness of supermarket and other Anchor Tenants to
commit to lease space. The Company believes that its market knowledge, its
strong relationships with supermarkets and other Anchor Tenants and its
capabilities in renovation and redevelopment, are particularly integral to its
ability to acquire and reposition Underperforming Supermarket Centers.
When evaluating such acquisitions, the Company considers factors similar
to those applied in the acquisition of Performing Supermarket Centers, and will
complete such acquisitions only after a careful due diligence process,
including an in-depth study of the reasons for the center's failure to perform,
the community demographics, the costs of renovation or redevelopment, and the
willingness of acceptable Anchor Tenants and other tenants to commit to the
site. Similarly, the Company believes that its competitive advantage is
enhanced by its ability to conduct an efficient due diligence investigation and
to commit to and fund an acquisition that is structured so as to meet the
requirements of a seller with
48
<PAGE>
respect to receiving cash or tax deferred benefits. In addition, the Company's
relationships with Anchor Tenants, who are familiar with the Company's
commitment to quality construction, maintenance and operations, aids it in
obtaining preleasing expressions of interest before the decision to acquire the
property is made.
Examples of the Company's ability to enhance Underperforming Supermarket
Centers include East Bay, Four Corners, Fort Caroline and Parker Towne. East
Bay, which was acquired in July 1993 at a 48.0% occupancy rate, was 82.6%
occupied at June 30, 1997; Four Corners, which was acquired in January 1993 at
a 76.0% occupancy rate, was 94.2% occupied at June 30, 1997; Fort Caroline,
which was acquired in January 1994 at a 83.0% occupancy rate, was 95.9%
occupied at June 30, 1997 (including an additional 7,200 square feet of Company
developed GLA) and Parker Towne, which was acquired in December 1993 at a 40.0%
occupancy rate, was 60.0% occupied at June 30, 1997. While the Company has
increased occupancy at Parker Towne by 50.0% and redeveloped space since its
acquisition, the retenanting of Parker Towne is proceeding at a slower pace
than anticipated.
In addition, the acquisition of Underperforming Supermarket Centers
frequently provides the Company with an opportunity to buy adjacent undeveloped
land whose value is depressed by proximity to the Underperforming Supermarket
Center and can be enhanced by the Company's rehabilitation program.
REDEVELOPMENT AND DEVELOPMENT OF SUPERMARKET CENTERS. The Company will
redevelop existing and develop new Supermarket Centers with characteristics
similar to those of the Existing Properties. The Company will consider
development only if the overall economics of developing a property appear to be
more favorable than acquiring and/or redeveloping an existing property. For
example, the Company has recently acquired Sky Lake, which will be
comprehensively redeveloped into a 300,000 square foot Supermarket Center. In
addition, the Company owns (i) Coral Way on which it intends to develop a
100,000 square foot Supermarket Center and (ii) 13.0 acres of land adjacent to
certain of the Existing Properties, substantially all of which is intended for
retail development. The Company has not previously developed shopping centers
and has not had extensive experience in redeveloping properties, although it
has done so on both a whole property basis, such as the redevelopment of the
Diana Building, as well as on an individual basis in order to meet specific
tenant needs including at Parker Towne, where more than 100,000 square feet
have been redeveloped as leased. In addition, members of management
cumulatively have extensive experience in development and redevelopment
activities.
Although the Company previously has concentrated on the acquisition of
existing Supermarket Centers, the Company believes that, as a result of
changing market conditions, development and redevelopment will provide
significant growth opportunities in the future. Accordingly, it may acquire or
option parcels of land in its target markets which are likely to be subject to
increased development. In connection with its development activities, the
Company has recently hired a licensed architect and general contractor to head
its development department and is in the process of retaining at least one
additional full-time employee to support its development and redevelopment
operations. See "Risk Factors--The Company Is Subject to Risks Associated with
Construction and Development Activities".
INCREASING REVENUES AND IMPROVING OPERATING MARGINS. The Company will
continue to seek to improve the financial performance of its portfolio by
increasing revenues (through increased occupancy and/or rental rates),
maintaining high tenant retention rates (i.e., the percentage of tenants who
renew their leases upon expiration), replacing certain existing tenants when
necessary with more creditworthy tenants, and aggressively managing operating
expenses. Increased competition, changes in economic conditions and declines in
tenant retention levels could adversely affect the Company's ability to improve
the financial performance of its property portfolio. Most of the Company's
lease agreements provide for percentage rents, indexed rent increases (based on
CPI or other criteria) and/or have scheduled rent escalations. While the
Company believes that substantially all its properties are in desirable
locations that are experiencing rising rents, low vacancy rates, and increased
demand, allowing the Company to renew leases, or relet space under expired
leases, at favorable rents, any significant
49
<PAGE>
increases in vacancy rates and/or decreases in demand could adversely affect
the Company's ability to renew such leases, or relet space under expired
leases, at favorable rates. There is no assurance that such trends will
continue.
The Company has developed strong relationships with its Anchor Tenants by
continually striving to promote tenant satisfaction by anticipating and
responding to their requirements. A number of the Company's Anchor Tenants have
evidenced this satisfaction by expanding their leased space within the
Company's properties. For example, at Commonwealth, the Company will invest
$1.3 million to expand Winn-Dixie's space by 12,000 square feet, and in return
Winn-Dixie (i) will increase its annual minimum rent by approximately $144,000,
starting January 1998 and (ii) extend its lease for an additional 20-year
period. See "Use of Proceeds". In addition, the Company seeks to increase
operating results through the strategic renovation and/or expansion of
properties which are typically adaptable for varied tenant layouts and can be
reconfigured to accommodate new tenants or the changing space needs of existing
tenants.
In three instances, drug store Anchor Tenants have vacated their leased
space, although they continue to be bound by the terms of their leases and make
lease payments to the Company. The Company may seek to obtain replacement
tenants with respect to these leased spaces with rental rates at least equal to
or exceeding those currently being paid by such drug store Anchor Tenants. In
the event any of such drug store Anchor Tenants terminates its lease with the
Company, the Company believes that it could relet the revelant space on terms
substantially similar or more favorable than the existing leases.
OTHER ACQUISITIONS. The Company may from time to time acquire or develop,
on a highly selective basis, other types of income-producing commercial
properties in markets in which the Company has significant expertise and which
present superior opportunities for a return on its investment. An example of
such opportunistic acquisitions is the Equity One Office Building in Miami
Beach, Florida. The office building was purchased in April 1992 when it was
unoccupied and as of June 30, 1997 was 100% occupied and generating annualized
revenue of approximately $317,000, as well as providing the Company's 3,000
square foot executive offices rent free. The Company also owns an additional
0.5 acres of land adjacent to this office building which it plans to develop in
the future.
50
<PAGE>
MARKET DATA
GENERAL
The Company retained Lesser, nationally recognized experts in real estate
consulting and urban economics, to assess the economic and demographic
characteristics of the State of Florida, as well as the three metropolitan
areas in Florida (Miami, Jacksonville and Orlando) in which 17 of the Existing
Properties (representing 83.6% of total GLA) are located. The discussion of
these markets set forth below is derived from the findings set forth in the
Lesser Market Overview. The selected economic and demographic characteristics
(population, employment, retail sales and food store sales) are key factors
which indicate the strength of a market for owning and operating Supermarket
Centers. While the Company believes that Lesser's views of economic and
demographic trends in these areas are reasonable, there can be no assurance
that these trends will in fact continue.
POPULATION
Florida represented approximately 5.4% of the total population of the
United States or 14.6 million people, ranking it as the fourth largest state in
the nation. For the period 1990 to 1997, the total population of Florida
increased by approximately 1.7% annually, as compared to an approximately 1.0%
increase nationwide and a 1.4% increase throughout the Southeastern United
States. Orlando, Jacksonville and Miami, which are the Company's key
sub-markets in Florida, have experienced annual population growth rates of
2.3%, 1.7% and 1.1%, respectively, each of which is higher than the national
average. Orlando was the sixth fastest growing major metropolitan area in the
United States between 1990 and 1997. For the period 1997 to 2002, population in
Florida is expected to increase annually by 1.4%. In the submarkets of Orlando,
Jacksonville and Miami population is expected to experience annual population
growth rates of 2.0%, 1.8% and 1.1%, respectively, as compared to an annual
population growth rate nationwide of 0.9% and an annual growth rate of 1.2%
throughout the Southeast.
TOTAL POLULATION AND ANNUAL GROWTH RATES
UNITED STATES
1990 248.7 248,709,872
1997 267.2 267,240,272 1.0%
2002 279.3 279,315,904 0.9%
SE STATES (1)
1990 53.8 53,780,528
1997 59.2 59,186,764 1.4%
2002 62.8 62,828,952 1.2%
FLORIDA
1990 12.9 12,937,926
1997 14.6 14,564,508 1.7%
2002 15.6 15,644,470 1.4%
JACKSONVILLE
1990 0.9 906,727
1997 1.0 1,021,984 1.7%
2002 1.1 1,117,149 1.8%
MIAMI
1990 1.9 1,937,094
1997 2.1 2,O92,559 1.1%
2002 2.2 2,208,164 1.1%
ORLANDO
1990 1.2 1,224,852
1997 1.4 1,438,297 2.3%
2002 1.6 1,585,255 2.0%
51
<PAGE>
EMPLOYMENT
For the period 1990 to 1997, employment in Florida increased annually by
2.5%, as compared to an annual growth rate of 1.6% nationwide and an annual
growth rate of 2.2% throughout the Southeastern United States. In the
submarkets of Orlando, Jacksonville and Miami, employment increased annually by
3.7%, 2.8% and 1.3%, respectively. For the period 1997 to 2002, employment in
Florida is expected to increase annually by 1.9%, as compared to an annual
employment growth rate nationwide of 1.3% and an annual employment growth rate
of 1.4% throughout the Southeast. In the submarkets of Orlando, Jacksonville
and Miami, employment is expected to increase annually by 2.2%, 1.3% and 1.5%,
respectively.
TOTAL EMPLOYMENT AND ANNUAL GROWTH RATES
UNITED STATES
1990 109.4 109,400,000
1997 122.1 122,090,000 1.6%
2002 130.4 130,370,000 1.3%
SE STATES (1)
1990 23.2 23,216,400
1997 27.0 26,992,220 2.2%
2002 29.0 28,985,100 1.4%
FLORIDA
1990 5.4 5,387,290
1997 6.4 6,393,380 2.5%
2002 7.0 7,023,440 1.9%
JACKSONVILLE
1990 0.4 423,760
1997 0.5 514,800 2.8%
2002 0.5 548,980 1.3%
MIAMI
1990 0.9 881,170
1997 1.0 963,990 1.3%
2002 1.0 1,036,750 1.5%
ORLANDO
1990 0.6 610,180
1997 0.8 787,170 3.7%
2002 0.9 875,630 2.2%
52
<PAGE>
RETAIL SALES
For the period 1990 to 1997, retail sales in Florida increased annually by
6.2%, as compared to an annual growth rate of 4.8% nationwide and an annual
growth rate of 5.8% throughout the Southeastern United States. In the
submarkets of Orlando, Jacksonville and Miami, retail sales increased annually
by 7.1%, 5.8% and 5.3%, respectively, each of which is higher than the national
average. For the period 1997 to 2002, retail sales in Florida are expected to
increase annually by 6.4%, as compared to 5.5% nationwide and 5.7% throughout
the Southeast. In the submarkets of Orlando, Jacksonville and Miami, retail
sales are expected to increase annually by 6.7%, 5.1% and 5.0%, respectively.
RETAIL SALES AND ANNUAL GROWTH RATES
UNITED STATES
1990 $1,845 1,845.1
1997 $2,560 2,559.9 4.8%
2002 $3,353 3,352.6 5.5%
SE STATES (1)
1990 $398 397.8
1997 $592 592.2 5.8%
2002 $780 780.5 5.7%
FLORIDA
1990 $112 111.6
1997 $170 169.8 6.2%
2002 $232 231.5 6.4%
JACKSONVILLE
1990 $7 7.4
1997 $11 11.0 5.8%
2002 $14 14.2 5.1%
MIAMI
1990 $16 16.5
1997 $24 23.6 5.3%
2002 $30 30.1 5.0%
ORLANDO
1990 $12 11.5
1997 $19 18.6 7.1%
2002 $26 25.8 6.7%
53
<PAGE>
FOOD STORE SALES
For the period 1990 to 1997, food store sales in Florida increased
annually by 3.4%, as compared to an annual growth rate of 2.3% nationwide and
3.5% throughout the Southeastern United States. In the submarkets of Orlando,
Jacksonville and Miami, food store sales increased annually by 6.6%, 4.1% and
2.5%, respectively.
FOOD STORE SALES AND ANNUAL GROWTH RATES
IN MILLIONS 1,000,000
UNITED STATES
1990 362,667 362,667
1997 424,091 424,091 2.3%
2002
SE STATES (1)
1990 78,041 78,041
1997 99,107 99,107 3.5%
2002
FLORIDA
1990 20,231 20,231
1997 25,542 25,542 3.4%
2002
JACKSONVILLE
1990 1,303 1,303
1997 1,724 1,724 4.1%
2002
MIAMI
1990 2,705 2,705
1997 3,214 3,214 2.5%
2002
ORLANDO
1990 1,701 1,701
1997 2,666 2,666 6.6%
2002
54
<PAGE>
THE PROPERTIES
The Existing Properties consist primarily of Supermarket Centers and
contain an aggregate of approximately 2.0 million square feet of GLA. As of June
30, 1997, the Existing Properties were 93.0% leased to approximately 360 tenants
(not including 535 tenants of the Company's mini-warehouse facility). With the
exception of Winn-Dixie, which represents approximately 12.5% of the Company's
aggregate annualized minimum rental revenues (i.e., the annualized fixed monthly
base rental amount in effect under each lease executed as of June 30, 1997,
excluding monthly tenant pass-throughs of operating and other expenses), no
tenant accounted for more than 4.3% of such tenant rent as of June 30, 1997. All
the Supermarket Centers were developed after 1982. See "--Lease Expirations",
"--Competition" and "Policies with Respect to Certain Activities--Investment
Policies". See also "--Additional Information Concerning the Existing
Properties" and "Use of Proceeds" for a discussion of renovations and
improvements contemplated for certain of the Existing Properties.
The following table sets forth certain information relating to the
Existing Properties as of June 30, 1997. All references to net rent per square
foot are calculated without giving effect to vacant space, unless otherwise
specified.
<TABLE>
<CAPTION>
NET
OPERATING NET
INCOME OPERATING
FOR THE INCOME FOR
NUMBER SIX MONTHS THE YEAR
OF ENDED ENDED
DATE TENANTS JUNE 30, DECEMBER 31,
PROPERTY(1) ACQUIRED GLA (UNITS) 1997 1996
- ----------- -------------- --------- --------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
NORTH FLORIDA
Atlantic Village June 30, 100,559 24 $ 374,172 $ 731,461
Shopping 1995
Center(2)(3)
Atlantic Beach, FL
Commonwealth February 28, 71,021 14 $ 210,939 $ 460,541
Shopping Center 1994
Jacksonville, FL
Fort Caroline January 21, 74,546 10 $ 228,201 $ 472,879
Trading Post(4) 1994
Jacksonville, FL
Monument Pointe January 31, 75,328 12 $ 190,985(5) --
Shopping Center 1997
Jacksonville, FL
Oak Hill Village December 7, 78,492 19 $ 229,012 $ 448,219
Shopping Center 1995
Jacksonville, FL
Mandarin Mini- May 10, 52,880 535 $ 96,680 $ 208,239
Storage 1994
Jacksonville, FL
CENTRAL
FLORIDA
East Bay Plaza July 23, 85,426 20 $ 152,716 $ 230,077
Largo, FL 1993
Eustis Square October 22, 126,791 22 $ 349,246 $ 703,519
Shopping Center 1993
Eustis, FL
Forest Edge December 31, 68,631 12 $ 182,190 --
Shopping Center 1996
Orlando, FL
Lake Mary November 9, 288,450 53 $ 1,447,409 $2,787,759
Shopping Centre 1995
Lake Mary, FL
<CAPTION>
AVERAGE AVERAGE
MINIMUM MINIMUM INITIAL
BASE RENT BASE RENT ACQUISITION &
PER SQ. FT. PER SQ. FT. REDEVELOPMENT PERCENT CERTAIN TENANTS
PROPERTY(1) (ANCHORS) (LOCALS) COSTS LEASED LEASE EXPIRATION DATES
- ----------- ------------- ------------- --------------- --------- ------------------------------------
<S> <C> <C> <C> <C> <C>
NORTH FLORIDA
Atlantic Village $5.15 $10.48 $ 5,950,000 98% Publix (2004), Blockbuster
Shopping Music (2001), Village Shoe
Center(2)(3) Box (1999)
Atlantic Beach, FL
Commonwealth $6.10 $ 7.79 $ 3,650,000 95% Winn-Dixie (2017), Subway (1998)
Shopping Center
Jacksonville, FL
Fort Caroline $6.69 $ 8.01 $ 3,705,000 96% Winn-Dixie (2015),
Trading Post(4) Eckerd (2004),
Jacksonville, FL McDonalds (2018)
Monument Pointe $4.90 $10.52 $ 3,731,000 94% Winn-Dixie (2005), Eckerd (2005),
Shopping Center First Union (1998),
Jacksonville, FL
Oak Hill Village $5.15 $ 9.05 $ 3,450,000 100% Publix (2005),
Shopping Center Walgreens (2019)(3),
Jacksonville, FL BlockbusterVideo(1999),
Little Caesars (2000)
Mandarin Mini- -- $ 5.75 $ 1,810,000 95% --
Storage
Jacksonville, FL
CENTRAL
FLORIDA
East Bay Plaza $6.88 $ 6.90 $ 1,610,000 83% Scottys (2001), Albertsons(6),
Largo, FL Hollywood Video (2007)
Eustis Square $5.70 $10.45 $ 7,249,000 92% Publix (2004), Bealls (2005),
Shopping Center Walgreens (2024)(3),
Eustis, FL US Pak N Ship (1999)
Forest Edge $5.78 $ 9.88 $ 3,100,000 99% Winn-Dixie (2007),
Shopping Center AutoZone (2006)
Orlando, FL
Lake Mary $9.58 $13.65 $20,850,000 100% K-Mart (2013),
Shopping Centre Albertsons (2012),
Lake Mary, FL General Cinema (2010),
Play It Again Sports (1998),
Chili's (2010), Einstein Bros,
Bagels (2001), NationsBank (2008),
Swim N Fun (2001)
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
NET
OPERATING NET
INCOME OPERATING
FOR THE INCOME FOR
NUMBER SIX MONTHS THE YEAR
OF ENDED ENDED
DATE TENANTS JUNE 30, DECEMBER 31,
PROPERTY(1) ACQUIRED GLA (UNITS) 1997 1996
- ----------- -------------- --------------- --------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
SOUTH FLORIDA
Bird Ludlum August 11, 192,477 48 $1,167,993 $ 2,223,722
Shopping Center 1994
Miami, FL
Plaza Del Rey December 50,146 20 $ 283,981 $ 572,143
Shopping Center 1992
Miami, FL
Pointe Royale July 27, 199,068 20 $ 477,851 $ 1,080,640
Shopping Center(7) 1995
Miami, FL
Pointe Royale July 27, 18,000(8) -- -- --
Office Building 1995
Miami, FL
West Lake Plaza November 6, 100,747 25 $ 412,268 $ 129,984(9)
Shopping Center(7) 1996
Miami, FL
Diana Building February 15, 18,707 5 $ 41,234 $ 1,266(9)
W. Palm Beach, FL 1995
Equity One April 10, 28,980(10) 10 $ 145,545 $ 259,373
Office Building 1992
Miami Beach, FL
TEXAS
Four Corners January 22, 115,178 25 $ 427,255 $ 775,874
Shopping Center 1993
Tomball, TX
Parker Tower Centre December 9, 205,792 18 $ 217,069 $ 407,766
Plano, TX 1993 ---------- ---- ----------- ------------
Total/Weighted
Average 1,951,219 892 $6,634,746 $11,493,462
========== ==== =========== ============
<CAPTION>
AVERAGE AVERAGE
MINIMUM MINIMUM INITIAL
BASE RENT BASE RENT ACQUISITION &
PER SQ. FT. PER SQ. FT. REDEVELOPMENT PERCENT CERTAIN TENANTS
PROPERTY(1) (ANCHORS) (LOCALS) COSTS LEASED LEASE EXPIRATION DATES
- -------------------- ------------- ------------- --------------- --------- -----------------------------
<S> <C> <C> <C> <C> <C>
SOUTH FLORIDA
Bird Ludlum $11.28 $13.40 $ 20,397,500 100% Winn-Dixie (2007),
Shopping Center Eckerd (2007), Vision
Miami, FL Works (2008), Rainbow
Shops (2003), GNC (2001),
Radio Shack (2000), Boat
U.S. Marine (1998), Barnett
Bank (1998)
Plaza Del Rey $ 9.59 $12.90 $ 3,831,000 98% Navarro (2001),
Shopping Center Rent A Center (2000)
Miami, FL
Pointe Royale $ 4.08 $ 9.85 $ 8,725,000 99% Best Buy (2010),
Shopping Center(7) Winn-Dixie (2011),
Miami, FL Dollar Bills (2004)
Household Finance
Company (2001)
Pointe Royale -- -- -- -- --
Office Building
Miami, FL
West Lake Plaza $ 8.41 $11.48 $ 7,930,000 99% Winn-Dixie (2016),
Shopping Center(7) Burger King (2007),
Miami, FL United Consumer
Club (1998)
Diana Building $14.33 $13.88 $ 1,514,000 60% Fat Tuesday's (2001)
W. Palm Beach, FL
Equity One -- $12.20 $ 1,748,000 100% City of Miami Beach
Office Building Parking Department (1998)
Miami Beach, FL
TEXAS
Four Corners $ 8.39 $ 9.71 $ 4,750,000 94% Kroger (2005),
Shopping Center Eckerd (2004),
Tomball, TX Wendy's (2010), Mailboxes
Etc. (2007), Rent A
Center (1999)
Parker Tower Centre $ 4.22 $ 6.89 $ 4,157,000 60% Minyards (2011),
Plano, TX ------ ------ ------------- ---- Blockbuster Video (2002),
Dollar General (2000)
Total/Weighted
Average $ 6.83 $10.61 $108,157,500 93%
======= ======= ============= ====
</TABLE>
- ----------------
(1) Does not include Lantana Village, Beauclerc Village or Summerlin Square
which the Company has agreed to purchase, or any redevelopment and
development properties.
(2) Walgreens has vacated this site, but continues to make lease payments.
(3) Pursuant to its lease agreement, Walgreens may terminate the lease in
2004.
(4) Since its acquisition in 1994, Winn-Dixie's space has been increased by an
aggregate of 7,200 square feet.
(5) Represents NOI for the five months ended June 30, 1997.
(6) Albertsons is located on property contiguous to the Company's property not
owned by the Company. Accordingly, Albertsons does not pay base rent or
make payments to the Company for common area maintenance and similar
charges at this location.
(7) Eckerd has vacated this site, but continues to make lease payments.
(8) Represents GLA following redevelopment. See "Use of Proceeds".
(9) Represents NOI for the two months ended December 31, 1996.
(10) Includes 3,000 square feet of GLA occupied by the Company.
56
<PAGE>
REDEVELOPMENT AND DEVELOPMENT PROPERTIES
SKY LAKE. In August 1997 the Company acquired Sky Lake, an existing
Community Shopping Center, for $11.8 million. Sky Lake is located in the North
Miami Beach, Florida area. Approximately 150,000 residents with household
incomes averaging $51,000 are located within a three mile radius of Sky Lake.
The Company will conduct a comprehensive redevelopment program at Sky Lake to
create a Supermarket Center containing 300,000 square feet of GLA. The Company
expects that the redevelopment will cost approximately $18.0 million and will
occur in several phases which are expected to be completed by May 1999. The
Company has entered into a non-binding letter of intent with Albertsons for the
lease of 60,000 square feet of GLA at Sky Lake. During the redevelopment, the
Company expects to receive certain rental revenue from tenants who will
continue operations during the redevelopment process.
CORAL WAY. In June 1997 the Company acquired 10.0 acres of vacant land at
Coral Way for approximately $1.5 million for the development of a 100,000
square foot Supermarket Center. Coral Way is located in a newly rezoned high
growth area of Southwest Dade County, Florida. The Company does not expect to
commence development at Coral Way earlier than November 1998 or complete such
development in less than than one year. The Company anticipates that the costs
of development will approximate $10.0 million. In addition, the Company has
agreed to acquire 4.4 acres of land proximate to Coral Way for future
development contingent upon, among other things, the rezoning of such property
for commercial use.
LAND FOR DEVELOPMENT. The Company owns approximately 13.0 acres of land
adjacent to certain of the Existing Properties, substantially all of which the
Company intends to develop as retail space. The Company expects to commence
construction on 5.0 acres adjacent to Lake Mary and 0.5 acres adjacent to
Commonwealth within three months following the Offering. The Company expects to
complete these projects by December 1998, at a cost of approximately $3.0
million and $450,000, respectively.
The following chart provides additional information with respect to
Redevelopment and Development Properties.
<TABLE>
<CAPTION>
NUMBER OF DEVELOPABLE CURRENT
PROPERTY LOCATION ACREAGE PARCELS SQUARE FEET ZONING
- -------- -------------------- --------- ----------- --------------- -------------
<S> <C> <C> <C> <C> <C>
ADJACENT TO EXISTING PROPERTIES
Commonwealth ................................. Jacksonville, FL 0.50 1 6,000 Retail
Fort Caroline ................................. Jacksonville, FL 0.50 1 7,000 Retail
Oak Hill .................................... Jacksonville, FL 0.25 1 6,000 Retail
Lake Mary .................................... Lake Mary, FL 5.00 1 70,000 Retail
Bird Ludlum ................................. Miami, FL 6.20 1 150 Units Residential
Equity One Office Building .................. Miami Beach, FL 0.50 2 50,000 Office
------ --- ---------
Total - Adjacent to Existing Properties ...... 12.95 7 139,000 (1)
------ --- ---------
REDEVELOPMENT/ DEVELOPMENT
PROPERTIES
Sky Lake .................................... NE Dade County, FL 24.00 1 285,000 Retail
Sky Lake .................................... NE Dade County, FL 1.50 2 15,000 Retail
Coral Way .................................... SW Dade County, FL 10.00 1 100,000 Retail
Vacant Land(2) .............................. SW Dade County, FL 4.40 2 40,000 Retail
------ --- ---------
Total--Redevelopment/Development
Properties ................................. 39.90 6 440,000
------ --- ---------
Total ....................................... 52.85 13 579,000
====== === =========
</TABLE>
- ----------------
(1) For a discussion of the properties, see "Additional Information Concerning
the Existing Properties".
(2) Under contract to purchase.
There can be no assurance that Sky Lake, Coral Way or any other
acquisition, redevelopment or development project will be consummated or, if
consummated, will be successful. See "Policies with Respect to Certain
Activities--Development Policies" and "Use of Proceeds".
57
<PAGE>
MAJOR TENANTS
The following table sets forth the GLA of the Existing Properties leased
to Anchor Tenants and other tenants as of June 30, 1997.
<TABLE>
<CAPTION>
ANCHOR OTHER
TENANTS TENANTS TOTAL
----------- --------- --------------
<S> <C> <C> <C>
Existing Properties (sq. ft.) ...... 1,039,044 752,707 1,791,751
Percentage of Total Leased GLA ...... 57.99% 42.01% 100.00%
</TABLE>
The following table sets forth as of June 30, 1997, information regarding
the leases with the Company's largest tenants based upon annualized minimum
rents of at least $250,000:
<TABLE>
<CAPTION>
PERCENT OF
GLA NUMBER ANNUALIZED AGGREGATE ANNUALIZED
TENANT (SQ. FT.) OF STORES MINIMUM RENTS MINIMUM RENTS
- ------ ----------- ----------- --------------- ----------------------
<S> <C> <C> <C> <C>
Winn-Dixie ............ 308,864 7 $1,886,286 12.52%
General Cinemas ......... 35,712 1 633,888 4.21
Albertsons ............ 63,139 1 568,251 3.77
Eckerd(1) ............... 59,700 6 514,142 3.41
K-Mart .................. 86,479 1 497,254 3.30
Publix .................. 118,110 3 567,080 3.76
Kroger .................. 45,528 1 373,330 2.48
Best Buy ............... 91,472 1 365,888 2.43
Blockbuster Video ...... 23,609 4 309,503 2.05
Walgreens(2) ............ 34,996 3 265,720 1.76
Minyard's ............... 70,550 1 253,980 1.69
-------- --- ----------- -------
Total ............... 938,159 29 $6,235,322 41.38%
======== === =========== =======
</TABLE>
- ----------------
(1) Includes two stores where the tenant has vacated the premises but has
continued to pay rent pursuant to its lease.
(2) Includes a store which Walgreens has vacated but continues to pay rent
pursuant to its lease.
LEASE EXPIRATIONS
The following table sets forth the anticipated lease expirations of the
Company's tenants (excluding renewal options and the Company's mini-storage
facility) from July 1, 1997 through June 30, 2007 and thereafter.
<TABLE>
<CAPTION>
PERCENT OF AVERAGE
PERCENT OF AGGREGATE ANNUAL
NUMBER OF GLA TOTAL ANNUALIZED ANNUALIZED MINIMUM RENT
JUNE 30, LEASES (SQ. FT.) OCCUPIED GLA MINIMUM RENT MINIMUM RENT PER SQ. FT.
- ---------------------- ----------- ----------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1998 ............... 71 153,955 8.88% $ 1,808,628 12.24% $ 11.75
1999 ............... 71 134,148 7.74 1,496,282 10.13 11.15
2000 ............... 81 166,975 9.63 1,737,637 11.76 10.41
2001 ............... 46 147,612 8.52 1,293,669 8.76 8.76
2002 ............... 33 74,376 4.29 977,403 6.62 13.14
2003 ............... 11 33,835 1.95 332,507 2.25 9.83
2004(1) ............ 5 54,857 3.17 292,917 1.98 5.34
2005 ............... 10 237,662 13.71 1,310,551 8.87 5.51
2006 ............... 2 50,878 2.94 442,880 3.00 8.70
2007 ............... 5 21,299 1.23 268,950 1.82 12.63
THEREAFTER ......... 22 657,450 37.94 4,812,047 32.57 7.32
---- ---------- ------- ------------ ------- --------
Total/Average ...... 357 1,733,047 100.00% $14,773,471 100.00% $ 8.52
==== ========== ======= ============ ======= ========
</TABLE>
- ----------------
(1) Does not include three lease agreements with Walgreens expiring in the
years 2019, 2019 and 2024, respectively, which Walgreens may terminate in
2004.
58
<PAGE>
Historically, the Company has not incurred substantial costs associated
with Tenant Improvements relating to lease expirations or renewals.
Additionally, because leasing activities are performed in-house, the Company
has not historically incurred substantial costs associated with Leasing
Commissions. No assurance can be given that such expenses will not increase in
the future.
ADDITIONAL INFORMATION CONCERNING THE EXISTING PROPERTIES
As of December 31, 1996, two of the Supermarket Centers, Bird Ludlum and
Lake Mary, had either a book value equal to or greater than 10.0% of the total
assets of the Company or gross revenues which accounted for more than 10.0% of
the Company's aggregate gross revenues. Set forth below is additional
information with respect to each of such properties.
BIRD LUDLUM. Bird Ludlum is a 192,477 square foot Supermarket Center
occupied by 48 tenants which is located at the intersection of Bird Road and
Ludlum Road in Miami, Florida. Traffic count at the Bird Ludlum center averages
approximately 85,000 vehicles per day. The property is located approximately
one mile east of the Palmetto Expressway, a major Miami roadway. Bird Ludlum is
located in a densely populated trade area of Miami with a population of over
155,000 within a three mile radius and an average household income of $51,000
per year. This property includes five out-parcel buildings, and has attracted a
full range of national and regional chain store tenants including Winn-Dixie,
Eckerd, Blockbuster, Radio Shack and Little Caesars. Outparcel buildings are
occupied by Visionworks, McDonalds, Dairy Queen, Jiffy Lube and Barnett Bank.
For a discussion of competition, see "--Competition".
In 1996, the Company purchased 7.4 acres of vacant land adjacent to Bird
Ludlum for a purchase price of $1.1 million. During early 1997, the Company
utilized approximately 1.2 acres of this land to build a parking lot for 150
automobiles.
Winn-Dixie, the only tenant which occupies more than 10.0% of the GLA at
Bird Ludlum, occupies 44,400 square feet of GLA under a lease which expires in
December 2007 and contains five renewal options of five years each. The annual
minimum rent payable by Winn-Dixie under this lease is $399,600. For the years
ended June 30, 1994, 1995 and 1996, Winn-Dixie reported sales of $22.3 million,
$22.3 million and $23.6 million, respectively.
The following table sets forth a schedule of lease expirations and other
information concerning leases at Bird Ludlum, assuming none of the tenants
exercise renewal options.
<TABLE>
<CAPTION>
PERCENT OF AVERAGE
AGGREGATE ANNUAL
NUMBER OF GLA PERCENT OF ANNUALIZED ANNUALIZED MINIMUM RENT
YEAR LEASES (SQ. FT.) TOTAL GLA MINIMUM RENT MINIMUM RENT PER SQ. FT.
- ---- ----------- ----------- ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1998 ............... 11 40,435 21.01% $ 620,627 25.44% $ 15.35
1999 ............... 12 30,540 15.87 375,859 15.40 12.31
2000 ............... 9 25,194 13.09 293,710 12.04 11.66
2001 ............... 3 10,300 5.35 81,687 3.35 7.93
2002 ............... 4 5,775 3.00 113,241 4.64 19.61
2003 ............... 5 15,195 7.89 200,813 8.23 13.22
2004 ............... 0 0 0.00 0 0.00 0.00
2005 ............... 0 0 0.00 0 0.00 0.00
2006 ............... 0 0 0.00 0 0.00 0.00
2007 ............... 0 0 0.00 0 0.00 0.00
THEREAFTER ......... 4 65,038 33.79 754,085 30.90 11.59
--- -------- ------- ----------- ------- --------
Total/Average ...... 48 192,477 100.00% $2,440,022 100.00% $ 12.68
=== ======== ======= =========== ======= ========
</TABLE>
The average annual rental income per square foot of GLA at Bird Ludlum for
the years ended December 31, 1994, 1995 and 1996 and the six months ended June
30, 1997 was $18.61, $17.31, $16.89 and $16.87, respectively.
59
<PAGE>
At the time of its acquisition by the Company, Bird Ludlum was 96.0%
leased. For the years ended December 31, 1994, 1995 and 1996 and the six months
ended June 30, 1997, the percentage of Bird Ludlum that was leased was 100.0%,
99.0%, 100.0% and 100.0%, respectively.
Depreciation (for tax purposes) on Bird Ludlum is taken as follows: (i)
approximately $14.2 million of the basis is being depreciated on a straight
line basis over 40 years, and (ii) approximately $1.3 million of the basis uses
a 15-year Accelerated Cost Recovery System ("ACRS") depreciation. Depreciation
for book purposes is calculated on a straight-line basis over 40 years.
LAKE MARY. Lake Mary is a 288,450 square foot Supermarket Center occupied
by 53 tenants which is located at the southeast corner of Lake Mary Boulevard
and Lake Emma Road in Lake Mary, Seminole County, Florida, in the Orlando
metropolitan area. The property was originally constructed during 1987 and
1988. Certain improvements and additions were made to Lake Mary in 1990. Lake
Mary, which is situated on a 47.0 acre parcel, has attracted a full range of
national and regional chain store tenants including K-Mart, Albertsons, General
Cinema, Chili's, Burger King, Einstein Bros. Bagels, Carvel Ice Cream, Radio
Shack, Little Caesars and H&R Block. For a discussion of competition, see
"--Competition".
Three tenants, K-Mart, Albertsons and General Cinemas, each occupy in
excess of 10.0% of the GLA at Lake Mary. K-Mart occupies 86,479 square feet of
GLA under a lease which expires in August, 2013. The annual minimum rent is
$497,254. For the years ended December 31, 1994, 1995 and 1996, K-Mart reported
sales of $7.5 million, $7.7 million and $8.2 million, respectively. The Company
believes that this K-Mart is an underperforming store. The prior owner (and
current lender on the property) has agreed to guarantee the rent due from
K-Mart (including recoveries) at any time K-Mart ceases making rental payments
during the three years following the Company's purchase of Lake Mary for a
period of three years subsequent to such breach. Albertsons occupies 63,139
square feet of GLA under a lease which expires in June 2012 and has four
renewal options of five years each. The annual minimum rent under the
Albertsons lease is $568,251, increasing to $599,820 in June 2002 and $631,390
in June 2007. For the years ended December 31, 1994, 1995 and 1996, Albertsons
reported sales of $23.8 million, $25.6 million and $27.5 million, respectively.
General Cinemas occupies 35,712 square feet of GLA under a lease which expires
in June 2010. The annual minimum rent is $633,888. The Company plans to
allocate $3.0 million from the proceeds of the Offering to develop 50,000
square feet of additional space at Lake Mary.
The following table sets forth a schedule of lease expirations and other
information concerning leases at Lake Mary, assuming none of the tenants
exercise renewal options:
<TABLE>
<CAPTION>
PERCENT OF AVERAGE
AGGREGATE ANNUAL
NUMBER OF GLA PERCENT OF ANNUALIZED ANNUALIZED MINIMUM RENT
YEAR LEASES (SQ. FT.) TOTAL GLA MINIMUM RENT MINIMUM RENT PER SQ. FT.
- ---- ----------- ----------- ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1998 ............... 8 10,835 3.79% $ 159,314 5.03% $ 14.70
1999 ............... 12 19,049 6.65 260,719 8.23 13.69
2000 ............... 10 18,025 6.30 230,497 7.28 12.79
2001 ............... 5 11,960 4.18 143,326 4.52 11.98
2002 ............... 11 25,916 9.05 356,864 11.26 13.77
2003 ............... 0 0 0.00 0 0.00 0.00
2004 ............... 1 1,332 0.46 19,154 0.61 14.38
2005 ............... 0 0 0.00 0 0.00 0.00
2006 ............... 0 0 0.00 0 0.00 0.00
2007 ............... 1 3,909 1.37 113,986 3.60 29.16
THEREAFTER ......... 5 195,229 68.20 1,884,197 59.47 9.65
--- -------- ------- ----------- ------- --------
Total/Average ...... 53 286,255 100.00% $3,168,057 100.00% $ 11.07
=== ======== ======= =========== ======= ========
</TABLE>
The average rental income per square foot of GLA at Lake Mary for the
years ended December 31, 1995 and 1996 and the six months ended June 30, 1997
was $12.30, $12.30 and $12.73, respectively.
60
<PAGE>
At the time of its acquisition by the Company, Lake Mary was 97.0% leased.
For the years ended December 31, 1995 and 1996 and the six months ended June
30, 1997, the percentage of Lake Mary that was leased was 97.0%, 100.0% and
100.0%, respectively.
Depreciation (for tax purposes) on Lake Mary is taken as follows: (i)
approximately $11.3 million of the basis is being depreciated on a straight
line basis over 40 years, and (ii) $2.0 million of the basis uses a 15-year
ACRS depreciation. Depreciation for book purposes is calculated on a
straight-line basis over 40 years.
Set forth below is additional information with respect to each of the
Company's other Existing Properties:
ATLANTIC VILLAGE. Atlantic Village is a 100,559 square foot Supermarket
Center occupied by 24 tenants which is located in Atlantic Beach, Florida (in
the Jacksonville metropolitan area). Atlantic Village is situated on 14.0 acres
and is anchored by a Publix. For the year ended December 31, 1996, Publix
reported sales of $19.9 million. The Company will invest $850,000 to remodel
the property and in return, Publix will renew its lease for another 10 years
starting August 1998. Walgreens has vacated this site, but continues to make
lease payments.
COMMONWEALTH. Commonwealth is a 71,021 square foot Supermarket Center
occupied by 14 tenants which is located in Jacksonville, Florida. Commonwealth
is situated on 12.8 acres and is anchored by a Winn-Dixie. For the year ended
June 30, 1996, Winn-Dixie reported sales of $12.4 million. The Company will
invest $1.3 million to expand Winn-Dixie's space by 12,000 square feet and in
return Winn-Dixie (i) will increase its monthly minimum rent by approximately
$12,000, starting January 1998 and (ii) extend its lease for an additional
20-year period. Additionally, the Company intends to build 6,000 square feet of
retail space on an existing out-parcel to accommodate an existing tenant at a
cost of approximately $450,000.
FORT CAROLINE. Fort Caroline is a 74,546 square foot Supermarket Center
occupied by 10 tenants which is located in Jacksonville, Florida. Fort Caroline
is situated on 9.6 acres and is anchored by a Winn-Dixie and Eckerd. For the
year ended June 30, 1996, Winn-Dixie reported sales of $13.8 million. During
1994 and 1995 the Company expanded Winn-Dixie's occupied space by an aggregate
of approximately 7,200 square feet, and Winn-Dixie agreed to extend its lease
for an additional 20-year period.
MONUMENT POINTE. Monument Pointe is a 75,328 square foot Supermarket
Center occupied by 12 tenants located in Jacksonville, Florida. Monument Pointe
is situated on 7.3 acres and is anchored by a Winn-Dixie and Eckerd. For the
year ended June 30, 1996, Winn-Dixie reported sales of $15.5 million.
OAK HILL. Oak Hill is a 78,492 square foot Supermarket Center occupied by
19 tenants located in Jacksonville, Florida. Oak Hill is situated on 11.7 acres
and is anchored by a Publix and Walgreens. For the year ended December 31,
1996, Publix reported sales of $12.9 million.
EAST BAY. East Bay is a 85,426 square foot Supermarket Center occupied by
20 tenants located in Largo, Florida (in the Tampa metropolitan area). East Bay
is situated on 10.3 acres and is anchored by an Albertsons, Scotty's and
Hollywood Video. Albertsons is located on property contiguous to the Company's
property which is not owned by the Company.
EUSTIS SQUARE. Eustis Square is a 126,791 square foot Supermarket Center
occupied by 22 tenants located in Eustis, Florida. Eustis Square is situated on
13.5 acres and is anchored by a Publix, Beall's and Walgreens. For the year
ended December 31, 1996, Publix reported sales of $12.5 million.
FOREST EDGE. Forest Edge is a 68,631 square foot Supermarket Center
occupied by 12 tenants located in Orlando, Florida. Forest Edge is situated on
8.2 acres and is anchored by a Winn-Dixie and AutoZone. For the year ended June
30, 1996, Winn-Dixie reported sales of $12.5 million.
61
<PAGE>
PLAZA DEL REY. Plaza Del Rey is a 50,146 square foot shopping center
occupied by 20 tenants located in Southwest Dade County, Florida. Plaza Del Rey
is situated on 4.6 acres and is anchored by a Navarro's. For the year ended
December 31, 1996, Navarro's reported sales of $8.9 million.
POINTE ROYALE. Pointe Royale is a 199,068 square foot Supermarket Center
occupied by 20 tenants located in Cutler Ridge, Dade County, Florida. Pointe
Royale is situated on 14.5 acres and is anchored by a Best Buy and Winn-Dixie.
For the year ended June 30, 1996, Winn-Dixie reported sales of $16.9 million.
The Company intends to invest $800,000 during 1998 to renovate a currently
vacant 18,000 square foot office building situated on the property. Eckerd has
vacated its leased space but has, to date, continued to pay rent pursuant to
its lease with the Company.
WEST LAKE. West Lake is a 100,747 square foot Supermarket Center occupied
by 25 tenants located in Kendall Lakes, Dade County, Florida. West Lake is
situated on 8.8 acres and is anchored by a Winn-Dixie and Burger King. For the
year ended June 30, 1996, Winn-Dixie reported sales of $10.2 million. Eckerd
has vacated this site, but continues to make lease payments.
FOUR CORNERS. Four Corners is a 115,178 square foot Supermarket Center
occupied by 25 tenants located in Tomball, Texas (Houston metropolitan area).
Four Corners is situated on 12.0 acres and is anchored by a Kroger and Eckerd.
For the year ended December 31, 1996, Kroger reported sales of $22.1 million.
PARKER TOWNE. Parker Towne is a 205,792 square foot Supermarket Center
occupied by 18 tenants located in Plano, Texas (Dallas metropolitan area).
Parker Towne is situated on 19.2 acres and is anchored by a Minyard's. For the
year ended December 31, 1996, Minyard's reported sales of $23.1 million.
EQUITY ONE OFFICE BUILDING. The Equity One Office Building is a 28,980
square foot mixed use (office/retail) property occupied by 10 tenants,
including the Company's corporate offices, located in Miami Beach, Florida. The
property is comprised of four parcels, which, in the aggregate, total 1.2
acres. Purchased in 1992, this property was completely redeveloped by the
Company. The property is adjacent to the Miami Beach City Hall and proximate to
the Miami Beach Convention Center.
DIANA BUILDING. The Diana building is a 18,707 square foot mixed use
(office/retail) property currently occupied by five tenants located in West
Palm Beach, Florida. This property was purchased in 1995 and was completely
redeveloped by the Company.
MANDARIN MINI-STORAGE. Mandarin is a 52,880 square foot mini-storage
warehouse occupied by 535 tenants located in Jacksonville, Florida. The
property is situated on 2.8 acres.
62
<PAGE>
PROPERTY MANAGEMENT, LEASING AND RELATED SERVICE BUSINESS
The Company's property management and substantially all of its leasing
activities and operating and administrative functions (including leasing,
legal, construction, data processing, finance and accounting) are administered
or coordinated by Company personnel. On-site functions such as maintenance,
landscaping, sweeping, plumbing and electrical are subcontracted out at each
location and, to the extent permitted by their respective leases, the cost of
these functions is passed on to the tenants. Personnel from the Company's
corporate headquarters conduct regular inspections of each property and
maintain frequent contact with major tenants.
The Company maintains an active leasing and maintenance program that,
combined with the quality and locations of the properties, has made the
Existing Properties attractive to tenants. The Company intends to continue to
hold the properties for long-term investment and, accordingly, places a strong
emphasis on quality construction and an on-going program of regular
maintenance. The properties are designed to require minimal capital
improvements.
The Company's management information systems provide operating data
necessary to make informed business decisions on a timely basis. These systems
allow instant access to store availability, lease data, tenants' sales history,
cash flow budgets and forecasts and enable the Company to maximize cash flow
from operations and closely monitor corporate expenses.
In addition to managing the Existing Properties, the Company provides
management and leasing services to certain third party owned properties.
Services are provided to third-party owners pursuant to contracts that are of
varying lengths of time and which generally provide for management fees of up
to 4.0% of monthly base rent property receipts. The management contracts are
typically cancelable upon 30 days' notice or upon certain events, including the
sale of the property. Leasing fees typically range from $2 to $3 per square
foot. During the year ended December 31, 1996 and the six months ended June 30,
1997, the Company earned management fees of $229,995 and $159,135,
respectively, in connection with its management of third party owned
properties. At present, the Company has no plans to expand these activities.
COMPETITION
There are numerous commercial developers, real estate companies and other
owners of real estate in the areas in which the Existing Properties are located
that compete with the Company in seeking land for development, properties for
acquisition, financing and tenants. Many of such competitors have substantially
greater resources than the Company. All of the Company's Supermarket Centers
are located in developed areas that include other Supermarket Centers. The
number of retail properties in a particular area could materially adversely
affect the Company's ability to lease vacant space and maintain the rents
charged at the Supermarket Centers or at any newly acquired property or
properties. One shopping center constructed less than two years ago stands
within a two-mile radius of Bird Ludlum. In addition, several smaller and older
strip centers are located along Bird Road in Miami. Lake Mary is located on a
retail thoroughfare which includes direct and proximate competition from a
free-standing Home Depot, a Target store and two shopping centers anchored by
Winn-Dixie and Publix, respectively. West Lake and Four Corners each competes
with nearby shopping centers anchored by supermarkets. Pointe Royale is
proximate to Cutler Ridge Mall and a Publix-anchored shopping center.
Free-standing retailers such as Circuit City and Toys R' Us within one mile of
Pointe Royale compete directly with tenants in such Supermarket Center. In
addition, there are several strip shopping centers in the vicinity. The
Company's other properties are subject to similar competition. Certain of the
Company's competitors may possess greater resources than the Company and may
have management with more experience than the Company's management. See "Risk
Factors--The Company Is Subject to Risks Associated with the Real Estate
Industry".
REGULATIONS AND INSURANCE
REGULATIONS. Retail properties are subject to various laws, ordinances and
regulations. The Company believes that each of the Existing Properties
maintains all material operating permits and
63
<PAGE>
approvals necessary to be maintained by the Company. For a discussion of the
ADA and governmental approvals regarding land use, levels of density, and
utility services, among others, see "Risk Factors-- Costs of Compliance Could
Have an Adverse Effect on the Company" and "--The Company Could be Affected by
Damage to Property Not Covered by Insurance".
INSURANCE. Under their leases, the Company's tenants are generally
responsible for providing adequate insurance on the property they lease. The
Company believes the Existing Properties are covered by adequate fire, flood
and property insurance provided by reputable companies. However, certain of the
Existing Properties are not covered by disaster insurance with respect to
certain hazards (such as hurricanes) for which coverage is not available or
available only at rates which, in the opinion of the Company, are not
economically justifiable.
ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and regulations,
including, without limitation, CERCLA, Chapter 403 of the Florida Statutes, the
Florida Dry Cleaning Contamination Clean-Up Act and the Dade County (Florida)
Pollution Protection Ordinance, an owner or operator of real estate may be
required to investigate and clean up hazardous or toxic substances or petroleum
product releases at such property and may be held liable to a governmental
entity or to third parties for property damage and for investigation and
clean-up costs incurred by such parties in connection with contamination. Many
such laws, including CERCLA, typically impose such liability without regard for
whether the owner knew of, or was responsible for, the presence of such
hazardous or toxic substances and the liability under such laws has been
interpreted to be joint and several unless divisible and there is a reasonable
basis for allocation of responsibility. The cost of investigation, remediation
or removal of such substances may be substantial, and the presence of such
substances, or the failure to properly remediate such substances, may adversely
affect the owner's ability to sell or rent such property or to borrow using
such property as collateral. Persons who arrange for the disposal or treatment
of hazardous or toxic substances may also be liable for the costs of removal or
remediation of such substances at a disposal or treatment facility, whether or
not such facility is owned or operated by such person. Some environmental laws
create a lien on a contaminated site in favor of the government for damages and
costs it incurs in connection with the contamination. The owner of a
contaminated site also may be subject to common law claims by third parties
based on damages and costs resulting from environmental contamination emanating
from such site. In connection with the ownership (direct or indirect),
operation, management and development of real properties, the Company is
generally considered an owner or operator of such properties or as having
arranged for the disposal or treatment of hazardous or toxic substances and,
therefore, potentially liable for removal or remediation costs, as well as
certain other related costs, including governmental fines and injuries to
persons and property.
Certain federal, state and local laws, regulations and ordinances also
govern the removal, encapsulation or disturbance of asbestos-containing
materials ("ACMs") when such materials are in poor condition or in the event of
construction, remodeling, renovation or demolition of a building. Such laws may
impose liability for release of ACMs and may permit third parties to seek
recovery from owners or operators of such properties for personal injury
associated with ACMs. Some of the environmental site assessments conducted at
the Existing Properties to date indicate that a number of the Existing
Properties contain ACMs. The Company is not aware, however, of any ACMs at the
properties that are friable or in otherwise poor condition. Assessments for
these properties are being conducted at this time.
The Company believes that the environmental studies conducted to date have
not revealed any significant environmental liability that would have a material
adverse effect on the Company's financial condition, results of operations,
liquidity and FFO; however, no assurance can be given that environmental
studies obtained by the Company reveal all environmental liabilities, that any
prior owner of land or a property owned or acquired by the Company did not
create any material environmental condition now known to the Company, or that a
material environmental condition does not otherwise exist (or may not exist in
the future). Tenants at the Existing Properties include plant-on-premises dry
cleaners, gasoline service stations and tire centers, photo development firms
and other
64
<PAGE>
retailers which use hazardous substances in their businesses. Although leases
with such tenants contain provisions intended to minimize environmental risks
and to shift the financial risks to the tenants, there is no assurance that the
Company will not incur liability in this regard.
A limited monitoring program with respect to groundwater testing has been
implemented at Plaza Del Rey based on questions raised by environmental studies
conducted at the time of purchase. Groundwater impacts have also been detected
at Atlantic Village, which is located in an area where a former municipal
landfill was operated. Buried refuse consistent with known landfill parameters
has been identified by the Company's consultants on the Atlantic Village site.
While these sites are not regarded by management as significant environmental
risks, if a material environmental condition does in fact exist (or exists in
the future) at these or other properties, it could have a significant adverse
impact upon the Company's financial condition, results of operations, liquidity
and FFO. No assurance can be given that the environmental studies that were
performed at the properties would disclose all environmental liabilities
thereon, that any prior owner thereof did not create a material environmental
condition not known to the Company or that a material environmental condition
does not otherwise exist as to any of the Existing Properties.
As noted, tenants at the shopping centers include plant-on-premises dry
cleaners. As a result of environmental site assesments conducted in the past
few months, low levels of perchloroethylene have been detected in soils at the
Company's Commonwealth, Fort Caroline and Eustis Square properties. The Company
understands that the owners of these cleaners are applying to participate in
state funded dry cleaner's programs. In connection with the Company's
acquisition of Sky Lake, a Phase II Environmental Site Assessment dated July
15, 1997 has revealed the existence of perchloroethylene at levels above
regulatory limits caused by a dry cleaning business operated on the premises.
The Company has learned that the site is included in the Florida Dry Cleaners
State Program, and as a condition to the Company's purchase of the property,
the seller agreed to pay all remediation costs, which environmental consultants
have estimated to be approximately $250,000. In addition, $500,000 has been
placed into an escrow account at closing to pay for the remediation. Based on
the remediation cost estimates, guarantees by the seller to pay for the
clean-up and the establishment of the escrow account, the Company has concluded
that the property does not pose a material environmental liability.
EMPLOYEES
At June 30, 1997, the Company had 18 full-time employees. The Company's
employees are not represented by a collective bargaining group, and the Company
considers its relations with its employees to be good.
LEGAL PROCEEDINGS
Neither the Company nor the Existing Properties are subject to any
material litigation. Further, to the Company's knowledge, there is no
litigation threatened against the Company or the Existing Properties, other
than routine litigation and administrative proceedings arising in the ordinary
course of business, which collectively are not expected to have a material
adverse effect on the business, financial condition, results of operations or
cash flows of the Company.
65
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's Board of Directors currently consists of eight members,
including three members who are independent directors. A fourth independent
director will be appointed prior to consummation of the Offering. Under the
Company's Bylaws, the affirmative vote of at least 80% of the entire Board of
Directors is required to approve any matter before the Board. Pursuant to the
Company's Bylaws, the Board of Directors is divided into three classes of
directors and directors serve until the election and qualification of their
successors. The initial terms of the first, second and third classes will
expire in 1998, 1999 and 2000, respectively. Beginning in 1998, directors of
each class will be chosen for three-year terms upon the expiration of their
current terms, with one class of directors elected annually by stockholders.
The Company believes that classification of the Board of Directors will help to
assure the continuity and stability of the Company's business strategies and
policies as determined by the Board of Directors. Holders of shares of Common
Stock will have no right to cumulative voting in the election of directors. At
each annual meeting of stockholders, 66 2/3% of the votes cast in such election
will be able to elect all of the directors whose terms expire at that meeting.
The Charter provides that a director may only be removed for Cause (as defined
in the Charter) by the affirmative vote of at least 80% of the votes cast at an
annual or special meeting of stockholders (but in no event less than a majority
of all votes entitled to be cast at the meeting) in the election of directors.
Subject to rights granted pursuant to any employment agreements, officers of
the Company serve at the pleasure of the Board of Directors.
Certain stockholders of the Company have entered into agreements to
control the Company. Such stockholders directly and indirectly own and/or
control an aggregate of 96.5% of the issued and outstanding shares of Common
Stock of the Company before giving effect to the Offering. Upon consummation of
the Offering, such stockholders will own and/or control an aggregate of 57.5%
of the outstanding shares of Common Stock (54.2% if the over-allotment option
granted to the Underwriters is exercised in full). The agreements provide that,
in all matters affecting the Company (other than the election of directors),
the parties to the agreements will vote all of their shares as they may agree,
or if they cannot agree, will vote against any proposal. With respect to the
election of directors, the parties have granted an Irrevocable Proxy to Globe
Reit, which is an affiliate of Mr. Katzman and of Messrs. Makavy and Wulkan,
directors of the Company. Globe Reit has the power under the Irrevocable Proxy
to vote all of the shares of the Common Stock of the stockholders who are
parties to the Irrevocable Proxy for the election of directors through May
2001, with, effectively, four of the directors designated by each of Gazit and
Danbar Resources, and the additional director, designated by agreement. As a
result of this agreement, the parties to the agreement may be deemed a "group"
within the meaning of Section 13(d) of the Exchange Act and may direct the
business and affairs of the Company. See "Principal Stockholders" and "Certain
Transactions".
The following table sets forth certain information with respect to the
directors and executive officers of the Company:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION WITH THE COMPANY TERM EXPIRES
- ---- --- ------------------------- ------------
<S> <C> <C> <C>
Chaim Katzman ......... 48 Chairman of the Board, President, 1998
Chief Executive Officer and Director
Doron Valero ......... 40 Executive Vice President, 1999
Chief Operating Officer and Director
David Bookman ......... 41 Vice President, Chief Financial Officer and Treasurer N/A
Alan J. Marcus ...... 40 Vice President, General Counsel and Secretary N/A
Noam Ben-Ozer ......... 33 Director 2000
Eli Makavy ............ 49 Director 1998
Shaiy Pilpel ......... 47 Director 2000
Shulamit Rozen-Katzman 34 Director 1999
David Wulkan ......... 44 Director 1999
Yuval Yanai ......... 45 Director 2000
Robert L. Cooney ...... 63 Director Nominee 1998
</TABLE>
66
<PAGE>
MANAGEMENT AND KEY EMPLOYEES
CHAIM KATZMAN has served as President, Chairman of the Board and Chief
Executive Officer and a director of the Company since its formation in 1992,
and has been involved in the purchase, development and management of commercial
and residential real estate in the southeastern United States since 1980. Mr.
Katzman received an L.L.B. from Tel Aviv University Law School in 1973. In
1991, Mr. Katzman purchased the controlling interest of Gazit. Mr. Katzman has
served as Chairman of the Board and Chief Executive Officer of Gazit since May
1991 and remains its largest stockholder and has served as a director of Globe
Reit since 1994. A licensed real estate broker in Florida, Mr. Katzman is a
member of NAREIT and the ICSC.
DORON VALERO has served as Executive Vice President, Chief Operating
Officer and a director of the Company since 1994. Mr. Valero manages the
Company's portfolio of properties and is responsible for, among other things,
acquisitions and leasing properties. Prior to joining the Company, from 1990 to
1993, Mr. Valero served as President and Chief Executive Officer of Global Fund
Investment, Inc., a real estate investment and management company. A licensed
mortgage broker in Florida, Mr. Valero is a member of NAREIT and ICSC. Mr.
Valero received a B.S.E. from Nova University in 1986.
DAVID N. BOOKMAN has served as the Company's Chief Financial Officer, Vice
President and Treasurer since July 1997. From December 1995 to July 1997, Mr.
Bookman served as the Company's Controller. From 1987 to 1995, Mr. Bookman was
a manager with Kenneth Leventhal & Co. Mr. Bookman has been a licensed
certified public accountant in the States of New York and Florida since 1985.
Mr. Bookman received his B.B.A. from Pace University in 1982.
ALAN J. MARCUS has served as the Company's Secretary since August 1997 and
will become Vice President and General Counsel of the Company upon consummation
of the Offering. Mr. Marcus has been a member of the Florida Bar since 1984 and
has maintained a private practice in Dade County, Florida since 1986. Mr.
Marcus' practice has concentrated on real estate and corporate matters. He is
also an adjunct professor at Florida International University. Mr. Marcus has
represented Global Realty & Management, Inc., the property management
subsidiary of the Company, since 1990 and the Company since 1993. Mr. Marcus
received a B.S. from the University of Miami in 1978 and a J.D. and LL.M.
(Taxation) from the University of Miami in 1983 and 1984, respectively.
NOAM BEN-OZER has been a director of this Company since 1996. Mr. Ben-Ozer
obtained an M.B.A. from Harvard University in 1994, and has served as a
consultant for Bain & Company since 1994. From 1993 to 1994 Mr. Ben-Ozer served
as an outside consultant to Lemout & Hauspie Speech Products. Mr. Ben-Ozer is a
certified public accountant in Israel.
ELI MAKAVY has served as a director of the Company since 1996. Mr. Makavy
currently serves as Chairman of the Board and Chief Executive of Danbar, as
well as Chairman of the Board of Danbar Resources. Mr. Makavy also serves on
the board of directors of Globe Reit and D.C.L. Technologies Ltd., an Israeli
company whose securities are publicly traded on TASE.
DR. SHAIY PILPEL has served as a director of the Company since 1996. Dr.
Pilpel heads the trading operation at Wexford Management, an investment firm.
From 1995 to 1996, Dr. Pilpel was a managing director of Canadian Imperial Bank
of Commerce where he headed the Mortgage Arbitrage and Quantitative Strategies
proprietary trading group, and prior thereto, a portfolio manager for
Steinhardt Partners. Dr. Pilpel received a B.S. in mathematics and B.A. in
philosophy from Tel Aviv University, a M.Sc. in mathematics from the Hebrew
University in Jerusalem, a Ph.D. in Statistics from the University of
California at Berkeley and a M.B.A. from Columbia University.
DR. SHULAMIT ROZEN-KATZMAN has served as a director of the Company since
1992. Dr. Rozen-Katzman has been a board certified pediatrician since 1992, and
currently is an attending physician at Jackson Memorial Hospital in Miami,
Florida. Dr. Rozen-Katzman has served as a director of Gazit since 1991 and
currently serves as its Vice Chairman. Dr. Rozen-Katzman is the wife of Chaim
Katzman. Dr. Rozen-Katzman received her medical degree from Tel Aviv University
School of Medicine.
67
<PAGE>
DAVID WULKAN has served as a director of the Company since 1996. Mr.
Wulkan serves as a member of the board of directors of Danbar Resources,
Chairman of the Board of Danbar Technologies Ltd., an Israeli company whose
securities are publicly traded on TASE, a board member and executive of Danbar,
and a Board member of each of Globe Reit and Data Automatization Ltd., an
Israeli company whose securities are publicly traded on the TASE. Mr. Wulkan
holds a B.A. Degree in Economics & Accounting and an M.B.A. from Tel Aviv
University. Mr. Wulkan is a certified public accountant in Israel.
YUVAL YANAI has served as a director of the Company since 1996 and has
been the Vice President, Finance and Chief Financial Officer of Elscint Ltd.
(Israel) since August 1991. Previously, he was senior consultant and head of
the economics department of Control Data Corporation (Israel), Tel Aviv. Mr.
Yanai is Chairman of the Board of Elscint Espan-a S.A. (Spain) and Productos
Medico Hospitalares Elscint Ltd. (Brazil). Mr. Yanai is a director of Elscint
Inc. (USA), Elscint France S.A. (France), Elscint GmbH (Germany) and Elgems
Ltd. (Israel). Mr. Yanai holds a B.A. in accounting and economics from Tel Aviv
University.
ROBERT L. COONEY will become a director of the Company prior to the
consummation of the Offering. Mr. Cooney served as a Managing Director of
Equity Capital Markets of Credit Suisse First Boston Corporation from 1978 to
1996. Mr. Cooney obtained an M.B.A. from Harvard University in 1962 and a B.S.
from College of the Holy Cross in 1956. Mr. Cooney has over 35 years experience
in capital markets and investment banking.
RAFAEL EGUILIOR, 44, was recently hired to serve as the Company's head of
development. Mr. Eguilior has served as the President of CCS Design Group,
Inc., an architectural design firm in Miami, Florida since 1996. From 1994 to
1996, Mr. Eguilior was the principal architect in the design firm bearing his
name. From 1992 to 1994, Mr. Eguilior was a principal architect with the
Nichols Partnership, Inc., of Coral Gables, Florida. Mr. Eguilior has worked
with the Company in connection with the construction and remodeling of West
Lake, and has performed site plan analyses for the Company with respect to
various properties. Mr. Eguilior has been a licensed architect and certified
general contractor in the State of Florida since 1982 and 1987, respectively.
Mr. Eguilior received a B.A. in Architecture from the University of Miami in
1979.
DIRECTORS' COMPENSATION
Non-employee directors receive, upon election to the Board of Directors
and annually thereafter, options to purchase 6,000 shares of Common Stock.
These options become exercisable over two years. In addition, non-employee
directors will receive a fee of $1,000 for each Board of Directors meeting or
committee meeting attended in person, plus reimbursement for reasonable
expenses incurred in attending the meetings. Non-employee directors will
receive an additional fee of $250 for each telephonic meeting attended.
Officers of the Company who are directors, and the two current directors who
receive consulting fees, will not be paid any directors' fees.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has maintained an Executive Committee and Audit and
Review Committee since 1996 and a Compensation Committee since 1997. The
Executive Committee is authorized to perform all functions which may be
lawfully delegated by the Board of Directors, provided, however, that the
Executive Committee can only act based on a unanimous vote and that the
Executive Committee may only approve acquisitions of property similar to that
in the Company's portfolio requiring an initial equity investment of up to
$15.0 million and acquisitions of vacant land having an initial equity
investment of up to $5.0 million in the aggregate. The Executive Committee is
comprised of Chaim Katzman, Doron Valero and Eli Makavy. The Audit and Review
Committee is comprised of Shaiy Pilpel, Noam Ben-Ozer and Yuval Yanai, each of
whom is a non-employee director of the Company. The Audit and Review
Committee's functions include recommending to the Board the engagement of the
Company's independent certified public accountants, reviewing with such
68
<PAGE>
accountants the plan and results of their audit of the Company's financial
statements and determining the independence of such accountants. The
Compensation Committee, whose members include Messrs. Pilpel, Ben-Ozer and
Yanai, makes recommendations with respect to compensation of officers and key
employees, including the granting of options under the 1995 Plan.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company, for
services rendered during the year ended December 31, 1996, to the Company's
Chief Executive Officer and to the Company's Executive Vice President and Chief
Operating Officer (collectively, the "Named Officers"). No other employee of
the Company received compensation equal to or exceeding $100,000 during such
year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------- --------------------
OTHER ANNUAL SECURITIES
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION UNDERLYING OPTIONS
- --------------------------- ---------- --------- -------------- --------------------
<S> <C> <C> <C> <C>
Chaim Katzman .................. $240,000 -- (1) 200,000(2)
Chairman of the Board, President,
and Chief Executive Officer
Doron Valero .................. $180,000 $50,000 (1) 180,000(2)
Executive Vice President and
Chief Operating Officer
</TABLE>
(1) The aggregate amount of perquisites and other personal benefits provided to
such Named Officer is less than 10% of the total annual salary and bonus
of such officer.
(2) Represents options granted under the 1995 Plan.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Chaim Katzman,
Chairman of the Board, President and Chief Executive Officer of the Company,
and Doron Valero, Executive Vice President and Chief Operating Officer, each of
which expires on December 31, 2003 (the "Employment Agreements"). Each of the
Employment Agreements is automatically renewable for an additional seven year
term unless either party gives written notice of an intent not to renew.
Pursuant to the Employment Agreements, Messrs. Katzman and Valero receive
annual base salaries of $240,000 and $180,000, respectively, which base salary
is increased annually by the greater of 6% or the rate of increase of the CPI
for the year immediately preceding each anniversary of the agreements. In
addition, the Employment Agreements provide that Messrs. Katzman and Valero may
receive a bonus as determined by the Company's Board of Directors, in its sole
discretion. Pursuant to Mr. Katzman's Employment Agreement, Mr. Katzman is
required to devote only so much of his time, attention, skill and efforts as
shall be required for the faithful performance of his duties. In addition, Mr.
Katzman is not required to reside and/or perform his duties within the United
States. Pursuant to the Employment Agreements, in the event the executives are
terminated by the Company without Cause (as defined in the Employment
Agreements), the executives shall receive all base compensation due for the
remaining term of such agreements. Mr. Katzman's Employment Agreement provides
that upon termination without Cause (as defined) or upon the occurrence of a
change in control, Mr. Katzman shall receive (i) all compensation due for the
balance of the term of his employment agreement, (ii) a severance payment equal
to two years of his current salary, (iii) vesting of all stock options granted
to him, (iv) payment of legal fees and expenses incurred as a result of
termination or change in control, and (v) a "put" option to tender all of his
shares of stock in the Company at a specified price. If the "put" option is
exercised, the Company must purchase all his shares of Common Stock at a price
per share
69
<PAGE>
equal to (i) if the Common Stock is then listed and traded on a securities
exchange, the average closing price over the forty-five trading days
immediately preceding the date the stock is tendered or (ii) if the Common
Stock is not then listed and traded on a securities exchange, the price per
share used in a similar third party arms' length sale of Common Stock during
the six-month period immediately preceding the tender. If the purchase price
cannot be determined in accordance with (i) and (ii) above, the price per share
shall be determined by an acceptable arbitrator in accordance with the rules of
commercial arbitration, or in the event the parties cannot agree on an
arbitrator, an arbitrator appointed by the American Arbitration Association.
The executive officers each hold options to purchase Common Stock granted
under the Company's 1995 Plan. The Employment Agreements provide that, to the
extent not already exercisable, such options will become immediately
exercisable if the executive's employment is terminated for any reason other
than Cause or voluntary resignation. Each of the executives is prohibited from
competing with the Company for the duration of their respective Employment
Agreements and, if terminated for Cause or upon voluntary resignation, for a
period of one year thereafter, without the prior written consent of the
Company's Board of Directors. During the term of Mr. Katzman's Employment
Agreement and thereafter, Mr. Katzman is authorized to engage in any other
business or businesses not in competition with the Company in the United
States, which may include non-commercial real estate acquisitions, development
and management, provided that his involvement in such business does not
adversely affect the performance of his duties under the Employment Agreement
or detrimentally affect the Company's business and affairs. Mr. Katzman may
engage in any business outside the United States, including the development of
commercial real property. Mr. Katzman and companies affiliated with Mr. Katzman
currently invest in commercial and retail properties in Canada and Israel.
Pursuant to the terms of each of Messrs. Katzman's and Valero's Employment
Agreements, such executives were granted registration rights with respect to
the shares of Common Stock issuable to such executives under options granted
pursuant to such employment agreements. Each of the executives has waived such
registration rights in connection with the Offering. See "Certain
Transactions".
INSURANCE
The Company has obtained a directors and officers liability insurance
policy, effective upon consummation of the Offering, which provides insurance
in the amount of $7.5 million per director and/or officer per occurrence.
Subject to typical exclusions, the policy insures (i) the officers and
directors of the Company from any claim arising out of an alleged wrongful act
by the directors and/or officers in their respective capacities and (ii) the
Company to the extent that the Company has indemnified its directors and/or
officers for such losses.
STOCK OPTION PLAN
In December 1995, the Company adopted the 1995 Stock Option Plan (the
"1995 Plan"), pursuant to which 1,000,000 shares of Common Stock are currently
reserved for issuance upon exercise of options. The 1995 Plan is designed as a
means to retain and motivate key employees, officers and directors. The
Company's Compensation Committee, or in the absence thereof, the Board of
Directors, administers and interprets the 1995 Plan and is authorized to grant
options thereunder to all eligible employees of the Company, including
executive officers and directors (whether or not they are employees) of the
Company or affiliated companies. Options granted under the 1995 Plan are on
such terms and at such prices as determined by the Compensation Committee,
except that the per share exercise price of incentive stock options cannot be
less than the fair market value of the Common Stock on the date of grant. Each
option is exercisable after the period or periods specified in the option
agreement but no option may be exercisable after the expiration of ten years
from the date of grant, as provided under the 1995 Plan. The 1995 Plan will
terminate on December 31, 2005, unless sooner terminated by the Company's Board
of Directors. Options granted to an individual who owns (or is deemed to own)
at least 10% of the total combined voting power of all classes of stock of the
Company or its subsidiary and which is intended to be an incentive stock option
must have an exercise price of at
70
<PAGE>
least 110% of the fair market value of the Common Stock on the date of grant,
and a term of no more than five years. The 1995 Plan also authorizes the
Company to make or guarantee loans to optionees to enable them to exercise
their options. Such loans must (i) provide for recourse to the optionee, (ii)
bear interest at a rate not less than the prime rate of interest, and (iii) be
secured by the shares of Common Stock purchased. The Board of Directors has the
authority to amend or terminate the 1995 Plan, provided that no such amendment
may impair the rights of the holder of any outstanding option without the
written consent of such holder, and provided further that certain amendments of
the 1995 Plan are subject to stockholder approval. At the date of consummation
of the Offering, options to purchase an aggregate of 614,000 shares of Common
Stock will be outstanding under the 1995 Plan at an exercise price ranging from
$8.25 to $12.375 per share, of which options to purchase 160,500 shares are
currently exercisable, options to purchase 352,500 shares are exercisable on
December 31, 1999 and options to purchase 101,000 shares are exercisable on
December 31, 2000. The exercise price of all options granted under the 1995
Plan were determined by the Company's Board of Directors and were equal to the
fair market value of the Common Stock as of the date of grant. At the date of
consummation of the Offering, 386,000 shares of Common Stock will be available
for future grants under the 1995 Plan.
The following table sets forth certain information with respect to options
granted under the 1995 Plan to the Named Officers for the year ended December
31, 1996, and represents all options granted by the Company to such Named
Officers for the period. In accordance with rules of the Commission, the table
also describes the hypothetical gains that would exist for the respective
options based on assumed rates of annual compounded stock appreciation of 5%
and 10% from the date of grant to the end of the option term. These
hypothetical gains are based on assumed rates of appreciation and, therefore,
the actual gains, if any, on stock option exercises are dependent on, among
other things, the future performance of the Common Stock, overall stock market
conditions, and the Named Officer's ability to exercise the option(s). As a
result, the amounts reflected in this table may not necessarily be achieved.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS POTENTIAL REALIZABLE
UNDERLYING GRANTED TO VALUE AT ASSUMED
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ANNUAL RATE OF
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5%($) 10%
- ---- ------------- -------------- ---------------- ----------- ------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Chaim Katzman ............ 200,000 44.4% $ 12.375(1) 12/31/05 $ 1,354,537(2) $ 3,360,920(2)
Chairman of the Board,
President and Chief
Executive Officer
Doron Valero ............ 150,000 33.3% $ 12.375(1) 12/31/05 $ 1,023,390(2) $ 2,520,690(2)
Executive Vice President
and Chief Operating
Officer ...............
</TABLE>
- ----------------
(1) Pursuant to the terms of each of Mr. Katzman's and Mr. Valero's Employment
Agreements, the option exercise price is subject to downward adjustment to
the extent that dividends declared and paid by the Company in each year
subsequent to 1995 exceed dividends declared and paid by the Company in
the year ended December 31, 1995.
(2) Does not take into account the effect of the downward adjustment to the
option exercise price described in note (1) above.
71
<PAGE>
CERTAIN TRANSACTIONS
INVESTMENT AGREEMENT
During 1996, the Company entered into an agreement with Globe Reit, an
affiliate of the Company, pursuant to which Globe Reit, through its wholly
owned subsidiary M.G.N., agreed to purchase an aggregate of 2,000,000 shares of
Common Stock for $24.75 million over a period of 30 months. As set forth in the
agreement, the per share purchase price increases at an annual rate of 9.7% and
decreases by amounts paid as dividends by the Company. The agreement also
provides for the purchase by Globe Reit of 400,000 Series C Warrants for the
purchase price of $1.8 million. See "Description of Capital Stock--Warrants".
Chaim Katzman, the Company's Chairman of the Board, President and Chief
Executive Officer, and Eli Makavy and David Wulkan, directors of the Company,
directly and indirectly share the power to control Globe Reit. See
"Management--Directors and Executive Officers" and "Principal Stockholders". As
of the date of this Prospectus, Globe Reit, through its wholly-owned subsidiary
M.G.N., had purchased an aggregate of 1,419,712 shares of Common Stock and
400,000 Series C Warrants and is required to purchase the additional 580,288
shares of Common Stock by August 1998. The Company believes that such sales of
Common Stock and warrants were made at full market value and on substantially
the same terms as the Company could have negotiated with other unaffiliated
third parties.
The agreement further provides that each of the Company, Globe Reit, Dan
Overseas and Gazit is also required to grant each other loans for amounts up to
$3.0 million, which amounts must be repaid within six months. Interest on such
loans shall be payable at the prevailing rate of interest at Bank Leumi
le-Israel B.M. at such time. Certain of the shares of the stock of the Company
owned by a borrower under such loan shall be pledged as collateral for the
repayment of any loan under the agreement.
During December 1995, the Company borrowed $2.2 million from Gazit, Globe
Reit and Dan Overseas for the purposes of making distributions, which amount
was repaid in full in June 1996. No loan amount is outstanding as of the date
of the Offering. This borrowing arrangement will be terminated upon
consummation of the Offering.
AGREEMENT AMONG STOCKHOLDERS
Globe Reit, Dan Overseas, M.G.N., Gazit (1995) and Chaim Katzman have
entered into agreements to control the Company. Such stockholders directly and
indirectly own and/or control an aggregate of 96.5% of the issued and
outstanding Common Stock of the Company before giving effect to the Offering.
Upon consummation of the Offering, such stockholders will own and/or control an
aggregate of 57.5% of the outstanding Common Stock (54.2% if the over-allotment
option granted to the Underwriters is exercised in full). Despite the reduction
in ownership following the Offering, the control which these stockholders may
exert over the affairs of the Company will continue. The agreements provide
that, in all matters affecting the Company (other than the election of
directors) the parties to the agreements will vote all of their shares as they
may agree, or if they cannot agree, will vote against any such proposal. With
respect to the election of directors of the Company, the parties have granted
an Irrevocable Proxy to Globe Reit, which is an affiliate of Mr. Katzman and of
Messrs. Makavy and Wulkan, directors of the Company. Globe Reit has the power
under the Irrevocable Proxy to vote all of the shares of Common Stock of the
stockholders who are parties to the Irrevocable Proxy for the election of
directors of the Company through May 2001, with, effectively, four of the
directors designated by each of Gazit and Danbar Resources, and the additional
director designated by agreement. Pursuant to this agreement, the parties to
the agreement may be deemed a "group" within the meaning of Section 13(d) of
the Exchange Act and may direct the business and affairs of the Company. See
"Principal Stockholders" and "Certain Transactions".
72
<PAGE>
ACQUISITION OF GLOBAL REALTY & MANAGEMENT, INC.
In January 1994, the Company acquired all of the outstanding capital stock
of Global Management from Doron Valero, the Company's Executive Vice President
and Chief Operating Officer, in exchange for 144,000 shares of Common Stock and
warrants to purchase an aggregate of 48,000 shares of Common Stock at an
exercise price of $8.25 per share. Such warrants were exercised by Mr. Valero
in December 1996.
LOANS TO EXECUTIVE OFFICERS
In June 1996, the Company made a loan to Chaim Katzman, the Company's
Chairman of the Board, President and Chief Executive Officer, in the principal
amount of $1.1 million, bearing interest at an annual rate of 6.86%. The funds
advanced to Mr. Katzman were used to exercise certain warrants to purchase an
aggregate of 215,000 shares of Common Stock. Interest on the loan is payable
annually on January 5. This loan is secured by the shares of Common Stock
acquired by Mr. Katzman through exercise of the warrants and matures on June
16, 2003, at which time the entire principal balance is due and payable. At
June 30, 1997, $1.1 million was outstanding under this loan. In the opinion of
the Company, the foregoing loan was made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other unaffiliated third parties.
In December 1996, the Company made a loan to Doron Valero, the Company's
Executive Vice President and Chief Operating Officer, in the principal amount
of $396,000, bearing interest at an annual rate of 5.25%. The funds advanced to
Mr. Valero were used to exercise certain warrants to purchase an aggregate of
48,000 shares of Common Stock. Interest on the loan is payable annually on
January 5. The loan is secured by the shares of Common Stock acquired by Mr.
Valero through exercise of the warrants and matures on June 16, 2003, at which
time the entire principal balance is due and payable. At June 30, 1997,
$396,000 was outstanding under this loan.
CONSULTING AGREEMENTS
In January 1996, the Company entered into consulting agreements with each
of Eli Makavy and David Wulkan, directors of the Company, pursuant to which
Messrs. Makavy and Wulkan provide the Company with financial and other advice,
assistance and support on an as-needed basis. In consideration for services
rendered under the consulting agreements, Messrs. Makavy and Wulkan receive a
quarterly consulting fee of $7,500, which amount is increased annually at the
greater of 6.0% or the increase in the CPI. Pursuant to the consulting
agreements, each of Messrs. Makavy and Wulkan are eligible to receive options
under the 1995 Plan. The Company had paid an aggregate of $61,800 to each of
Messrs. Makavy and Wulkan under such consulting agreements. In addition, each
of Messrs. Makavy and Wulkan have received an aggregate of 50,000 options to
purchase Common Stock at an exercise price of $12.375 per share. Pursuant to
the terms of each of Mr. Wulkan's and Mr. Makavy's consulting agreements, the
option price is subject to downward adjustment to the extent that dividends
declared and paid by the Company in each year subsequent to 1995 exceed
dividends declared and paid by the Company in the year ended December 31, 1995.
MANAGED PROPERTIES
Several apartment properties in which Mr. Valero has an ownership interest
or which are owned by corporations on which he serves as an officer or director
are managed by the Company. Each of these management agreements represents
arms-length contractual agreements, and generate an average of $4,800 in
management fees per year per property. Mr. Valero receives no additional
compensation in connection with these management agreements.
REGISTRATION RIGHTS
Pursuant to the terms of each of Messrs. Katzman's and Valero's Employment
Agreements, such executives were granted registration rights (collectively,
"Registration Rights") with respect to the
73
<PAGE>
shares of Common Stock issuable to such executives under options granted
pursuant to such employment agreements. Each of the executives has waived such
Registration Rights in connection with the Offering.
Pursuant to the terms of the Series C Warrants, the holders of the Series
C Warrants were granted Registration Rights for the shares of Common Stock
issuable upon the exercise of such warrants. The holders of the Series C
Warrants have waived such Registration Rights in connection with the Offering.
Pursuant to a Registration Rights Agreement, the Company has granted both
demand and piggyback Registration Rights to each of Chaim Katzman, Gazit
(1995), Dan Overseas, Globe Reit, Eli Makavy, Doron Valero and David Wulkan
with respect to the shares of Common Stock owned by them (the "Registration
Rights Agreement"). Each of the parties to the Registration Rights Agreement
has waived its registration rights in connection with the Offering.
BENEFITS OF OFFERING TO EXISTING STOCKHOLDERS, INCLUDING MANAGEMENT
Existing stockholders, including certain members of management, are
expected to benefit from the Offering due to the anticipated improved liquidity
of their shares of Common Stock, an increase in the net tangible book value of
their shares of Common Stock and the potential increase in the value of any
options or warrants which they hold to purchase additional shares of Common
Stock.
USE AGREEMENT
In 1994 and 1995, the Company paid Gazit a user fee of $172,500 and
$150,000, respectively, for the use of Gazit's facilities and equipment for the
conduct of the Company's business affairs, as well as for Mr. Katzman's
services to the Company.
SERVICE AGREEMENT
On January 1, 1996, the Company and Gazit entered into an agreement
whereby Chaim Katzman, or any employee of Gazit or its affiliates, may use the
Company's facilities, equipment, supplies and personnel to conduct Gazit's and
Mr. Katzman's business affairs for a quarterly user fee of $2,500. Since the
commencent of this agreement an aggregate of $17,500 has been paid by Gazit to
the Company.
OTHER
The Company paid legal fees in the approximate amount of $88,529, $95,160
and $84,340 during the years ended December 31, 1994, 1995, and 1996,
respectively, to the Law Office of Alan J. Marcus. Mr. Marcus, the Secretary of
the Company, will become Vice President and General Counsel following
consummation of the Offering.
Robert L. Cooney, a director nominee, served as a Managing Director of
Equity Capital Markets of Credit Suisse First Boston from 1978 to 1996. See
"Management--Management and Key Employees" and "Underwriting".
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES
The following is a discussion of certain investment, financing, conflicts
of interest, redevelopment and development and other policies of the Company.
These policies have been determined by the Company's Board of Directors and
generally may be amended or revised from time to time by the Board of Directors
without a vote of the stockholders.
INVESTMENT POLICIES
INVESTMENTS IN REAL ESTATE. The Company's investment objective is to
maximize total return to stockholders by increasing cash flow per share and
maximizing the value of its properties primarily
74
<PAGE>
through the acquisition, development, renovation and management of Supermarket
Centers. See "Business--Business and Growth Strategies".
Although the Company intends to principally acquire or develop Supermarket
Centers, it may acquire or develop other types of properties such as office
buildings or multifamily residential projects. In addition, although the
Company presently intends to acquire and develop properties in various
locations in the Southeast with demographic characteristics similar to its
present markets, its future acquisitions and development activities may not be
limited to any geographic area. There is also no limit on the percentage of the
Company's assets which may be invested in one property or in any area.
Pending disbursements for investment as described herein, the Company may
invest its funds in deposits at commercial banks, money market accounts,
certificates of deposit, government securities, investment grade preferred
stock of other publicly held REITs or other liquid investments (including GNMA,
FNMA, and FHLMC mortgage-backed securities) as the Board of Directors deems
appropriate. The Company intends to continue to make investments in such a way
that it will continue to qualify as a REIT and not be treated as an investment
company under the Investment Company Act of 1940.
While to date the Company has emphasized equity real estate investments,
it may, in its discretion, invest in mortgages and other real estate and
related interests. Subject to the percentage ownership limitations and gross
income tests necessary for REIT qualification, the Company also may invest in
securities of entities engaged in real estate activities or securities of other
issuers, including for the purpose of exercising control over such entities. As
of the date of this Prospectus, the Company held approximately 0.5% of the
outstanding capital stock of Sizeler Property Investors Inc., a publicly held
REIT. See "Federal Income Tax Considerations--Taxation of the Company". The
Company may acquire all or substantially all of the securities or assets of
other REITs or similar entities where such investments would be consistent with
the Company's investment policies.
INVESTMENTS IN REAL ESTATE THROUGH OTHER ENTITIES. The Company also may
participate with other entities in property ownership, through joint ventures
or other types of co-ownership. Although the Company would likely seek to
acquire the controlling interest in such entities, it is not required to do so.
To date, the Company has not participated in property ownership with other
entities. The Company will not enter into a joint venture or partnership to
make an investment that would not otherwise meet its investment policies.
FINANCING POLICIES
The Company intends to finance future acquisitions with the most
advantageous sources of capital available at the time, which may include
additional equity offerings, debt financing, retention of cash flow subject to
provisions in the Code or a combination of these methods.
The Company's policy is to maintain a ratio of total indebtedness to total
market capitalization of approximately 50.0% or less. Upon completion of the
Offering, assuming an initial offering price of $14.50, and use of the net
proceeds contemplated hereby, the ratio of the Company's total indebtedness to
total market capitalization will be approximately 21.8%. The Company may, from
time to time re-evaluate its borrowing policies in light of then current
economic conditions, relative costs of debt and equity capital, the market
value of its properties, growth and acquisition opportunities and other
factors. Because there is no limit on the Company's ratio of debt-to-total
market capitalization, the Company may modify its borrowing policy and may
increase or decrease its ratio of debt-to-total market capitalization as, when
and if the Company deems it appropriate. Borrowings may be unsecured or may be
secured by any or all of the Existing Properties or additional properties and
may have full or limited recourse to all or any assets of the Company and may
contain cross-default or cross-collateralization provisions.
The Company may acquire properties subject to seller financing, existing
loans secured by mortgages, deeds of trust or similar liens. The Company does
not have a policy limiting the number or
75
<PAGE>
amount of mortgages that may be placed on any particular property, but mortgage
financing instruments usually limit additional liens on such properties.
The Company may incur indebtedness for purposes other than the acquisition
or development of properties when it deems it advisable to do so. For example,
the Company may borrow for working capital purposes or to make capital
improvements. In addition, the Company may borrow to meet the REIT taxable
income distribution requirements under the Code if the Company has taxable
income without receipt of cash sufficient to meet these distribution
requirements.
CONFLICTS OF INTEREST POLICIES
The Company has adopted certain policies designed to reduce potential
conflicts of interest. In general, the Company will not engage in any
transaction with any director, officer or affiliate thereof involving the
purchase or sale of property unless such transaction is approved by a majority
vote (or in certain cases by a unanimous vote) of the disinterested directors
(including a majority of independent directors) as being fair, competitive, and
commercially reasonable and no less favorable to the Company than similar
transactions between unaffiliated parties under the same circumstances.
Chaim Katzman, the Company's Chairman of the Board, President and Chief
Executive Officer, and Doron Valero, the Company's Executive Vice President and
Chief Operating Officer, are subject to certain conflict of interest
restrictions as set forth in their employment agreements with the Company. See
"Management--Employment Agreements". Each of Messrs. Katzman and Valero are
involved in other business activities, including real estate activities.
Certain of the Company's independent directors generally may engage in real
estate transactions which may be of the type conducted by the Company, but it
is not anticipated that such transactions will have any material effect upon
the Company's operations.
REDEVELOPMENT AND DEVELOPMENT POLICIES
The Company may invest in properties under development or vacant land upon
which development will occur and may redevelop existing properties. See
"Business-Business and Growth Strategies". Although historically the Company
has not commenced construction in any redevelopment or development projects
without obtaining a commitment from an Anchor Tenant, it is not obligated to do
so.
POLICIES WITH RESPECT TO OTHER ACTIVITIES
The Company has authority to offer shares of Common Stock and preferred
stock or other securities and to repurchase or otherwise reacquire its shares
of Common Stock and preferred stock or any other securities and may engage in
such activities in the future.
The Company has no outstanding loans to other entities or persons,
including its officers and directors, except for outstanding loans to Chaim
Katzman and Doron Valero in connection with their acquisition of Common Stock.
The Company may in the future make loans to other persons with the approval of
the independent directors.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements which have been certified by its
independent public accountants, and quarterly reports containing unaudited
summary financial information for each of the first three quarters of each
fiscal year.
The Company's policies with respect to all of the above activities may be
reviewed and modified from time to time by the Company's Board of Directors
without a vote of the stockholders.
76
<PAGE>
PRINCIPAL STOCKHOLDERS
Certain stockholders of the Company have entered into agreements to
control the Company. In particular, pursuant to an Investment Contract, dated
as of May 21, 1996, among Dan Overseas, Gazit (1995), as successor-in-interest
to Gazit Holdings Inc., Globe Reit and the Company (the "Investment Contract"),
and a Shareholders Agreement, dated May 21, 1996, between Gazit and Danbar
Resources (the "Shareholders Agreement," and together with the Investment
Contract and Irrevocable Proxy, the "Control Agreements"), Globe Reit has been
granted an Irrevocable Proxy to vote all the shares of Common Stock owned by
the stockholders who are parties to the Control Agreements (collectively with
Mr. Katzman, the "Affiliated Group") for the election of directors of the
Company through May 2001, with, effectively, four of the directors designated
by each of Gazit and Danbar Resources, and the additional director designated
by agreement. With respect to all other matters, the Control Agreements provide
that the parties to the Affiliated Group will vote all of their shares as they
may agree, or if they cannot agree, will vote against any such proposal. Mr.
Katzman, the Company's Chairman of the Board, President and Chief Executive
Officer, has agreed that his shares of Common Stock would be bound by the terms
of the Control Agreements.
Pursuant to the Control Agreements, the Affiliated Group may be deemed to
beneficially own, for purposes of the Exchange Act, all shares of Common Stock
beneficially owned by any member of the Affiliated Group (including shares of
Common Stock which may be acquired within 60 days upon the exercise of options
or warrants or pursuant to contract) or 8,673,958 shares of Common Stock at
June 30, 1997, constituting 97.6% of the outstanding Common Stock at June 30,
1997 (63.9% following consummation of the Offering). Similarly, each member of
the Affiliated Group may be deemed to own all of the shares of Common Stock
owned by the Affiliated Group by virtue of the shared power to vote such shares
of Common Stock; the table set forth below does not give effect to this shared
power.
By virtue of his offices, direct and indirect share ownership and voting
arrangement regarding Gazit, Mr. Katzman may be deemed to control Gazit (and
Gazit to control Globe Reit and the Company). Additionally, each of Messrs.
Makavy and Wulkan, by virtue of his office and direct and indirect share
ownership of Danbar, may be deemed to control Danbar (and Danbar to control
Danbar Resources, Globe Reit and the Company). As a result, Mr. Katzman may be
deemed to beneficially own the Common Stock owned by Gazit (1995) and Globe
Reit, and each of Messrs. Makavy and Wulkan to beneficially own the Common
Stock owned by Dan Overseas and Globe Reit. The table set forth below does not
give effect to such beneficial ownership of each of Gazit and Danbar Resources
of Globe Reit.
77
<PAGE>
Subject to the foregoing, the following table sets forth certain
information concerning the beneficial ownership of the Common Stock as of June
30, 1997, and as adjusted to reflect the sale of 4,700,000 shares of Common
Stock by the Company by (i) each person known by the Company to be the
beneficial owner of more than 5.0% of the outstanding Common Stock, (ii) each
director of the Company, (iii) each of the Named Officers and (iv) all
executive officers and directors of the Company as a group. Unless otherwise
indicated, the address of each named person is c/o Equity One, Inc., 777 17th
Street, Penthouse, Miami Beach, Florida 33139.
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING SHARES
OWNED
-----------------------
BEFORE AFTER
NAME OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP OFFERING OFFERING
- --------------------------- ---------------------- ---------- ----------
<S> <C> <C> <C>
Affiliated Group(2) .............................. 8,673,958 97.6% 63.9%
Globe Reit Investments, Ltd.(3) .................. 3,460,001 37.2% 24.7%
Gazit (1995), Inc.(4) ........................... 3,072,592 41.2% 25.3%
Dan Overseas, Ltd.(5) ........................... 1,663,032 23.1% 14.0%
M.G.N. (USA), Inc.(6) ........................... 2,400,000 30.4% 19.1%
Chaim Katzman(7) ................................. 3,525,926 46.7% 28.8%
Doron Valero(8) ................................. 322,500 4.6% 2.8%
Eli Makavy(9) .................................... 1,688,032 23.4% 14.2%
David Wulkan(10) ................................. 1,688,032 23.4% 14.2%
Shaiy Pilpel .................................... -- -- --
Yuval Yanai .................................... -- -- --
Shulamit Katzman(11) ........................... -- -- --
Noam Ben Ozer .................................... -- -- --
All executive officers and directors of the Company
as a group (11 persons) (12) .................. 5,566,466 68.8% 43.5%
</TABLE>
- ----------------
(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such persons within 60 days from the date of this Prospectus
upon the exercise of options and warrants or purchasable pursuant to an
executory contract to acquire Common Stock. Each beneficial owner's
percentage ownership is determined by assuming that options and warrants
and shares purchasable under an executory contract that are held by such
person (but not those held by any other person) and that are exercisable
or purchasable within 60 days from the date of this Prospectus have been
exercised or purchased. For purposes of this table, a beneficial owner of
securities includes any person who, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise has or
shares (i) voting power which includes the power to vote, or direct the
voting of, such security and/or (ii) investment power which includes the
power to dispose, or to direct the disposition of, such security.
(2) See Notes (3), (4), (5), (6), (7), (9) and (10) below.
(3) Includes (i) 1,060,000 shares of Common Stock owned by Globe Reit, (ii)
580,288 shares of Common Stock purchasable by M.G.N. under an executory
agreement to purchase Common Stock, (iii) 1,420,952 shares of Common Stock
owned by M.G.N. and (iv) 398,760 shares of Common Stock issuable upon the
exercise of presently exercisable warrants to purchase Common Stock owned
by M.G.N. Does not give effect to the Control Agreements.
(4) Includes (i) 2,530,456 shares of Common Stock owned by Gazit (1995) and
(ii) 542,136 shares of Common Stock issuable upon the exercise of
presently exercisable warrants to purchase Common Stock. Does not give
effect to the Control Agreements.
(5) Includes (i) 1,369,602 shares of Common Stock owned by Dan Overseas and
(ii) 293,430 shares of Common Stock issuable upon the exercise of
presently exercisable warrants to purchase Common Stock. Does not give
effect to the Control Agreements.
(6) Includes (i) 1,420,952 shares of Common Stock owned by M.G.N., (ii)
398,760 shares of Common Stock issuable upon the exercise of presently
exercisable warrants to purchase Common Stock and (iii) 580,288 shares of
Common Stock purchasable under an executory agreement to purchase Common
Stock. Does not give effect to the Control Agreements.
(7) Includes (i) 2,530,456 shares of Common Stock owned by Gazit (1995) which
Mr. Katzman may be deemed to control, (ii) 542,136 shares of Common Stock
issuable upon the exercise of presently exercisable warrants to purchase
Common Stock owned by Gazit (1995), (iii) 290,990 shares of Common Stock
owned by Mr. Katzman, (iv) 100,000 shares of Common Stock issuable upon
the exercise of options granted to Mr. Katzman under the 1995 Plan, which
options are currently exercisable and (iv) 62,344 shares of Common Stock
issuable to Mr. Katzman as custodian for his minor children upon the
exercise of presently exercisable warrants to purchase Common Stock. Does
not include 100,000 shares of Common Stock issuable upon exercise of
options granted to Mr. Katzman under the 1995 Plan, which options are not
currently exercisable. Does not give effect to the Control Agreements.
78
<PAGE>
(8) Includes (i) 192,000 shares of Common Stock owned by Mr. Valero, (ii)
82,500 shares of Common Stock issuable upon the exercise of options
granted to Mr. Valero under the 1995 Plan, which options are currently
exercisable and (iii) 48,000 shares of Common Stock issuable upon the
exercise of presently exercisable warrants to purchase Common Stock. Does
not include 97,500 shares of Common Stock issuable upon the exercise of
options granted to Mr. Valero under the 1995 Plan, which options are not
currently exercisable.
(9) Includes (i) 1,369,602 shares of Common Stock owned by Dan Overseas which
Mr. Makavy may be deemed to control, (ii) 293,430 shares of Common Stock
issuable upon the exercise of presently exercisable warrants to purchase
Common Stock owned by Dan Overseas and (iii) 25,000 shares of Common Stock
issuable upon the exercise of options granted to Mr. Makavy under the 1995
Plan, which options are currently exercisable. Does not include 25,000
shares of Common Stock issuable upon the exercise of options granted to
Mr. Makavy under the 1995 Plan, which options are not currently
exercisable. Does not give effect to the Control Agreements.
(10) Includes (i) 1,369,602 shares of Common Stock owned by Dan Overseas which
Mr. Wulkan may be deemed to control, (ii) 293,430 shares of Common Stock
issuable upon the exercise of presently exercisable warrants to purchase
Common Stock owned by Dan Overseas and (iii) 25,000 shares of Common Stock
issuable upon the exercise of options granted to Mr. Wulkan under the 1995
Plan, which options are currently exercisable. Does not include 25,000
shares of Common Stock issuable upon the exercise of options granted to
Mr. Wulkan under the 1995 Plan, which options are not currently
exercisable. Does not give effect to the Control Agreements.
(11) Shulamit Rozen-Katzman is the wife of Chaim Katzman, the Company's
Chairman of the Board, President and Chief Executive Officer. Does not
include shares of Common Stock owned by Chaim Katzman. See Note (7) above.
(12) See footnotes (7)-(10) above. Also includes (i) 4 shares of Common Stock
owned by David Bookman, (ii) 4 shares of Common Stock owned by Alan J.
Marcus and (iii) 5,000 shares of Common Stock issuable to Mr. Bookman upon
the exercise of options granted to Mr. Bookman under the 1995 Plan, which
options are currently exercisable. Does not include 15,000 shares of
Common Stock issuable upon the exercise of options granted to Mr. Bookman,
which options are not currently exercisable.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized stock consists of 40,000,000 shares of Common
Stock, $0.01 par value per share, and 5,000,000 shares of preferred stock,
$0.01 par value per share. As of June 30, 1997, 6,908,130 shares of Common
Stock and no shares of preferred stock were issued and outstanding. Under
Maryland law, stockholders generally are not liable for the corporation's debts
or obligations. The following summary of the terms of the capital stock of the
Company does not purport to be complete and is subject to and qualified in its
entirety by reference to the MGCL and to the Company's Charter and Bylaws,
copies of which are exhibits to the Registration Statement of which this
Prospectus is a part. See "Additional Information".
COMMON STOCK
Each outstanding share of Common Stock entitles the holder to one vote on
all matters presented to stockholders for a vote, including the election of
directors. Except as provided in the terms of any other class or series of
stock, the holders of Common Stock possess the exclusive voting power, subject
to the provisions of the Company's Charter regarding the ownership of shares of
Common Stock in excess of the Aggregate Stock Ownership Limit, or such other
limit as provided in the Company's Charter or as otherwise permitted by the
Board of Directors as described below.
Holders of shares of Common Stock have no preference, conversion,
exchange, sinking fund or redemption and have no preemptive rights to subscribe
for any securities of the Company or cumulative voting rights in the election
of directors. All shares of Common Stock to be issued and outstanding following
the consummation of the Offering will be duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights. Subject to the preferential
rights of any other shares or series of stock and to the provisions of the
Charter regarding ownership of shares of Common Stock in excess of the
Aggregate Stock Ownership Limit, or such other limit as provided by the
Company's Charter or as otherwise permitted by the Board of Directors described
below, distributions may be paid to the holders of shares of Common Stock if
and when authorized and declared by the Board of Directors of the Company out
of assets legally available therefor. The Company intends to make quarterly
distributions, beginning with distributions for the portion of the quarter from
the consummation of the Offering through December 31, 1997. See "Distribution
Policy".
79
<PAGE>
Subject to the right of any holders of preferred stock to receive
preferential distributions, if the Company is liquidated each outstanding share
of Common Stock will be entitled to participate pro rata in the assets
remaining after payment of, or adequate provision for, all known debts and
liabilities of the Company.
Subject to the provisions of the Charter regarding the ownership of shares
of Common Stock in excess of the Aggregate Stock Ownership Limit, or such other
limit as provided in the Company's Charter or as otherwise permitted by the
Board of Directors described below, all shares of Common Stock will have equal
distribution, liquidation and voting rights, and will have no preferences or
exchange rights. See "--Restrictions on Ownership and Transfer of Common
Stock".
Under the MGCL, a Maryland corporation generally cannot dissolve, amend
its charter, merge, sell all or substantially all of its assets, engage in a
share exchange or engage in similar transactions outside of the ordinary course
of business unless approved by the affirmative vote of stockholders holding at
least two-thirds of the shares entitled to vote on the matter unless a greater
or lesser percentage (but no less than a majority of all of the votes entitled
to be cast on the matter) is set forth in the corporation's Charter. The
Charter contains no such provision increasing or decreasing the two-thirds vote
requirement. The phrase "substantially all of the assets" is not defined in the
MGCL and is, therefore, subject to interpretation by courts applying Maryland
law in the context of the facts and circumstances of a particular case.
The Charter authorizes issuances of additional shares of stock and the
classification or reclassification of unissued shares of either Common Stock or
preferred stock into other classes or series of classes of stock with
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms or
conditions of redemption for each such class or series.
PREFERRED STOCK
The Charter authorizes the Board of Directors to classify any unissued
shares of preferred stock and to reclassify any previously classified but
unissued shares of any series. Prior to issuance of shares of each series, the
Board is required by the MGCL and the Charter to set, subject to the provisions
of the Charter regarding the restrictions on transfer of stock, the terms,
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms or
conditions of redemption for each such series. Thus, the Board of Directors
could authorize the issuance of shares of preferred stock with terms and
conditions which could have the effect of delaying, deferring or preventing a
transaction or a change in control of the Company that might involve a premium
price for holders of Common Stock or otherwise be in their best interest. As of
the date hereof, no shares of preferred stock are outstanding and the Company
has no present plans to issue any preferred stock.
WARRANTS
As of June 30, 1997, Series C Warrants to purchase an aggregate of
1,306,124 shares of Common Stock at an exercise price of $8.25 per share,
subject to adjustments, were issued and outstanding. These warrants are freely
transferable and are exercisable by the holders thereof through the close of
business on December 31, 1999. Series C Warrants to purchase 1,296,670 shares
of Common Stock have been issued to Gazit (1995), Dan Overseas, M.G.N. and
Chaim Katzman, as custodian for his minor children. The Series C Warrants
provide for certain registration rights which have been waived by each of the
holders of the outstanding Series C Warrants in connection with the Offering.
RESTRICTIONS ON OWNERSHIP AND TRANSFER OF COMMON STOCK
For the Company to qualify as a REIT under the Code, not more than 50.0%
in value of the issued and outstanding capital stock may be owned, actually or
constructively, by five or fewer individuals (as
80
<PAGE>
defined in the Code to include certain entities) during the last half of a
taxable year and the capital stock must be beneficially owned by 100 or more
persons during at least 335 days of a taxable year of 12 months (or during a
proportionate part of a shorter taxable year). In addition, rent from Related
Party Tenants (as defined below under "Federal Income Tax Considerations
Taxation of the Company-- Income Tests") is not qualifying income for purposes
of the gross income tests of the Code. See "Federal Income Tax
Considerations-Taxation of the Company--Requirements for Qualification".
Because the Board of Directors believes it is essential for the Company to
qualify as a REIT, the Board of Directors has adopted provisions in the
Company's Charter restricting the acquisition and ownership of shares of the
Company's capital stock. Subject to certain exceptions specified in the
Company's Charter, no holder may own, either actually or constructively under
the applicable attribution rules of the Code, more than the Aggregate Stock
Ownership Limit or more than the Common Stock Ownership Limit.
If, as a result of a purported acquisition (actual or constructive) of
capital stock, any person (a "Prohibited Transferee") would acquire, either
actually or constructively under the applicable attribution rules of the Code,
shares of capital stock in excess of an applicable ownership restriction, such
shares will be automatically transferred to a trust for the benefit of a
charitable beneficiary, and the Prohibited Transferee shall not acquire any
rights in such shares. Such automatic transfer shall be deemed to be effective
as of the close of business on the business day prior to the purported
acquisition by the Prohibited Transferee. The Prohibited Transferee shall not
benefit economically from ownership of any shares of stock held in trust, shall
have no rights to dividends and shall not possess any rights to vote or other
rights attributable to the shares of stock held in trust. While such stock is
held in trust, the trustee shall have all voting rights with respect to the
shares, and all dividends or distributions paid on such stock will be paid to
the trustee of the trust for the benefit of the charitable beneficiary (any
dividend or distribution paid on shares of capital stock prior to the discovery
by the Company that such shares have been automatically transferred to the
trust shall, upon demand, be paid over to the trustee for the benefit of the
charitable beneficiary). The Prohibited Transferee shall have no voting rights
with respect to shares of stock held in the trust and, subject to Maryland law,
effective as of the date that such shares of stock have been transferred to the
trust, the trustee shall have the authority (at the trustee's sole discretion)
(i) to rescind as void any vote cast by a Prohibited Transferee prior to the
discovery by the Company that such shares have been transferred to the Trust
and (ii) to recast such vote in accordance with the desires of the trustee
acting for the benefit of the charitable beneficiary. However, if the Company
has already taken irreversible corporate action, then the trustee shall not
have the authority to rescind and recast such vote. Within 20 days of receiving
notice from the Company of the transfer of shares to the trust, the trustee of
the trust is required to sell the shares held in the trust to a person
designated by the trustee who may own such shares without violating the
ownership restrictions (a "Permitted Holder"). Upon such sale, the interest of
the charitable beneficiary in the shares sold shall terminate and the price
paid for the shares by the Permitted Holder shall be distributed to the
Prohibited Transferee to the extent of the lesser of (i) the price paid by the
Prohibited Transferee for the shares or, in the case of a transfer of shares to
a trust resulting from an event other than an actual acquisition of shares by a
Prohibited Transferee, the fair market value, on the date of transfer to the
trust, of the shares so transferred or (ii) the fair market value of the shares
on the date of transfer by the trustee to the Permitted Holder. Any proceeds in
excess of this amount shall be paid to the charitable beneficiary. If, prior to
the discovery by the Company that shares of stock have been transferred to the
trust, such shares are sold by a Prohibited Transferee, then (i) such shares
shall be deemed to have been sold on behalf of the trust and (ii) to the extent
that the Prohibited Transferee received an amount for such shares that exceeds
the amount that such Prohibited Transferee was entitled to receive pursuant to
the aforementioned requirement, such excess shall be paid to the Trustee upon
demand.
Shares of capital stock transferred to a trustee shall be deemed to be
offered for sale to the Company, or its designee, at a price per share equal to
the lesser of (i) the price per share in the transaction that resulted in such
transfer to the trust (or, in case of a devise or gift, the fair market value
on the date of such devise or gift) or (ii) the fair market value on the date
the Company, or its designee,
81
<PAGE>
accepts such offer. The Company shall have the right to accept such offer until
the Trustee has sold the shares of stock held in the Trust. Upon such a sale to
the Company, the interest of the charitable beneficiary in the shares sold
shall terminate and the Trustee shall distribute the net proceeds of the sale
to the Prohibited Transferee.
If shares of capital stock which would cause the Company to be
beneficially owned by less than 100 persons are issued or transferred to any
person, such issuance or transfer shall be null and void to the intended
transferee, and the intended transferee would acquire no rights to such stock.
In addition to any of the foregoing ownership limits, the Company's
Charter provides that no holder may own, either actually or constructively
under the applicable attribution rules of the Code, any shares of any class of
the Company's stock if such ownership or acquisition (i) would cause more than
50.0% in value of the Company's outstanding stock to be owned, either actually
or constructively under the applicable attribution rules of the Code, by five
or fewer individuals (as defined in the Code to include certain entities), (ii)
would result in the Company's stock being beneficially owned by less than 100
persons (determined without reference to any rules of attribution), or (iii)
would otherwise result in the Company failing to qualify as a REIT. Acquisition
or ownership (actual or constructive) of the Company's stock in violation of
these restrictions will result in automatic transfer of such stock to a trust
for the benefit of a charitable beneficiary, automatic repurchase of the
violative shares by the Company, or the violative transfer will be deemed void
AB INITIO, as described above.
The Board of Directors may, but in no event will be required to, exempt a
stockholder from the Aggregate Stock Ownership Limit and the Common Stock
Ownership Limit, as the case may be, if it determines that such ownership will
not jeopardize the Company's status as a REIT and the Board of Directors
otherwise decides such action would be in the best interests of the Company. As
a condition to such waiver, the Board of Directors may require an opinion of
counsel satisfactory to it and/or undertakings or representations from the
applicant with respect to preserving the REIT status of the Company. The
Company has exempted Gazit (1995), Globe Reit, Dan Overseas and M.G.N. from the
Common Stock Ownership Limit and the Aggregate Stock Ownership Limit.
If the Board of Directors shall at any time determine in good faith that a
person intends to acquire or own, has attempted to acquire or own, or may
acquire or own stock of the Company in violation of the above described limits,
the Board of Directors shall take such action as it deems advisable to refuse
to give effect or to prevent such ownership or acquisition, including but not
limited to causing the Company to repurchase stock, refusing to give effect to
such ownership or acquisition on the books of the Company, or instituting
proceedings to enjoin such ownership or acquisition.
The constructive ownership rules are complex and may cause Common Stock
owned actually or constructively by a group of related individuals and/or
entities to be constructively owned by one individual or entity. As a result,
the acquisition of less than 5% of the outstanding Common Stock by an
individual or entity could cause that individual or entity (or another
individual or entity) to constructively own Common Stock in excess of the
limits described above, and thus subject such stock to the Common Stock
Ownership Limit, or the Aggregate Stock Ownership Limit.
All certificates representing shares of the Company's stock will bear a
legend referring to the restrictions described above.
All persons who own more than 5.0% (or such lower percentage as required
by the Code or the Treasury Regulations promulgated thereunder) of all classes
or series of the Company's stock, including the Company's Common Stock, must
file annually with the Company a report containing information regarding their
ownership of such shares, as set forth in the Treasury Regulations. Each such
owner shall provide to the Company such additional information as the Company
may request in order to determine the effect, if any, of such beneficial
ownership or the Company's status as a REIT and to ensure compliance with the
Aggregate Stock Ownership Limit. In addition, each stockholder shall upon
demand be required to disclose to the Company in writing such information with
respect to the actual
82
<PAGE>
and constructive ownership of shares as the Board of Directors deems necessary
to comply with the provisions of the Code applicable to a REIT or to comply
with the requirements of any taxing authority or governmental agency.
These ownership limitations could have the effect of delaying, deferring
or preventing a change of control or other transaction in which holders of
some, or a majority, of shares of Common Stock might receive a premium for
their shares over the then prevailing market price or which such holders might
believe to be otherwise in their best interest.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF MARYLAND LAW, AND THE COMPANY'S
CHARTER AND BYLAWS
The following paragraphs summarize certain provisions of the MGCL and the
Company's Charter and Bylaws. The summary does not purport to be complete and
is subject to and qualified in its entirety by reference to Maryland law and to
the Company's Charter and Bylaws, copies of which have been filed as exhibits
to the Registration Statement of which this Prospectus is a part. See
"Additional Information".
PROVISIONS OF MARYLAND LAW; CHARTER PROVISIONS
Certain provisions of the MGCL and of the Company's Charter and Bylaws may
have the effect of delaying, deferring or preventing a change in control of the
Company or the removal of existing management and, as a result, may prevent the
stockholders of the Company from receiving a substantial premium for their
shares over then-current market prices.
BUSINESS COMBINATIONS. Under the MGCL, certain "business combinations"
(including a merger, consolidation, share exchange, or, in certain
circumstances, an asset transfer or issuance or reclassification of equity
securities) between a Maryland corporation and an interested stockholder or an
affiliate thereof is prohibited for five years after the most recent date on
which the Interested Stockholder became an Interested Stockholder. Thereafter,
any such business combination must be recommended by the board of directors of
such corporation and approved by the affirmative vote of at least (a) 80% of
the votes entitled to be cast by holders of outstanding shares of voting stock
of the corporation and (b) two-thirds of the votes entitled to be cast by
holders of voting stock of the corporation other than shares held by the
Interested Stockholder with whom (or with whose affiliate) the business
combination is to be effected, unless, among other conditions, the holders of
Common Stock receive a minimum price (as defined in the MGCL) for their shares
of Common Stock and the consideration is received in cash or in the same form
as previously paid by the Interested Stockholder for its Common Stock. These
provisions of the MGCL do not apply, however, to business combinations that are
approved or exempted by the board of directors of the corporation prior to the
time that the Interested Stockholder becomes an Interested Stockholder. The
Board of Directors has previously exempted from such provisions of the MGCL any
business combination with an officer or director of the Company or any
affiliate of any officer or director of the Company.
CONTROL SHARE ACQUISITIONS. The MGCL provides that "control shares" of a
Maryland corporation acquired in a "control share acquisition" have no voting
rights except to the extent approved by a vote of two-thirds of the votes
entitled to be cast on the matter, excluding shares of stock owned by the
acquiror, by officers or by directors who are employees of the corporation.
"Control shares" are voting shares of stock which, if aggregated with all other
such shares of stock previously acquired by such person, or in respect of which
such person is able to exercise or direct the exercise of voting power (except
solely by virtue of a revocable proxy), would entitle the acquiror to exercise
voting power in electing directors within one of the following ranges of voting
power: (i) one-fifth or more but less than one-third, (ii) one-third or more
but less than a majority, or (iii) a majority of all voting power. Control
shares do not include shares the acquiring person is then entitled to vote as a
result of having previously obtained stockholder approval. A "control share
acquisition" means the acquisition of control shares subject to certain
exceptions.
83
<PAGE>
A person who has made or proposes to make a control share acquisition,
upon satisfaction of certain conditions (including an undertaking to pay
expenses), may compel the Board of Directors to call a special meeting of
stockholders to be held within 50 days of demand to consider the voting rights
of the shares. If no request for a meeting is made, the corporation may itself
present the question at any stockholders meeting.
If voting rights are not approved at the meeting or if the acquiring
person does not deliver an acquiring person statement as required by the
statute, then, subject to certain conditions and limitations, the corporation
may redeem any or all of the control shares (except those for which voting
rights previously have been approved) for fair value determined, without regard
to the absence of voting rights for control shares, as of the date of the last
control share acquisition by the acquiror or of any meeting of stockholders at
which the voting rights of such shares are considered and not approved. If
voting rights for control shares are approved at a stockholders meeting and the
acquiror becomes entitled to vote a majority of the shares entitled to vote,
all other stockholders may exercise appraisal rights. The fair value of the
shares as determined for purposes of such appraisal rights may not be less than
the highest price per share paid by the acquiror in the control share
acquisition.
The control share acquisition statute does not apply to shares acquired in
a merger, consolidation or share exchange if the corporation is a party to the
transaction or to acquisitions approved or exempted by the charter or bylaws of
a corporation.
The Bylaws of the Company contain a provision exempting from the control
share acquisition statute any and all acquisitions by any person of the
Company's shares of Common Stock. Such provision of the Bylaws may be amended
without stockholder approval. There can be no assurance that such provision
will not be amended or eliminated at any time in the future. As a result of the
Company's decision to opt out of the control share acquisition statute,
stockholders who acquire a substantial block of Common Stock are not precluded
from exercising full voting rights with respect to their shares on all matters
without first obtaining the approval of other stockholders entitled to vote.
This may have the effect of making it easier for any such control share
stockholder to effect a business combination with the Company. However, no
assurance can be given that any such business combination would be consummated
or, if consummated, would result in a purchase of shares of Common Stock from
any stockholder at a premium.
In addition, certain provisions of the Company's Charter and Bylaws
summarized in the following paragraphs may be deemed to have an anti-takeover
effect and may delay, defer or prevent a change in control, a tender offer or
takeover attempt that a stockholder might consider in its best interest,
including those attempts that might result in a premium over the market price
for the shares held by stockholders.
CLASSIFICATION OF THE BOARD OF DIRECTORS. The Company's Charter provides
that the number of directors of the Company may be established by the Bylaws
but may not be fewer than the minimum number required by the MGCL (under which
most circumstances is three directors). Any vacancy may be filled, at any
regular meeting or at any special meeting called for that purpose, by 80% of
the remaining directors. Pursuant to the Bylaws, the Company's Board of
Directors are divided into three classes. As the term of each class expires,
the directors in that class will be elected for a term of three years. The
affirmative vote of a majority of the votes represented at a meeting of
stockholders duly called shall be required to elect a director. The Company
believes that the classification of the Board of Directors will help to assure
the continuity and stability of the Company's business strategies and policies
as determined by the Board of Directors. Holders of Common Stock will have no
right to cumulative voting for the election of directors. Consequently, at each
annual meeting of stockholders, the holders of a majority of shares of Common
Stock represented at a meeting of stockholders will be able to elect all of the
successors of the class of directors whose terms expire at that meeting.
The classified director provision could have the effect of making the
replacement of incumbent directors more time consuming and difficult, and could
discourage a third-party from making a tender
84
<PAGE>
offer or otherwise attempting to obtain control of the Company, even though
such an attempt might be beneficial to the Company and its stockholders.
Elections of directors at two annual meetings would be necessary to effect a
change in control of the Board of Directors. Thus, the classified board
provision could increase the likelihood that incumbent directors will retain
their positions.
REMOVAL OF DIRECTORS. The Charter provides that one or more directors may
be removed only for cause (as defined in the Charter) and by the affirmative
vote of at least 80% of the votes cast at an annual or special meeting of
stockholders (but in no event less than a majority of all votes entitled to be
cast at the meeting). This provision, when coupled with the provision in the
Charter authorizing the Board of Directors to fill vacant directorships, may
preclude stockholders from changing incumbent directors except at an annual
meeting.
SPECIAL MEETINGS. The Bylaws provide that special meetings of stockholders
may be called only by the President, Chief Executive Officer, or Chairman of
the Board of Directors and must be called upon the written demand of the
holders of not less than a majority of all of the votes entitled to be cast at
a the meeting.
AUTHORIZED BUT UNISSUED SHARES. The authorized but unissued shares of
Common Stock and preferred stock are available for future issuance without
stockholder approval. If issued, these additional shares may be utilized for a
variety of corporate purposes, including future public offerings to raise
additional capital, corporate acquisitions and employee benefit plans. The
existence of authorized but unissued Common Stock and preferred stock may
enable the Board of Directors to issue shares to persons friendly to current
management which could render more difficult or discourage an attempt to obtain
control of the Company by means of a proxy contest, tender offer, merger or
otherwise, and thereby protect the continuity of the Company's management.
SUPERMAJORITY PROVISIONS. Under the Bylaws of the Company, the
affirmative vote of at least 662/3% of the votes cast at a meeting of
stockholders duly called at which a quorum is present is required to approve
any matter properly before the meeting, unless a greater percentage is required
by statute or by the Charter. Under the MGCL, a Maryland corporation generally
cannot dissolve, amend its charter, merge, sell all or substantially all of its
assets, engage in a share exchange or engage in similar transactions outside of
the ordinary course of business unless approved by the affirmative vote of
stockholders holding at least two-thirds of the shares entitled to vote on the
matter unless a greater or lesser percentage (but no less than a majority of
all of the votes entitled to be cast on the matter) is set forth in the
corporation's charter. Any amendment to any provision of the Charter requiring
a vote of stockholders must be approved by the affirmative vote of at least
662/3% of all votes entitled to be cast on the matter, unless such provision
requires a greater percentage of affirmative votes. The Bylaws provide that a
vote of at least 80% of the Board of Directors is required to approve any
matter before the Board of Directors.
ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS
The Bylaws of the Company provide that (a) with respect to an annual
meeting of stockholders, nominations of persons for election to the Board of
Directors and the proposal of business to be considered by stockholders may be
made only (i) pursuant to the Company's notice of the meeting, (ii) by the
Board of Directors or (iii) by a stockholder who is entitled to vote at the
meeting and has complied with the advance notice procedures set forth in the
Bylaws and (b) with respect to special meetings of stockholders, only the
business specified in the Company's notice of meeting may be brought before the
meeting of stockholders and nominations of persons for election to the Board of
Directors may be made only (i) pursuant to the Company's notice of the meeting,
(ii) by the Board of Directors or (iii) provided that the Board of Directors
has determined that directors shall be elected at such meeting, by a
stockholder who is entitled to vote at the meeting and has complied with the
advance notice provisions set forth in the Bylaws.
85
<PAGE>
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The MGCL requires a corporation (unless its Charter provides otherwise,
which the Company's Charter does not) to indemnify a director or officer who
has been successful, on the merits or otherwise, in the defense of any
proceeding to which he is made a party by reason of his service in that
capacity. The MGCL permits a corporation to indemnify its present and former
directors and officers, among others, against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection
with any proceeding to which they may be made a party by reason of their
service in those or other capacities unless it is established that (a) the act
or omission of the director or officer was material to the matter giving rise
to the proceeding and (i) was committed in bad faith or (ii) was the result of
active and deliberate dishonesty, (b) the director or officer actually received
an improper personal benefit in money, property or services or (c) in the case
of any criminal proceeding, the director or officer had reasonable cause to
believe that the act or omission was unlawful. However, under the MGCL, a
Maryland corporation may not indemnify for an adverse judgment in a suit by or
in the right of the corporation, or for a judgment of liability on the basis
that a personal benefit was improperly received, unless in either case, a court
orders indemnification and then only for expenses. In addition, the MGCL
permits a corporation to advance reasonable expenses to a director or officer
upon the corporation's receipt of (a) a written affirmation by the director or
officer of his good faith belief that he has met the standard of conduct
necessary for indemnification by the corporation and (b) a written undertaking
by or on his behalf to repay the amount paid or reimbursed by the corporation
if it shall ultimately be determined that the standard of conduct was not met.
The termination of any proceeding by conviction, or upon a plea of nolo
contendere or its equivalent, or an entry of any order of probation prior to
judgment, creates a rebuttable presumption that the director or officer did not
meet the requisite standard of conduct required for indemnification to be
permitted.
The MGCL permits a Maryland coporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Charter contains
such a provision which eliminates such liability to the maximum extent
permitted by Maryland law. However, this provision does not limit the ability
of the Company or its stockholders to obtain other relief, such as an
injunction or recission.
The Charter of the Company authorizes it, to the maximum extent permitted
by Maryland law, to obligate itself to indemnify and to pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to (a) any
present or former director or officer of the Company or (b) any individual who,
while a director of the Company and at the request of the Company, serves or
has served another corporation, real estate investment trust, partnership,
joint venture, trust, employee benefit plan or any other enterprise as a
director, officer, managing member, partner or trustee of such corporation,
real estate investment trust, partnership, joint venture, trust, employee
benefit plan or other enterprise from and against any claim or liability to
which such person may become subject or which such person may incur by reason
of his or her status as a present or former director or officer of the Company.
The Bylaws of the Company obligate it, to the maximum extent permitted by
Maryland law, to indemnify and to pay or reimburse reasonable expenses in
advance of final disposition of a proceeding to (a) any present or former
director or officer who is made a party to the proceeding by reason of his
service in that capacity or (b) any individual who, while a director of the
Company and at the request of the Company, serves or has served another
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, partner
or trustee of such corporation, real estate investment trust, partnership,
joint venture, trust, employee benefit plan or other enterprise and who is made
a party to the proceeding by reason of his service in that capacity. The
Charter and Bylaws also permit the Company to indemnify and advance expenses to
any person who served a predecessor of the Company in any of the capacities
described above and to any employee or agent of the Company or a predecessor of
the Company.
The Bylaws of the Company obligate it, to the maximum extent permitted by
Maryland law, to indemnify and to pay or reimburse reasonable expenses in
advance of final disposition of a proceeding
86
<PAGE>
to (a) any present or former director or officer who is made a party to the
proceeding by reason of his service in that capacity or (b) any individual who,
while a director of the Company and at the request of the Company, serves or
has served another corporation, real estate investment trust, partnership,
joint venture, trust, employee benefit plan or any other enterprise as a
director, officer, partner or trustee of such corporation, real estate
investment trust, partnership, joint venture, trust, employee benefit plan or
other enterprise and who is made a party to the proceeding by reason of his
service in that capacity. The Charter and Bylaws also permit the Company to
indemnify and advance expenses to any person who served a predecessor of the
Company in any of the capacities described above and to any employee or agent
of the Company or a predecessor of the Company.
The Company has entered into indemnification agreements with each member
of the Board of Directors (each, an "Indemnified Director"). The
indemnification agreements require, among other things, that the Company
indemnify to the fullest extent permitted by law and advance to the Indemnified
Director all related expenses, subject to reimbursement if it is subsequently
determined that indemnification is not permitted. Under the indemnification
agreements, the Company must also indemnify and advance all expenses incurred
by an Indemnified Director seeking to enforce his rights under the
indemnification agreements and may cover executive officers and directors under
the Company's directors' and officers' liability insurance. Although the form
of indemnification agreement offers substantially the same scope of coverage
afforded by law, it provides greater assurance to directors and executive
officers that indemnification will be available, because, as a contract, it
cannot be modified unilaterally in the future by the Board of Directors or the
stockholders to eliminate the rights it provides.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar of the Common Stock will be American
Stock Transfer & Trust Company.
87
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, the Company will have 11,608,130 shares
of Common Stock outstanding (12,313,130 shares if the over-allotment option is
exercised in full). Of those shares, the 4,700,000 shares sold in the Offering
(5,405,000 shares if the over-allotment option is exercised in full) will be
freely transferable without restriction or registration under the Act, unless
purchased by persons deemed to be "affiliates" of the Company (as that term is
defined under the Act). The remaining 6,908,130 shares of Common Stock to be
outstanding immediately following the Offering ("restricted shares") may only
be sold in the public market if such shares are registered under the Act or
sold in accordance with Rule 144 promulgated under the Act.
In general, under Rule 144 a person (or persons whose shares are
aggregated) including an affiliate, who has beneficially owned his shares for
one year, may sell in the open market within any three-month period a number of
shares that does not exceed the greater of (i) 1% of the then outstanding
shares of the Company's Common Stock (approximately 116,081 shares immediately
after the Offering, 123,131 if the over-allotment option is exercised in full)
or (ii) the average weekly trading volume in the Common Stock on all exchanges
and reported through the automated quotation system of a registered securities
association during the four calendar weeks preceding such sale. Sales under
Rule 144 are also subject to certain limitations on the manner of sale, notice
requirements and availability of current public information about the Company.
A person (or persons whose shares are aggregated) who is deemed not to have
been an "affiliate" of the Company at any time during the 90 days preceding a
sale by such person and who has beneficially owned his shares for at least two
years, may sell such shares in the public market under Rule 144(k) without
regard to the volume limitations, manner of sale provisions, notice
requirements or availability of current information referred to above.
Restricted shares properly sold in reliance upon Rule 144 are thereafter freely
tradeable without restrictions or registration under the Act, unless thereafter
held by an "affiliate" of the Company.
The Company and the holders of substantially all of the outstanding Common
Stock have agreed not to sell any shares of Common Stock for 180 days from the
date of this Prospectus without the prior written consent of Credit Suisse
First Boston. See "Underwriting". Following such 180-day period, approximately
5,300,000 shares held by current stockholders will be available for sale under
Rule 144 of the Act. Additionally, shares of Common Stock have been reserved
for issuance under the Company's 1995 Plan, under which options to purchase
614,000 shares of Common Stock are issued and outstanding. The Company intends
to register under the Act all 1,000,000 eligible shares issued or reserved for
issuance under the 1995 Plan. See "Management--Stock Option Plan". Shares
covered by such registration will, when issued, be eligible for resale in the
public market, subject to Rule 144 limitations applicable to affiliates.
Pursuant to certain registration rights agreements among the Company and
certain current stockholders, the Company has granted various registration
rights to such stockholders who have waived such rights with respect to the
Offering. See "Certain Transactions".
Prior to the Offering, there has been no trading market for the Common
Stock. No prediction can be made as to the effect, if any, that future sales of
shares pursuant to Rule 144 or otherwise will have on the market price
prevailing from time to time. Sales of substantial amounts of the Common Stock
in the public market following the Offering could adversely affect the then
prevailing market price.
88
<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS
The following summary discusses the material federal income tax
considerations to prospective purchasers of the Common Stock, other than
existing stockholders, with respect to the acquisition, ownership and
disposition of Common Stock. This summary includes a discussion of tax matters
regarding the Company. This summary is based on current law, which is subject
to change, possibly retroactively. The statements set forth below, insofar as
they purport to describe matters of law, are, in the opinion of Greenberg
Traurig Hoffman Lipoff Rosen & Quentel, P.A., tax counsel to the Company
("Greenberg Traurig"), the material federal tax considerations relevant to
purchasers of Common Stock, other than existing stockholders of the Company. A
copy of that tax opinion has been filed as an exhibit to the Company's
registration statement of which this Prospectus forms a part.
THIS DISCUSSION DOES NOT PURPORT TO DEAL WITH TAX CONSIDERATIONS RELEVANT
TO AN EXISTING STOCKHOLDER OF THE COMPANY OR ALL ASPECTS OF TAXATION THAT MAY
BE RELEVANT TO ANY OTHER PARTICULAR PURCHASER IN LIGHT OF HIS OR HER PERSONAL
INVESTMENT OR TAX CIRCUMSTANCES, OR TO CERTAIN TYPES OF PURCHASERS SUBJECT TO
SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS (INCLUDING INSURANCE
COMPANIES, FINANCIAL INSTITUTIONS, BROKER-DEALERS, TAX-EXEMPT ORGANIZATIONS,
FOREIGN CORPORATIONS OR PERSONS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED
STATES, EXCEPT TO THE EXTENT DISCUSSED UNDER THE HEADINGS "TAXATION OF
TAX-EXEMPT STOCKHOLDERS" AND "TAXATION OF NON-U.S. STOCKHOLDERS"). ACCORDINGLY,
EACH PROSPECTIVE PURCHASER, INCLUDING EXISTING STOCKHOLDERS, IS URGED TO
CONSULT HIS OR HER OWN TAX ADVISER REGARDING THE SPECIFIC FEDERAL INCOME TAX
CONSEQUENCES, AS WELL AS THE STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES,
TO HIM OR HER OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF A SHARE OF
COMMON STOCK IN LIGHT OF HIS OR HER PERSONAL INVESTMENT OR TAX CIRCUMSTANCES.
TAXATION OF THE COMPANY
GENERAL
The Company has elected to be taxed as a REIT under sections 856 through
860 of the Code, commencing with its taxable year ending December 31, 1995. The
Company believes that it has been organized and has operated in a manner that
qualifies it to be taxed under the code as a REIT commencing with that taxable
year. The Company intends to continue to operate in that manner. No assurance,
however, can be given that the manner in which the Company has operated or will
operate has qualified or will qualify the Company to be taxed as a REIT.
The sections of the Code that govern the federal income tax treatment of a
REIT and its stockholders are highly technical and complex. The following
discussion sets forth the material aspects of those sections. This summary is
qualified in its entirety by the applicable Code provisions, the rules and
regulations promulgated thereunder, and the administrative and judicial
interpretations thereof.
In the opinion of Greenberg Traurig, the Company has been organized in
conformity with the requirements for qualification as a REIT under the Code
beginning with the taxable year of the Company starting January 1, 1995, and
the method of operation of the Company and its subsidiaries since January 1,
1995 has enabled the Company, and the proposed method of operation of the
Company will enable the Company, to meet the requirements for qualification and
taxation as a REIT under the Code. It must be emphasized that this opinion is
based on various factual assumptions represented to Greenberg Traurig by the
Company relating to the organization of the Company, the income, assets,
operations and records of, and other matters regarding, the Company,
distributions by the Company and the direct and indirect ownership of the
Company's Common Stock. The opinion assumes further that the statements in the
Prospectus are and will remain true, correct and complete and that actions
89
<PAGE>
described in the Prospectus have been or will be taken as described. Any
variation or difference in the facts from those set forth or assumed in the
opinion may affect the conclusions stated therein. In addition, the opinion
relies on letters of Deloitte & Touche LLP, the Company's accountants, to a
major stockholder of the Company and to the Company regarding the Company's
compliance with the requirements of the Code to be treated as a REIT and
assumes the accuracy of the information provided by the Company on which those
letters were based. The opinion speaks only as of the date it was issued and is
based solely on legal authorities as they then exist. Those legal authorities
are subject to change either prospectively or retroactively, see "--Failure to
Quality", and Greenberg Traurig assumes no obligation to update or supplement
its opinion. Finally, the Company's qualification and taxation as a REIT depend
on the Company's ability to meet (through actual operating results,
distribution levels, diversity of stock ownership and other factors) the
various qualification tests imposed under the Code, the results of which
Greenberg Traurig has not investigated independently and will not investigate
independently, and some of which are outside the control of the Company to
satisfy. Accordingly, no assurance can be given that the actual results of the
Company's operations for any taxable year have satisfied or will satisfy the
REIT qualification tests under the Code.
If the Company qualifies for taxation as a REIT, it generally will not be
subject to federal corporate income tax on its net income that is distributed
currently to stockholders. This treatment substantially eliminates the double
taxation at the corporate and stockholder levels that generally results from
investment in a corporation. The Company, however, nevertheless will be subject
to federal income tax as follows: First, the Company will be taxed at regular
corporate rates on any undistributed REIT taxable income, including
undistributed net capital gains. Second, under certain circumstances, the
Company may be subject to the alternative minimum tax on its items of tax
preference. Third, if the Company (i) has net income from the sale or other
disposition of foreclosure property (defined generally as a property acquired
by the Company through foreclosure or otherwise after a default on a loan
secured by the property or on a lease of the property) that is held primarily
for sale to customers in the ordinary course of business or (ii) has other
nonqualifying income from foreclosure property, the Company will be subject to
tax at the highest corporate rate on that income. Fourth, if the Company has
net income from prohibited transactions (which are, in general, certain sales
or other dispositions of property held primarily for sale to customers in the
ordinary course of business, other than foreclosure property), that income will
be subject to tax at a 100% rate. Fifth, if the Company should fail to satisfy
the 75% gross income test or the 95% gross income test (discussed below) but
nonetheless has maintained its qualification as a REIT because certain other
requirements have been met, it will be subject to tax at a 100% rate on an
amount equal to (a) the gross income attributable to the greater of the amount
by which the Company fails the 75% or 95% test multiplied by (b) a fraction
intended to reflect the Company's profitability. Sixth, if the Company should
fail to distribute during any calendar year at least the sum of (i) 85% of its
REIT ordinary income for the year, (ii) 95% of its REIT capital gain net income
for the year, and (iii) any undistributed taxable income from prior periods,
the Company would be subject to a 4% excise tax on the excess of the required
distribution over the amount actually distributed. Seventh, if the Company
acquires an asset from a C corporation (I.E., generally a corporation subject
to full corporate level tax) in a transaction in which the basis of the Company
in the asset is determined by reference to the basis of the C corporation in
the asset (a "Built-In Gain Asset"), and if the Company recognizes gain on a
disposition of the asset during the ten-year period beginning on the date the
Company acquired the asset (the "Recognition Period"), the Company, pursuant to
Treasury regulations yet to be issued, will pay tax at the highest regular
corporate tax rate on the lesser of (i) the excess of the fair market value of
the asset over the basis of the Company in the asset on the date the Company
acquired the asset (the "Built-In Gain") and (ii) the gain recognized by the
Company. The Company has elected pursuant to Notice 88-19 to be subject to the
rules similar to the rules of section 1374 of the Code on net Built-In Gains.
This election was adopted for the tax year ending December 31, 1995 and has
been filed with the Company's Form 1120 for the tax year ended December 31,
1996.
90
<PAGE>
REQUIREMENTS FOR QUALIFICATION
The Code defines a REIT as a corporation, trust or association (1) that is
managed by one or more trustees or directors; (2) the beneficial ownership of
which is evidenced by transferable shares or by transferable certificates of
beneficial interest; (3) that would be taxable as a domestic corporation but
for sections 856 through 859 of the Code; (4) that is neither a financial
institution nor an insurance company subject to certain provisions of the Code;
(5) the beneficial ownership of which is held by 100 or more persons; (6)
during the last half of whose taxable year not more than 50% in value of the
outstanding stock of which is owned, directly or constructively, by five or
fewer individuals (as defined in the Code to include certain entities); and (7)
that meets certain other tests, described below, regarding the nature of its
income and assets. The Code provides that conditions (1) through (4) must be
met during the entire taxable year and that condition (5) must be met during at
least 335 days of a taxable year of twelve months or during a proportionate
part of a taxable year of less than twelve months. Conditions (5) and (6) do
not apply until after the first taxable year for which an election is made to
be taxed as a REIT. For purposes of conditions (5) and (6), pension funds and
certain other tax-exempt entities are treated as individuals, subject to a
"look-through" exception in the case of condition (6).
The Company has satisfied condition (5) and believes that it has satisfied
condition (6). In addition, the Company's Charter provides for restrictions
regarding ownership and transfer of shares, which restrictions are intended to
assist the Company in continuing to satisfy the share ownership requirements
described in (5) and (6) above. Those ownership and transfer restrictions are
described in "Description of Capital Stock--Restrictions on Ownership and
Transfer of Common Stock". Those restrictions may not ensure that the Company
in all cases will be able to satisfy the share ownership requirements described
above. If the Company fails to satisfy those share ownership requirements, the
Company's status as a REIT will terminate. See "--Failure to Qualify". Pursuant
to the Taxpayer Relief Act of 1997, enacted August 5, 1997, starting with a
REIT's first taxable year that begins after August 5, 1997, a REIT that
complies with Treasury regulations for ascertaining the ownership of its shares
and that does not know, or exercising reasonable diligence would not have
known, whether it failed condition (6) will be treated as meeting condition
(6).
In addition, a corporation may not elect to become a REIT unless its
taxable year is a calendar year. The Company has and will continue to have a
calendar taxable year.
OWNERSHIP OF SUBSIDIARIES
Section 856(i) of the Code provides that a corporation that is a qualified
REIT subsidiary (defined as any corporation if 100 percent of whose stock is
held by the REIT at all times during the period the corporation is in
existence) shall not be treated as a separate corporation, and all assets,
liabilities and items of income, deduction and credit of a qualified REIT
subsidiary shall be treated as assets, liabilities and those items (as the case
may be) of the REIT. The Company believes that each of its subsidiaries
qualifies as a qualified REIT subsidiary within the meaning of the Code. Thus,
in applying the requirements described herein, the Company's subsidiaries are
ignored, and all assets, liabilities and items of income, deduction and credit
of those subsidiaries are treated as assets, liabilities and items of income,
deduction and credit of the Company. Pursuant to the Taxpayer Relief Act of
1997, starting with a REIT's first taxable year that begins after August 5,
1997, a corporation can qualify as a qualified REIT subsidiary even though
there was a period of time during which the REIT did not own 100 percent of its
stock, in which case the corporation will be treated as liquidated and
reincorporated by the REIT.
INCOME TESTS
To maintain qualification as a REIT, the Company each year must satisfy
three gross income requirements. First, at least 75% of the Company's gross
income (excluding gross income from prohibited transactions) must be derived
directly or indirectly from investments relating to real property
91
<PAGE>
or mortgages on real property (including rents from real property and, in
certain circumstances, interest) or from certain types of temporary
investments. Second, at least 95% of the Company's gross income (excluding
gross income from prohibited transactions) must be derived from such real
property investments, dividends, interest and gain from the sale or disposition
of stock or securities (or from any combination of the foregoing). Third, gain
derived from the sale or other disposition of stock or securities held for less
than one year, property in a prohibited transaction and real property held for
less than four years (apart from involuntary conversions and sales of
foreclosure property) must represent less than 30% of the Company's gross
income (including gross income from prohibited transactions). Pursuant to the
Taxpayer Relief Act of 1997, the third gross income requirement is eliminated,
starting with a REIT's first taxable year that begins after August 5, 1997.
Rents received by the Company will qualify as rents from real property in
satisfying the gross income requirements for a REIT described above only if
several conditions are met. First, the amount of rent must not be based in
whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from rents from real
property solely by reason of being based on a fixed percentage or percentages
of receipts or sales. Second, rents received from a tenant will not qualify as
rents from real property in satisfying the gross income tests if the REIT, or
an actual or constructive owner of 10% or more of the REIT, actually or
constructively owns 10% or more of the tenant (a "Related Party Tenant").
Third, if rent attributable to personal property leased in connection with a
lease of real property is greater than 15% of the total rent received under the
lease, the portion of the rent attributable to the personal property will not
qualify as rents from real property. Finally, for rents received to qualify as
rents from real property, the REIT generally must not operate or manage the
property or furnish or render services to the tenants of such property, other
than through an independent contractor from whom the REIT derives no revenue.
The REIT, however, may perform directly certain services that are usually or
customarily rendered in connection with the rental of space for occupancy only
and are not otherwise considered rendered to the occupant of the property.
Moreover, pursuant to the Taxpayer Relief Act of 1997, starting with a REIT's
first taxable year that begins after August 5, 1997, income derived by a REIT
from services provided to tenants or from managing or operating a property will
be treated as rent from real property provided the income does not exceed one
percent of the REIT's gross income from the property. The Company has not and
will not (i) charge rent for any property that is based in whole or in part on
the income or profits of any person (except by reason of being based on a
percentage of receipts or sales, as described above), (ii) rent any property to
a Related Party Tenant (unless the Board of Directors determines in its
discretion that the rent received from the Related Party Tenant is not material
and will not jeopardize the Company's status as a REIT), (iii) derive rental
income attributable to personal property (other than personal property leased
in connection with the lease of real property, the amount of which is less than
15% of the total rent received under the lease) or (iv) perform services
considered to be rendered to the occupant of the property (unless the income
from those services qualifies as rent from real property pursuant to the
Taxpayer Relief Act of 1997) other than through an independent contractor from
whom the Company derives no revenue. The Company believes that the aggregate
amount of any nonqualifying income in any taxable year has not exceeded and
will not exceed the limit on nonqualifying income under the gross income tests.
If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it nevertheless may qualify as a REIT for that year
if it is entitled to relief under certain provisions of the Code. Those relief
provisions generally will be available if the Company's failure to meet the
gross income tests was due to reasonable cause and not willful neglect, the
Company attaches a schedule of the sources of its income to its federal income
tax return, and any incorrect information on the schedule is not due to fraud
with intent to evade tax. It is not possible, however, to state whether in all
circumstances the Company would be entitled to the benefit of those relief
provisions. For example, if the Company fails to satisfy the gross income tests
because nonqualifying income that the Company intentionally receives exceeds
the limits on that income, the IRS could conclude that the Company's failure to
satisfy the gross income tests was not due to reasonable cause. If those relief
provisions are inapplicable to a particular set of circumstances involving the
Company, the Company will not qualify as a REIT. As discussed above in
"--Taxation of the Company-General", even if those relief provisions
92
<PAGE>
apply, a tax would be imposed with respect to the net nonqualifying income. No
similar mitigation provision provides relief if the Company fails the 30% gross
income test. In that case, the Company would cease to qualify as a REIT. As
noted above, however, that test no longer will apply to the Company starting
January 1, 1998.
Any gain realized by the Company on the sale of any property held as
inventory or other property held primarily for sale to customers in the
ordinary course of business will be treated as income from a prohibited
transaction that is subject to a penalty tax at a 100% rate. This prohibited
transaction income also may have an adverse effect upon the Company's ability
to satisfy the gross income tests for qualification as a REIT. Under existing
law, whether property is held as inventory or primarily for sale to customers
in the ordinary course of a trade or business is a question of fact that
depends on all the facts and circumstances with respect to the particular
transaction. The Company intends to hold the Existing Properties for investment
with a view to long-term appreciation, to engage in the business of developing,
owning and operating the Existing Properties and acquiring, developing, owning
and operating other properties and to make occasional sales of the Existing
Properties consistent with the Company's investment objectives. There can be no
assurance, however, that the IRS might not contend that one or more of those
sales is subject to the 100% penalty tax.
ASSET TESTS
The Company must satisfy three tests relating to the nature of its assets
at the close of each quarter of its taxable year. First, at least 75% of the
value of the Company's total assets must be represented by real estate assets,
cash, cash items and government securities (including stock or debt instruments
held for not more than one year purchased with the proceeds of an offering by
the Company of stock or debt with a term of at least five years). Second, not
more than 25% of the Company's total assets may be represented by securities
other than those qualifying for the 75% asset class. Third, of the investments
included in the 25% asset class, the value of any one issuer's securities owned
by the Company may not exceed 5% of the value of the Company's total assets,
and the Company may not own more than 10% of any one issuer's outstanding
voting securities.
After initially meeting the asset tests at the close of any quarter, the
Company will not lose its status as a REIT for failure to satisfy those tests
at the end of a later quarter solely by reason of changes in asset values. If
the failure to satisfy the asset tests results from an acquisition of
securities or other property during a quarter, the failure can be cured by
disposition of sufficient nonqualifying assets within 30 days after the close
of that quarter. The Company has maintained and will continue to maintain
adequate records of the value of its assets to ensure compliance with the asset
tests and within the 30 days after the close of any quarter will take those
actions that may be required to cure any noncompliance. If the Company fails to
cure noncompliance with the asset tests within that time period, the Company
will cease to qualify as a REIT.
ANNUAL DISTRIBUTION REQUIREMENTS
To qualify as a REIT, the Company is required to distribute dividends to
its stockholders (other than capital gain dividends) in an amount at least
equal to (A) the sum of (i) 95% of the Company's REIT taxable income (computed
without regard to the dividends paid deduction and the Company's net capital
gain) and (ii) 95% of any after tax net income from foreclosure property minus
(B) the sum of certain items of noncash income in excess of 5% of the Company's
REIT taxable income. In addition, if the Company disposes of any Built-In Gain
Asset during its Recognition Period, the Company will be required to distribute
at least 95% of any Built-in Gain, after tax, recognized on the disposition of
that asset pursuant to Treasury regulations that have not yet been promulgated.
Those distributions must be paid in the taxable year to which they relate or in
the following taxable year if declared before the Company timely files its tax
return for that year and if paid on or before the first regular dividend
payment after declaration. Those distributions are taxable to holders of Common
Stock (other than tax-exempt entities, as discussed below) in the year paid
even though they relate to a prior year for purposes of the Company's 95%
distribution requirement. To the extent the Company does not
93
<PAGE>
distribute all of its net capital gain or distributes at least 95% but less
than all of its REIT taxable income, as adjusted, it will be subject to tax
thereon at regular corporate tax rates. The Company has made and intends to
make timely distributions sufficient to satisfy these annual distribution
requirements.
It is expected that the Company's REIT taxable income will be less than
its cash flow due to the allowance of depreciation and other noncash charges in
computing REIT taxable income. Accordingly, the Company anticipates that it
generally will have sufficient cash or liquid assets to enable it to satisfy
the distribution requirements described above. It is possible, however, that
the Company, from time to time, may not have sufficient cash or other liquid
assets to meet those distribution requirements due to timing differences
between (i) the actual receipt of income and actual payment of deductible
expenses and (ii) the inclusion of the income and deduction of the expenses in
arriving at taxable income of the Company. If timing differences occur, the
Company, in order to meet the distribution requirements, may find it necessary
to arrange for short-term, or possibly long-term, borrowings.
Under certain circumstances, the Company may be able to rectify a failure
to meet the distribution requirements for a year by paying a deficiency
dividend to stockholders in a later year. A deficiency dividend may be included
in the Company's deduction for dividends paid for the earlier year. Thus, the
Company may be able to avoid paying tax on amounts that can be deducted as
deficiency dividends. The Company, however, will be required to pay interest
with respect to tax eliminated through a deficiency dividend.
Furthermore, if the Company should fail to distribute during any calendar
year at least the sum of (i) 85% of its REIT ordinary income for the year, (ii)
95% of its REIT capital gain income for the year and (iii) any undistributed
taxable income from prior periods, the Company would be subject to a 4% excise
tax on the excess of that required distribution over the amounts actually
distributed.
FAILURE TO QUALIFY FOR TAXATION AS A REIT
If the Company fails to qualify for taxation as a REIT in any taxable
year, and if the relief provisions do not apply, the Company will be subject to
tax (including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to stockholders in any year in which the
Company fails to qualify as a REIT will not be deductible by the Company (nor
be required to be made). As a result, the Company's failure to qualify as a
REIT would reduce the Cash Available for Distribution by the Company to its
stockholders. In addition, if the Company fails to qualify as a REIT, all
distributions to stockholders will be taxable to them as ordinary income to the
extent of the Company's current and accumulated earnings and profits, although,
subject to certain limitations, corporate distributees may be eligible for the
dividends received deduction. Unless entitled to relief under specific
statutory provisions, the Company also will be disqualified from taxation as a
REIT for the four taxable years following the year during which qualification
is lost. It is not possible to state whether the Company in all circumstances
would be entitled to statutory relief from disqualification as a REIT.
TAXATION OF U.S. STOCKHOLDERS
As used herein, the term "U.S. Stockholder" means a holder of shares of
Common Stock who, for U.S. federal income tax purposes, is (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any state
therein or the District of Columbia, (iii) an estate the income of which is
subject to U.S. federal income taxation regardless of its source, or (iv) a
trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more U.S.
fiduciaries have the authority to control all substantial decisions of the
trust.
As long as the Company qualifies as a REIT, distributions made by the
Company out of its current or accumulated earnings and profits (and not
designated as a capital gain dividend) will constitute
94
<PAGE>
dividends taxable to its taxable U.S. Stockholders as ordinary income. Those
distributions will not be eligible for the dividends received deduction in the
case of U.S. Stockholders that are corporations.
Distributions by the Company that are designated by the Company properly
as capital gain dividends, to the extent they do not exceed the Company's
actual net capital gain for the taxable year, will constitute gain from the
sale or other disposition of a capital asset held for more than one year to a
U.S. Stockholder without regard to the period for which the U.S. Stockholder
has held his shares of Common Stock. Gain recognized by the Company on
disposition of a property will not qualify as capital gain to the extent it
does not exceed prior depreciation deductions taken with respect to the
property. It is not clear whether amounts qualifying as capital gain dividends
will be taxable to a noncorporate U.S. Stockholder at the mid-term capital
gains rate (applicable to gain from the sale of an asset held for more than one
year but not more than eighteen months), long term capital gains rate
(applicable to gain from the sale of an asset held for more than eighteen
months), or some other rate. This uncertainty may be clarified by future
regulations. A U.S. Stockholder that is a corporation may be required to treat
up to 20% of certain capital gain dividends as ordinary income.
Pursuant to the Taxpayer Relief Act of 1997, starting with a REIT's first
taxable year that begins after August 5, 1997, a REIT may elect to retain and
pay income tax on net long-term capital gains that it receives during a taxable
year. If a REIT makes this election, its stockholders are required to include
in their income as long-term capital gain their proportionate share of the
undistributed long-term capital gains so designated by the REIT. A stockholder
will be treated as having paid his or her share of the tax paid by the REIT in
respect of long-term capital gains so designated by the REIT, for which the
stockholder will be entitled to a credit or refund. In addition, the
stockholder's basis in his or her REIT shares will be increased by the amount
of the REIT's designated undistributed long-term capital gains that are
included in the stockholder's long-term capital gains, reduced by the
stockholder's proportionate share of tax paid by the REIT on those gains that
the stockholder is treated as having paid. The earnings and profits of the REIT
will be reduced, and the earnings and profits of any corporate stockholder of
the REIT will be increased, to take into account amounts designated by the REIT
pursuant to this rule. A REIT must pay its tax on its designated long-term
capital gains within 30 days of the close of any taxable year in which it
designates long-term capital gains pursuant to this rule, and it must mail a
written notice of its designation to its stockholders within 60 days of the
close of the taxable year.
Distributions by the Company that exceed the Company's current and
accumulated earnings and profits and that are not designated as capital gain
dividends will be treated by a U.S. Stockholder first as tax free reductions of
his tax basis in his shares of Common Stock to the extent thereof and
thereafter as capital gains (provided he holds those shares as capital assets).
Capital gain recognized by certain noncorporate U.S. Stockholders is taxed at
preferential rates that will vary depending on whether the Common Stock has
been held for more than one year or more than 18 months on the date of a
distribution. Dividends declared by the Company in October, November or
December of any year and payable to a stockholder of record on a specified date
in any of those months shall be treated as both paid by the Company and
received by the stockholder on December 31 of that year, provided the dividend
actually is paid by the Company on or before January 31 of the following year.
A stockholder may not include in his own income tax return any net operating
loss or capital loss of the Company. Distributions made by the Company and gain
arising from the sale or exchange by a U.S. Stockholder of shares of Common
Stock will not be treated as passive activity income, and, as a result, a U.S.
Stockholder generally will not be able to apply any "passive losses" against
that income or gain. Distributions by the Company, to the extent they do not
constitute a return of basis, generally will be treated as investment income
for purposes of computing the investment income limitation. Gain arising from
the sale or other disposition of Common Stock, however, will not be treated as
investment income unless the U.S. Stockholder elects to reduce the amount of
his total net capital gain eligible for preferential capital gains tax rates by
the amount of that gain with respect to that Common Stock.
Upon any sale or other disposition of Common Stock, a U.S. Stockholder
will recognize gain or loss for federal income tax purposes in an amount equal
to the difference between (i) the amount of
95
<PAGE>
cash and the fair market value of any property received on the sale or other
disposition and (ii) the holder's adjusted tax basis in the Common Stock. That
gain or loss will be capital gain or loss if the Common Stock has been held by
the U.S. Stockholder as a capital asset and will be long-term gain or loss if
the share has been held for more than one year. In general, any loss recognized
by a U.S. Stockholder upon the sale or other disposition of Common Stock that
has been held for six months or less (after applying certain holding period
rules) will be treated as a long-term capital loss to the extent of
distributions received by the U.S. Stockholder from the Company that were
required to be treated as long-term capital gains.
BACKUP WITHHOLDING
The Company will report to its U.S. Stockholders and to the IRS the amount
of dividends paid during each calendar year and the amount of tax withheld, if
any. Under the backup withholding rules, a U.S. stockholder may be subject to
backup withholding at the rate of 31% with respect to dividends paid unless the
U.S. Stockholder (a) is a corporation or comes within certain other exempt
categories and, when required, demonstrates that fact or (b) provides a
taxpayer identification number, certifies as to no loss of exemption from
backup withholding and otherwise complies with applicable requirements of the
backup withholding rules. A U.S. Stockholder that does not provide the Company
with his correct taxpayer identification number also may be subject to
penalties imposed by the IRS. Any amount paid as backup withholding will be
creditable against the U.S. Stockholder's income tax liability. In addition,
the Company may be required to withhold a portion of capital gain distributions
to any stockholders who fail to certify their non-foreign status to the
Company. See "--Taxation of Non-U.S. Stockholders".
TAXATION OF CERTAIN TAX-EXEMPT STOCKHOLDERS
The IRS has ruled that amounts distributed as dividends by a qualified
REIT do not constitute unrelated business taxable income ("UBTI") when received
by a tax-exempt entity. Based on that ruling, provided a tax-exempt stockholder
(with certain exceptions described below) has not held its Common Stock as
"debt financed property" within the meaning of the Code and the Common Stock is
not otherwise used in a trade or business, dividends from the Company will not
be UBTI. Similarly, income from the sale of Common Stock will not constitute
UBTI unless the tax-exempt stockholder has held the Common Stock as "debt
financed property" within the meaning of the Code or has used the Common Stock
in a trade or business.
For a tax-exempt stockholder that is a social club, voluntary employee
benefit association, supplemental unemployment benefit trust or qualified group
legal services plan exempt from federal income taxation under Code section
501(c)(7), (c)(9), (c)(17) or (c)(20), respectively, income from an investment
in the Company will constitute UBTI unless the organization is able properly to
deduct amounts set aside or placed in reserve for certain purposes so as to
offset the income generated by its investment in the Company. Those prospective
investors should consult their own tax advisers concerning these "set aside"
and reserve requirements.
Notwithstanding the above, however, a portion of the dividends paid by a
pension-held REIT shall be treated as UBTI as to any trust that (1) is
described in section 401(a) of the Code, (2) is tax-exempt under section 501(a)
of the Code and (3) holds more than 10% by value of the interests in the REIT.
Tax-exempt pension funds that are described in section 401(a) of the Code are
referred to below as qualified trusts. A REIT is a pension-held REIT if (1) it
would not have qualified as a REIT but for the fact that section 856(h)(3) of
the Code provides that stock owned by a qualified trust shall be treated, for
purposes of requirement (5) of the requirements for qualification as a REIT
(see "Taxation of the Company--Requirements for Qualification"), as owned by
the beneficiaries of the trust (rather than by the trust itself), and (2)
either (a) at least one qualified trust holds more than 25% by value of the
interests in the REIT, or (b) one or more qualified trusts, each of which owns
more than 10% by value of the interests in the REIT, hold in the aggregate more
than 50% by value of the interests in the REIT. The percentage of any REIT
dividend treated as UBTI is equal to the ratio of (i) the UBTI earned by the
REIT (treating the REIT as if it were a qualified trust and therefore subject
to tax on UBTI) to (ii)
96
<PAGE>
the total gross income of the REIT. A DE MINIMIS exception applies when the
percentage is less than 5% for any year. The provisions requiring qualified
trusts to treat a portion of REIT distributions as UBTI will not apply if the
REIT is able to satisfy requirement (5) of the requirements for qualification
as a REIT without relying upon the look-through exception with respect to
qualified trusts. As a result of certain limitations on the transfer and
ownership of Common Stock contained in the Charter, the Company is not and does
not expect to be classified as a pension held REIT.
TAXATION OF NON-U.S. STOCKHOLDERS
The rules governing U.S. federal income taxation of the ownership and
disposition of Common Stock by persons that are, for purposes of such taxation,
nonresident alien individuals, foreign corporations, foreign partnerships or
foreign estates or trusts (collectively, "Non-U.S. Stockholders") are complex,
and no attempt is made herein to provide more than a brief summary of the
rules. The discussion, which is directed only at prospective investors that are
not existing stockholders, does not address all aspects of U.S. federal income
taxation and does not address state, local or foreign tax consequences that may
be relevant to a Non-U.S. Stockholder in light of his particular circumstances.
In addition, this discussion is based on current law, which is subject to
change, and assumes that the Company qualifies for taxation as a REIT.
Prospective Non-U.S. Stockholders should consult their own tax advisers to
determine the impact of federal, state, local and foreign tax laws, including
any reporting requirements, with regard to an investment in Common Stock.
DISTRIBUTIONS
A distribution by the Company to a Non-U.S. Stockholder which is neither
attributable to gain from a sale or exchange by the Company of a U.S. real
property interest nor designated by the Company as a capital gain dividend will
be treated as a dividend to the extent it is paid out of current or accumulated
earnings and profits of the Company. A dividend will be subject to withholding
of U.S. federal income tax imposed on the gross amount thereof at the rate of
30% or any lower rate that may be specified by an applicable income tax treaty,
unless the dividend is effectively connected with the conduct of trade or
business by the Non-U.S. Stockholder within the United States or, if an income
tax treaty applies, is attributable to a U.S. permanent establishment of the
Non-U.S. Stockholder. A dividend received by a Non-U.S. Stockholder which is
effectively connected with a U.S. trade or business or is attributable to a
U.S. permanent establishment will be subject to tax at graduated rates on net
income in generally the same manner as a dividend received by a U.S.
Stockholder is taxed and is not subject to U.S. withholding tax. A dividend
received by a Non-U.S. Stockholder that is a corporation also may be subject to
an additional branch profits tax at a 30% rate or a lower rate that may be
specified by an applicable income tax treaty.
Pursuant to current Treasury regulations, dividends paid to an address in
a country outside the United States generally are presumed to be paid to a
resident of that country for purposes of determining the applicability of U.S.
withholding tax and the applicability of a tax treaty. Under Treasury
regulations that will apply to payments made after December 31, 1998, however,
a Non-U.S. Stockholder who wishes to claim the benefit of an applicable treaty
would be required to satisfy certain certification and other requirements.
Under certain treaties, lower withholding rates generally applicable to
dividends do not apply to dividends from a REIT. Certain certification and
disclosure requirements must be satisfied to qualify for the exemption from
U.S. withholding tax for income effectively connected with a U.S. trade or
business or attributable to a U.S. permanent establishment.
Distributions in excess of current or accumulated earnings and profits of
the Company will not be taxable to a Non-U.S. Stockholder to the extent they do
not exceed the adjusted basis of the stockholder's Common Stock but rather will
reduce the adjusted basis of that Common Stock. To the extent those
distributions exceed the adjusted basis of a Non-U.S. Stockholder's Common
Stock, they will be treated as gain from the sale or exchange of his Common
Stock, the tax treatment of which is described below. If it cannot be
determined at the time a distribution is made whether or not that distribution
will exceed current and accumulated earnings and profits, the distribution
generally will be
97
<PAGE>
treated as a dividend for withholding tax purposes. However, amounts thus
withheld are generally refundable by the IRS if it subsequently is determined
that the distribution in fact exceeded current and accumulated earnings and
profits of the Company.
A distribution to a Non-U.S. Stockholder that is designated by the Company
at the time of distribution as a capital gains dividend (and not arising from
the disposition of a United States real property interest) generally will not
be subject to U.S. federal income tax unless (i) income in respect of the
Common Stock is effectively connected with a U.S. trade or business of the
Non-U.S. Stockholder (or, if an income tax treaty applies, is attributable to a
U.S. permanent establishment of the Non-U.S. Stockholder), in which case the
Non-U.S. Stockholder will be subject to the same tax consequences as a U.S.
Stockholder with respect to that distribution (except that a Non-U.S.
stockholder that is a foreign corporation also may be subject to the U.S.
branch profits tax, as discussed above), or (ii) the Non-U.S. Stockholder is a
nonresident alien individual who is present in the United States for 183 days
or more during the taxable year and has a "tax home" in the United States, in
which case the nonresident alien individual will be subject to a 30% tax on his
net capital gains.
A distribution to a Non-U.S. Stockholder that is attributable to gain from
a sale or exchange by the Company of a United States real property interest
will be treated as income effectively connected with a U.S. trade or business
of the Non-U.S. Stockholder. The Non-U.S. Stockholder thus generally would be
taxed at the same graduated tax rates applicable to a U.S. Stockholder (subject
to a special alternative minimum tax in the case of a nonresident alien
individual). A distribution by the Company is deemed to be designated as a
capital gain dividend to the maximum extent it may be so designated, and tax in
an amount equal to 35% of that amount must be withheld from the portion of the
distribution paid to a Non-U.S. Stockholder. In addition, in the hands of a
Non-U.S. Stockholder that is a corporation, the gain may be subject to the U.S.
branch profits tax, as discussed above. In general, in determining whether a
stockholder is a U.S. Stockholder not subject to withholding tax, the Company
or other withholding agent may rely on an IRS Form W-9 or on a certificate of
non-foreign status containing information specified by Treasury regulations,
provided the Company or other withholding agent does not have actual knowledge
to the contrary. The amount of any tax withheld is creditable against the
Non-U.S. Stockholder's U.S. federal income tax liability, and any amount of tax
withheld in excess of that tax liability may be refunded provided an
appropriate claim for refund is filed with the IRS.
SALE OF COMMON STOCK
A Non-U.S. Stockholder will not be subject to U.S. federal income tax on
gain recognized on a sale or other taxable disposition of Common Stock which is
not effectively connected with a U.S. trade or business of the Non-U.S.
Stockholder, so long as the Common Stock is regularly traded on an established
securities market. Notwithstanding the foregoing, gain from the sale or
exchange of Common Stock will be taxable to a Non-U.S. Stockholder if either
(i) the gain is effectively connected with a U.S. trade or business of the
Non-U.S. Stockholder (or, if an income tax treaty applies, is attributable to a
U.S. permanent establishment of the Non-U.S. Stockholder), in which case the
Non-U.S. Stockholder generally will be subject to the same tax treatment as a
U.S. Stockholder with respect to that gain (subject possibly to a special
alternative minimum tax in the case of a nonresident alien individual), and a
Non-U.S. Stockholder that is a foreign corporation also may be subject to a
U.S. branch profits tax, as discussed above, or (ii) the Non-U.S. Stockholder
is a nonresident alien individual who is present in the United States for at
least 183 days during the taxable year and who has a "tax home" in the United
States. In the latter case, the nonresident alien will be subject to a 30% U.S.
withholding tax on his or her net capital gains. If any gain on a sale or other
disposition of Common Stock would be subject to taxation under section 897 of
the Code, the purchaser generally would be required to withhold and remit to
the IRS tax in an amount equal to 10% of the purchase price.
BACKUP WITHHOLDING OF TAX AND INFORMATION REPORTING
Backup withholding of tax (which generally is a withholding tax imposed at
the rate of 31% on certain payments to persons that fail to furnish identifying
information under the U.S. information
98
<PAGE>
reporting requirements) and information reporting generally will not apply to
distributions paid to Non-U.S. Stockholders outside the United States that are
treated as (i) dividends subject to the 30% (or lower treaty rate) withholding
tax discussed above, (ii) capital gain dividends or (iii) distributions
attributable to gain from the sale or exchange by the Company of U.S. real
property interests. As a general matter, backup withholding and information
reporting will not apply to a payment of the proceeds of a sale of Common Stock
by or through a foreign office of a foreign broker. Information reporting (but
not backup withholding) will apply, however, to a payment of the proceeds of a
sale of Common Stock by a foreign office of a broker that (a) is a United
States person, (b) derives 50% or more of its gross income for certain periods
from the conduct of a trade or business in the United States or (c) is a
"controlled foreign corporation" (generally, a foreign corporation controlled
by certain U.S. stockholders) for U.S. tax purposes, unless the broker has
documentary evidence in its records that the holder is a Non-U.S. Stockholder
and certain other conditions are met, or the Non-U.S. Stockholder otherwise
establishes an exemption. Payment of the proceeds of sale of Common Stock to or
through a U.S. office of a broker is subject to both backup withholding and
information reporting unless the stockholder certifies under penalties of
perjury that he is a Non-U.S. Stockholder or otherwise establishes an
exemption. A Non-U.S. Stockholder may obtain a refund of any amounts withheld
under the backup withholding rules by filing the appropriate claim for refund
with the IRS.
The U.S. Treasury Department recently issued final regulations regarding
the withholding and information reporting rules discussed above. In general,
the new regulations do not alter the substantive withholding and information
reporting requirements but unify current certification procedures and forms and
clarify and modify reliance standards. The new regulations, for example,
require a Non-U.S. Stockholder that wishes to claim the benefit of a reduced
tax rate in an applicable tax treaty with respect to dividends received from a
U.S. corporation to satisfy certain certification and other requirements. In
addition, the new regulations require a corporation that is a REIT to withhold
tax at the 30% rate (or lower treaty rate) on the portion of a distribution
that is not designated as a capital gain dividend or a return of basis and at
the 35% rate described above on the portion of any distribution designated by
the REIT as a capital gain dividend. The new regulations generally are
effective for payments made after December 31, 1998, subject to certain
transition rules. THE DISCUSSION SET FORTH ABOVE IN "TAXATION OF NON-U.S.
STOCKHOLDERS" DOES NOT TAKE INTO ACCOUNT THE NEW REGULATIONS. PROSPECTIVE
NON-U.S. STOCKHOLDERS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISERS
REGARDING THE NEW REGULATIONS.
TAXPAYER RELIEF ACT OF 1997
On August 5, 1997, President Clinton signed into law the Taxpayer Relief
Act of 1997 (H.R. 2014), which will have the effect of modifying certain
REIT-related Code provisions for taxable years beginning on or after January 1,
1998. In addition to the changes contained in this legislation discussed above,
some of the other potentially significant REIT-related changes contained in the
legislation include; (i) the rule disqualifying a REIT for any year in which it
fails to comply with certain regulations requiring the REIT to monitor its
stock ownership is replaced with a financial penalty; (ii) the rules regarding
attribution to partnerships of ownership in another entity for purposes of
defining qualified rent and independent contractors are modified so that
attribution occurs only when a partner owns a 25% or greater interest in the
partnership; (iii) the class of excess noncash items for purposes of the REIT
distribution requirements is expanded; and (iv) certain other Code provisions
relating to REITs are amended. Some or all of the provisions could affect both
the Company's operations and its ability to maintain its REIT status for its
taxable years beginning in 1998.
OTHER TAX CONSEQUENCES
The Company and its stockholders may be subject to taxation in various
state or local jurisdictions, including those in which it or they transact
business or reside. The state and local tax treatment of the Company and its
stockholders may not conform to the federal income tax consequences discussed
above. Consequently, prospective stockholders should consult their own tax
advisers regarding the effect of state and local tax laws on an investment in
the Company.
99
<PAGE>
ERISA CONSIDERATIONS
The following is a summary of material considerations arising under the
Employment Retirement Income Security Act of 1974 ("ERISA") and the Code that
may be relevant to a prospective purchaser (including with respect to the
discussion contained in "Plan Assets Issue", to a prospective purchaser that is
not an employee benefit plan, another tax-qualified retirement plan, an
individual retirement account or an individual retirement annuity ("IRAs")).
This discussion does not propose to deal with all aspects of ERISA or the Code
or, to the extent not preempted, state law that may be relevant to particular
employee benefit plan shareholders (including plans subject to Title I of
ERISA, other employee benefit plans and IRAs subject to the prohibited
transaction provisions of the Code, and governmental plans and church plans
that are exempt from ERISA and prohibited transaction provisions of the Code
but that may be subject to state law requirements) in light of their particular
circumstances.
THE FOLLOWING IS INTENDED TO BE A SUMMARY ONLY AND IS NOT A SUBSTITUTE FOR
CAREFUL PLANNING WITH A PROFESSIONAL. A FIDUCIARY MAKING THE DECISION TO INVEST
IN SHARES OF COMMON STOCK ON BEHALF OF A PROSPECTIVE PURCHASER WHICH IS A PLAN
SUBJECT TO ERISA, A TAX-QUALIFIED RETIREMENT PLAN, AN IRA OR OTHER EMPLOYEE
BENEFIT PLAN (COLLECTIVELY "PLANS") IS ADVISED TO CONSULT ITS OWN LEGAL ADVISOR
REGARDING THE SPECIFIC CONSIDERATIONS ARISING UNDER ERISA, THE CODE AND (TO THE
EXTENT NOT PREEMPTED) STATE LAW WITH RESPECT TO THE PURCHASE, OWNERSHIP OR SALE
OF SHARES OF COMMON STOCK BY SUCH PLAN OR IRA. A fiduciary should also consider
the entire discussion under the heading "Federal Income Tax Considerations", as
material contained therein is relevant to any decision by an employee benefit
plan, tax-qualified retirement plan or IRA to purchase the Common Stock.
FIDUCIARY CONSIDERATIONS
Each fiduciary of a Plan subject to ERISA should carefully consider
whether an investment in shares of Common Stock is consistent with its
fiduciary responsibilities under ERISA. In particular, to the extent a Plan is
subject to ERISA, the fiduciary requirements of Part 4 of Title I of ERISA
require (i) the Plan's investments to be prudent and in the best interests of
the Plan, its participants and beneficiaries, (ii) the Plan's Investments to be
diversified in order to reduce the risk of large losses, unless under the
circumstances it is clearly prudent not to do so and (iii) the Plan's
investments to be authorized under ERISA and the terms of the governing
documents of the Plan. In determining whether an investment in shares of Common
Stock is prudent for purposes of ERISA, the appropriate fiduciary of a Plan
should consider all of the facts and circumstances, including, without
limitation, whether the investment is reasonably designed, as a part of the
Plan's portfolio for which the fiduciary has investment responsibility, to meet
the objectives of the Plan, taking into consideration the risk of loss and
opportunity for gain (or other return) from the investment, the diversification
cash flow and funding requirements of the Plan, and the liquidity and current
return of the Plan's portfolio. A fiduciary should also take into account the
nature of the Company's business, the management of the Company and the length
of the Company's operating history and other matters described under "Risk
Factors".
In addition, provisions of ERISA and the Code prohibit certain
transactions in Plan assets that involve persons who have specified
relationships with a Plan. The consequences of such prohibited transactions
include excise taxes, disqualification of IRAs and other liabilities.
PLAN ASSETS ISSUE
A prohibited transaction may occur if the assets of the Company are deemed
to be Plan assets. In certain circumstances where a Plan holds an interest in
an entity, the assets of the entity are deemed to be Plan assets (the
"look-through rule"). Under such circumstances, any person that exercises
authority
100
<PAGE>
or control with respect to the management or disposition of such assets is a
Plan fiduciary. Plan assets are not defined in ERISA or the Code, but the
United States Department of Labor has issued regulations, effective March 13,
1987 (the "Regulations"), that outline the circumstances under which a Plan's
interest in an entity will be subject to the look-through rule.
The Regulations apply only to the purchase by a Plan of an "equity
interest" in an entity, such as common stock of a REIT. However, the
Regulations provide an exception to the look-through rule for equity interests
that are "publicly-offered securities".
Under the Regulations, a "publicly-offered security" is a security that is
(i) freely transferable, (ii) part of a class of securities that is widely held
and (iii) either (a) part of a class of securities that is registered under
section 12(b) or 12(g) of the Exchange Act or (b) sold to a Plan as part of an
offering of securities to the public pursuant to an effective registration
statement under the Securities Act and the class of securities of which such
security is a part is registered under the Exchange Act within 120 days (or
such longer period as may be allowed by the Commission) after the end of the
fiscal year of the issuer during which the offering of such securities to the
public occurred. Whether a security is considered "freely transferable" depends
on the facts and circumstances of each case. Generally, if the security is part
of an offering in which the minimum investment is $10,000 or less, any
restriction on or prohibition against any transfer or assignment of such
security for the purposes of preventing a termination or reclassification of
the entity for federal or state tax purposes will not of itself prevent the
security from being considered freely transferable. A class of securities is
considered "widely-held" only if it is a class of securities that is owned by
100 or more investors independent of the issuer and of one another.
The Company anticipates that the Common Stock will meet the criteria of
the publicly-offered securities exception to the look-through rule. First, the
Company anticipates that the Common Stock will be considered to be freely
transferable, as the minimum investment will be less than $10,000 and the only
restrictions upon its transfer are those required under federal income tax laws
to maintain the Company's status as a REIT. Second, the Company believes that
the Common Stock will be held by l00 or more investors and that at least 100 or
more of these Investors will be independent of the Company and of one another.
Third, the Common Stock will be part of an offering of securities to the public
pursuant to an effective registration statement under the Securities Act and
will be registered under the Exchange Act within 120 days after the end of the
fiscal year of the Company during which the offering of such securities to the
public occurs. Accordingly, the Company believes that if a Plan purchases the
Common Stock, the Company's assets should not be deemed to be Plan assets and,
therefore, that any person who exercises authority or control with respect to
the Company's assets should not be a Plan fiduciary.
101
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated , 1997 (the "Underwriting Agreement"), the Underwriters
named below (the "Underwriters"), for whom Credit Suisse First Boston
Corporation, The Robinson-Humphrey Company, LLC and Salomon Brothers Inc are
acting as representatives (collectively, the "Representatives"), have severally
but not jointly agreed to purchase from the Company the following respective
numbers of shares of Common Stock:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER ------------------
<S> <C>
Credit Suisse First Boston Corporation ......
The Robinson-Humphrey Company, LLC ............
Salomon Brothers Inc ........................
---------
Total .................................... 4,700,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the shares of Common Stock
offered hereby (other than those shares covered by the over-allotment option
described below) if any are purchased. The Underwriting Agreement provides
that, in the event of a default by an Underwriter, in certain circumstances,
the purchase commitments of the non-defaulting Underwriters may be increased or
the Underwriting Agreement may be terminated.
The Company has granted to the Underwriters an option, expiring at the
close of business on the 30th day after the date of this Prospectus, to
purchase up to 705,000 additional shares at the initial public offering price
less the underwriting discounts and commissions, all as set forth on the cover
page of this Prospectus. Such option may be exercised only to cover
over-allotments in the sale of the shares of Common Stock. To the extent such
option is exercised, each Underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares of Common Stock as it was obligated to purchase pursuant to the
Underwriting Agreement.
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public initially at the
public offering price set forth on the cover page of this Prospectus and,
through the Representatives, to certain dealers at such price less a concession
of $ per share, and the Underwriters and such dealers may allow a discount
of $ per share on sales to certain other dealers. After the initial public
offering, the public offering price and concession and discount to dealers may
be changed by the Representatives.
The Representatives have informed the Company that they do not expect
discretionary sales by the Underwriters to exceed 5.0% of the number of shares
being offered hereby.
The Company and its officers, directors and holders of substantially all
of the outstanding shares of Common Stock have agreed that they will not offer,
sell, contract to sell, announce their intention to sell, pledge or otherwise
dispose of, directly or indirectly, or file with the Securities and Exchange
Commission a registration statement under the Securities Act relating to, any
additional shares of Common Stock or securities convertible or exchangeable
into or exercisable for any shares of Common Stock without the prior written
consent of Credit Suisse First Boston Corporation for a period of 180 days
after the date of this Prospectus.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act, or
contribute to payments which the Underwriters may be required to make in
respect thereof.
102
<PAGE>
The Common Stock has been approved for listing on the New York Stock
Exchange subject to official notice of issuance.
Prior to the Offering, there has been no public market for the Common
Stock. The initial price to the public for the shares of Common Stock has been
negotiated among the Company and the Representatives. Such initial price is
based on, among other things in addition to prevailing market conditions, the
Company's financial and operating history and condition, its prospects and the
prospects for its industry in general, the management of the Company and the
market prices for securities of companies in businesses similar to that of the
Company. See "Risk Factors-The Price of the Common Stock May Be Adversely
Affected by the Lack of a Prior Market and Fluctuations in the Stock Market;
The Offering Price Is Not Based Upon Property Valuations".
The Representatives, on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Exchange Act.
Over-allotment involves syndicate sales in excess of the Offering size, which
creates a syndicate short position. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not exceed
a specified maximum. Syndicate covering transactions involve purchases of the
Common Stock in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the
Representatives to reclaim a selling concession from a syndicate member when
the Common Stock originally sold by such syndicate member are purchased in a
syndicate covering transaction to cover syndicate short positions. Such
stabilizing transactions, syndicate covering transactions and penalty bids may
cause the price of the Common Stock to be higher than it would otherwise be in
the absence of such transactions. These transactions may be effected on the New
York Stock Exchange or otherwise and, if commenced, may be discontinued at any
time.
Robert L. Cooney, a director nominee, served as a Managing Director of
Equity Capital Markets of Credit Suisse First Boston from 1978 to 1996. See
"Management--Management and Key Employees" and "Certain Transactions".
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby will be passed
upon for the Company by Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A.,
Miami, Florida. In addition, the description of federal income tax consequences
contained in this Prospectus entitled "Federal Income Tax Considerations" is
based upon the opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel,
P.A., Miami, Florida. Certain legal matters related to the Offering will be
passed upon for the Underwriters by Latham & Watkins, Los Angeles, California.
Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. and Latham & Watkins
will rely upon the opinion of Ballard Spahr Andrews & Ingersoll, Baltimore,
Maryland, as to certain matters relating to Maryland law.
EXPERTS
The financial statements of the Company as of December 31, 1996 and 1995
and for each of the three years in the period ended December 31, 1996 included
in this prospectus and the related financial statement schedule included
elsewhere in the registration statement have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their reports appearing herein and
elsewhere in the registration statement, and have been so included in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
The statements of revenues and certain expenses of West Lake for the
period from January 1, 1996 through November 5, 1996 and Lantana Village for
the year ended December 31, 1996 and Summerlin
103
<PAGE>
Square for the year ended December 31, 1996 included in this prospectus have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports appearing herein and elsewhere in the registration statement, and have
been so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
In addition, certain statistical information and analysis provided under
the captions "Prospectus Summary--Market Data" and "Business--Market Data" has
been prepared by Lesser and included herein in reliance upon the authority of
such firm as an expert in, among other things, real estate consulting and urban
economics.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-11 (together with all amendments, exhibits and schedules thereto, the
"Registration Statement") under the Securities Act, with respect to the Common
Stock offered hereby. This Prospectus does not contain all of the information
set forth in the Registration Statement. For further information with respect
to the Company and the Common Stock offered hereby, reference is hereby made to
such Registration Statement. Statements contained in this Prospectus as to the
contents of any contract or other document are not necessarily complete and, in
each instance, reference is made to the copy of such contract or document filed
as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. Copies of the Registration
Statement may be obtained from the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission at Seven World Trade Center, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, upon payment of the fees
prescribed by the Commission, or may be examined without charge at the offices
of the Commission. In addition, copies of the Registration Statement and
related documents may be obtained through the Commission's Internet address at
http://www.sec.gov.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements which have been certified by its
independent public accountants, and quarterly reports containing unaudited
summary financial information for each of the first three quarters of each
fiscal year.
104
<PAGE>
GLOSSARY
Unless the context otherwise requires, the following capitalized terms
shall have the meanings set forth below for the purposes of this Prospectus:
"ACQUISITION AND DEVELOPMENT OF THE REDEVELOPMENT/DEVELOPMENT PROPERTIES"
means the acquisition and development of those properties referred to in
footnote (1) to the table under "Use of Proceeds".
"ACQUISITION LINE OF CREDIT" means a line of credit of up to $35.0 million
to be secured by unencumbered Existing Properties and other properties of the
Company.
"ACRS" means the accelerated cost recovery system depreciation.
"ADA" means the Americans with Disabilities Act, enacted on July 26, 1990.
"AGGREGATE STOCK OWNERSHIP LIMIT" means not more than 5% (in value or in
number of shares, whichever is more restrictive) of the aggregate of the
outstanding shares of all classes or series of stock of the Company, including,
without limitation, Common Stock and Preferred Stock.
"ANCHOR TENANT" means a tenant that, due to size, reputation or other
factors, is particularly responsible for drawing other tenants and shoppers to
a shopping center.
"ATLANTIC VILLAGE" means the Atlantic Village Shopping Center, comprising
100,559 of GLA, located in Atlantic Beach, Florida.
"BASE RENT" means gross rent excluding payments by tenants on account of
real estate taxes, operating expenses, utility expenses and percentage rent.
"BEAUCLERC VILLAGE" means the Beauclerc Village Shopping Center,
comprising 67,930 square feet of GLA located in Jacksonville, Florida.
"BIRD LUDLUM" means the Bird Ludlum Shopping Center, comprising 192,477
square feet of GLA located in Miami, Florida.
"BYLAWS" means the Bylaws of the Company.
"CASH AVAILABLE FOR DISTRIBUTION" means FFO as adjusted for capital
expenditures and scheduled principal payments.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act, as amended by the Superfund Amendments and Reauthorization Act
of 1986.
"CHARTER" means the charter of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means shares of the Company's common stock, par value $0.01
per share.
"COMMON STOCK OWNERSHIP LIMIT" means not more than five percent (in value
or in number of shares, whichever is more restrictive) of the aggregate of the
outstanding shares of Common Stock of the Company.
"COMMONWEALTH" means the Commonwealth Shopping Center, comprising 71,021
square feet of GLA located in Jacksonville, Florida.
"COMMUNITY SHOPPING CENTER" means a shopping center containing 100,000 to
300,000 square feet of GLA.
105
<PAGE>
"COMPANY" means the business and property of Equity One, Inc., a Maryland
corporation, and its consolidated subsidiaries.
"CORAL WAY" means 10 acres of real property located in Southwest Dade
County, Florida upon which the Company intends to develop a 100,000 square foot
Supermarket Center.
"CPI" means the Consumer Price Index.
"DANBAR" means Danbar, Ltd., an Israeli corporation whose securities are
publicly traded on TASE.
"DANBAR RESOURCES" means Danbar Resources, Ltd., an Israeli corporation
whose securities are publicly traded on TASE and a subsidiary of Danbar.
"DAN OVERSEAS" means Dan Overseas, Ltd., a British Virgin Islands
corporation and wholly-owned subsidiary of Danbar Resources.
"DIANA BUILDING" means the 18,707 square feet mixed use office/retail
property located in West Palm Beach, Florida.
"EAST BAY" means East Bay Plaza comprising 85,426 square feet of GLA
located in Largo, Florida.
"EMPLOYMENT AGREEMENTS" mean, collectively, the employment agreements by
and between the Company and each of Chaim Katzman and Doron Valero, each of
which expire on December 31, 2003.
"EQUITY ONE OFFICE BUILDING" means the Equity One Office Building
comprising 28,980 square feet of mixed-use office/retail property, including
the Company's corporate offices located in Miami Beach, Florida.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"EUSTIS SQUARE" means the Eustis Square Shopping Center comprising 126,791
square feet of GLA located in Eustis, Florida.
"EXCESS SHARES" means those shares, the number of which is in excess of
the Ownership Limit.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXISTING PROPERTIES" means the 15 shopping center properties, two mixed
used (office/retail) properties, one office building and one mini-warehouse
facility owned by the Company at the time of the Offering.
"FFO" means Funds From Operations.
"FIRPTA" means the Foreign Investment in Real Property Tax Act of 1980.
"FOREST EDGE" means the Forest Edge Shopping Center comprising 68,631
square feet of GLA located in Orlando, Florida.
"FORT CAROLINE" means the Fort Caroline Trading Post comprising 74,546
square feet of GLA located in Jacksonville, Florida.
"FOUR CORNERS" means the Four Corners Shopping Center comprising 115,178
square feet of GLA located in Tomball, Texas, in the Houston metropolitan area.
"FUNDS FROM OPERATIONS" means, as defined by NAREIT, net income (loss)
(computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of property, plus real estate related depreciation and
amortization (excluding amortization of deferred financing costs).
"GAAP" means generally accepted accounting principles.
106
<PAGE>
"GAZIT (1995)" means Gazit (1995), Inc., a Nevada corporation, a wholly
owned subsidiary of Gazit and successor in interest to Gazit Holdings, Inc.
"GAZIT" means Gazit Inc., a Panamanian corporation whose securities are
publicly traded on TASE.
"GLA" means gross leasable area.
"GLOBAL REALTY" means Global Realty & Management, Inc., a wholly owned
subsidiary of the Company, which performs property management services for the
Company's properties.
"GLOBE REIT" means Globe Reit Investments, Ltd., an Israeli corporation
(formerly known as M.G.N. Oil and Gas Resources, Ltd.) whose securities are
publicly traded on TASE.
"ICSC" means the International Council of Shopping Centers.
"INTERESTED STOCKHOLDER" means, for purposes of the MGCL, any person who
beneficially owns ten percent or more of the voting power of the Company's
shares or an affiliate of the corporation who, at any time within a two year
period prior to a specified date, was the beneficial owner of ten percent or
more of the voting power of the then outstanding voting stock of the Company.
"IRREVOCABLE PROXY" means the irrevocable proxy granted to Globe Reit by
Dan Overseas, Gazit (1995) and Mr. Chaim Katzman to vote through May 2001 all
of the shares of Common Stock now owned or hereafter acquired by Dan Overseas,
Gazit (1995) and Mr. Katzman for the purposes of electing directors of the
Company.
"IRS" means the Internal Revenue Service.
"LAKE MARY" means the Lake Mary Shopping Centre comprising 288,450 square
feet of GLA located in Seminole County, Orlando, Florida.
"LANTANA VILLAGE" means Lantana Village Square Shopping Center, comprising
85,300 square feet of GLA located in Lantana, Florida.
"LEASING COMMISSIONS" means brokerage commission fees paid by the Company
in connection with new leases or lease renewals.
"LIBOR" means London Interbank Offered Rate published by the Wall Street
Journal.
"M.G.N." means M.G.N. (USA), Inc., a Nevada corporation and wholly owned
subsidiary of Globe Reit.
"MANDARIN" means the Mandarin Mini-Storage warehouse comprising 52,880
square feet of GLA located in Jacksonville, Florida.
"MGCL" means the Maryland General Corporation Law, as amended.
"MONUMENT POINTE" means the Monument Pointe Shopping Center comprising
75,328 square feet of GLA located in Jacksonville, Florida.
"MORTGAGE INDEBTEDNESS" means that mortgage indebtedness referred to in
footnote (4) to the table under "Use of Proceeds".
"NAMED OFFICERS" means, collectively, the Company's Chief Executive
Officer, and the Company's Executive Vice President and Chief Operating
Officer.
"NAREIT" means the National Association of Real Estate Investment Trusts.
"NAREIT WHITE PAPER" means the White Paper on FFO approved by the Board of
Governors of the NAREIT in March 1995.
"NEIGHBORHOOD SHOPPING CENTER" means a shopping center containing less
than 100,000 square feet of GLA.
107
<PAGE>
"1995 PLAN" means the 1995 Stock Option Plan adopted by the Company in
December, 1995.
"NET OPERATING INCOME" or "NOI" means net operating income determined by
subtracting operating and general administrative expenses directly related to
the property from total revenues.
"1995 PLAN" means the 1995 Stock Incentive Plan of the Company.
"NYSE" means the New York Stock Exchange, Inc.
"OAK HILL" means the Oak Hill Village Shopping Center comprising 78,492
square feet of GLA located in Jacksonville, Florida.
"OFFERING" means the offering of shares of Common Stock of the Company
pursuant to and as described in this Prospectus.
"OWNERSHIP LIMIT" means the restriction contained in the Company's Charter
providing that, subject to certain exceptions, no holder may own, or be deemed
to own by virtue of the constructive ownership provisions of the Code, more
than 5% (by number or value, whichever is more restrictive) of the outstanding
shares of Common Stock.
"PARKER TOWNE" means the Parker Towne Centre comprising 205,792 square
feet of GLA located in Plano, Texas, in the Dallas metropolitan area.
"PERFORMING SUPERMARKET CENTER" means Neighborhood and Community Shopping
Centers with tenants occupying 85% or more of GLA and which are well
maintained, substantially fully leased and maintain an appropriate mix of
Anchor Tenants and other tenants.
"PERMITTED HOLDER" means a person who may own shares of stock of the
Company without violating the ownership restrictions of the Charter.
"PLAZA DEL REY" means the Plaza Del Rey Shopping Center comprising 50,146
square feet of GLA located in Southwest Dade County, Florida.
"POINTE ROYALE" means the Pointe Royale Shopping Center comprising 199,068
square feet of GLA located in Cutler Ridge, Dade County, Florida.
"PROHIBITED OWNER" means a person or entity holding record title to shares
in excess of the Ownership Limit.
"PROHIBITED TRANSFEREE" means any person to which any transfer of Common
Stock of the Company would result in the person violating the Ownership Limit.
"PROPOSED PERFORMING SUPERMARKET CENTER ACQUISITIONS" means the proposed
acquisitions of Lantana Village and Beauclerc Village referred to in footnote
(2) to the table under "Use of Proceeds".
"REGISTRABLE SHARES" means those shares of stock of the Company granted
Registration Rights.
"REGISTRATION RIGHTS AGREEMENT" means the registration right agreement by
and among the Company and each of Chaim Katzman, Gazit (1995), Dan Overseas,
Globe Reit, Eli Makavy, Doron Valero and David Wulkan with respect to their
Registrable Shares.
"REGISTRATION RIGHTS" mean those registration rights granted to certain
stockholders pursuant to the Registration Rights Agreement, the Employment
Agreements, and the Series C Warrants.
"REIT" means a real estate investment trust as defined in Section 856 of
the Code which meets the requirements for qualification as a REIT described in
Sections 856 through 860 of the Code.
"RELATED PARTY TENANT" means a tenant actually or constructively owned 10%
or more by the REIT or an owner of 10% or more of the REIT.
"RENOVATION OF EXISTING PROPERTIES" means the renovation and development
of those properties referred to in footnote (3) to the table under "Use of
Proceeds".
108
<PAGE>
"REPRESENTATIVES" shall mean Credit Suisse First Boston Corporation, The
Robinson-Humphrey Company, LLC and Salomon Brothers Inc. as representatives for
the Underwriters.
"RULE 144" means Rule 144 promulgated under the Securities Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SERIES C WARRANTS" means the warrants to purchase up to 1,306,124 shares
of Common Stock of the Company at an exercise price of $8.25 exercisable
through December 31, 1999.
"SKY LAKE" means the property recently acquired by the Company which is
known as Sky Lake Mall in North Dade County, Florida, which, after a
comprehensive redevelopment, will contain 300,000 square feet of GLA.
"STATEMENT NO. 128" means the Statement of Financial Accounting Standards
No. 128, "Earnings Per Share", issued by the Financial Accounting Standards
Board in February 1997.
"SUMERLIN SQUARE" means the Summerlin Square Shopping Center comprising
110,200 square feet of GLA located in Fort Myers, Florida.
"SUPERMARKET CENTERS" means Community and Neighborhood Shopping Centers
anchored by supermarkets.
"TASE" means the Tel Aviv Stock Exchange.
"TENANT IMPROVEMENTS" means capital costs incurred by the Company for
leasehold improvements including costs for items such as heating, ventilation
and air conditioning, plumbing, electrical upgrades, interior walls, wall
finishes, ceiling treatment and floor coverings.
"TREASURY REGULATIONS" means regulations of the U.S. Department of the
Treasury under the Code.
"UBTI" means unrelated business taxable income.
"UNDERPERFORMING SUPERMARKET CENTER" means Neighborhood and Community
Shopping Centers which are not Performing Supermarket Centers.
"UNDERWRITERS" means Credit Suisse First Boston Corporation, The
Robinson-Humphrey Company, LLC and Salomon Brothers Inc and those parties named
in the Underwriting Agreement as underwriters of the Offering.
"UNDERWRITING AGREEMENT" means the Underwriting Agreement between the
Company and the Representatives relating to the purchase of the Common Stock
offered hereby.
"WEST LAKE" means the West Lake Plaza Shopping Center comprising 100,747
square feet of GLA located in Kendall Lakes, Dade County, Florida.
109
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
PAGE
----
EQUITY ONE, INC. AND SUBSIDIARIES
PRO FORMA (UNAUDITED):
Pro Forma Consolidated Financial Statements ................................. F-2
Pro Forma Consolidated Balance Sheet as of June 30, 1997 .................. F-3
Pro Forma Consolidated Statement of Operations
for the six months ended June 30, 1997 .................................... F-4
Pro Forma Consolidated Statement of Operations
for the year ended December 31, 1996 ....................................... F-5
Notes to the Pro Forma Consolidated Financial Statements ..................... F-6
HISTORICAL:
Condensed Consolidated Balance Sheets as of June 30, 1997 (Unaudited)
and December 31, 1996 ...................................................... F-8
Unaudited Condensed Consolidated Statements of Operations
for the six months ended June 30, 1997 and 1996 ........................... F-9
Unaudited Condensed Consolidated Statements of Stockholders' Equity
for the six months ended June 30, 1997 and 1996 ........................... F-10
Unaudited Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 1997 and 1996 ........................... F-11
Notes to Unaudited Condensed Consolidated Financial Statements ............... F-12
Independent Auditors' Report ................................................ F-13
Consolidated Balance Sheets as of December 31, 1996 and 1995 ............... F-14
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 and 1994 .......................................... F-15
Consolidated Statements of Stockholders' Equity
for the years ended December 31, 1996, 1995 and 1994 ..................... F-16
Consolidated Statements of Cash Flows
for the years ended December 31, 1996, 1995 and 1994 ..................... F-17
Notes to Consolidated Financial Statements ................................. F-18
WEST LAKE PLAZA SHOPPING CENTER - 1996 ACQUISITION PROPERTY
Independent Auditors' Report ................................................ F-29
Statement of Revenues and Certain Expenses for the period from January 1, 1996
through November 5, 1996 ................................................... F-30
Notes to Statement of Revenues and Certain Expenses ........................ F-31
LANTANA VILLAGE SQUARE - PROPOSED ACQUISITION PROPERTY
Independent Auditors' Report ................................................ F-33
Statement of Revenues and Certain Expenses for the year ended
December 31, 1996 and the six months ended June 30, 1997 (Unaudited) ...... F-34
Notes to Statement of Revenues and Certain Expenses ........................ F-35
SUMMERLIN SQUARE - PROPOSED ACQUISITION PROPERTY
Independent Auditors' Report ................................................ F-37
Statement of Revenues and Certain Expenses for the year ended
December 31, 1996 and the six months ended June 30, 1997 (Unaudited) ...... F-38
Notes to Statement of Revenues and Certain Expenses ........................ F-39
</TABLE>
F-1
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The unaudited pro forma consolidated balance sheet as of June 30, 1997 is
presented as if the Offering and the application of the net proceeds of the
Offering all had occurred on June 30, 1997. The pro forma consolidated
statements of operations for the six months ended June 30, 1997 and the year
ended December 31, 1996 are presented as if the Offering and the application of
the net proceeds (and the acquisition of West Lake, Forest Edge, Monument,
Lantana, Beauclerc and Summerlin), all had occurred on January 1, 1996.
The pro forma consolidated financial statements should be read in
conjunction with and are based upon the historical consolidated financial
statements of Equity One, Inc. and Subsidiaries, including the notes thereto,
included elsewhere in the Prospectus. Because the preponderance of proceeds are
allocated to acquisition, development, redevelopment and renovation projects
which, for pro forma statement of operations purposes, do not generate any
revenue or expense, pro forma results of operations reflect only the repayment
of mortgage notes payable and the proposed acquisitions of Lantana Village,
Beauclerc Village and Summerlin and omit any revenue or expense from other
proceeds uses (except for historical revenue and expense attributable to Sky
Lake which will continue during the redevelopment process). Accordingly, the
pro forma consolidated financial statements do not purport to represent the
Company's financial position as of June 30, 1997 or the results of operations
for the six months ended June 30, 1997 or for the year ended December 31, 1996
that would actually have occurred had the Offering (and the acquisitions listed
above) and the application of the net proceeds of the Offering all been
completed on June 30, 1997 or at the beginning of the periods presented, or to
project the Company's financial position or results of operations as of any
future date or for any future period.
F-2
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS(1)
--------------------------
HISTORICAL DEBIT CREDIT PRO FORMA
------------ --------- -------------- ------------
<S> <C> <C> <C> <C>
ASSETS
RENTAL PROPERTIES:
Land ............................................. $ 30,961 $11,666 A(1) $ 42,627
Building and improvements ........................ 81,445 32,731 A(2) 114,176
-------- -------- ------------ --------
112,406 44,397 156,803
Less accumulated depreciation ..................... (6,003) (6,003)
-------- --------
Rental properties, net ........................... 106,403 44,397 150,800
Cash and cash equivalents ........................ 4,558 B 4,558
Accounts and other receivables, net ............... 824 824
Securities available for sale ..................... 5,589 5,589
Deposits .......................................... 1,403 1,403
Prepaid and other assets ........................ 1,210 1,210
Deferred financing costs, net ..................... 886 313 C(1) 573
-------- ------------ --------
Total assets ................................. $120,873 $44,397 $ 313 $164,957
======== ======== ============ ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
LIABILITIES:
Mortgage notes payable ........................... $ 64,916 $17,860 D $ 47,056
Tenants' security deposits ........................ 708 708
Accounts payable and accrued expenses ............ 1,679 1,679
Deferred rental income ........................... 76 76
-------- --------
Total liabilities .............................. 67,379 17,860 0 49,519
======== ======== ============ ========
STOCKHOLDER'S EQUITY:
Common stock and additional paid-in capital ...... 55,019 11,666 A(1) 117,799
32,731 A(2)
17,860 D
523 C(2)
Notes receivable from stock sales ............... (1,525) (1,525)
Retained (deficit) .............................. 0 836 C (836)
-------- -------- ------------ --------
Total stockholders' equity ..................... 53,494 836 62,780E 115,438
-------- -------- ------------ --------
Total liabilities and stockholders' equity ...... $120,873 $18,696 $ 62,780 $164,957
======== ======== ============ ========
</TABLE>
The accompanying notes are an integral part of these
pro forma consolidated financial statements.
F-3
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS(2) PRO FORMA
------------ ---------------- -----------
<S> <C> <C> <C>
REVENUES:
Rental income .................................... $9,361 $ 1,682F $11,043
Investment revenue .............................. 312 312
------- --------
Total revenues .............................. 9,673 1,682 11,355
------- ---------- --------
COSTS AND EXPENSES:
Operating expenses .............................. 2,743 265 F 3,008
Depreciation and amortization .................. 1,178 221 F 1,399
Interest ....................................... 2,939 (186)G 2,753
General and administrative expenses ............ 241 75 H 316
------- ---------- --------
Total costs and expenses ..................... 7,101 375 7,476
------- ---------- --------
Net income ....................................... $2,572 $ 1,307 $ 3,879
======= ========== ========
Net earnings per share based on weighted average
number of shares of common stock outstanding
excluding shares attributable to development and
redevelopment activities ..................... $ 0.40
========
Weighted average number of shares of
common stock outstanding excluding shares
attributable to development and redevelopment
activities (I) ................................. 9,816
========
</TABLE>
The accompanying notes are an integral part of these
pro forma consolidated financial statements.
F-4
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS(2) PRO FORMA
------------ ---------------- -----------
<S> <C> <C> <C>
REVENUES:
Rental income .................................... $16,337 $ 5,372F $21,709
Investment revenue .............................. 377 377
-------- --------
Total revenues .............................. 16,714 5,372 22,086
-------- ----------- --------
COSTS AND EXPENSES:
Operating expenses .............................. 4,832 1,260 F 6,092
Depreciation and amortization .................. 2,067 667 F 2,734
Interest ....................................... 5,380 (164)G 5,216
General and administrative expenses ............ 515 150 H 665
-------- ----------- --------
Total costs and expenses ..................... 12,794 1,913 14,707
-------- ----------- --------
Net income ....................................... $ 3,920 $ 3,459 $ 7,379
======== =========== ========
Net earnings per share based on weighted average
number of shares of common stock outstanding
excluding shares attributable to development and
redevelopment activities ..................... $ 0.84
========
Weighted average number of shares of
common stock outstanding excluding shares
attributable to development and redevelopment
activities (I) ................................. 8,791
========
</TABLE>
The accompanying notes are an integral part of these
pro forma consolidated financial statements.
F-5
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
1. ADJUSTMENTS TO THE PRO FORMA CONSOLIDATED BALANCE SHEET
The pro forma adjustments to the Pro Forma Consolidated Balance Sheet as
of June 30, 1997 are as follows:
<TABLE>
<S> <C>
(A) Reflects the cost of the proposed retail property acquisitions and the cost of the
renovation and development of the Existing Properties
Seller financing in connection with purchase of Sky Lake ........................ $ 7,000
Development costs of Sky Lake ................................................... 9,987
Purchase price of proposed retail property acquisitions (Lantana, Beauclerc
and Summerlin) .................................................................. 20,000
Purchase price of 4.4 acres of vacant land proximate to Coral Way (not yet
acquired) ..................................................................... 1,010
Atlantic Village Shopping Center renovation costs .............................. 850
Commonwealth Shopping Center renovation costs .................................... 1,750
Lake Mary Centre development costs ................................................ 3,000
Point Royale office building renovation costs .................................... 800
--------
Total proposed retail property acquisitions and renovation and development
of Existing Properties ......................................................... $44,397
========
</TABLE>
The cost of the proposed retail property acquisitions and renovations and
development of Existing Properties will be allocated as follows:
<TABLE>
<S> <C>
(1) Land ........................................................................ $ 11,666
(2) Buildings and improvements ................................................... 32,731
---------
$ 44,397
=========
(B) The adjustment to pro forma cash and cash equivalents was determined as follows:
Net proceeds from the Offering after underwriting discount and estimated issuance
costs of $5,370 ............................................................... $ 62,780
Repayment of mortgage notes payable including $523 of additional loan fees......... (18,383)
Purchase of proposed retail property acquisitions and costs of renovation and
development of Existing Properties .......................................... (44,397)
---------
Net increase in cash and cash equivalents ....................................... $ 0
=========
(C) (1) Reflects the write-off of loan costs relating to repayment of mortgage
notes payable and ............................................................ $ 313
(2) Additional loan fees resulting from the early repayment of mortgage
notes payable ............................................................... 523
---------
$ 836
=========
(D) Reflects the repayment of mortgage notes payable of $18,383, net of $523 of
additional loan fees ............................................................ $ 17,860
=========
(E) Reflects the sale of 4,700 shares of common stock in the Offering
Proceeds from the Offering ...................................................... $ 68,150
Costs associated with the Offering ............................................. (5,370)
Additional loan fees resulting from the early repayment of mortgage notes payable (523)
---------
Net proceeds after expenses and loan fees .......................................... $ 62,257
=========
Par value of common stock to be issued in the Offering .............................. $ 47
Additional paid-in capital from the net proceeds of the Offering .................. 62,210
---------
$ 62,257
=========
</TABLE>
F-6
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
2. ADJUSTMENTS TO THE PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The pro forma adjustments to the Pro Forma Consolidated Statements of
Operations for the six months ended June 30, 1997 and the year ended December
31, 1996 are as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1997 1996
----------- --------------
<S> <C> <C>
(F) Reflects the pro forma net effect of a full year of operations of
West Lake, Sky Lake, Forest Edge, Monument, Lantana,
Beauclerc and Summerlin shopping centers
Rental income ...................................................... $1,682 $ 5,372
Operating expenses ................................................... (265) (1,260)
Depreciation and amortization ....................................... (221) (667)
------ --------
$1,196 $ 3,445
====== ========
(G) Reflects the effect on interest expense as a result of the following:
Pro forma net effect of a full year of operations of West Lake, Sky
Lake, Forest Edge, Monument, Lantana, Beauclerc
and Summerlin shopping centers .................................... $ 37 $ 851
Increase in interest expense from prepayment penalties ............ 523 523
Decrease in interest expense, including the amortization of
deferred financing costs, resulting from the repayment of
mortgage notes payable .......................................... (746) (1,538)
------ --------
$ (186) (164)
====== ========
(H) Reflects the increase in general and administrative expenses for the
incremental costs of operating as a public REIT .................. $ 75 $ 150
====== ========
( I ) Pro forma net earnings per share is based upon the following
weighted average shares outstanding:
Common stock outstanding (weighted average) ........................ 6,949 5,924
Common stock to be issued in the Offering excluding shares
attributable to redevelopment activities of 1,833 ............... 2,867 2,867
------ --------
9,816 8,791
====== ========
</TABLE>
F-7
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------ --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
RENTAL PROPERTIES:
Land ............................................................... $ 30,961 $ 28,094
Building and improvements .......................................... 81,445 78,612
-------- --------
112,406 106,706
Less accumulated depreciation ....................................... 6,003 4,849
-------- --------
Rental properties, net ............................................. 106,403 101,857
Cash and cash equivalents .......................................... 4,558 1,951
Accounts and other receivables, net ................................. 824 800
Securities available for sale ....................................... 5,589 4,528
Deposits ............................................................ 1,403 510
Prepaid and other assets .......................................... 1,210 1,165
Deferred financing costs, net ....................................... 886 1,011
-------- --------
Total assets ................................................... $120,873 $111,822
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Mortgage notes payable ............................................. $ 64,916 $ 66,831
Tenants' security deposits .......................................... 708 694
Accounts payable and accrued expenses .............................. 1,679 950
Deferred rental income ............................................. 76 252
-------- --------
Total liabilities ................................................ 67,379 68,727
======== ========
COMMITMENTS AND CONTIGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock $0.01 par value, 5,000 shares
authorized but unissued ..........................................
Common stock $0.01 par value, 40,000 shares authorized;
6,908 and 5,768 shares issued and outstanding, respectively ...... 69 58
Additional paid-in capital .......................................... 54,950 44,562
Notes receivable from stock sales ................................. (1,525) (1,525)
-------- --------
Total stockholders' equity ....................................... 53,494 43,095
-------- --------
Total liabilities and stockholders' equity ........................ $120,873 $111,822
======== ========
</TABLE>
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
F-8
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED
JUNE 30,
-------------------
1997 1996
-------- --------
<S> <C> <C>
REVENUES:
Rental income ....................................... $9,361 $8,000
Investment revenue ................................. 312 42
------- -------
Total revenues ................................. 9,673 8,042
------- -------
COSTS AND EXPENSES:
Operating expenses ................................. 2,743 2,341
Depreciation and amortization ..................... 1,178 1,010
Interest .......................................... 2,939 2,648
General and administrative expenses ............... 241 213
------- -------
Total costs and expenses ........................ 7,101 6,212
------- -------
Net income .......................................... $2,572 $1,830
======= =======
Net earnings per share (Restated, see Note 1) ...... $ 0.37 $ 0.37
======= =======
</TABLE>
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
F-9
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NOTES
ADDITIONAL RECEIVABLE TOTAL
COMMON PAIN-IN FROM RETAINED STOCKHOLDERS'
STOCK CAPITAL STOCK SALES EARNINGS EQUITY
-------- ------------ ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Balance January 1, 1996 ............... $44 $29,095 $ 29,139
Net income .............................. $ 1,830 1,830
Issuance of common stock ............... 10 12,786 12,796
Dividends paid ........................ (1,775) (1,775)
Notes receivable from stock sales ...... $ (1,129) (1,129)
-------- --------
Balance June 30, 1996 (Unaudited) ...... $54 $41,881 $ (1,129) $ 55 $ 40,861
==== ======= ======== ======== ========
Balance January 1, 1997 ............... $58 $44,562 $ (1,525) $ 43,095
Net income .............................. $ 2,572 2,572
Issuance of common stock ............... 11 10,596 10,607
Dividends paid ........................ (208) (2,572) (2,780)
------- -------- --------
Balance June 30, 1997 (Unaudited) ...... $69 $54,950 $ (1,525) $ 0 $ 53,494
==== ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
F-10
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED
JUNE 30,
----------------------------
1997 1996
------------ -------------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ......................................................... $ 2,572 $ 1,830
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization .................................... 1,335 1,067
Provision for losses on accounts receivable ........................ 23
Loss (gain) on sales of securities ................................. 5 (3)
Changes in assets and liabilities:
Accounts and other receivables .................................... (47) 342
Deposits ......................................................... (892) (593)
Prepaid and other assets .......................................... (63) (47)
Accounts payable and accrued expenses ........................... 729 1,349
Tenants' security deposits ....................................... 13 30
Deferred rental income .......................................... (176) (34)
Due from related parties .......................................... (7) 39
---------- ---------
Net cash provided by operating activities ........................ 3,492 3,980
---------- ---------
INVESTING ACTIVITIES:
Acquisition of rental property .................................... (5,204) (1,193)
Acquisition of building improvements .............................. (496) (1,168)
Purchases of securities ............................................. (3,950) (1,199)
Sales and prepayments of securities ................................. 2,884 65
---------- ---------
Net cash used in investing activities ........................... (6,766) (3,495)
---------- ---------
FINANCING ACTIVITIES:
Due to stockholders ................................................ (2,130)
Repayments of mortgage notes payable .............................. (18,063) (629)
Borrowings under mortgage notes payable ........................... 16,148
Stock subscription and issuance .................................... 10,607 11,667
Cash dividends paid to stockholders ................................. (2,780) (1,775)
Deferred financing costs .......................................... (31) (120)
---------- ---------
Net cash provided by financing activities ........................ 5,881 7,013
---------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS ........................... 2,607 7,498
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ..................... 1,951 770
---------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD ........................... $ 4,558 $ 8,268
========== =========
SUPPLEMENTAL DISCLOSURE:
Cash paid for interest ............................................. $ 2,755 $ 2,523
========== =========
Common stock issued for notes receivable ........................... $ 1,129
=========
</TABLE>
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
F-11
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements of the Company
should be read in conjunction with the audited consolidated financial
statements included elsewhere herein. Accordingly, certain disclosures
accompanying the annual consolidated financial statements prepared in
accordance with generally accepted accounting principles are omitted. In the
opinion of management, all adjustments, consisting solely of normal recurring
adjustments, necessary for fair presentation of the condensed consolidated
financial statements have been included. The current period's results of
operations are not necessarily indicative of results which ultimately may be
achieved for the year.
The condensed consolidated financial statements include the accounts of
the Company's wholly-owned subsidiaries. All intercompany balances have been
eliminated.
NEW ACCOUNTING PRONOUNCEMENTS - In February 1997, SFAS No. 128, EARNINGS
PER SHARE was issued. SFAS No. 128, which supersedes APB Opinion No. 15,
requires a dual presentation of basic and diluted earnings per share on the
face of the income statement. Basic earnings per share excludes dilution and is
computed by dividing income or loss attributable to common stockholders by the
weighted-average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Diluted earnings per share is computed similarly
to fully diluted earnings per share under APB Opinion No. 15. SFAS No. 128 is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods; earlier application is not permitted. When
adopted, all prior-periods earnings per share data are required to be restated.
In February 1997, SFAS No. 129, DISCLOSURE OF INFORMATION ABOUT CAPITAL
STRUCTURE was issued. SFAS No. 129, which applies to all entities that have
issued securities, requires in summary form, the pertinent rights and
privileges of the various securities outstanding. Examples of information that
shall be disclosed are dividends and liquidation preferences, participation
rights, call prices and dates, conversion or exercise prices or rates and
pertinent dates, sinking-fund requirements, unusual voting rights, and
significant terms of contracts to issue additional shares. SFAS No. 129 is
effective for financial statements issued for periods ending after December 15,
1997.
NET EARNINGS PER SHARE - Net earnings per share is calculated by dividing
net earnings by the weighted average number of common shares and common share
equivalents outstanding during the six month period. The weighted average
number of shares outstanding and used in the calculation of net earnings per
share was restated for the subsequent stock split, see Note 2, and was
6,949,107 and 5,412,144 in 1997 and 1996, respectively.
2. SUBSEQUENT EVENTS
On July 15, 1997, the Company's Board of Directors declared and paid a
two-for-one split of the Company's common stock in the form of a 100% stock
dividend to stockholders on July 15, 1997. A total of 3,454,065 shares of
common stock were issued in connection with the split. The stated par value of
each share was not changed from $.01. A total of $34,541 was reclassified from
the Company's additional paid in capital account to the Company's common stock
account. All share and per share amounts have been restated to retroactively
reflect the stock split.
On September 16, 1997, the Company's Board of Directors declared a stock
dividend equal to $0.2625 per share and payable to stockholders of record at
the close of business on September 16, 1997.
F-12
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Equity One, Inc.:
We have audited the accompanying consolidated balance sheets of Equity
One, Inc. and subsidiaries (the "Company") as of December 31, 1996 and 1995,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the accompanying consolidated financial statements present
fairly, in all material respects, the consolidated financial position of Equity
One, Inc. and subsidiaries as of December 31, 1996 and 1995 and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Miami, Florida
February 15, 1997
(July 15, 1997 as to Note 10)
F-13
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
ASSETS
RENTAL PROPERTIES:
Land ............................................. $ 28,094 $23,358
Buildings and improvements ..................... 78,612 69,412
-------- --------
106,706 92,770
Less accumulated depreciation ..................... 4,849 2,832
-------- --------
Rental properties, net ........................... 101,857 89,938
Cash and cash equivalents ........................ 1,951 770
Accounts and other receivables, net ............... 800 922
Securities available for sale ..................... 4,528 160
Deposits .......................................... 510 623
Prepaid and other assets ........................ 1,165 1,120
Deferred financing costs, net ..................... 1,011 937
-------- --------
Total assets ................................. $111,822 $94,470
======== ========
LIABILITIES, COMMON STOCK ISSUED WITH
PUT OPTION AND STOCKHOLDERS' EQUITY
LIABILITIES:
Mortgage notes payable ........................... $ 66,831 $60,583
Due to stockholders .............................. 2,216
Tenants' security deposits ........................ 694 552
Accounts payable and accrued expenses ............ 950 917
Deferred rental income ........................... 252 63
-------- --------
Total liabilities ........................... 68,727 64,331
-------- --------
Common Stock Issued With Put Option -
144,000 Shares ................................. -0- 1,000
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value - 5,000,000 shares
authorized but unissued
Common stock, $0.01 par value - 40,000,000 shares
authorized; 5,768,418 and 4,517,558 shares
issued and outstanding for 1996 and
1995, respectively .............................. 58 44
Additional paid-in capital ........................ 44,562 29,095
Notes receivable from stock sales ............... (1,525) -0-
-------- --------
Total stockholders' equity .................. 43,095 29,139
-------- --------
Total liabilities and stockholders' equity ...... $111,822 $94,470
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-14
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- -----------
<S> <C> <C> <C>
RENTAL INCOME ....................................... $16,337 $10,792 $6,125
-------- -------- ------
INVESTMENT REVENUE:
Interest .......................................... 239 497 166
Dividends .......................................... 111 23 42
Realized gain (loss) on securities, net ............ 27 36 (135)
-------- -------- ------
Total investment revenue ........................ 377 556 73
-------- -------- ------
COSTS AND EXPENSES:
Operating expenses ................................. 4,832 3,293 2,236
Depreciation and amortization ..................... 2,067 1,496 996
Interest .......................................... 5,380 3,498 2,099
General and administrative expenses ............... 515 549 504
-------- -------- ------
Total costs and expenses ........................ 12,794 8,836 5,835
-------- -------- ------
Income Before Income Taxes ........................ 3,920 2,512 363
Income Taxes ....................................... 130
------
Net Income .......................................... $ 3,920 $ 2,512 $ 233
======== ======== ======
Net Earnings Per Share (Restated, see Note 1) ...... $ 0.65 $ 0.51 $ 0.07
======== ======== ======
</TABLE>
See accompanying notes to the consolidated financial statements.
F-15
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
NET NOTES RETAINED
ADDITIONAL UNREALIZED RECEIVABLE EARNINGS TOTAL
COMMON PAID-IN HOLDING LOSS FROM (ACCUMULATED STOCKHOLDERS'
STOCK CAPITAL ON SECURITIES STOCK SALES DEFICIT) EQUITY
-------- ------------ --------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 ............ $25 $12,797 $ (71) $ (147) $ 12,604
Issuance of common stock ............... 18 15,900 15,918
Net income .............................. 233 233
Change in net unrealized holding
loss on securities available
for sale .............................. 43 43
--- ------- ----- -------- ------- --------
Balance, December 31, 1994 ............ 43 28,697 (28) 86 28,798
Issuance of common stock ............... 1 622 623
Net income .............................. 2,512 2,512
Dividends paid ........................ (224) (2,598) (2,822)
Change in net unrealized
holding loss on securities
available for sale ..................... 28 28
--- ------- ----- -------- -------- --------
Balance, December 31, 1995 ............ 44 29,095 29,139
Issuance of common stock ............... 13 14,727 14,740
Conversion of common stock
issued with put option to
equity ................................. 1 999 1,000
Net income .............................. 3,920 3,920
Dividends paid ........................ (259) (3,920) (4,179)
Notes receivable from stock sales ...... $ (1,525) (1,525)
---- ------- ----- -------- -------- --------
Balance, December 31, 1996 ............ $58 $44,562 $ 0 $ (1,525) $ 0 $ 43,095
---- ------- ----- -------- -------- --------
</TABLE>
See accompanying notes to the consolidated financial statements.
F-16
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ---------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income ................................................ $ 3,920 $ 2,512 $ 233
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ........................... 2,282 1,578 1,049
(Gain) loss on sales of securities ..................... (27) (36) 135
Changes in assets and liabilities (net of acquisition):
Accounts and other receivables ........................ 122 (651) 489
Deposits ................................................ 113 (262) (194)
Prepaid and other assets .............................. (112) (75) (7)
Accounts payable and accrued expenses .................. 67 250 370
Income tax liability ................................. (34) (35) 70
Tenants' security deposits .............................. 142 219 225
Deferred rental income ................................. 189 (57) 114
Due to related party .................................... 0 0 (2)
Due from related party ................................. 18 26 (49)
--------- --------- ----------
Net cash provided by operating activities ............ 6,680 3,469 2,433
--------- --------- ----------
INVESTING ACTIVITIES:
Acquisition of rental property ........................... (13,936) (40,722) (29,556)
Purchases of securities ................................. (7,029) (3,601) (3,540)
Proceeds from sales and principal payments on securities 2,688 6,812 2,696
Change in deposits for acquisition of rental property ... 0 0 220
Repayment of notes receivable ........................... 0 300 425
--------- --------- ----------
Net cash used in investing activities .................. (18,277) (37,211) (29,755)
--------- --------- ----------
FINANCING ACTIVITIES:
Due to stockholders ....................................... (2,216) 2,216 0
Repayments of mortgate notes payable ..................... (4,352) (729) (452)
Borrowings under mortgage notes ........................... 10,599 28,620 17,599
Deferred financing costs ................................. (289) (467) (339)
Stock subscription and issuance ........................... 13,215 623 15,918
Cash dividends paid to stockholders ..................... (4,179) (2,822) 0
--------- --------- ----------
Net cash provided by financing activities ............ 12,778 27,441 32,726
--------- --------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS .......................................... 1,181 (6,301) 5,404
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD ....................................... 770 7,071 1,667
--------- --------- ----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD ............................................. $ 1,951 $ 770 $ 7,071
========= ========= ==========
SUPPLEMENTAL SCHEDULE OF CASH
AND NONCASH ITEMS:
ACQUISITION:
Other receivables ....................................... $ 8
Other assets ............................................. 992
----------
Common stock issued with put option ..................... $ 1,000
==========
Conversion of common stock issued
with put option to equity .............................. $ 1,000
=========
Cash paid for interest .................................... $ 4,752 $ 3,513 $ 1,956
========= ========= ==========
Cash paid for income taxes .............................. $ 36 $ 60
========= ==========
Common stock issued for notes receivable .................. $ 1,525
=========
Change in unrealized depreciation in securities
available for sale .................................... $ 28 $ 43
========= ==========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-17
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General - Equity One, Inc. (the "Company") was incorporated in Maryland on
June 15, 1992, as a wholly-owned subsidiary of Gazit Holdings, Inc. During
1996, Gazit Holdings, Inc. transferred all of its stock ownership to Gazit
(1995), Inc. ("Gazit") ( See Note 6). During 1996 and 1995, additional shares
of stock were issued to both affiliated and unaffiliated entities, reducing
Gazit's holdings in the Company to approximately 37% and 45% as of December 31,
1996 and 1995, respectively.
Effective January 1, 1994 the Company acquired Global Realty and
Management, Inc. ("Global"), the property manager for four of the Company's
properties at the time of acquisition respresenting approximately 30% of
Global's revenues. The acquisition was accounted for as a purchase. The
outstanding common stock of Global was exchanged for 144,000 shares of the
Company's common stock and 48,000 Class B warrants to purchase the Company's
common stock at $8.25 per share through December 31, 1996. The Class B warrants
were issued to all common stockholders on a pro rata basis based on their
percentage of common stock owned. The former stockholder of Global was granted
an option to "put" his newly acquired Company stock to the Company for $1,000
for a five-year period. During 1996, the Company canceled the put option in
exchange for a similar put option to be issued by certain stockholders of the
Company. On December 30, 1996, the former stockholder of Global exercised the
48,000 Class B warrants to purchase the Company's common stock at $8.25 per
share. The Company provided a $396 loan for a six year period for the purpose
of exercising the Class B warrants held by the former stockholder. The loan
bears interest at 5.25% per year. The loan has been offset against
stockholders' equity. Additionally, the Company entered into an employment
agreement with the former stockholder for a period of 7 years with an option to
extend the agreement for another 7 years. The former stockholder is entitled to
remuneration of $180 per year, effective January 1, 1996 and options to
purchase 150,000 shares in the Company at an exercise price of $12.38 per share
under the Company's 1995 Stock Option Plan (the "Plan").
The Company currently owns and operates fourteen retail properties and
two mixed use (office/retail) properties and one mini-warehouse located in
Florida and Texas, comprising approximately 87% and 13% of the total rentable
square footage, respectively. In addition, Winn-Dixie Stores Inc., and Publix
Supermarkets Inc., rent approximately 16% and 7%, 10% and 7%, and 13% and 4% of
the total rentable square footage, for 1996, 1995 and 1994, respectively.
BASIS OF CONSOLIDATION - The consolidated financial statements include the
accounts of Equity One, Inc. and its wholly-owned subsidiaries (collectively
the "Company"): Florida Del Rey Holdings II, Inc., Gazit (Meridian), Inc., Four
Corners Equity Corp., Equity One (Beta), Inc., Equity One (Eustis Square),
Inc., Equity One (Parker Towne Center), Inc., Global Realty and Management,
Inc., Equity One (Commonwealth), Inc., Equity One (Alpha), Inc., Equity One
(Mandarin), Inc., Equity One (Atlantic Village), Inc., Equity One (Epsilon),
Inc., Equity One (Point Royal), Inc., Equity One (Lake Mary), Inc., Equity One
(Olive), Inc., Equity One (West Lake), Inc., Equity One (Forest Edge), Inc.,
Equity One (Oak Hill), Inc., and Equity One (Delta), Inc. All subsidiaries
hereinafter are referred to as "the Consolidated Companies." All intercompany
balances and transactions have been eliminated.
CASH AND CASH EQUIVALENTS - For purposes of the statements of cash flows,
the Company considers certificates of deposit with an initial maturity of three
months or less to be cash equivalents. Cash and cash equivalents consist of the
following as of December 31, 1996 and 1995:
F-18
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
<TABLE>
<CAPTION>
L996 1995
-------- ------
<S> <C> <C>
Cash ........................... $1,828 $770
Certificates of deposit ...... 123
------- -----
Total ..................... $1,951 $770
======= =====
</TABLE>
INVESTMENT SECURITIES - Investment securities are accounted for under
Statement of Financial Accounting Standards ("SFAS") No. 115, ACCOUNTING FOR
CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, which the Company adopted
during 1993. Under SFAS No. 115, investment securities must be classified and
accounted for under the following conditions:
TRADING ACCOUNT SECURITIES - Trading account securities are held in
anticipation of short-term sales or market movements. Trading account
securities are stated at fair value. Gains or losses on the sale of trading
account securities, as well as unrealized fair value adjustments, are
included in operating income.
SECURITIES AVAILABLE FOR SALE - Securities to be held for unspecified
periods of time including securities that management intends to use as part
of its asset/liability strategy, or that may be sold in response to changes
in interest rates, changes in prepayment risk, or other similar factors,
are classified as available for sale and are carried at fair value.
Unrealized gains or losses are reported as a net amount in a separate
component of stockholders' equity until realized. As of December 31, 1996
and 1995, all of the Company's securities are classified as securities
available for sale.
SECURITIES HELD TO MATURITY - Securities that management has a positive
intent and the ability to hold to maturity are carried at cost, adjusted
for amortization of premiums and accretion of discounts over the life of
the securities using a method which approximates the level yield method.
DEPOSITS - Deposits are comprised of funds held by various institutions
for future payments of taxes and insurance, utility and other service deposits.
RENTAL PROPERTY - Rental property is stated at cost. Major renewals and
betterments are capitalized. Maintenance, repairs and minor renewals are
charged to operating expense as incurred. Depreciation is provided for using
the straight-line method over the estimated useful lives of the assets which
range from 5 to 40 years, except for building improvements related to leasehold
improvements which are depreciated over the lesser of the assets' useful lives
or the terms of the related leases.
LONG-LIVED ASSETS - In accordance with Financial Accounting Standards No.
121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF (SFAS No. 121), long-lived assets, such as property,
certain identifiable intangibles, and goodwill related to those assets to be
held and used are to be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amounts of an asset may not be
recoverable. The Company periodically assesses the recoverability of the
long-lived assets based on its expectations of future profitability and
undiscounted cash flow of the related operations. These factors, along with
management's plans with respect to the operations, are considered in assessing
the recoverability of long-lived assets. If the Company determines, based on
such measures, that the carrying amount is impaired, the long-lived assets will
be written down to its recoverable value with corresponding charge to earnings.
During the periods presented, no such impairment was incurred.
F-19
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
DEFERRED FINANCING COSTS - Deferred financing costs consist of loan
origination and other fees directly related to the rental property financing
with third parties. The fees are being amortized using the straight-line method
over the term of the notes, ranging from 5 to 30 years.
RENTAL INCOME - Rental income is recognized on a straight-line basis over
the terms of the respective leases and is comprised of minimum rentals,
contingent rentals and the pass-through of certain expenses. Contingent rentals
are generally received from tenants based on their gross sales. For the years
ended December 31, 1996, 1995 and 1994, contingent rentals recognized by the
Company were approximately $153, $87 and $80, respectively.
INCOME TAXES - There is no provision for income tax expense for the year
ended December 31, 1996 and 1995, as a result of the Company changing to real
estate investment trust ("REIT") status, effective January 1, 1995. The Company
is not taxed on its taxable operating income if it distributes such income to
stockholders in conformity with the requirements of the Internal Revenue Code
and meets certain other requirements. Company management is of the opinion that
they are complying with the requirements of REIT status and hence starting from
January 1, 1995 the Company is a REIT for income tax purposes. The Company
intends to continue to meet such requirements and distribute any of its future
taxable operating income in conformity with such requirements. Distributed
capital gains on sales of real estate are not subject to tax; however,
undistributed capital gains are taxed as capital gain.
PERVASIVENESS OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS - In October 1995, SFAS No. 123, ACCOUNTING
FOR STOCK-BASED COMPENSATION, was issued. SFAS No. 123, encourages, but does
not require a fair value based method of accounting for employee stock options
or similar equity instruments. Entities which elect not to adopt the fair value
method of accounting are required to make pro-forma disclosures of net income
and earnings per share as if the fair value method were adopted. The company
has not adopted the fair value method and therefore continues to apply the
intrinsic method of measuring stock based compensation as prescribed by
Accounting Principles Board Opinion ("APB") No. 25, Accounting for Stock Issued
to Employees, and related interpretations.
In February 1997, SFAS No. 128, EARNINGS PER SHARE was issued. SFAS No.
128, which supersedes APB Opinion No. 15, requires a dual presentation of basic
and diluted earnings per share on the face of the income statement. Basic
earnings per share excludes dilution and is computed by dividing income or loss
attributable to common stockholders by the weighted-average number of common
shares outstanding for the period. Diluted earnings per share reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity.
Diluted earnings per share is computed similarly to fully diluted earnings per
share under APB Opinion 15. SFAS No. 128 is effective for financial statements
issued for periods ending after December 15, 1997,
F-20
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
including interim periods; earlier application is not permitted. When adopted,
all prior-period earnings per share data are required to be restated but are
not expected to differ materially from the historical amounts.
In February 1997, SFAS No. 129, DISCLOSURE OF INFORMATION ABOUT CAPITAL
STRUCTURE was issued. SFAS No. 129, which applies to all entities that have
issued securities, requires in summary form, the pertinent rights and
privileges of the various securities outstanding. Examples of information that
shall be disclosed are dividends and liquidation preferences, participation
rights, call prices and dates, conversion or exercise prices or rates and
pertinent dates, sinking-fund requirements, unusual voting rights, and
significant terms of contracts to issue additional shares. SFAS No. 129 is
effective for financial statements issued for periods ending after December 15,
1997.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The estimated fair values of
financial instruments have been determined by the Company using available
market information and appropriate valuation methods in accordance with
Statement of Financial Accounting Standards No. 107, DISCLOSURES ABOUT FAIR
VALUE OF FINANCIAL INSTRUMENTS. The Company has used the following market
assumptions and/or estimation methods:
CASH AND CASH EQUIVALENTS, ACCOUNTS AND OTHER RECEIVABLES AND ACCOUNTS
PAYABLE - The carrying amounts reported in the consolidated balance sheets
are reasonable estimates of fair value due to their short term nature.
INVESTMENT SECURITIES - Fair values are based on quoted market prices,
dealer quotes, and independent pricing services. The carrying value
approximates fair value due to the nature of the investments due to their
short-term nature.
MORTGAGE NOTES PAYABLE - The estimated fair value at December 31, 1996 and
1995 was $63,016 and $57,065, respectively, calculated based on the net
present value of payments over the term of the notes using estimated market
rates for similar notes payable.
INTEREST RATE CAP AGREEMENTS - The fair value is based on dealer quotes and
generally represents an estimate of the amount the Company would be paid to
terminate the agreement at the reporting date. The fair value at December
31, 1996 and 1995 was $6 and $0 respectively.
The fair value estimates presented herein are based on information
available to management as of the reporting dates. Although management is not
aware of any factors that would significantly affect the estimated fair value
amounts, such amounts have not been comprehensively revalued for purposes of
these financial statements since that date and, therefore, current estimates of
fair value may differ significantly from the amounts presented herein.
NET EARNINGS PER SHARE - Net earnings per share is calculated by dividing
net earnings by the weighted average number of common shares and common stock
equivalents outstanding during each year. The weighted average number of shares
outstanding and used in the calculation were restated for the subsequent stock
split, see Note 10, and were 5,923,250, 5,375,580 and 3,453,792 in 1996, 1995
and 1994, respectively.
2. SECURITIES AVAILABLE FOR SALE
As of December 31, 1996 and 1995, there were no material differences
between amortized cost and fair value. For the years ended December 31, 1996,
1995 and 1994, the Company had gross securities
F-21
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
2. SECURITIES AVAILABLE FOR SALE--(CONTINUED)
sales of $2,411, $6,776 and $2,831 resulting in gross realized gains of $32,
$52 and $26 and gross realized losses of $5, $16 and $161, respectively.
At December 31, 1996 and 1995, debt securities, mortgage-backed securities
and U.S. government obligations all mature within five years. Actual maturities
may differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
3. ACCOUNTS AND OTHER RECEIVABLES
Composition in the consolidated balance sheets:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Tenants .......................................... $746 $907
Accrued interest receivable - institutions ...... 38
Employee loans and advances ..................... 16 15
----- -----
Total .......................................... $800 $922
===== =====
</TABLE>
The accounts receivable balances do not include a valuation allowance as
the Company has historically had minor charge-offs.
4. RENTAL PROPERTY
Composition in the consolidated balance sheets:
<TABLE>
<CAPTION>
LAND,
BUILDINGS
AND BUILDING
COST EQUIPMENT IMPROVEMENTS TOTAL
- ---- ----------- -------------- ------------
<S> <C> <C> <C>
Balance at beginning of year ......... $ 90,595 $2,175 $ 92,770
Additions in the reporting year ...... 12,381 1,555 13,936
-------- ------ --------
Balance at end of year ............... 102,976 3,730 106,706
-------- ------ --------
ACCUMULATED DEPRECIATION
Balance at beginning of year ......... (2,622) (210) (2,832)
Depreciation for the year ............ (1,854) (163) (2,017)
-------- ------ --------
Balance at end of year ............... (4,476) (373) (4,849)
-------- ------ --------
Undepreciated balance
as of December 31, 1996 ............... $ 98,500 $3,357 $101,857
======== ====== ========
Undepreciated balance
as of December 31, 1995 ............... $ 87,973 $1,965 $ 89,938
======== ====== ========
</TABLE>
Substantially all of the Company's rental property serves as collateral to
non-recourse mortgages payable totaling $66,831 and $60,583 as of December 31,
1996 and 1995, respectively (See Note 5).
Assets are depreciated on a straight-line basis over their estimated
useful lives, as follows:
F-22
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
4. RENTAL PROPERTY--(CONTINUED)
<TABLE>
<S> <C>
Buildings .............................. 33 to 40 years
Building/leasehold improvements ...... 5 to 40 years
Furniture and equipment ............... 5 to 7 years
</TABLE>
5. MORTGAGE NOTES PAYABLE
Mortgage notes payable consist of the following:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Mortgage payable, 8.125%, payable in monthly installments of $29
including interest, unpaid balance due August 31, 2011, collateralized
by rental property (Financed through an Insurance Company) ............ $ 3,015 $ 3,036
Mortgage payable, 9.49%, payable in monthly installments of $26
including interest, unpaid balance due March 1, 2003, collateralized
by rental property (Financed through an Insurance Company) ............ 3,001 3,026
Mortgage payable, 8.25%, payable in monthly installments of $8
including interest, unpaid balance due August 1, 2000, collaterized by
rental property (Financed through an Insurance Company) ............... 924 939
Mortgage payable, 9%, payable in monthly installments of $55
including interest, unpaid balance due July 1, 2002, collaterized by
rental property (Financed through an Insurance Company) ............... 5,482 5,638
Mortgage payable, 8.5%, interest only payable monthly through
January 1, 1996 with monthly installments of $21 including
interest commencing January 1, 1996, unpaid balance due
September 30, 1998, collateralized by rental property (Financed
through an Insurance Company) ....................................... 2,351 2,400
Mortgage payable, 7.75% through August 1, 1997, at which time the
rate will adjust, payable in monthly installments of $115 including
interest, at which time the remaining principal is payable unless the
lender extends the loan. Under the terms of the note, the lender
shall not declare the note to be due and payable provided that the
Company has satisfied all of the lender's conditions as set forth in
the note agreement. Under the terms of the note, the lender has the
option to extend the loan for two three-year periods at an interest
rate to be determined by the lender. Interest at this rate plus
principal payments amortizing the remaining balance over a 17 and
14 year period at each of the option dates, respectively, are payable
monthly and any remaining principal due on August 1, 2003. The
Company has entered into a cap agreement to hedge its interest rate
risk as discussed below. The loan is collateralized by rental property.
(Financed through an Insurance Company) .............................. 13,221 13,561
</TABLE>
F-23
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
5. MORTGAGE NOTES PAYABLE--(CONTINUED)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Mortgage payable, 8.75%, payable in monthly installments of $19
including interest, unpaid balance due June 30, 2000, collaterized by
rental property (Financed through a Bank) .............................. 2,247 2,277
Mortgage payable, 6.375%, payable in monthly installments of $8
including interest, unpaid balance due May 10, 1999, collaterized by
rental property (Financed through an Insurance Company) ............... 1,227 1,244
Mortgage payable, 8.15%, payable in monthly installments of $37
including interest, unpaid balance due July 1, 2002, collaterized by
rental property (Financed through an Insurance Company) ............... 4,044 4,150
Mortgage payable, 7.625%, payable in monthly installments of $20
including interest, unpaid balance due January 1, 2006, collaterized
by rental property (Financed through an Insurance Company) ............ 2,445 2,500
Mortgage payable, 9.35%, payable in monthly installments of $23
including interest, unpaid balance due March 1, 2002, collaterized by
rental property (Financed through an Insurance Company) ............... 2,419 2,467
Mortgage payable, 7.95%, payable in monthly installments of $50
including interest, unpaid balance due July 15, 2010, collaterized by
rental property (Financed through an Insurance Company) ............... 5,816 5,946
Mortgage payable, 7.85%, payable in monthly installments of $111
including interest, unpaid balance due December 1, 2010, collaterized
by rental property (Financed through an Insurance Company) ............ 13,109 13,399
Mortgage payable, 8.25%, payable in monthly installments of $19
including interest, unpaid balance due October 1, 2002, collaterized
by rental property (Financed through an Insurance Company) ............ 2,058
Mortgage payable, 7.875%, through July 1, 2006 payable in monthly
installments of $46 including interest, at which time the lender will
adjust the rate of interest equal to the sum of "Moody's" "A"
corporate bond index daily rate plus .375%, rounded to the next
highest one-eighth percentage rate. An additional disbursement of
$480 will be made by the lender after certain conditions and terms
are met, including but not limited to the construction of a restaurant,
at which time the monthly installment will increase to $50. The
unpaid balance is due June 30, 2016, collateralized by rental property
(Financed through an Insurance Company) ................................. 5,472
-------- --------
Total ..................................................................... $66,831 $60,583
======== ========
</TABLE>
F-24
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
5. MORTGAGE NOTES PAYABLE--(CONTINUED)
Principal maturities of the mortgage notes payable as of December 31, 1996
are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C>
1997 ............ $ 1,655
1998 ............ 4,037
1999 ............ 3,057
2000 ............ 4,951
2001 ............ 3,118
Thereafter ...... 50,013
--------
Total ......... $66,831
========
</TABLE>
As of December 31, 1996 and 1995, the Company had outstanding an off
balance sheet interest rate cap on a variable rate obligation, which protects
the Company from rising interest rates. This cap has a notional amount of
$13,000.
On February 14, 1997, the Company refinanced the mortgage note payable of
7.75% with a principal balance of $13,221 as of December 31, 1996, referred to
above. The principal amount received was $13,400. The new loan bears an
interest rate of 7.68% per year. The monthly installments are $115 including
interest. The new loan is repayable in periodic installments and matures in
2015.
6. RELATED PARTY TRANSACTIONS
In May 1996, an agreement was signed with the Company's principal
stockholders, Gazit(1995), Inc., Danbar Resources and Development Ltd. through
their wholly owned subsidiaries and Globe-Reit Investments, Ltd. and other
stockholders and interested parties, to raise capital for expansion and other
purposes. Under this agreement, the Company will issue 2,000,000 shares of
$0.01 par value common stock to a wholly owned subsidiary of Globe-Reit
Investments, Ltd. at $12.375 per share in installments determined by the
Company. As of December 31, 1996, 800,000 shares of common stock were issued to
M.G.N. (USA), Inc. for $9,908.
The per share price will be increased by 9.7% per annum for each year or
part of a year that elapses from December 10, 1995 until the date the proceeds
are received, reduced by the amount of dividends that are distributed per share
in that period. Dividends distributed subsequent to December 10, 1995 and the
accrued interest, adjusted the share price to $12.64 as of December 31, 1996.
STOCK OPTION PLAN - On October 23, 1996, the Company adopted the Plan
which is described below. The Company applies APB Opinion 25 and related
interpretations in accounting for the Plan. The purpose of the Plan is to
further the growth of the Company, by offering an incentive to directors,
officers and other key employees of the Company, and to increase the interest
of these employees in the Company, through additional ownership of its common
stock. The effective date of the Plan is January 1, 1996. The maximum number of
shares of common stock as to which options may be granted under this Plan is
1,000,000 shares, which shall be reduced each year by the required or
discretionary grant of options. The term of each option shall be determined by
the Stock Option Committee (the "Committee") of the Company, but in no event
shall be longer than ten years from the date of the grant. The vesting of the
options shall be determined by the Committee, in its sole and absolute
discretion, at the date of grant of the option.
F-25
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
6. RELATED PARTY TRANSACTIONS--(CONTINUED)
During 1996, the Company issued 350,000 options under the Plan to two
officers of the Company at an exercise price of $12.375 per share, fair market
value on the date of grant as determined by an independent valuation, which
shall vest over a four year period, 87,500 shares each year, commencing on
January 1, 1997, and on the first day of each year, until all options vest. The
per share option price is subject to a downward adjustment to the extent that
dividends declared and paid by the Company in each year subsequent to 1995
exceed dividends declared and paid by the Company in the year ended December
31, 1995. As of December 31, 1996, the per share price if exercised on that
date was $12.20. On the date of exercise of options under the Plan, the Company
will record compensation expense for any difference between the exercise price
and fair market value of the shares on that date.
The Company applies APB No. 25 and related interpretations in accounting
for its stock option plan to employees and non-employee members of the Board as
described in Note 1. Accordingly, no compensation expense has been recognized
in the year ended December 31, 1996 related to this Plan. Compensation costs
would have been increased by approximately $418,000 in 1996 had the fair value
of stock options granted been recognized as compensation expense as prescribed
by SFAS No. 123. The fair value of the stock options at the date of grant was
estimated using the minimum value method prescribed by SFAS No. 123.
MANAGEMENT AGREEMENT - An affiliated entity, Gazit U.S.A., Inc., has
provided the Company with office space, office services and certain management
and consulting services for which the Company pays a management fee. For the
years ended December 31, 1995 and 1994 such fee totaled $150 and $172
respectively, and is included in general and administrative expenses in the
accompanying consolidated statements of operations.
The Company provided an affiliated entity, Gazit (1995), Inc., with office
space, office services and certain management and consulting services for which
the Company receives a management fee. For the year ended December 31, 1996,
such fees totaled $10 and is included as an offset to general and
administrative expenses in the accompanying consolidated statements of
operations.
DUE TO STOCKHOLDERS - As of December 31, 1995, the Company had notes
payable of $2,200 to three of its stockholders bearing interest at 10%, payable
on demand. Interest expense related to these notes for the years ended December
31, 1996 and 1995 was $96 and $16, respectively. These notes were repaid in
June, 1996.
7. INCOME TAXES
There is no income tax provision for 1996 and 1995 due to the Company's
change to real estate investment trust status (See Note 1).
As of December 31, 1996 and 1995, the Company had a capital loss
carryforward of $72 and $99, respectively.
F-26
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
8. FUTURE MINIMUM RENTAL INCOME, COMMITMENTS AND CONTINGENCIES
Future minimum rental income under noncancelable leases approximates the
following as of December 31, 1996:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C>
1997 ............ $ 13,334
1998 ............ 11,609
1999 ............ 10,234
2000 ............ 8,848
2001 ............ 7,780
Thereafter ...... 54,170
---------
Total ......... $105,975
=========
</TABLE>
During 1996, the Company obtained a line of credit of $2,500 secured by
rental property.
During 1996, the Company pledged a letter of credit for $1,500 as
additional security on one of its properties. The letter of credit is
collateralized by securities held by the Company at December 31, 1996.
The Company is subject to litigation in the normal course of business,
none of which, in the opinion of management, will have a material adverse
effect on the financial condition, results of operations or cash flows of the
Company.
9. STOCKHOLDERS' EQUITY
As of December 31, 1996 and 1995, the Company has authority to issue
45,000,000 shares, of which 40,000,000 are shares of common stock and 5,000,000
are shares of preferred stock. The Company had Class A and B warrants issued
and outstanding to purchase 735,000 and 1,141,734 shares of the Company's
common stock as of December 31, 1995. Each Class A warrant is exercisable at
$5.25 per share and expires on December 31, 1998. Each Class B warrant was
exercisable at $8.25 per share.
On December 30, 1996, 235,610 Class B warrants were exercised at $8.25 per
share and the remaining 906,124 warrants exchanged proportionately for
1,340,000 Class C warrants. The Company authorized the issuance of up to
1,400,000 Class C warrants at an exercise price of $8.25 per share and expire
on December 31, 1999. As of December 31, 1996, the Company has 1,306,124 Class
C warrants issued and outstanding.
The composition of the number of shares of issued and outstanding common
stock is as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Common Stock ....................................... 5,768 4,374
Common stock issued with put option (Note 1) ...... 144
----- ------
Total shares issued and outstanding ............ 5,768 4,518
===== ======
</TABLE>
During 1996, the Company paid cash dividends of $.375, $.20 and $.225 on
June 18, September 30, and December 31, respectively, to all stockholders of
record on those dates. Gross dividends paid were $4,179 for the year ended
December 31, 1996.
F-27
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
9. STOCKHOLDERS' EQUITY--(CONTINUED)
During 1995, the Company paid cash dividends of $.25, $.125 and $.25 on
June 28, September 27, and December 28, respectively, to all stockholders of
record on those dates. Gross dividends paid were $2,822 for the year ended
December 31, 1995.
During 1996, two officers exercised stock options for promissory notes.
These notes are full recourse promissory notes bearing interest at 5.25% and
6.86%, respectively, and are collateralized by the stock issued upon exercise
of the stock options. Interest is payable annually and principal is due on
December 30, 2002 and June 16, 2003, respectively. The notes have been
reflected in the financial statements as a reduction of stockholders' equity.
An officer's Employment Agreement provides that if his employment is
terminated for any reason other than Cause, or in the event of a Change in
Control (as defined in the Employment Agreement), the officer shall be granted
a "put" option giving him the right to tender all of his shares of Common Stock
to the Company for purchase at a price per share equal to (i) if the Common
Stock is then listed and traded on a securities exchange, the average closing
price over the forty-five trading days immediately preceding the date the stock
is tendered or (ii) if the Common Stock is not then listed and traded on a
securities exchange, the price per share used in a similar third party arms'
length sale of Common Stock during the six-month period immediately preceding
the tender. If the purchase price cannot be determined in accordance with (i)
and (ii) above, the price per share shall be determined by an acceptable
arbitrator in accordance with the rules of commercial arbitration, or in the
event the parties cannot agree on an arbitrator, an arbitrator appointed by the
American Arbitration Association.
10. SUBSEQUENT EVENT
On July 15, 1997, the Company's Board of Directors declared and paid a
two-for-one split of the Company's Common Stock in the form of a 100% stock
dividend to stockholders on July 15, 1997. A total of 3,454,065 shares of
common stock were issued in connection with the split. The stated par value of
each share was not changed from $.01. A total of $34,541 was reclassified from
the Company's additional paid in capital account to the Company's common stock
account. All share and per share amounts have been restated to retroactively
reflect the stock split.
11. CONDENSED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1996
Total revenue ............... $4,030 $4,012 $4,240 $4,432
Net income .................. 907 923 1,138 952
Net earnings per share ...... $ 0.18 $ 0.19 $ 0.19 $ 0.09
1995
Total revenue ............... $2,271 $2,527 $3,065 $3,485
Net income .................. 517 586 713 696
Net earnings per share ...... $ 0.11 $ 0.12 $ 0.16 $ 0.12
</TABLE>
Quarterly computations of per share amounts which have been restated for
the subsequent stock split, see Note 10, are made independently. Therefore, the
sum of the per share amounts for the quarters may not agree with the per share
amounts for the year.
F-28
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Equity One (West Lake), Inc.:
We have audited the statement of revenues and certain expenses of West
Lake Plaza Shopping Center (the "Property") for the period from January 1, 1996
through November 5, 1996. This financial statement is the responsibility of the
Property's management. Our responsibility is to express an opinion on the
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission (for inclusion in the filing of Form S-11 of Equity
One, Inc.). Material amounts, described in Note 1 to the statement of revenues
and certain expenses, that would not be comparable to those resulting from
future operations of the acquired property are excluded, and the statement is
not intended to be a complete presentation of the acquired property's revenues
and expenses.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of West Lake Plaza
Shopping Center for the period from January 1, 1996 through November 5, 1996 in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Miami, Florida
July 22, 1997
F-29
<PAGE>
WEST LAKE PLAZA SHOPPING CENTER
STATEMENT OF REVENUES AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, 1996
THROUGH
NOVEMBER 5, 1996
------------------
<S> <C>
REVENUES:
Rental income .............................. $781,125
Recoverable expenses ........................ 180,092
Total revenues ........................... 961,217
---------
CERTAIN EXPENSES:
Property operating ........................ 107,966
Real estate taxes ........................... 115,830
Insurance ................................. 26,468
---------
Total certain expenses .................. 250,264
---------
REVENUES IN EXCESS OF CERTAIN EXPENSES ...... $710,953
=========
</TABLE>
See notes to the statement of revenues and certain expenses.
F-30
<PAGE>
WEST LAKE PLAZA SHOPPING CENTER
NOTES TO THE STATEMENT OF REVENUES AND CERTAIN EXPENSES
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
West Lake Plaza Shopping Center ("West Lake" Or The "Property"), located
in Miami, Florida, was acquired by Equity One, (West Lake), Inc. (the
"Company") from an unrelated party on November 6, 1996. The statement of
revenues and certain expenses includes information related to the operations of
the Property for the period from January 1, 1996 through November 5, 1996 as
recorded by the previous owner, Real Equities Limited Partnership II, and for
the period from November 6, 1996 through December 31, 1996 as recorded by
Equity One (West Lake), Inc.
The accompanying historical financial statement information is presented
in conformity with Rule 3-14 of the Securities and Exchange Commission.
Accordingly, the financial statement is not representative of the actual
operations for the year ended December 31, 1996 as certain expenses, which may
not be comparable to the expenses expected to be incurred in the future
operations of the acquired property, have been excluded. Expenses excluded
consist of interest, income taxes, depreciation and amortization, and other
costs not directly related to the future operations of the acquired property.
The Company is not aware of any material factors relating to the Property
that would cause the reported financial information not to be necessarily
indicative of future operating results.
The statement of revenues and certain expenses for the six month period
ended June 30, 1997 has not been audited. In the opinion of management, all
adjustments consisting solely of normal recurring adjustments necessary for the
fair presentation of the statement of revenues and certain expenses for the
interim period have been included. The current period's results of operations
are not necessarily indicative of results which ultimately may be achieved for
the year.
MANAGEMENT'S USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
RENTAL INCOME - Rental income is recognized on a straight-line basis over
the terms of the related leases.
PROPERTY OPERATING EXPENSES - Property operating expenses consist
primarily of utilities, repairs and maintenance, security and safety, cleaning,
and other administrative expenses.
MANAGEMENT FEES - For the period ended November 5, 1996, the Property was
managed by Real Equities Limited Parternship II for a property management fee
paid monthly based on an annual rate of 4% of total rental income. For the
period from November 6, 1996 through December 31, 1996, the Property was
managed by Global Realty and Management, Inc. for a property management fee
paid monthly based on an annual rate of 4% of total base rents collected.
F-31
<PAGE>
WEST LAKE PLAZA SHOPPING CENTER
NOTES TO THE STATEMENT OF REVENUES AND CERTAIN EXPENSES--(CONTINUED)
2. OPERATING LEASES
Operating revenue is principally obtained from tenant rentals under
noncancelable operating lease agreements. The future minimum rentals under
noncancelable operating lease agreements as of December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31 AMOUNT
- ----------- ------------
<S> <C>
1997 ............ $ 819,117
1998 ............ 696,251
1999 ............ 610,681
2000 ............ 549,950
2001 ............ 533,106
Thereafter ...... 6,004,968
-----------
Total ......... $9,214,073
===========
</TABLE>
* * * * * *
F-32
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Equity One, Inc.:
We have audited the statement of revenues and certain expenses of Lantana
Village Square (the "Property") for the year ended December 31, 1996. This
financial statement is the responsibility of the Property's management. Our
responsibility is to express an opinion on the financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission (for inclusion in the filing of Form S-11 of Equity
One, Inc.). Material amounts, described in Note 1 to the statement of revenues
and certain expenses, that would not be comparable to those resulting from
future operations of the acquired property are excluded, and the statement is
not intended to be a complete presentation of the acquired Property's revenues
and expenses.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of Lantana Village
Square for the year ended December 31, 1996 in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Miami, Florida
October 1, 1997
F-33
<PAGE>
LANTANA VILLAGE SQUARE
STATEMENT OF REVENUES AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
SIX MONTHS IN THE
PERIOD ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
(UNAUDITED)
<S> <C> <C>
REVENUES:
Rental income .............................. $377,197 $751,867
Recoverable expenses ........................ 87,037 161,633
Other income .............................. 776 1,985
--------- ---------
465,010 915,485
--------- ---------
CERTAIN EXPENSES:
Property operating ........................ 36,059 88,895
Real estate taxes ........................... 64,765 129,530
Insurance ................................. 19,578 19,493
--------- ---------
Total certain expenses .................. 120,402 237,918
--------- ---------
REVENUES IN EXCESS OF CERTAIN EXPENSES ...... $344,608 $677,567
========= =========
</TABLE>
See notes to the statement of revenues and certain expenses.
F-34
<PAGE>
LANTANA VILLAGE SQUARE
NOTES TO THE STATEMENT OF REVENUES AND CERTAIN EXPENSES
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Lantana Village Square ("Lantana" or the "Property"), located in Lantana,
Florida, is under contract to be acquired from an unrelated party by Equity
One, Inc. (the "Company"). The statement of revenues and certain expenses
includes information related to the operations of the Property for the year
ended December 31, 1996 as recorded by the owner, Commercial Venture Services,
Inc.
The accompanying historical financial statement information is presented
in conformity with Rule 3-14 of the Securities and Exchange Commission.
Accordingly, the financial statement is not representative of the actual
operations for the year ended December 31, 1996 as certain expenses, which may
not be comparable to the expenses expected to be incurred in future operations
of the property, have been excluded. Expenses excluded consist of interest,
income taxes, depreciation and amortization, and other costs not directly
related to the future operations of the property after acquisition.
The Company is not aware of any material factors relating to the Property
that would cause the reported financial information not to be necessarily
indicative of future operating results.
The statement of revenues and certain expenses for the six months in the
period ended June 30, 1997 has not been audited. In the opinion of management,
all adjustments consisting solely of normal recurring adjustments necessary for
the fair presentation of the statement of revenues and certain expenses for the
interim period have been included. The current period's results of operations
are not necessarily indicative of results which ultimately may be achieved for
the year.
MANAGEMENT'S USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
RENTAL INCOME - Rental income is recognized on a straight-line basis over
the terms of the related leases. For the year ended December 31, 1996,
contingent rentals recognized by the Property were approximately $16,577.
PROPERTY OPERATING EXPENSES - Property operating expenses consist
primarily of utilities, repairs and maintenance, security and safety, cleaning,
and other expenses.
MANAGEMENT FEES - For the year ended December 31, 1996, the Property was
managed by Commercial Venture Services, Inc. for a property management fee paid
monthly based on a fixed monthly fee of $3,200.
CONTRACT FOR PURCHASE OF PROPERTY - A contract for the purchase of the
Property was signed on September 24, 1997 with Commercial Venture Services,
Inc. The closing date is scheduled for November 5, 1997.
F-35
<PAGE>
LANTANA VILLAGE SQUARE
NOTES TO THE STATEMENT OF REVENUES AND CERTAIN EXPENSES--(CONTINUED)
2. OPERATING LEASES
Operating revenue is principally obtained from tenant rentals under
noncancelable operating lease agreements. The future minimum rentals under
noncancelable operating lease agreements as of December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31 AMOUNT
- ----------- ------------
<S> <C>
1997 ............ $ 724,817
1998 ............ 702,035
1999 ............ 613,303
2000 ............ 521,128
2001 ............ 505,184
Thereafter ...... 5,007,204
-----------
Total ............ $8,073,671
===========
</TABLE>
F-36
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Equity One, Inc.:
We have audited the statement of revenues and certain expenses of
Summerlin Square (the "Property") for the year ended December 31, 1996. This
financial statement is the responsibility of the Property's management. Our
responsibility is to express an opinion on the financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission (for inclusion in the filing of Form S-11 of Equity
One, Inc.). Material amounts, described in Note 1 to the statement of revenues
and certain expenses, that would not be comparable to those resulting from
future operations of the acquired property are excluded, and the statement is
not intended to be a complete presentation of the acquired Property's revenues
and expenses.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of Summerlin Square
for the year ended December 31, 1996 in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Miami, Florida
October 30, 1997
F-37
<PAGE>
SUMMERLIN SQUARE
STATEMENT OF REVENUES AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
SIX MONTHS IN THE PERIOD ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
-------------------------------- -------------------
(UNAUDITED)
<S> <C> <C>
REVENUES:
Rental income .................. $549,493 $1,040,323
Recoverable expenses ............ 76,627 127,235
--------- -----------
626,120 1,167,558
--------- -----------
CERTAIN EXPENSES:
Property operating ............ 30,962 65,866
Real estate taxes ............... 76,540 148,026
Insurance ..................... 22,042 30,563
--------- -----------
Total certain expenses ...... 129,544 244,455
--------- -----------
REVENUES IN EXCESS OF
CERTAIN EXPENSES ............... $496,576 $ 923,103
========= ===========
</TABLE>
F-38
<PAGE>
SUMMERLIN SQUARE
NOTES TO THE STATEMENT OF REVENUES AND CERTAIN EXPENSES
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Summerlin Square ("Summerlin" or the "Property"), located in Fort Myers,
Florida, is under contract to be acquired from an unrelated party by Equity
One, Inc. (the "Company"). The statement of revenues and certain expenses
includes information related to the operations of the Property for the year
ended December 31, 1996 as recorded by the owner, Sunrise Limited Partnership.
The accompanying historical financial statement information is presented
in conformity with Rule 3-14 of the Securities and Exchange Commission.
Accordingly, the financial statement is not representative of the actual
operations for the year ended December 31, 1996 as certain expenses, which may
not be comparable to the expenses expected to be incurred in the future
operations of the acquired property, have been excluded. Expenses excluded
consist of interest, income taxes, depreciation and amortization, and other
costs not directly related to the future operations of the acquired property.
The statement of revenues and certain expenses for the six months in the
period ended June 30, 1997 has not been audited. In the opinion of management,
all adjustments, consisting solely of normal recurring adjustments, necessary
for the fair presentation of the statement of revenues and certain expenses for
the interim period have been included. The current period's results of
operations are not necessarily indicative of results which ultimately may be
achieved for the year.
The Company is not aware of any material factors relating to the Property
that would cause the reported financial information not to be necessarily
indicative of future operating results.
MANAGEMENT'S USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
RENTAL INCOME - Rental income is recognized on a straight-line basis over
the terms of the related leases. For the year ended December 31, 1996, no
contingent rentals were recognized by the Property.
PROPERTY OPERATING EXPENSES - Property operating expenses consist
primarily of utilities, repairs and maintenance, security and safety, cleaning,
and other expenses.
MANAGEMENT FEES - For the year ended December 31, 1996, the Property was
managed by Sunrise Limited Parternship for a property management fee paid
monthly based on 4% of base rental income.
LETTER OF INTENT FOR PURCHASE OF PROPERTY - A letter of intent for the
purchase of the Property was signed on October 20, 1997 with Sunrise Limited
Partnership. The closing date is scheduled to take place on or before January
10, 1998.
F-39
<PAGE>
SUMMERLIN SQUARE
NOTES TO THE STATEMENT OF REVENUES AND CERTAIN EXPENSES--(CONTINUED)
2. OPERATING LEASES
Operating revenue is principally obtained from tenant rentals under
noncancelable operating lease agreements. The future minimum rentals under
noncancelable operating lease agreements as of December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31 AMOUNT
- ----------- ----------
<S> <C>
1997 ............ $1,024,490
1998 ............ 822,109
1999 ............ 684,577
2000 ............ 518,030
2001 ............ 561,288
Thereafter ...... 2,115,900
-----------
Total ......... $5,726,394
===========
</TABLE>
F-40
<PAGE>
---------------------------- ----------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF.
---------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary ................................. 1
Risk Factors .................................... 17
Use of Proceeds ................................. 31
Distribution Policy .............................. 32
Dilution .......................................... 36
Capitalization .................................... 37
Selected Consolidated Financial Data ............ 38
Management's Discussion and Analysis of
Financial Condition and Results of
Operations .................................... 40
Business .......................................... 46
Management ....................................... 66
Certain Transactions .............................. 72
Policies with Respect to Certain Activities ...... 74
Principal Stockholders ........................... 77
Description of Capital Stock ..................... 79
Shares Eligible for Future Sale .................. 88
Federal Income Tax Considerations ............... 89
ERISA Considerations .............................. 100
Underwriting .................................... 102
Legal Matters .................................... 103
Experts .......................................... 103
Additional Information ........................... 104
Glossary .......................................... 105
Index to Financial Statements ..................... F-1
</TABLE>
---------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
EQUITY ONE, INC. LOGO
EQUITY ONE, INC.
4,700,000 Shares
Common Stock
($.01 par value)
PROSPECTUS
CREDIT SUISSE FIRST BOSTON
THE ROBINSON-HUMPHREY
COMPANY
SALOMON BROTHERS INC
---------------------------- ----------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 31. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Registrant estimates that expenses payable by the Registrant in
connection with the Offering described in this registration statement (other
than underwriting discounts and commissions) will be as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee .................. $ 26,206.06
NASD filing fee ...................................................... 9,148.00
New York Stock Exchange listing fee ................................. 107,700.00
Printing and engraving expenses ....................................... 100,000.00
Accounting fees and expenses .......................................... 100,000.00
Legal fees and expenses ............................................. 200,000.00
Fees and expenses (including legal fees) for qualifications under state
securities laws ................................................... 5,000.00
Registrar and Transfer Agent's fees and expenses ..................... 5,000.00
Miscellaneous ......................................................... 46,945.94
-------------
Total ............................................................ $ 600,000.00
=============
</TABLE>
- ----------------
All amounts except the Securities and Exchange Commission registration fee, the
NASD filing fee and the NYSE listing fee are estimated.
ITEM 32. SALES TO SPECIAL PARTIES.
The following table sets forth the persons to whom the Company sold Common
Stock within the last six months at prices varying from the proposed Offering
price. Share amounts and purchase prices have been adjusted for the two-for-one
stock split effected by the Company on July 15, 1997.
<TABLE>
<CAPTION>
DATE PURCHASER PURCHASE PURCHASE PRICE PRICE PER SHARE
- ---------- ------------------------------ ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
05/09/97 Globe Reit Investments, Ltd. 522,404 Shares $6,692,000 $ 12.81
05/21/97 Globe Reit Investments, Ltd. 35,034 Shares $ 450,000 $ 12.84
06/17/97 Globe Reit Investments, Ltd. 38,670 Shares $ 500,003 $ 12.93
06/17/97 Gazit (1995), Inc. 400,000 Shares $2,050,000 $ 5.125(1)
06/17/97 Dan Overseas, Ltd. 120,000 Shares $ 615,000 $ 5.125(1)
06/19/97 Globe Reit Investments, Ltd. 23,604 Shares $ 300,006 $ 12.71
</TABLE>
- ----------------
(1) Represents the exercise of Outstanding Series A Warrants, which warrants
were issued by the Company in early 1993.
II-1
<PAGE>
ITEM 33. RECENT SALES OF UNREGISTERED SECURITIES.
(A) Set forth below is information relating to certain sales of an
aggregate of 3,098,676 shares of Common Stock within the last three years.
<TABLE>
<CAPTION>
DATE OF SALE PURCHASER SHARES PURCHASED PURCHASE PRICE
- ------------ --------- ---------------- --------------
<S> <C> <C> <C>
09/29/94 Dan Overseas, Ltd. 10,260 Shares $ 85,000
10/03/94 Gazit Holdings, Inc. 255,556 Shares $ 2,300,000
10/03/94 Dan Overseas, Ltd. 138,148 Shares $ 1,243,332
11/07/94 Globe Reit Investments, Ltd. 300,000 Shares $ 2,775,000
11/25/94 Globe Reit Investments, Ltd. 430,000 Shares $ 4,017,060
12/07/94 Globe Reit Investments, Ltd. 266,668 Shares $ 2,500,000
06/28/95 Globe Reit Investments, Ltd. 63,332 Shares $ 622,505
06/10/96 Chaim Katzman 215,000 Shares(1) $ 1,128,750
07/05/96 M.G.N. (USA) Inc.(2) 800,000 Shares $11,668,125
05/09/97 M.G.N. (USA) Inc.(2) 522,404 Shares $ 6,692,000
05/21/97 M.G.N. (USA) Inc.(2) 35,034 Shares $ 450,000
06/17/97 M.G.N. (USA) Inc.(2) 38,670 Shares $ 500,003
06/19/97 M.G.N. (USA) Inc.(2) 23,604 Shares $ 300,006
</TABLE>
- ----------------
(1) Represents the exercise of Series A Warrants granted to Mr. Katzman in the
beginning of 1993.
(2) Represents sales pursuant to the investment agreement between the Company
and Globe Reit Investments, Ltd. dated May 21, 1996. M.G.N. (USA) Inc. is
the wholly-owned subsidiary of Globe Reit Investments, Ltd.
The aforementioned issuances and sales were made in reliance upon the
exemption from registration provisions of the Act afforded by Section 4(2)
thereof, as transactions by an issuer not involving a public offering.
(B) On December 30, 1996, the Company issued an aggregate of 235,500
shares of Common Stock upon the exercise of outstanding Series B Warrants (the
"Series B Warrants"). The Series B Warrants were issued by the Company in June
1994.
<TABLE>
<CAPTION>
PURCHASER SHARES PURCHASED AGGREGATE PURCHASE PRICE
--------- ------------------ --------------------------
<S> <C> <C>
Gazit (1995), Inc. 101,516 Shares $837,507
Dan Overseas, Ltd. 54,984 Shares $453,618
Globe Reit Investments, Ltd. 1,240 Shares $ 10,230
Doron Valero 48,000 Shares $396,000
Chaim Katzman 25,990 Shares $214,417
Saul Rickman 970 Shares $ 8,002
Martin Klein 2,910 Shares $ 24,007
</TABLE>
The aforementioned issuances and sales were made in reliance upon the
exemption from registration provisions of the Act afforded by Section 4(2)
thereof, as transactions by an issuer not involving a public offering.
(C) On December 30, 1996, the Company issued Series C Warrants in exchange
for outstanding Series B Warrants on a pro rata basis. Series C Warrants to
purchase an aggregate of 1,306,124 shares of Common Stock were issued in
connection with this exchange. The Series C Warrants are exercisable at an
exercise price of $8.25 per share, the exercise price of the Series B Warrants
and expire on December 31, 1999. The Series C Warrants were issued as follows:
<TABLE>
<CAPTION>
STOCKHOLDER SHARES SUBJECT TO WARRANTS
----------- ----------------------------
<S> <C>
Gazit (1995), Inc. ...... 542,136 Shares
Dan Overseas, Ltd. ...... 293,430 Shares
M.G.N. (USA) Inc. ...... 398,760 Shares
Chaim Katzman ............ 62,344 Shares
Saul Rickman ............ 2,364 Shares
Martin Klein ............ 7,090 Shares
</TABLE>
II-2
<PAGE>
The aforementioned issuances were made in reliance upon the exemption from
registration provisions of the Act afforded by Section 4(2) thereof, as
transactions by an issuer not involving a public offering.
(D) On June 17, 1997, the Company issued an aggregate of 520,000 shares of
Common Stock upon the exercise of outstanding Series A Warrants. The Series A
Warrants were issued by the Company in the beginning of 1993. The Common Stock
was issued as follows:
<TABLE>
<CAPTION>
STOCKHOLDER SHARES PURCHASED AGGREGATE PURCHASE PRICE
----------- ------------------ ------------------------
<S> <C> <C>
Gazit (1995), Inc. 400,000 Shares $2,050,000
Dan Overseas, Ltd. 120,000 Shares $ 615,000
</TABLE>
The aforementioned issuances were made in reliance upon the exemption from
registration provisions of the Act afforded by Section 4(2) thereof, as
transactions by an issuer not involving a public offering.
ITEM 34. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Maryland General Corporation Law (the "MGCL") permits a Maryland
corporation to include in its charter a provision limiting the liability of its
directors and officers to the corporation and its stockholders for money
damages except for liability resulting from (a) actual receipt of an improper
benefit or profit in money, property or services or (b) active and deliberate
dishonesty established by a final judgment as being material to the cause of
action. The Charter of the Company contains such a provision which limits such
liability to the maximum extent permitted by the MGCL. This provision does not
limit the ability of the Company or its stockholders to obtain other relief,
such as an injunction or rescission.
The Bylaws of the Company obligate it to the maximum extent permitted by
Maryland law to indemnify and to pay or reimburse reasonable expenses in
advance of final disposition of a proceeding to (a) any present or former
director or officer who is made a party to the proceeding by reason of his
service in that capacity or (b) any individual who, while a director of the
Company and at the request of the Company, serves or has served another
corporation, real estate investment trust partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, partner
or trustee of such corporation, real estate investment trust partnership, joint
venture, trust, employee benefit plan, or other enterprise and who is made a
party to the proceeding by reason of his service in that capacity. The Charter
and Bylaws also permit the Company to indemnify and advance expenses to any
person who served a predecessor of the Company in any of the capacities
described above and to any employee or agent of the Company or a predecessor of
the Company.
The MGCL requires a corporation (unless its Charter provides otherwise,
which the Company's Charter does not) to indemnify a director or officer who
has been successful, on the merits or otherwise, in the defense of any
proceeding to which he is made a party by reason of his service in that
capacity. The MGCL permits a corporation to indemnify its present and former
directors and officers, among others, against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection
with any proceeding to which they may be made a party by reason of their
service in those or other capacities unless it is established that (a) the act
or omission of the director or officer was material to the matter giving rise
to the proceeding and (i) was committed in bad faith or (ii) was the result of
active and deliberate dishonesty, (b) the director or officer actually received
an improper personal benefit in money, property or services or (c) in the case
of any criminal proceeding, the director or officer had reasonable cause to
believe that the act or omission was unlawful. However, under the MGCL, a
Maryland corporation may not indemnify for an adverse judgment in a suit by or
in the right of the corporation or for a judgment of liability on the basis
that a personal benefit was improperly received, unless in either case a court
orders indemnification and then only for expenses. In addition, the MGCL
permits a corporation to advance reasonable expenses to a director or officer
upon the Company's receipt of (a) a written affirmation by the director or
officer of his good faith belief that he has met the standard of conduct
necessary for indemnification by the Company and (b) a written undertaking by
or on his behalf to repay the amount paid or reimbursed by the Company if it
shall ultimately be determined that the standard of conduct was not met. The
termination of any proceeding by conviction, or upon a plea of nolo contendere
or its equivalent, or an entry of any order of probation prior to judgment,
creates a
II-3
<PAGE>
rebuttable presumption that the director or officer did not meet the requisite
standard of conduct required for indemnification to be permitted.
It is the position of the Commission that indemnification of directors and
officers for liabilities arising under the Securities Act is against public
policy and is unenforceable pursuant to Section 14 of the Securities Act.
ITEM 35. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED.
Not Applicable.
ITEM 36. FINANCIAL STATEMENTS AND EXHIBITS SCHEDULES.
(a) Financial Statements.
PRO FORMA (UNAUDITED)
Pro Forma Consolidated Financial Statements
Pro Forma Consolidated Balance Sheet as of June 30, 1997
Pro Forma Consolidated Statement of Operations for the six months ended
June 30, 1997
Pro Forma Consolidated Statement of Operations for the year ended December
31, 1996
Notes to the Pro Forma Consolidated Financial Statements
HISTORICAL:
Unaudited Condensed Consolidated Balance Sheets as of June 30, 1997
(Unaudited) and December 31, 1996
Unaudited Condensed Consolidated Statements of Operations for the six
months ended June 30, 1997 and 1996
Unaudited Condensed Consolidated Statements of Stockholders' Equity for the
six months ended June 30, 1997 and 1996
Unaudited Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 1997 and 1996
Notes to Unaudited Condensed Consolidated Financial Statements
Independent Auditor's Report
Consolidated Balance Sheets as of December 31, 1996 and 1995
Consolidated Statements of Operations for the years ended December 31,
1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994
Notes to Consolidated Financial Statements
WEST LAKE PLAZA SHOPPING CENTER--1996 ACQUISITION PROPERTY:
Independent Auditors' Report
Statement of Revenues and Certain Expenses for the period from January 1,
1996 through November 5, 1996
Notes to Statement of Revenues and Certain Expenses
LANTANA VILLAGE SQUARE--PROPOSED ACQUISITION PROPERTY
Independent Auditors' Report
Statement of Revenues and Certain Expenses for the year ended December 31,
1996 and the six months ended June 30, 1997 (unaudited)
Notes to Statement of Revenues and Certain Expenses
SUMMERLIN SQUARE--PROPOSED ACQUISITION PROPERTY
Independent Auditors' Report
Statement of Revenues and Certain Expenses for the year ended December 31,
1996 and the six months ended June 30, 1997 (unaudited)
Notes to Statement of Revenues and Certain Expenses
II-4
<PAGE>
(b) Exhibits
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
1.1 Proposed form of Underwriting Agreement.
3.1 Form of Company Charter, as amended.
3.2 Form of Company Bylaws, as amended.
4.1 Form of Common Stock Certificate
5.1 Opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. as to the validity of the
Common Stock being registered.
8.1 Form of opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. as to tax
matters.
10.1 Form of Indemnification Agreement.(1)
10.2 Employment Agreement, dated as of January 1, 1996 by and between the Company and Chaim
Katzman.(1)
10.3 Employment Agreement, dated as of January 1, 1996 by and between the Company and Doron
Valero.(1)
10.4 Form of 1995 Stock Option Plan, as amended.
10.5 Form of Stock Option Agreement.(1)
10.6 Registration Rights Agreement, dated as of January 1, 1996 by and among the Company,
Chaim Katzman, Gazit Holdings, Inc., Dan Overseas Ltd., Glob Reit Investments, Ltd., Eli
Makavy, Doron Valero and David Wulkan.
10.7 Stock Pledge Agreement, dated June 17, 1996, by and between Chaim Katzman and the
Company.(1)
10.8 Promissory Note, in the amount of $1,128,750 from Chaim Katzman, payable to the Company.
10.9 Stock Pledge Agreement, dated December 30, 1996, by and between the Company and Doron
Valero.(1)
10.10 Promissory Note, in the amount of $396,000 from Doron Valero payable to the Company.
10.11 Consulting Agreement, dated as of January 1, 1996 by and between the Company and Eli
Makavy.(1)
10.12 Consulting Agreement, dated as of January 1, 1996 by and between the Company and David
Wulkan.(1)
10.13 Investment Agreement, dated May 21, 1996 by and between Globe Reit Investments, Ltd.,
Dan Overseas, Ltd., Gazit Holdings, Inc. and the Company.
10.14 Shareholders Agreement, dated May 21, 1996 by and between Gazit Inc. and Danbar
Resources, Ltd.
10.15 Use Agreement, regarding use of facilities, by and between Gazit (1995), Inc. and the
Company, dated January 1, 1996.(1)
10.16 Pledge Agreement, dated November 9, 1995 among Equity One (Lake Mary), Inc. and The
Mutual Life Insurance Company of New York.(1)
10.17 Note Secured by First Real Estate Lien, dated November 9, 1995 in the amount of $13,422,500
from Equity One (Lake Mary), Inc. in favor of The Mutual Life Insurance Company of New
York.(1)
10.18 Purchase and Sale Agreement, dated October 24, 1995 by and between 1740 Ventures, Inc. and
Equity One (Lake Mary), Inc.(1)
10.19 Florida Real Estate Mortgage and Security Agreement, dated November 9, 1995 by and
between Equity One (Lake Mary), Inc. and The Mutual Life Insurance Company of New
York.(1)
10.20 Agreement for Purchase and Sale, dated June 12, 1997 by and between Equity One (Gamma)
Inc. and Isidoro Lerman, Trustee.(1)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
10.21 Contract for Sale and Purchase, dated March 31, 1997 by and among Equity One (Gamma)
Inc., Angel Pena and Hermilio Concepcion.(1)
10.22 Property Management Agreement, dated as of January 1, 1996, by and between the Company
and Global Realty and Management, Inc.(1)
10.23 Agreement for Purchase and Sale (Lantana Village Square), dated September 24, 1997,
between Equity One (Gamma) Inc. and Commercial Ventures Services, Inc.(1)
10.24 Mortgage Promissory Note, dated August 19, 1997, by and between Equity One (Sky Lake)
Inc. and Isidoro Lerman, as Trustee.
10.25 Mortgage, dated August 19, 1997, by and between Equity One (Sky Lake) Inc. and Isidoro
Lerman, as Trustee.
23.1 Consent of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. (to be included in its
opinion to be filed as Exhibit 5.1).
23.2 Consents of Deloitte & Touche LLP.
23.3 Consent of Ballard Spahr Andrews & Ingersoll.
23.4 Consent of Robert Charles Lesser & Co.
24.1 Reference is made to the Signatures section of this Registration Statement for the Power of
Attorney contained therein.
27.1 Financial Data Schedule.(1)
99.1 Consent of Robert L. Cooney.(1)
</TABLE>
- ----------------
* To be filed by amendment.
(1) Previously filed.
(c) Financial Statement Schedules:
Independent Auditors Report
Schedule III--Real Estate Investments and Accumulated Depreciation for the
year ended December 31, 1996
All other schedules have been omitted either because they are not
applicable or because the required information has been disclosed in the
financial statements and related notes included in the prospectus.
ITEM 37. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registration of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
a registration statement in reliance upon
II-6
<PAGE>
Rule 430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall
be deemed to be part of the registration statement as of the time it was
declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 3 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Miami,
State of Florida, on November 6, 1997.
EQUITY ONE, INC.
By: /s/ CHAIM KATZMAN
Chaim Katzman, Chairman of the
Board,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ CHAIM KATZMAN Chairman of the Board, President November 6, 1997
- -------------------------------- and Chief Executive Officer
Chaim Katzman (principal executive officer )
/s/ DAVID BOOKMAN* Vice President, Chief Financial November 6, 1997
- -------------------------------- Officer and Treasurer
David Bookman (principal accounting officer)
/s/ DORON VALERO* Executive Vice President, Chief November 6, 1997
- -------------------------------- Operating Officer and Director
Doron Valero
- -------------------------------- Director November , 1997
Noam Ben Ozer
/s/ ELI MAKAVY* Director November 6, 1997
- --------------------------------
Eli Makavy
/s/ DR. SHAIY PILPEL* Director November 6, 1997
- --------------------------------
Dr. Shaiy Pilpel
/s/ DR. SHULAMIT ROZEN-KATZMAN* Director November 6, 1997
- --------------------------------
Dr. Shulamit Rozen-Katzman
/s/ DAVID WULKAN* Director November 6, 1997
- --------------------------------
David Wulkan
- -------------------------------- Director November , 1997
Yuval Yanai
* By: /s/ CHAIM KATZMAN November 6, 1997
- --------------------------------
Chaim Katzman
Attorney-in-fact
</TABLE>
II-8
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Equity One, Inc.:
We have audited the accompanying consolidated balance sheets of Equity
One, Inc. and subsidiaries (the "Company") as of December 31, 1996 and 1995,
and for each of the three years in the period ended December 31, 1996, and have
issued our report thereon dated February 15, 1997 (July 15, 1997 as to Note
10). Our audits also included the financial statement schedule, listed in Item
16. This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audit. In
our opinion, such financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
Deloitte & Touche LLP
Miami, Florida
February 15, 1997
S-1
<PAGE>
SCHEDULE III
EQUITY ONE, INC. AND SUBSIDIARIES
REAL ESTATE INVESTMENTS AND
ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CAPITALIZED GROSS AMOUNTS
INITIAL COST SUBSEQUENT TO AT WHICH CARRIED
BUILDINGS & ACQUISITION- AT THE CLOSE OF
PROPERTY LOCATION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS THE LAND IMPROVEMENTS
-------- -------- ------------- --------- -------------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
NORTH FLORIDA
Atlantic Village
Shopping Center Atlantic Beach, FL $ 4,044 $ 1,190 $ 4,760 $ 18 $ 1,190 $ 4,778
Commonwealth
Shopping Center Jacksonville, FL 2,247 730 2,920 730 2,920
Fort Caroline
Trading Post Jacksonville, FL 2,419 738 2,432 535 738 2,967
Mandarin Mini-Storage Jacksonville, FL 1,227 362 1,448 5 362 1,453
Oak Hill Village
Shopping Center Jacksonville, FL 2,445 690 2,760 37 690 2,797
CENTRAL FLORIDA
East Bay Plaza Largo, FL 924 314 1,296 241 314 1,537
Eustis Square
Shopping Center Eustis, FL 5,482 1,450 5,799 23 1,450 5,822
Forest Edge
Shopping Center Orlando, FL 2,058 1,250 1,850 1,250 1,850
Lake Mary Centre Lake Mary, FL 13,109 6,972 13,878 30 6,972 13,908
SOUTH FLORIDA
Bird Ludlam
Shopping Center Miami, FL 13,221 4,080 16,318 1,403 5,425 16,375
Diana Building W. Palm Beach, FL 0 123 493 898 123 1,391
Equity One
Office Building Miami Beach, FL 0 579 423 746 579 1,169
Plaza Del Rey
Shopping Center Miami, FL 3,015 740 2,961 130 740 3,091
Point Royale
Shopping Center Miami, FL 5,816 3,720 5,005 106 3,720 5,111
West Lakes Plaza Miami, FL 5,472 2,141 5,789 65 2,141 5,854
TEXAS
Four Corners
Shopping Center Tomball,TX 3,001 950 3,800 278 950 4,078
Parker Towne Centre Plano, TX 2,351 720 2,881 556 720 3,437
-------- -------- -------- ------- -------- --------
TOTAL $66,831 $26,749 $74,813 $5,071 $28,094 $78,538
======== ======== ======== ======= ======== ========
</TABLE>
S-2
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
REAL ESTATE INVESTMENTS AND
ACCUMULATED DEPRECIATION--(CONTINUED)
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED DATE DEPRECIABLE
PROPERTY TOTAL DEPRECIATION ACQUIRED LIVES
-------- ----- ------------ -------- -------------
<S> <C> <C> <C> <C>
NORTH FLORIDA
Atlantic Village Shopping Center $ 5,968 $ 179 JUNE 30, 1995 40
Commonwealth Shopping Center $ 3,650 207 FEBRUARY 28, 1994 40
Fort Caroline Trading Post $ 3,705 205 JANUARY 24, 1994 40
Mandarin Mini-Storage $ 1,815 96 MAY 10, 1994 40
Oak Hill Village Shopping Center $ 3,487 76 DECEMBER 7, 1995 40
CENTRAL FLORIDA
East Bay Plaza $ 1,851 186 JULY 27, 1993 30
Eustis Square Shopping Center $ 7,272 627 OCTOBER 22, 1993 30
Forest Edge Shopping Center $ 3,100 0 DECEMBER 31, 1996 40
Lake Mary Centre $ 20,880 406 NOVEMBER 9, 1995 40
SOUTH FLORIDA
Bird Ludlam Shopping Center $ 21,800 994 AUGUST 11, 1994 40
Diana Building $ 1,514 25 FEBRUARY 15, 1995 40
Equity One Office Building $ 1,748 84 APRIL 10, 1992 40
Plaza Del Rey Shopping Center $ 3,831 605 AUGUST 22, 1991 30
Point Royale Shopping Center $ 8,831 182 JULY 27, 1995 40
West Lakes Plaza $ 7,995 22 NOVEMBER 6, 1996 40
TEXAS
Four Corners Shopping Center $ 5,028 601 JANUARY 22, 1993 30
Parker Towne Centre $ 4,157 320 DECEMBER 9, 1993 30
--------- -------
TOTAL $106,632 $4,815
========= =======
</TABLE>
S-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NO. DESCRIPTION NUMBER
- ------- ----------- ------------
<S> <C> <C>
1.1 Proposed form of Underwriting Agreement.
3.1 Form of Company Charter, as amended.
3.2 Form of Company Bylaws, as amended.
4.1 Form of Common Stock Certificate
5.1 Opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. as to the
validity of the Common Stock being registered.
8.1 Form of opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. as
to tax matters.
10.4 Form of 1995 Stock Option Plan, as amended.
10.6 Registration Rights Agreement, dated as of January 1, 1996 by and among the
Company, Chaim Katzman, Gazit Holdings, Inc., Dan Overseas Ltd., Glob Reit
Investments, Ltd., Eli Makavy, Doron Valero and David Wulkan.
10.8 Promissory Note, in the amount of $1,128,750 from Chaim Katzman, payable to the
Company.
10.10 Promissory Note, in the amount of $396,000 from Doron Valero payable to the Company.
10.13 Investment Agreement, dated May 21, 1996 by and between Globe Reit Investments, Ltd.,
Dan Overseas, Ltd., Gazit Holdings, Inc. and the Company.
10.14 Shareholders Agreement, dated May 21, 1996 by and between Gazit Inc. and Danbar
Resources, Ltd.
10.24 Mortgage Promissory Note, dated August 19, 1997, by and between Equity One
(Sky Lake) Inc. and Isidoro Lerman, as Trustee.
10.25 Mortgage, dated August 19, 1997, by and between Equity One (Sky Lake) Inc. and
Isidoro Lerman, as Trustee.
23.2 Consents of Deloitte & Touche LLP.
23.3 Consent of Ballard Spahr Andrews & Ingersoll.
23.4 Consent of Robert Charles Lesser & Co.
</TABLE>
EXHIBIT 1.1
4,700,000 SHARES
EQUITY ONE, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
_______, 1997
CREDIT SUISSE FIRST BOSTON CORPORATION
THE ROBINSON-HUMPHREY COMPANY, LLC
SALOMON BROTHERS INC
As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, N.Y. 10010-3629
Dear Sirs:
1. INTRODUCTORY. Equity One, Inc., a Maryland corporation ("Company"),
proposes to issue and sell 4,700,000 shares ("Firm Securities") of its Common
Stock ("Securities") and also proposes to issue and sell to the Underwriters, at
the option of the Underwriters, an aggregate of not more than 705,000 additional
shares ("Optional Securities") of its Securities as set forth below. The Firm
Securities and the Optional Securities are herein collectively called the
"Offered Securities". The Company hereby agrees with the several Underwriters
named in Schedule A hereto ("Underwriters") as follows:
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the several Underwriters that:
(a) A registration statement (No. 333-33977) relating to the
Offered Securities, including a form of prospectus, has been filed with
the Securities and Exchange Commission ("Commission") and either (i)
has been declared effective under the Securities Act of 1933 ("Act")
and is not proposed to be amended or (ii) is proposed to be amended by
amendment or post-effective amendment. If such registration statement
("initial registration statement") has been declared effective, either
(i) an additional registration statement ("additional registration
statement") relating to the Offered Securities may have been filed with
the Commission pursuant to Rule 462(b) ("Rule 462(b)") under the Act
and, if so filed, has become effective upon filing pursuant to such
Rule and the Offered Securities all have been duly registered under the
Act pursuant to the initial registration statement and, if applicable,
the additional registration statement or (ii) such an additional
registration statement may be filed with the Commission pursuant to
Rule 462(b) and will become effective upon filing pursuant to such Rule
and upon such filing the Offered Securities will all have been duly
registered under the Act pursuant to the initial registration statement
and such additional registration statement. If the Company does not
propose to amend the initial registration statement or if an additional
registration statement has been filed and the Company does not propose
to amend it, and if any post-effective amendment to either such
registration statement has been filed with the Commission prior
<PAGE>
to the execution and delivery of this Agreement, the most recent
amendment (if any) to each such registration statement has been
declared effective by the Commission or has become effective upon
filing pursuant to Rule 462(c) ("Rule 462(c)") under the Act or, in the
case of the additional registration statement, Rule 462(b). For
purposes of this Agreement, "Effective Time" with respect to the
initial registration statement or, if filed prior to the execution and
delivery of this Agreement, the additional registration statement means
(i) if the Company has advised the Representatives that it does not
propose to amend such registration statement, the date and time as of
which such registration statement, or the most recent post-effective
amendment thereto (if any) filed prior to the execution and delivery of
this Agreement, was declared effective by the Commission or has become
effective upon filing pursuant to Rule 462(c), or (ii) if the Company
has advised the Representatives that it proposes to file an amendment
or post-effective amendment to such registration statement, the date
and time as of which such registration statement, as amended by such
amendment or post-effective amendment, as the case may be, is declared
effective by the Commission. If an additional registration statement
has not been filed prior to the execution and delivery of this
Agreement but the Company has advised the Representatives that it
proposes to file one, "Effective Time" with respect to such additional
registration statement means the date and time as of which such
registration statement is filed and becomes effective pursuant to Rule
462(b). "Effective Date" with respect to the initial registration
statement or the additional registration statement (if any) means the
date of the Effective Time thereof. The initial registration statement,
as amended at its Effective Time, including all information contained
in the additional registration statement (if any) and deemed to be a
part of the initial registration statement as of the Effective Time of
the additional registration statement pursuant to the General
Instructions of the Form on which it is filed and including all
information (if any) deemed to be a part of the initial registration
statement as of its Effective Time pursuant to Rule 430A(b) ("Rule
430A(b)") under the Act, is hereinafter referred to as the "Initial
Registration Statement". The additional registration statement, as
amended at its Effective Time, including the contents of the initial
registration statement incorporated by reference therein and including
all information (if any) deemed to be a part of the additional
registration statement as of its Effective Time pursuant to Rule
430A(b), is hereinafter referred to as the "Additional Registration
Statement". The Initial Registration Statement and the Additional
Registration Statement are herein referred to collectively as the
"Registration Statements" and individually as a "Registration
Statement". The form of prospectus relating to the Offered Securities,
as first filed with the Commission pursuant to and in accordance with
Rule 424(b) ("Rule 424(b)") under the Act or (if no such filing is
required) as included in a Registration Statement, is hereinafter
referred to as the "Prospectus". No document has been or will be
prepared or distributed in reliance on Rule 434 under the Act.
(b) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement: (i)
on the Effective Date of the Initial Registration Statement, the
Initial Registration Statement conformed in all respects to the
requirements of the Act and the rules and regulations of the Commission
("Rules and Regulations") and did not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading,
(ii) on the Effective Date of the Additional Registration Statement (if
any), each Registration Statement conformed, or will conform, in all
respects to the requirements of the Act and the Rules and Regulations
and did not include, or will not include, any untrue statement of a
material fact and did not omit, or will not omit, to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading, and (iii) on the date of this Agreement, the
Initial Registration Statement and, if the Effective Time of the
Additional Registration Statement is prior to the execution and
delivery of this Agreement, the Additional Registration Statement each
conforms, and at the time of filing of the Prospectus pursuant to Rule
424(b) or (if no such filing is required) at the Effective Date of the
Additional Registration Statement in which the Prospectus is included,
each Registration Statement and the Prospectus will conform, in all
respects to the requirements of the Act and the Rules and Regulations,
and neither of such documents includes, or will include, any untrue
statement of a material fact or omits, or will omit, to state any
material fact required to be stated therein or necessary to make the
2
<PAGE>
statements therein not misleading. If the Effective Time of the Initial
Registration Statement is subsequent to the execution and delivery of
this Agreement: on the Effective Date of the Initial Registration
Statement, the Initial Registration Statement and the Prospectus will
conform in all respects to the requirements of the Act and the Rules
and Regulations, neither of such documents will include any untrue
statement of a material fact or will omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and no Additional Registration Statement has
been or will be filed. The two preceding sentences do not apply to
statements in or omissions from a Registration Statement or the
Prospectus based upon written information furnished to the Company by
any Underwriter through the Representatives specifically for use
therein, it being understood and agreed that the only such information
is that described as such in Section 7(b) hereof.
(c) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Maryland,
with power and authority (corporate and other) to own its properties
and conduct its business as described in the Prospectus; and the
Company is duly qualified to do business as a foreign corporation in
good standing in all other jurisdictions in which its ownership or
lease of property or the conduct of its business requires such
qualification.
(d) Each subsidiary of the Company has been duly incorporated
and is an existing corporation in good standing under the laws of the
jurisdiction of its incorporation, with power and authority (corporate
and other) to own its properties and conduct its business as described
in the Prospectus; and each subsidiary of the Company is duly qualified
to do business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification; all of the issued
and outstanding capital stock of each subsidiary of the Company has
been duly authorized and validly issued, is fully paid and
nonassessable and is owned by the Company; and the capital stock of
each subsidiary owned by the Company, directly or through subsidiaries,
is owned free from liens, encumbrances and defects.
(e) Since the effective date of the Company's REIT election,
each subsidiary of the Company has at all times been treated, and will
be treated, as a "qualified REIT subsidiary" under Section 856(i) of
the Code.
(f) The Offered Securities and all other outstanding shares of
stock of the Company have been duly authorized; all outstanding shares
of stock of the Company are, and, when the Offered Securities have been
delivered and paid for in accordance with this Agreement on each
Closing Date (as defined below), such Offered Securities will have
been, validly issued, fully paid and nonassessable and will conform in
all material respects to the description thereof contained in the
Prospectus; and the stockholders of the Company have no preemptive
rights with respect to the Securities and no Securities issued by the
Company have been issued in violation of such preemptive rights
(including all outstanding shares of capital stock) except such
violations as have been irrevocably waived.
(g) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person that would give rise to a valid claim against the Company or any
Underwriter for a brokerage commission, finder's fee or other like
payment in connection with this offering.
(h) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of
the Company owned or to be owned by such person or to require the
Company to include such securities in the securities registered
pursuant to a Registration Statement or in any securities being
registered pursuant to any other
3
<PAGE>
registration statement filed by the Company under the Act, and all
rights as to this offering have been waived.
(i) Except as disclosed in the Prospectus, there are no
outstanding (A) securities, equity interests or obligations of the
Company or any of its subsidiaries convertible into or exchangeable for
any capital stock or equity interests (as the case may be) of the
Company or any such subsidiary, (B) warrants, rights or options to
subscribe for or purchase from the Company or any such subsidiary any
such capital stock or equity interests or any such convertible or
exchangeable securities, equity interests or obligations, or (C)
obligations of the Company or any such subsidiary to issue any shares
of capital stock, equity interests, any such convertible or
exchangeable securities, equity interests or obligations, or any such
warrants, rights or options.
(j) Except as disclosed in the Prospectus and except for the
shares of capital stock of each of the subsidiaries owned by the
Company, neither the Company nor any such subsidiary owns any shares of
stock or any other equity securities of any corporation or has any
equity interest in any firm, partnership, association or other entity.
(k) The Offered Securities have been approved for listing on
the New York Stock Exchange subject to notice of issuance.
(l) No consent, approval, authorization, or order of, or
filing with, any governmental agency or body or any court is required
for the consummation of the transactions contemplated by this Agreement
in connection with the issuance and sale of the Offered Securities by
the Company, except such as have been obtained and made under the Act
and such as may be required under state securities laws.
(m) The execution, delivery and performance of this Agreement,
and the issuance and sale of the Offered Securities will not result in
a breach or violation of any of the terms and provisions of, or
constitute a default under, any statute, any rule, regulation or order
of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company, any subsidiary of the Company or
any of their properties, or any indenture, mortgage, deed of trust,
lease or any other agreement or instrument to which the Company, any
such subsidiary is a party or by which the Company or any such
subsidiary is bound or to which any of the properties of the Company or
any such subsidiary is subject, or the charter or by-laws of the
Company or any such subsidiary and the Company has full power and
authority to authorize, issue and sell the Offered Securities as
contemplated by this Agreement; provided, however that the execution of
this Agreement may constitute defaults under the mortgages related to
the Company's Monument Pointe Shopping Center, Plaza Del Rey Shopping
Center, Westlake Shopping Center and Atlantic Shopping Center for which
the Company has received waivers or which will be paid off with the
proceeds of the offering or for which sufficient capacity will remain
at all times under the Acquisition Line of Credit (as defined in the
Prospectus) or any subsequent credit facility.
(n) This Agreement has been duly authorized, executed and
delivered by the Company.
(o) The Company is organized in conformity with the
requirements for qualification as a real estate investment trust (a
"REIT") under the Internal Revenue Code of 1986, as amended (the
"Code"), and the method of operation of the Company and its
subsidiaries has at all times enabled since such qualification in 1995,
and its proposed method of operation will enable, the Company to
continue to meet the requirements for taxation as a REIT under the
Code. All statements in the Prospectus regarding the Company's
qualification as a REIT are true, complete and correct in all material
respects.
(p) Deloitte & Touche LLP are independent public accountants
with respect to the Company as required by the Act.
4
<PAGE>
(q) Except as disclosed in the Prospectus, the Company and its
subsidiaries have good and marketable title to all real properties and
all other properties and assets owned by them, in each case free from
liens, encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or to be made thereof
by them; the Company and its subsidiaries hold any leased real or
personal property under valid and enforceable leases with no exceptions
that would materially interfere with the use made or to be made thereof
by them; and except as disclosed in the Prospectus, no tenant under any
lease pursuant to which the Company or any of its subsidiaries will
lease its property or any other person will have an option or a right
of first refusal to purchase the premises leased thereunder or the
building of which such premises are a part.
(r) No default exists, and no event has occurred which, with
notice or lapse of time or both, would constitute a default in the due
performance and observance of any term, covenant or condition of any
indenture, mortgage, deed of trust, lease or other agreement or
instrument to which the Company or any of its subsidiaries is a party
(including, without limitation, a default by any tenant of any portion
of the property of the Company or its subsidiaries) or by which the
Company or any of its subsidiaries or any of their respective
properties is bound or may be affected in any material adverse respect
with regard to property, business or operations of the Company and its
subsidiaries taken as a whole except such as have been irrevocably
waived; provided, however that the execution of this Agreement may
constitute defaults under the mortgages related to the Company's
Monument Pointe Shopping Center, Plaza Del Rey Shopping Center,
Westlake Shopping Center and Atlantic Shopping Center for which the
Company has received waivers or which will be paid off with the
proceeds of the offering or for which sufficient capacity will remain
at all times under the Acquisition Line of Credit (as defined in the
Prospectus) or any subsequent credit facility.
(s) No foreclosures have been instituted and none are
currently threatened with respect to any property or assets directly or
indirectly owned (whether now or in the past) by the Company or any of
its subsidiaries.
(t) The Company and its subsidiaries possess adequate
certificates, authorities or permits issued by appropriate governmental
agencies or bodies necessary to conduct the business now operated by
them and have not received any notice of proceedings relating to the
revocation or modification of any such certificate, authority or permit
that, if determined adversely to the Company or any of its subsidiaries
would individually or in the aggregate have a material adverse effect
on the Company and its subsidiaries taken as a whole.
(u) Each of the properties owned by the Company and its
subsidiaries is in substantial compliance with all presently applicable
provisions of the Americans with Disabilities Act and no failure of the
Company or any of its subsidiaries to comply with all presently
applicable provisions of the Americans with Disabilities Act would have
a material adverse effect on the Company and its subsidiaries, taken as
a whole.
(v) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent that
might have a material adverse effect on the Company and its
subsidiaries taken as a whole.
(w) The Company and its subsidiaries own, possess or can
acquire on reasonable terms, adequate trademarks, trade names and other
rights to inventions, know-how, patents, copyrights, confidential
information and other intellectual property (collectively,
"intellectual property rights") necessary to conduct the business now
operated by them, or presently employed by them, and have not received
any notice of infringement of or conflict with asserted rights of
others with respect to any intellectual property rights that, if
determined adversely to the Company or any of its subsidiaries would
5
<PAGE>
individually or in the aggregate have a material adverse effect on the
Company and its subsidiaries taken as a whole.
(x) Except as disclosed in the Prospectus, neither the Company
nor any of its subsidiaries is in violation of any statute, any rule,
regulation, decision or order of any governmental agency or body or any
court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or
restoration of the environment or human exposure to hazardous or toxic
substances (collectively, "Environmental Laws"), owns or operates any
real property contaminated with any substance that is subject to any
Environmental Laws, is liable for any off-site disposal or
contamination pursuant to any Environmental Laws, or is subject to any
claim relating to any Environmental Laws, which violation,
contamination, liability or claim would individually or in the
aggregate have a material adverse effect on the Company and its
subsidiaries taken as a whole; and the Company is not aware of any
pending investigation which might lead to such a claim.
(y) The Company has provided the Representatives with all
environmental site assessments, investigations or other reports or
surveys in its possession or of which it is aware in connection with
environmental laws and laws and regulations relating to health and
safety requested by the Representatives in their due diligence request
letter.
(z) Except as disclosed in the Prospectus, there are no
pending actions, suits, proceedings, inquiries, arbitrations,
investigations, litigation or governmental proceedings against or
affecting the Company, any of its subsidiaries, or any of their
respective properties that, if determined adversely to the Company or
any of its subsidiaries would individually or in the aggregate have a
material adverse effect on the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as a whole, or would materially and adversely affect
the ability of the Company to perform its obligations under this
Agreement; and no such actions, suits, proceedings, inquiries,
arbitrations, investigations, litigation or governmental proceedings
are threatened or, to the Company's knowledge, contemplated. Neither
the Company nor any of its subsidiaries is a party or subject to the
provisions of any injunction, judgment, decree or order of any court,
regulatory body, administrative agency or other governmental body which
would individually or in the aggregate have a material adverse effect
on the Company and its subsidiaries taken as a whole.
(aa) The financial statements included in each Registration
Statement and the Prospectus present fairly the financial position of
the Company and its consolidated subsidiaries as of the dates shown and
their results of operations and cash flows for the periods shown, and
such financial statements have been prepared in conformity with the
generally accepted accounting principles in the United States applied
on a consistent basis; and the schedules included in each Registration
Statement present fairly the information required to be stated therein
and the assumptions used in preparing the pro forma financial
information included in each Registration Statement and the Prospectus
provide a reasonable basis for presenting the significant effects
directly attributable to the transactions or events described therein,
the related pro forma adjustments give appropriate effect to those
assumptions, and the pro forma columns therein reflect the proper
application of those adjustments to the corresponding historical
financial statement amounts.
(bb) Except as disclosed in the Prospectus, since the date of
the latest audited financial statements included in the Prospectus
there has been no material adverse change, nor any development or event
involving a prospective material adverse change, in the condition
(financial or other), business, properties or results of operations of
the Company and its subsidiaries taken as a whole, and, except as
disclosed in or contemplated by the Prospectus, there has been no
dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock.
6
<PAGE>
(cc) Except as disclosed in the Prospectus, since the date of
the latest audited financial statements included in the Prospectus none
of the properties owned by the Company or its subsidiaries has
sustained any material loss or interference from fire, flood,
hurricane, accident or other calamity, whether or not covered by
insurance.
(dd) The Company is not and, after giving effect to the
offering and sale of the Offered Securities and the application of the
proceeds thereof as described in the Prospectus, will not be an
"investment company" as defined in the Investment Company Act of 1940.
(ee) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Section 517.075, Florida Statutes
and the Company agrees to comply with such Section if prior to the
completion of the distribution of the Offered Securities it commences
doing such business.
(ff) Except as disclosed in the Prospectus, the Company and
its subsidiaries have and maintain liability, property and casualty
insurance (insured by insurers of recognized financial responsibility)
in favor of the Company and its subsidiaries with respect to each of
the properties owned by the Company and its subsidiaries in an amount
and on such terms as is reasonable and customary for businesses of the
type proposed to be conducted by the Company and its subsidiaries,
including, among other things, insurance against theft, damage,
destruction and acts of vandalism. None of the Company nor any of its
subsidiaries has received from any insurance company notice of any
material defects or deficiencies affecting the insurability of any such
property.
(gg) Title insurance in favor of the Company is in force with
respect to each of the properties owned by the Company and its
subsidiaries in an amount previously disclosed to the Representatives.
(hh) Except as disclosed in the Prospectus, all entitlements
necessary for development and/or renovation of each of the properties
planned for development, material expansion or renovation as described
in the Prospectus as having been vested or entitled with development
rights have been obtained, and no further governmental or regulatory
approvals are necessary for additional development of such properties.
With respect to any other property planned for development, material
expansion or renovation and which is not described in the Prospectus as
having received all necessary entitlements, the Company expects that
such entitlements will be issued in normal course.
(ii) The mortgages and deeds of trust encumbering the
properties are not convertible and such mortgages and deeds of trust
are not cross-defaulted or cross-collateralized.
(jj) No environmental engineering firm which prepared Phase I
environmental assessment reports (or other similar reports) with
respect to the properties owned by the Company and its subsidiaries as
set forth in the Registration Statement was employed for such purpose
on a contingent basis or has any substantial interest in the Company or
any of its subsidiaries.
(kk) Each of the properties owned by the Company and its
subsidiaries complies with all applicable codes, laws and regulations
(including, without limitation, building and zoning codes and laws
relating to handicapped access), except such violations which would not
have a material adverse effect on the Company and its subsidiaries
taken as a whole.
(ll) The Company will apply the net proceeds from the offering
of the Offered Securities in the manner set forth under "Use of
Proceeds" in the Prospectus, and the Company will file timely and
accurate reports with the Commission in accordance with Rule 463 under
the Act or any successor provision.
7
<PAGE>
3. PURCHASE, SALE AND DELIVERY OF OFFERED SECURITIES. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and the Underwriters agree, severally and not jointly, to purchase
from the Company, at a purchase price of $ per share, the respective numbers of
shares of Firm Securities set forth opposite the names of the Underwriters in
Schedule A hereto.
The Company will deliver the Firm Securities to the Representatives for
the accounts of the Underwriters, against payment of the purchase price in
Federal (same day) funds by official bank check or checks or wire transfer to an
account at a bank acceptable to Credit Suisse First Boston Corporation ("CSFBC")
drawn to the order of Equity One, Inc., account number ____________________, at
the office of ____________________, ____________________, at __________ A.M.,
New York time, on _______________, 1997, or at such other time not later than
seven full business days thereafter as CSFBC and the Company determine, such
time being herein referred to as the "First Closing Date". For purposes of Rule
15c6-1 under the Securities Exchange Act of 1934, the First Closing Date (if
later than the otherwise applicable settlement date) shall be the settlement
date for payment of funds and delivery of securities for all the Offered
Securities sold pursuant to the offering. The certificates for the Firm
Securities so to be delivered will be in definitive form, in such denominations
and registered in such names as CSFBC requests and will be made available for
checking and packaging at the office of CSFBC, Eleven Madison Avenue, New York,
N.Y. 10010-3629, at least 24 hours prior to the First Closing Date.
In addition, upon written notice from CSFBC given to the Company from
time to time not more than 30 days subsequent to the date of the Prospectus, the
Underwriters may purchase all or less than all of the Optional Securities at the
purchase price per Security to be paid for the Firm Securities. The Company
agrees to sell to the Underwriters the number of shares of Optional Securities
specified in such notice and the Underwriters agree, severally and not jointly,
to purchase such Optional Securities. Such Optional Securities shall be
purchased for the account of each Underwriter in the same proportion as the
number of shares of Firm Securities set forth opposite such Underwriter's name
bears to the total number of shares of Firm Securities (subject to adjustment by
CSFBC to eliminate fractions) and may be purchased by the Underwriters only for
the purpose of covering over-allotments made in connection with the sale of the
Firm Securities. No Optional Securities shall be sold or delivered unless the
Firm Securities previously have been, or simultaneously are, sold and delivered.
The right to purchase the Optional Securities or any portion thereof may be
exercised from time to time and to the extent not previously exercised may be
surrendered and terminated at any time upon notice by CSFBC to the Company.
Each time for the delivery of and payment for the Optional Securities,
being herein referred to as an "Optional Closing Date", which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "Closing Date"), shall be determined by CSFBC
but shall be not later than five full business days after written notice of
election to purchase Optional Securities is given. The Company will deliver the
Optional Securities being purchased on each Optional Closing Date to the
Representatives for the accounts of the several Underwriters, against payment of
the purchase price therefor in Federal (same day) funds by official bank check
or checks or wire transfer to an account at a bank acceptable to CSFBC drawn to
the order of Equity One, Inc., at the office of ____________________,
____________________. The certificates for the Optional Securities being
purchased on each Optional Closing Date will be in definitive form, in such
denominations and registered in such names as CSFBC requests upon reasonable
notice prior to such Optional Closing Date and will be made available for
checking and packaging at the office of CSFBC, Eleven Madison Avenue, New York,
N.Y. 10010-3629 at a reasonable time in advance of such Optional Closing Date.
4. OFFERING BY UNDERWRITERS. It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public as
set forth in the Prospectus.
8
<PAGE>
5. CERTAIN AGREEMENTS OF THE COMPANY. The Company agrees with the
several Underwriters that:
(a) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement, the
Company will file the Prospectus with the Commission pursuant to and in
accordance with subparagraph (1) (or, if applicable and if consented to
by CSFBC, subparagraph (4)) of Rule 424(b) not later than the earlier
of (A) the second business day following the execution and delivery of
this Agreement or (B) the fifteenth business day after the Effective
Date of the Initial Registration Statement.
The Company will advise CSFBC promptly of any such filing pursuant to
Rule 424(b). If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement and
an additional registration statement is necessary to register a portion
of the Offered Securities under the Act but the Effective Time thereof
has not occurred as of such execution and delivery, the Company will
file the additional registration statement or, if filed, will file a
post-effective amendment thereto with the Commission pursuant to and in
accordance with Rule 462(b) on or prior to 10:00 P.M., New York time,
on the date of this Agreement or, if earlier, on or prior to the time
the Prospectus is printed and distributed to any Underwriter, or will
make such filing at such later date as shall have been consented to by
CSFBC.
(b) The Company will advise CSFBC promptly of any proposal to
amend or supplement the initial or any additional registration
statement as filed or the related prospectus or the Initial
Registration Statement, the Additional Registration Statement (if any)
or the Prospectus and will not effect such amendment or supplementation
without CSFBC's consent; and the Company will also advise CSFBC
promptly of the effectiveness of each Registration Statement (if its
Effective Time is subsequent to the execution and delivery of this
Agreement) and of any amendment or supplementation of a Registration
Statement or the Prospectus and of the institution by the Commission of
any stop order proceedings in respect of a Registration Statement and
will use its best efforts to prevent the issuance of any such stop
order and to obtain as soon as possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection with
sales by any Underwriter or dealer, any event occurs as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act,
the Company will promptly notify CSFBC of such event and will promptly
prepare and file with the Commission, at its own expense, an amendment
or supplement which will correct such statement or omission or an
amendment which will effect such compliance. Neither CSFBC's consent
to, nor the Underwriters' delivery of, any such amendment or supplement
shall constitute a waiver of any of the conditions set forth in Section
6.
(d) As soon as practicable, but not later than the
Availability Date (as defined below), the Company will make generally
available to its securityholders an earnings statement covering a
period of at least 12 months beginning after the Effective Date of the
Initial Registration Statement (or, if later, the Effective Date of the
Additional Registration Statement) which will satisfy the provisions of
Section 11(a) of the Act. For the purpose of the preceding sentence,
"Availability Date" means the 45th day after the end of the fourth
fiscal quarter following the fiscal quarter that includes such
Effective Date, except that, if such fourth fiscal quarter is the last
quarter of the Company's fiscal year, "Availability Date" means the
90th day after the end of such fourth fiscal quarter.
(e) The Company will furnish to the Representatives copies of
each Registration Statement (four of which will be signed and will
include all exhibits), each related preliminary prospectus, and, so
long as a prospectus relating to the Offered Securities is required to
be delivered under the Act in
9
<PAGE>
connection with sales by any Underwriter or dealer, the Prospectus and
all amendments and supplements to such documents, in each case in such
quantities as CSFBC requests. The Prospectus shall be so furnished on
or prior to 3:00 P.M., New York time, on the business day following the
later of the execution and delivery of this Agreement or the Effective
Time of the Initial Registration Statement. All other documents shall
be so furnished as soon as available. The Company will pay the expenses
of printing and distributing to the Underwriters all such documents.
(f) The Company will arrange for the qualification of the
Offered Securities for sale under the laws of such jurisdictions as
CSFBC designates and will continue such qualifications in effect so
long as required for the distribution.
(g) During the period of five years hereafter, the Company
will furnish to the Representatives and, upon request, to each of the
other Underwriters, as soon as practicable after the end of each fiscal
year, a copy of its annual report to stockholders for such year; and
the Company will furnish to the Representatives (i) as soon as
available, a copy of each report and any definitive proxy statement of
the Company filed with the Commission under the Securities Exchange Act
of 1934 or mailed to stockholders, and (ii) from time to time, such
other information concerning the Company as CSFBC may reasonably
request.
(h) The Company will pay all expenses incident to the
performance of its obligations under this Agreement, for any filing
fees and other expenses (including fees and disbursements of counsel)
incurred in connection with qualification of the Offered Securities for
sale under the laws of such jurisdictions as CSFBC designates and the
printing of memoranda relating thereto, for the filing fee incident to,
and the reasonable fees and disbursements of counsel to the
Underwriters in connection with, the review by the National Association
of Securities Dealers, Inc. of the Offered Securities, which fees are
not expected to exceed $5,000.00, for any travel expenses of the
Company's officers and employees and any other expenses of the Company
in connection with attending or hosting meetings with prospective
purchasers of the Offered Securities and for expenses incurred in
distributing preliminary prospectuses and the Prospectus (including any
amendments and supplements thereto) to the Underwriters.
(i) For a period of 180 days after the date of the initial
public offering of the Offered Securities, the Company will not offer,
sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Commission a registration statement under
the Act relating to, any additional shares of its Securities or
securities convertible into or exchangeable or exercisable for any
shares of its Securities, or publicly disclose the intention to make
any such offer, sale, pledge, disposition or filing, without the prior
written consent of CSFBC except (A) the filing of a registration
statement on a Form S-8 in accordance with the terms of an employee
stock option plan in effect on the date hereof, (B) grants of employee
stock options pursuant to the terms of a plan in effect on the date
hereof, (C) issuances of Securities pursuant to the exercise of such
options or the exercise of any other employee stock options outstanding
on the date hereof, (D) issuances of Securities pursuant to the
Company's agreement with Globe Reit Investments, Ltd. and (E) issuances
of Securities pursuant to the Company's outstanding Series C Warrants.
(j) The Company will use its best efforts to continue to meet
the requirements to qualify as a REIT under the Code.
6. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The obligations
of the several Underwriters to purchase and pay for the Firm Securities on the
First Closing Date and the Optional Securities to be purchased on each Optional
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company herein, to the accuracy of the
certificates of Company officers to the Underwriters made pursuant to the
10
<PAGE>
provisions hereof, to the performance by the Company of its obligations
hereunder and to the following additional conditions precedent:
(a) The Representatives shall have received a letter, dated
the date of delivery thereof (which, if the Effective Time of the
Initial Registration Statement is prior to the execution and delivery
of this Agreement, shall be on or prior to the date of this Agreement
or, if the Effective Time of the Initial Registration Statement is
subsequent to the execution and delivery of this Agreement, shall be
prior to the filing of the amendment or post-effective amendment to the
registration statement to be filed shortly prior to such Effective
Time), of Deloitte & Touche LLP confirming that they are independent
public accountants within the meaning of the Act and the applicable
published Rules and Regulations thereunder and stating to the effect
that:
(i) in their opinion the financial statements and
schedules examined by them and included or incorporated by
reference in the Registration Statements comply as to form in
all material respects with the applicable accounting
requirements of the Act and the related published Rules and
Regulations;
(ii) they have performed the procedures specified by
the American Institute of Certified Public Accountants for a
review of interim financial information as described in
Statement of Auditing Standards No. 71, Interim Financial
Information, on the unaudited financial statements included in
the Registration Statements;
(iii) on the basis of the review referred to in
clause (ii) above, a reading of the latest available interim
financial statements of the Company, inquiries of officials of
the Company who have responsibility for financial and
accounting matters and other specified procedures, nothing
came to their attention that caused them to believe that:
(A) the unaudited financial data included in
the Registration Statements do not comply as to form
in all material respects with the applicable
accounting requirements of the Act and the related
published Rules and Regulations or any material
modifications should be made to such unaudited
financial statements for them to be in conformity
with generally accepted accounting principles;
(B) the unaudited consolidated total
revenues, net operating income, net income and net
income per share amounts for the six-month periods
ended June 30, 1996 and June 30, 1997 included in the
Prospectus were not determined on a basis
substantially consistent with that of the
corresponding amounts in the audited statements of
income;
(C) at the date of the latest available
balance sheet read by such accountants, or at a
subsequent specified date not more than three
business days prior to the date of this Agreement,
there was any change in the capital stock or any
increase in indebtedness of the Company and its
consolidated subsidiaries or, at the date of the
latest available balance sheet read by such
accountants, there was any decrease in consolidated
net assets, as compared with amounts shown on the
latest balance sheet included in the Prospectus; or
(D) for the period from the closing date of
the latest income statement included in the
Prospectus to the closing date of the latest
available income statement read by such accountants
there were any decreases, as compared with the
corresponding period of the previous year and with
the period of corresponding length ended the date of
the latest
11
<PAGE>
income statement included in the Prospectus, in
consolidated total revenues, or in the total or per
share amounts of consolidated net income,
except in all cases set forth in clauses (C) and (D) above for
changes, increases or decreases which the Prospectus discloses
have occurred or may occur or which are described in such
letter;
(iv) they have read the unaudited pro forma
information included in the Registration Statement and made
inquiries of officials of the Company who have responsibility
for financial and accounting matters and other specified
procedures, and nothing came to their attention that caused
them to believe that the unaudited pro forma financial data
included in the Registration Statements do not comply as to
form in all material respects with the applicable accounting
requirements of the Act and the related published Rules and
Regulations or that the pro forma adjustments have not been
properly applied to the historical amounts in the compilation
of those statements; and
(v) they have compared specified amounts (or
percentages derived from such amounts) and other financial
information contained in the Registration Statements (in each
case to the extent that such amounts, percentages and other
financial information are derived from the general accounting
records of the Company and its subsidiaries subject to the
internal controls of the Company's accounting system or are
derived directly from such records by analysis or computation)
with the results obtained from inquiries, a reading of such
general accounting records and other procedures specified in
such letter and have found such amounts, percentages and other
financial information to be in agreement with such results,
except as otherwise specified in such letter.
For purposes of this subsection, (i) if the Effective Time of the
Initial Registration Statement is subsequent to the execution and
delivery of this Agreement, "Registration Statements" shall mean the
initial registration statement as proposed to be amended by the
amendment or post-effective amendment to be filed shortly prior to its
Effective Time, (ii) if the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement but
the Effective Time of the Additional Registration is subsequent to such
execution and delivery, "Registration Statements" shall mean the
Initial Registration Statement and the additional registration
statement as proposed to be filed or as proposed to be amended by the
post-effective amendment to be filed shortly prior to its Effective
Time, and (iii) "Prospectus" shall mean the prospectus included in the
Registration Statements.
(b) If the Effective Time of the Initial Registration
Statement is not prior to the execution and delivery of this Agreement,
such Effective Time shall have occurred not later than 10:00 P.M., New
York time, on the date of this Agreement or such later date as shall
have been consented to by CSFBC. If the Effective Time of the
Additional Registration Statement (if any) is not prior to the
execution and delivery of this Agreement, such Effective Time shall
have occurred not later than 10:00 P.M., New York time, on the date of
this Agreement or, if earlier, the time the Prospectus is printed and
distributed to any Underwriter, or shall have occurred at such later
date as shall have been consented to by CSFBC. If the Effective Time of
the Initial Registration Statement is prior to the execution and
delivery of this Agreement, the Prospectus shall have been filed with
the Commission in accordance with the Rules and Regulations and Section
5(a) of this Agreement. Prior to such Closing Date, no stop order
suspending the effectiveness of a Registration Statement shall have
been issued and no proceedings for that purpose shall have been
instituted or, to the knowledge of the Company or the Representatives,
shall be contemplated by the Commission.
(c) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) any change, or any
development or event involving a prospective change, in the condition
(financial or
12
<PAGE>
other), business, properties or results of operations of the Company
and its subsidiaries taken as a whole which, in the judgment of a
majority in interest of the Underwriters including the Representatives,
is material and adverse and makes it impractical or inadvisable to
proceed with completion of the public offering or the sale of and
payment for the Offered Securities; (ii) any downgrading in the rating
of any debt securities of the Company by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule
436(g) under the Act), or any public announcement that any such
organization has under surveillance or review its rating of any debt
securities of the Company (other than an announcement with positive
implications of a possible upgrading, and no implication of a possible
downgrading, of such rating); (iii) any suspension or limitation of
trading in securities generally on the New York Stock Exchange or the
Nasdaq Stock Market's National Market, or any setting of minimum prices
for trading on such exchange, or any suspension of trading of any
securities of the Company on any exchange or in the over-the-counter
market; (iv) any banking moratorium declared by U.S. Federal, New York
or Florida authorities; or (v) any outbreak or escalation of major
hostilities in which the United States is involved, any declaration of
war by Congress or any other substantial national or international
calamity or emergency if, in the judgment of a majority in interest of
the Underwriters including the Representatives, the effect of any such
outbreak, escalation, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the public
offering or the sale of and payment for the Offered Securities.
(d) The Representatives shall have received an opinion, dated
as of such Closing Date, of Greenberg, Traurig, Hoffman, Lipoff, Rosen
& Quentel, P.A., counsel for the Company, to the effect that:
(i) The Company is a corporation duly incorporated
and existing under the laws of the State of Maryland and is in
good standing with the State Department of Assessments and
Taxation of Maryland with corporate power and authority to own
its properties and conduct its business substantially as
described in the Prospectus; and the Company is duly qualified
to do business as a foreign corporation in good standing in
all other jurisdictions in which its ownership or lease of
property or the conduct of its business requires such
qualification except where the failure to so qualify would not
have a material adverse effect on the Company and its
subsidiaries taken as a whole;
(ii) Each of the subsidiaries has been duly
incorporated and is an existing corporation in good standing
under the laws of the state of its incorporation, with
corporate power and authority to own its properties and
conduct its business as described in the Prospectus; and the
each subsidiary is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions in
which its ownership or lease of property or the conduct of its
business requires such qualification except where the failure
to so qualify would not have a material adverse effect on the
Company and its subsidiaries taken as a whole; all of the
issued and outstanding capital stock of each subsidiary of the
Company has been duly authorized and validly issued and is
fully paid and nonassessable and is owned by the Company; and
the capital stock of each subsidiary owned by the Company,
directly or through subsidiaries, is owned free from liens,
encumbrances and defects;
(iii) The Company has an authorized and outstanding
capitalization as set forth under the heading "Capitalization"
in the Prospectus; the Offered Securities delivered on such
Closing Date and all other outstanding shares of the Common
Stock of the Company have been duly authorized and validly
issued, are fully paid and nonassessable and conform in all
material respects to the description thereof under the heading
"Description of Capital Stock" in the Prospectus; the
stockholders of the Company have no preemptive rights with
respect to the Securities and all other outstanding shares of
the Common Stock of the Company and no Securities issued by
the Company have been issued in violation of any such
preemptive rights except such violations as
13
<PAGE>
have been irrevocably waived and the Securities conform to
the description under the heading "Description of Capital
Stock" in the Prospectus;
(iv) Except as disclosed in the Prospectus, there are
no contracts, agreements or understandings between the Company
and any person granting such person the right to require the
Company to file a registration statement under the Act with
respect to any securities of the Company owned or to be owned
by such person or to require the Company to include such
securities in the securities registered pursuant to the
Registration Statement or in any securities being registered
pursuant to any other registration statement filed by the
Company under the Act, and all rights as to this offering have
been waived;
(v) The Company is not and, after giving effect to
the offering and sale of the Offered Securities and the
application of the proceeds thereof as described in the
Prospectus, will not be an "investment company" as defined in
the Investment Company Act of 1940;
(vi) No consent, approval, authorization or order of,
or filing with, any governmental agency or body or any court
is required for the consummation of the transactions
contemplated by this Agreement in connection with the issuance
or sale of the Offered Securities by the Company, except such
as have been obtained and made under the Act and such as may
be required under state securities laws;
(vii) The execution, delivery and performance of this
Agreement and the issuance and sale of the Offered Securities
will not result in a breach or violation of any of the terms
and provisions of, or constitute a default or event which with
notice and passage of time would constitute a default or
additional default under, any statute, any rule, regulation or
order of any governmental agency or body or any court having
jurisdiction over the Company or any subsidiary of the Company
or any of their properties, or any indenture, mortgage, deed
of trust, lease or any other agreement or instrument to which
the Company or any such subsidiary is a party or by which the
Company or any such subsidiary is bound or to which any of the
properties of the Company or any such subsidiary is subject,
or the charter or by-laws of the Company or any such
subsidiary, provided, however, that the execution of this
Agreement may constitute defaults under the mortgages related
to the Company's Monument Pointe Shopping Center, Plaza Del
Rey Shopping Center, Westlake Shopping Center and Atlantic
Shopping Center for which the Company has received waivers or
which will be paid off with the proceeds of the offering or
for which sufficient capacity will remain at all times under
the Acquisition Line of Credit (as defined in the Prospectus)
or any subsequent credit facility and the Company has full
power and authority to authorize, issue and sell the Offered
Securities as contemplated by this Agreement;
(viii) The statements set forth in the Prospectus
under the caption "Description of Capital Stock", insofar as
they purport to constitute a summary of the terms of the
Securities, under the captions "Federal Income Tax
Considerations", "Shares Eligible for Future Sale", "ERISA
Considerations", and under the caption "Underwriting", insofar
as they purport to describe the provisions of the laws and
documents referred to therein, are accurate and complete in
all material respects and fairly present the information
required to be shown;
(ix) The Initial Registration Statement was declared
effective under the Act as of the date and time specified in
such opinion, the Additional Registration Statement (if any)
was filed and became effective under the Act as of the date
and time (if determinable) specified in such opinion, the
Prospectus either was filed with the Commission pursuant to
the subparagraph of Rule 424(b) specified in such opinion on
the date specified therein or was included in the Initial
Registration Statement or the Additional Registration
Statement (as the case may be), and, to the
14
<PAGE>
knowledge of such counsel, no stop order suspending the
effectiveness of a Registration Statement or any part thereof
has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the Act, and
each Registration Statement and the Prospectus, and each
amendment or supplement thereto, as of their respective
effective or issue dates, complied as to form in all material
respects with the requirements of the Act and the Rules and
Regulations; such counsel has no reason to believe that any
part of a Registration Statement or any amendment thereto, as
of its effective date or as of such Closing Date, contained
any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the
circumstances under which they were made or that the
Prospectus or any amendment or supplement thereto, as of its
issue date or as of such Closing Date, contained any untrue
statement of a material fact or omitted to state any material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading; the descriptions in the Registration Statements
and Prospectus of statutes, rules, regulations, orders,
injunctions, decrees, judgments, legal and governmental
proceedings and contracts and other documents are accurate and
complete in all material respects and fairly present the
information required to be shown; and such counsel does not
know of any legal or governmental proceedings required to be
described in a Registration Statement or the Prospectus which
are not described as required or of any contracts or documents
of a character required to be described in a Registration
Statement or the Prospectus or to be filed as exhibits to a
Registration Statement which are not described and filed as
required; it being understood that such counsel need express
no opinion as to the financial statements or other financial
data contained in the Registration Statements or the
Prospectus;
(x) This Agreement has been duly authorized,
executed and delivered by the Company;
(xi) To such counsel's knowledge after reasonable
investigation, there are no governmental actions, governmental
suits or governmental proceedings pending or threatened
against the Company with respect to the business and property
of the Company and its subsidiaries other than (a) those which
have been disclosed in the Prospectus, and (b) those which
would not have a material adverse effect on the Company and
its subsidiaries taken as a whole;
(xii) To such counsel's knowledge after reasonable
investigation, no default exists, and no event has occurred
which, with notice or lapse of time or both, would constitute
a default in the due performance and observance of any term,
covenant or condition of any indenture, mortgage, deed of
trust, lease or other agreement or instrument to which the
Company or any of its subsidiaries is a party (including,
without limitation, a default by any tenant of any portion of
the property of the Company or its subsidiaries) or by which
the Company of any of its subsidiaries or any of their
respective properties is bound or may be affected in any
material adverse respect with regard to property, business or
operations of the Company and its subsidiaries taken as a
whole, except such as have been irrevocably waived;
(xiii) Except as disclosed in the Prospectus, to such
counsel's knowledge after reasonable investigation, there are
no outstanding (A) securities, equity interests or obligations
of the Company or any of its subsidiaries convertible into or
exchangeable for any stock or equity interests (as the case
may be) of the Company or any such subsidiary, (B) warrants,
rights or options to subscribe for or purchase from the
Company or any such subsidiary any such stock or equity
interests or any such convertible or exchangeable securities,
equity interests or obligations, or (C) obligations of the
Company or any such subsidiary to issue any shares of capital
stock, equity interests, any such convertible or exchangeable
securities, equity interests or obligations, or any such
warrants, rights or options;
15
<PAGE>
(xiv) The Company is organized in conformity with the
requirements for qualification as a REIT under the Code, and
the method of operation of the Company and its subsidiaries
has at all times enabled, and its proposed method of operation
will enable, the Company to continue to meet the requirements
for taxation as a REIT under the Code. All statements in the
Prospectus regarding the Company's qualification as a REIT are
true, complete and correct in all material respects; and
(xv) Since the date of the Company's REIT election,
each subsidiary of the Company has at all times been treated,
and will be treated, as a "qualified REIT subsidiary" under
Section 856(i) of the Code.
In rendering the opinions above, Greenberg, Traurig, Hoffman, Lipoff, Rosen &
Quentel, P.A. may rely as to the incorporation of the Company and all other
matters governed by Maryland law upon the opinion of Ballard Spahr Andrews &
Ingersoll.
(e) The Representatives shall have received an opinion, dated
such Closing Date, of Ballard Spahr Andrews & Ingersoll, counsel for
the Company, to the effect that:
(i) The Company is a corporation duly incorporated
and existing under the laws of the State of Maryland and is in
good standing with the State Department of Assessments and
Taxation of Maryland with corporate power and authority to own
its properties and conduct its business substantially as
described in the Prospectus; and the Company is duly qualified
to do business as a foreign corporation in good standing in
all other jurisdictions in which its ownership or lease of
property or the conduct of its business requires such
qualification except where the failure to so qualify would not
have a material adverse effect on the Company and its
subsidiaries as a whole;
(ii) The Company has an authorized and outstanding
capitalization as set forth under the heading "Capitalization"
in the Prospectus, and the Offered Securities delivered on
such Closing Date and all other outstanding shares of the
Common Stock of the Company have been duly authorized and
validly issued, are fully paid and nonassessable and conform
in all material respects to the description thereof contained
under the heading "Description of Capital Stock" in the
Prospectus; and the stockholders of the Company have no
preemptive rights with respect to the Securities and all other
outstanding shares of the Common Stock of the Company or other
similar rights arising by operation of the Maryland General
Corporation Law (the "MGCL") or under the charter or bylaws of
the Company or any agreement or other instrument known to such
counsel and no securities issued by the Company, have been
issued in violation of any such preemptive rights;
(iii) The executive and delivery of this Agreement
has been duly authorized by the Company;
(iv) The form of certificate used to represent the
Offered Securities is in due and proper form and complies in
all material respects with all applicable statutory
requirements under the laws of the State of Maryland;
(v) The information in the Prospectus under the
caption "Description of Capital Stock" to the extent that it
constitutes matters of Maryland law, summaries of legal
matters, documents or proceedings, or legal conclusions, has
been reviewed by them and is correct in all material respects.
16
<PAGE>
(f) The Representatives shall have received from Latham &
Watkins, counsel for the Underwriters, such opinion or opinions, dated
such Closing Date, with respect to the incorporation of the Company,
the validity of the Offered Securities delivered on such Closing Date,
the Registration Statements, the Prospectus and other related matters
as the Representatives may require, and the Company shall have
furnished to such counsel such documents as they request for the
purpose of enabling them to pass upon such matters. In rendering such
opinion, Latham & Watkins may rely as to the incorporation of the
Company and all other matters governed by Maryland law upon the opinion
of Ballard Spahr Andrews & Ingersoll referred to above.
(g) The Representatives shall have received a certificate,
dated as of such Closing Date, of the Chief Executive Officer and a
principal financial or accounting officer of the Company in which such
officers, to the best of their knowledge after reasonable
investigation, shall state that: the representations and warranties of
the Company in this Agreement are true and correct; the Company has
complied with all agreements and satisfied all conditions on its part
to be performed or satisfied hereunder at or prior to such Closing
Date; no stop order suspending the effectiveness of any Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are contemplated by the Commission; the Additional
Registration Statement (if any) satisfying the requirements of
subparagraphs (1) and (3) of Rule 462(b) was filed pursuant to Rule
462(b), including payment of the applicable filing fee in accordance
with Rule 111(a) or (b) under the Act, prior to the time the Prospectus
was printed and distributed to any Underwriter; and, subsequent to the
date of the most recent financial statements in the Prospectus, there
has been no material adverse change, nor any development or event
involving a prospective material adverse change, in the condition
(financial or other), business, properties or results of operations of
the Company and its subsidiaries taken as a whole except as set forth
in or contemplated by the Prospectus or as described in such
certificate.
(h) The Representatives shall have received letters, dated as
of such Closing Date, of Deloitte & Touche LLP which meet the
requirements of subsection (a) of this Section, except that the
specified date referred to in such subsection will be a date not more
than three days prior to such Closing Date for the purposes of this
subsection.
(i) The Representatives shall have received from each of the
principal stockholders and affiliates a lockup agreement whereby each
of the foregoing, for a period of 180 days after the date of the
initial public offering of the Offered Securities will not offer, sell,
contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Commission a registration statement under
the Act relating to, any additional shares of its Securities or
securities convertible into or exchangeable or exercisable for any
shares of the Securities, or publicly disclose the intention to make
any such offer, sale, pledge, disposition or filing, without the prior
written consent of CSFBC except grants of employee stock options
pursuant to the terms of a plan in effect on the date hereof, issuances
of Securities pursuant to the exercise of such options or the exercise
of any other employee stock options outstanding on the date hereof,
issuances of Securities pursuant to the Company's dividend reinvestment
plan and issuances of Securities pursuant to the Class C Warrants.
(j) The Representatives shall have received on or before the
First Closing Date with respect to each of the properties owned by the
Company and its subsidiaries:
(i) An Extended ALTA Owner's Title Insurance Policy
issued at the time of the acquisition of each property by the
Company (each, a "Title Policy") naming the Company or its
subsidiaries as named insured and insuring such party that it
owns fee title to the real property described therein in an
amount of the original purchase price thereof, subject only to
any material exceptions to title as are described in the
Prospectus, and such exceptions which do not adversely affect
the current or potential use to be made of such property (the
"Permitted Exceptions");
17
<PAGE>
(ii) A current title status report issued by a
reputable title insurance company reasonably acceptable to the
Representatives and showing fee title to the property
described therein vested in the Company or its subsidiaries,
subject only to the Permitted Exceptions and subsequent
matters which will not materially adversely affect the
Company's title.
(iii) Either (A) a current final "as-built" ALTA
survey of each Property completed in accordance with the
Minimum Standard Detail requirements for ALTA/ACSM Land Title
Surveys, with additional Title A survey requirements, jointly
established and adopted by ALTA and ACSM in 1992 that meet the
requirements of a Class A Survey as defined therein or (B)
such other form of title survey which is in form and substance
satisfactory to the Representatives for each of the
Properties.
(iv) The Representatives shall have satisfied
themselves that (A) all utilities serving the Properties are
adequate for the present use of the Properties and any
expansions thereof described in the Prospectus; and (B) all
means of ingress and egress, parking, access to public streets
and drainage facilities are or will be available to the
Properties and are adequate for the present use of the
Properties and any expansions thereof described in the
Prospectus and are in compliance with applicable law;
(v) The Representatives shall have received and
approved with respect to each Property, to the extent
applicable, (A) copies of the applicable zoning ordinances and
maps marked to show the location of such Property and
certified by an appropriate governmental authority to be
complete and accurate; (B) evidence that such zoning
ordinances and the general plans/specific plans and all other
land use regulations of the applicable municipal jurisdictions
and all covenants, conditions and restrictions, if any,
affecting the Property permit the use of the Property for its
current use (and reconstruction and resumption of use in the
event of damage, destruction, or cessation of use) as a matter
of right for an unlimited time period and not merely as a
legal non-conforming use; (c) copies of all material licenses,
certificates, approvals and authorizations, including plot
plan and subdivision approvals, zoning variances and other
material authorizations required by governmental authorities
or by any applicable covenants, conditions and restrictions
for the use and operation of such Property for current use.
(vi) The Representatives shall have received written
reports in form and substance satisfactory to the
Representatives from one or more qualified engineering firms
approved by Representatives to the effect that the
improvements on each Property have been constructed in
compliance with, and currently are in substantial compliance
with, all governmental requirements, including the Americans
With Disabilities Act, and with all restrictions of record
applicable thereto which affect the use of such Property, and
that there are no material structural defects or other
material capital repairs required for such Property.
(vii) Policies or certificates of insurance relating
to each property evidencing coverages and in amounts
customarily obtained by owners of similar properties, together
with a letter of opinion from a nationally or regionally
recognized insurance broker approved by the Representatives
stating, in substance, that the coverage limits and companies
underwriting such insurance for the Company are within the
realm of reasonableness given the Company's business,
operations and claims history;
(viii) UCC, judgment and tax lien searches confirming
that the personal property comprising a part of each Property
is subject to no liens other than Permitted Exceptions;
18
<PAGE>
(ix) An estoppel certificate, in form and substance
acceptable to the Representatives, from each of the Anchor
Tenants (as defined in the Prospectus);
(x) If such property is subject to a mortgage, deed
of trust or similar financing (an "Existing Mortgage") which,
as described in the Prospectus, is to be repaid with the
proceeds of the offering, a letter dated not earlier than 10
days prior to the First Closing Date from the holder of such
Existing Mortgage indicating the amount required to satisfy
all amounts then secured by such Existing Mortgage and the
additional amount required for each day after the date of such
letter necessary to satisfy all obligations secured thereby,
together with all documentation and consents necessary to
permit the repayment of all amounts owed and the release of
the Existing Mortgage; and if such property is subject to an
Existing Mortgage which, as described in the Prospectus, is to
remain of record after the offering, a letter dated not
earlier than 10 days prior to the First Closing Date from the
holder of such Existing Mortgage indicating that the mortgagor
or grantor under such Existing Mortgage is not then in
default, indicating the total principal amount due under the
Existing Mortgage, the date of the last payment and principal
and interest under such mortgage, and to the extent required
by the mortgage, the holder of the Existing Mortgage's consent
to this offering; and
(xi) A Phase I Environmental Report, or updates, for
each of the Company's properties in form and substance
acceptable to the Representatives.
The Company will furnish the Representatives with such conformed copies of such
opinions, certificates, letters and documents as the Representatives reasonably
request. CSFBC may in its sole discretion waive on behalf of the Underwriters
compliance with any conditions to the obligations of the Underwriters hereunder,
whether in respect of an Optional Closing Date or otherwise.
7. INDEMNIFICATION AND CONTRIBUTION. (a) The Company will indemnify and
hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any related preliminary 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 not misleading,
and will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement in or omission or alleged
omission from any of such documents in reliance upon and in conformity with
written information furnished to the Company by any Underwriter through the
Representatives specifically for use therein, it being understood and agreed
that the only such information furnished by any Underwriter consists of the
information described as such in subsection (b) below.
(b) Each Underwriter will severally and not jointly indemnify
and hold harmless the Company against any losses, claims, damages or liabilities
to which the Company may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any Registration Statement, the Prospectus, or
any amendment or supplement thereto, or any related preliminary prospectus, or
arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein 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 Underwriter through the
19
<PAGE>
Representatives specifically for use therein, and will reimburse any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred, it being understood and agreed that the only such
information furnished by any Underwriter consists of the following information
in the Prospectus furnished on behalf of each Underwriter: the last paragraph at
the bottom of the cover page concerning the terms of the offering by the
Underwriters, the legend concerning over-allotments and stabilizing on the
inside front cover page, the concession and reallowance figures appearing in the
fourth paragraph under the caption "Underwriting" and the information contained
in the fifth paragraph under the caption "Underwriting".
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under subsection (a) or (b) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under subsection (a) or (b) above. In case any such action is
brought against any indemnified party and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any claims
that are the subject matter of such action.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Underwriters on the other from the offering
of the Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses) received
by the Company bear to the total underwriting discounts and commissions received
by the Underwriters. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid by an indemnified
party as a result of the losses, claims, damages or liabilities referred to in
the first sentence of this subsection (d) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any action or claim which is the subject of this
subsection (d). Notwithstanding the provisions of this subsection (d), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such
20
<PAGE>
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company under this Section 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
any Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section shall be in addition to any liability which the
respective Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Company, to each officer of the Company
who has signed a Registration Statement and to each person, if any, who controls
the Company within the meaning of the Act.
8. DEFAULT OF UNDERWRITERS. If any Underwriter or Underwriters default
in their obligations to purchase Offered Securities hereunder on either the
First or any Optional Closing Date and the aggregate number of shares of Offered
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed 10% of the total number of shares of Offered Securities
that the Underwriters are obligated to purchase on such Closing Date, CSFBC may
make arrangements satisfactory to the Company for the purchase of such Offered
Securities by other persons, including any of the Underwriters, but if no such
arrangements are made by such Closing Date, the non-defaulting Underwriters
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the Offered Securities that such defaulting Underwriters
agreed but failed to purchase on such Closing Date. If any Underwriter or
Underwriters so default and the aggregate number of shares of Offered Securities
with respect to which such default or defaults occur exceeds 10% of the total
number of shares of Offered Securities that the Underwriters are obligated to
purchase on such Closing Date and arrangements satisfactory to CSFBC and the
Company for the purchase of such Offered Securities by other persons are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Company, except
as provided in Section 9 (provided that if such default occurs with respect to
Optional Securities after the First Closing Date, this Agreement will not
terminate as to the Firm Securities or any Optional Securities purchased prior
to such termination). As used in this Agreement, the term "Underwriter" includes
any person substituted for an Underwriter under this Section. Nothing herein
will relieve a defaulting Underwriter from liability for its default.
9. SURVIVAL OF CERTAIN REPRESENTATIONS AND OBLIGATIONS. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or its officers and of the several Underwriters set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation, or statement as to the results thereof, made by or on behalf
of any Underwriter, the Company or any of their respective representatives,
officers or directors or any controlling person, and will survive delivery of
and payment for the Offered Securities. If this Agreement is terminated pursuant
to Section 8 or if for any reason the purchase of the Offered Securities by the
Underwriters is not consummated, the Company shall remain responsible for the
expenses to be paid or reimbursed by it pursuant to Section 5 and the respective
obligations of the Company and the Underwriters pursuant to Section 7 shall
remain in effect, and if any Offered Securities have been purchased hereunder
the representations and warranties in Section 2 and all obligations under
Section 5 shall also remain in effect. If the purchase of the Offered Securities
by the Underwriters is not consummated for any reason other than solely because
of the termination of this Agreement pursuant to Section 8 or the occurrence of
any event specified in clause (iii), (iv) or (v) of Section 6(c), the Company
will reimburse the Underwriters for all out-of-pocket expenses (including fees
and disbursements of counsel) reasonably incurred by them in connection with the
offering of the Offered Securities.
10. NOTICES. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed
to the Representatives, c/o Credit Suisse First Boston Corporation, Eleven
Madison Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking
Department,Transactions Advisory Group, or, if sent to the Company, will be
mailed, delivered or telegraphed and confirmed to it at 777 17th Street,
Penthouse, Miami Beach, FL 33139, Attention: Chaim Katzman, with a copy
21
<PAGE>
to Gary Epstein, Esq., Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel,
P.A., 1221 Brickell Avenue, Miami, FL 33131; provided, however, that any notice
to an Underwriter pursuant to Section 7 will be mailed, delivered or telegraphed
and confirmed to such Underwriter.
11. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 7, and no other
person will have any right or obligation hereunder.
12. REPRESENTATION OF UNDERWRITERS. The Representatives will act for
the several Underwriters in connection with this financing, and any action under
this Agreement taken by the Representatives jointly or by CSFBC will be binding
upon all the Underwriters.
13. COUNTERPARTS. This Agreement may be executed 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 Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
The Company hereby submits to the non-exclusive jurisdiction of the
Federal and state courts in the Borough of Manhattan in The City of New York in
any suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
22
<PAGE>
If the foregoing is in accordance with the Representatives
understanding of our agreement, kindly sign and return to the Company one of the
counterparts hereof, whereupon it will become a binding agreement between the
Company and the several Underwriters in accordance with its terms.
Very truly yours,
EQUITY ONE, INC.
By...............................
Title:
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
Acting on behalf of itself and as the
Representative of the several
Underwriters.
CREDIT SUISSE FIRST BOSTON CORPORATION
THE ROBINSON-HUMPHREY COMPANY, LLC
SALOMON BROTHERS INC
By CREDIT SUISSE FIRST BOSTON CORPORATION
By........................................
Title:
23
<PAGE>
SCHEDULE A
UNDERWRITER
NUMBER OF
FIRM SECURITIES
---------------
Credit Suisse First Boston Corporation........................
The Robinson-Humphrey Company, LLC............................
Salomon Brothers Inc..........................................
Total............................................... 4,700,000
=========
EXHIBIT 3.1
EQUITY ONE, INC.
ARTICLES OF AMENDMENT AND RESTATEMENT
FIRST: Equity One, Inc., a Maryland corporation (the
"Corporation"), desires to amend and restate its Charter as currently in effect
and as hereinafter amended.
SECOND: The following provisions are all the provisions of the
Charter currently in effect and as hereinafter amended:
ARTICLE I
INCORPORATION
The corporation was formed under the general laws of the State
of Maryland on June 15, 1992.
ARTICLE II
NAME
The name of the corporation (the "Corporation") is Equity One,
Inc.
ARTICLE III
PURPOSE
The Corporation was formed for the purposes of engaging in any
lawful act or activity (including, without limitation or obligation, engaging in
business as a real estate investment trust under the Internal Revenue Code of
1986, as amended, or any successor statute (the "Code")) for which corporations
may be organized under the general laws of the State of Maryland as now or
hereafter in force. For purposes of these Articles, "REIT" means a real estate
investment trust under Sections 856 through 860 of the Code.
<PAGE>
ARTICLE IV
PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT
The address of the principal office of the Corporation in the
State of Maryland is c/o Ballard Spahr Andrews & Ingersoll, 300 East Lombard
Street, Baltimore, Maryland 21202, Attention: James J. Hanks, Jr. The name of
the resident agent of the Corporation in the State of Maryland is James J.
Hanks, Jr., whose post address is c/o Ballard Spahr Andrews & Ingersoll, 300
East Lombard Street, Baltimore, Maryland 21202. The resident agent is a citizen
of and resides in the State of Maryland.
ARTICLE V
PROVISIONS FOR DEFINING, LIMITING AND REGULATING CERTAIN POWERS OF
THE CORPORATION AND OF THE STOCKHOLDERS AND DIRECTORS
Section 5.1 NUMBER AND CLASSIFICATION OF DIRECTORS. The
business and affairs of the Corporation shall be managed under the direction of
the Board of Directors. The number of directors of the Corporation initially
shall be nine, which number may be increased or decreased pursuant to the
Bylaws, but shall never be less than the minimum number required by the Maryland
General Corporation Law. The names of the directors who shall serve until their
successors are duly elected and qualify are:
Chaim Katzman
Doron Valero
Noam Ben-Ozer
Eli Makavy
Shaiy Pilpel
Shulamit Rozen-Katzman
Yuval Yanai
David Wulkan
Robert Cooney
-2-
<PAGE>
The directors may increase the number of directors and may
fill any vacancy, whether resulting from an increase in the number of directors
or otherwise, on the Board of Directors in the manner provided in the Bylaws.
Section 5.2 AUTHORIZATION BY BOARD OF STOCK ISSUANCES. The
Board of Directors may authorize the issuance from time to time of shares of
stock of the Corporation of any class or series, whether now or hereafter
authorized, or securities or rights convertible into shares of its stock of any
class or series, whether now or hereafter authorized, for such consideration as
the Board of Directors may deem advisable (or without consideration in the case
of a stock split or stock dividend), subject to such restrictions or
limitations, if any, as may be set forth in the Charter or the Bylaws.
Section 5.3 PREEMPTIVE RIGHTS. Except as may be provided by
the Board of Directors in setting the terms of classified or reclassified shares
of stock pursuant to Section 6.4 or as may be otherwise agreed by contract, no
holder of shares of stock of the Corporation shall, as such holder, have any
preemptive right to purchase or subscribe for any additional shares of stock of
the Corporation or any other security of the Corporation which it may issue or
sell.
Section 5.4 INDEMNIFICATION. The Corporation shall have the
power, to the maximum extent permitted by Maryland law in effect from time to
time, to obligate itself to indemnify, and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to, (a) any individual
who is a present or former director or officer of the Corporation or (b) any
individual who, while a director of the Corporation and at the request of the
Corporation, serves or has served as a director, officer, managing member,
partner or trustee of another corporation, real estate investment trust,
partnership, joint venture, trust, employee benefit plan or any other enterprise
from and against any claim or liability to which such person may become subject
or which such person may incur by reason of his status as a present or former
director or officer of the Corporation. The Corporation shall have the power,
with the approval of the Board of Directors, to provide such indemnification and
advancement of expenses to a person who served a predecessor of the Corporation
in any of the capacities described in (a) or (b) above and to any employee or
agent of the Corporation or a predecessor of the Corporation.
Section 5.5 DETERMINATIONS BY BOARD. The determination as to
any of the following matters, made in good faith by or pursuant to the direction
of the Board of Directors
-3-
<PAGE>
consistent with the Charter and in the absence of actual receipt of an improper
benefit in money, property or services or active and deliberate dishonesty
established by a court, shall be final and conclusive and shall be binding upon
the Corporation and every holder of shares of its stock: the amount of the net
income of the Corporation for any period and the amount of assets at any time
legally available for the payment of dividends, redemption of its stock or the
payment of other distributions on its stock; the amount of paid-in surplus, net
assets, other surplus, annual or other net profit, net assets in excess of
capital, undivided profits or excess of profits over losses on sales of assets;
the amount, purpose, time of creation, increase or decrease, alteration or
cancellation of any reserves or charges and the propriety thereof (whether or
not any obligation or liability for which such reserves or charges shall have
been created shall have been paid or discharged); the fair value, or any sale,
bid or asked price to be applied in determining the fair value, of any asset
owned or held by the Corporation; any matter relating to the acquisition,
holding or disposition of any assets by the Corporation; or any other matter
relating to the business and affairs of the Corporation.
Section 5.6 REIT QUALIFICATION. If the Corporation elects to
qualify for federal income tax treatment as a REIT, the Board of Directors shall
use its reasonable best efforts to take such actions as are necessary or
appropriate to preserve the status of the Corporation as a REIT; however, if the
Board of Directors determines that it is no longer in the best interests of the
Corporation to continue to be qualified as a REIT, the Board of Directors may
revoke or otherwise terminate the Corporation's REIT election pursuant to
Section 856(g) of the Code. The Board of Directors also may determine that
compliance with any restriction or limitation on stock ownership and transfers
set forth in Article VII is no longer required for REIT qualification.
Section 5.7 REMOVAL OF DIRECTORS. Subject to the rights of
holders of one or more classes or series of Preferred Stock to elect or remove
one or more directors, any director, or the entire Board of Directors, may be
removed from office at any time, but only for cause and then only by the
affirmative vote of at least eighty percent (80%) of the votes cast at an annual
or special meeting of stockholders (but in no event less than a majority of all
votes entitled to be cast at the meeting). For the purpose of this paragraph,
"cause" shall mean with respect to any particular director a final judgment of a
court of competent jurisdiction holding that such director
-4-
<PAGE>
caused demonstrable, material harm to the Corporation through bad faith or
active and deliberate dishonesty.
Section 5.8 ADVISOR AGREEMENTS. Subject to such approval of
stockholders and other conditions, if any, as may be required by any applicable
statute, rule or regulation, the Board of Directors may authorize the execution
and performance by the Corporation of one or more agreements with any person,
corporation, association, company, trust, partnership (limited or general) or
other organization whereby, subject to the supervision and control of the Board
of Directors, any such other person, corporation, association, company, trust,
partnership (limited or general) or other organization shall render or make
available to the Corporation managerial, investment, advisory and/or related
services, office space and other services and facilities (including, if deemed
advisable by the Board of Directors, the management or supervision of the
investments of the Corporation) upon such terms and conditions as may be
provided in such agreement or agreements (including, if deemed fair and
equitable by the Board of Directors, the compensation payable thereunder by the
Corporation).
ARTICLE VI
STOCK
Section 6.1 AUTHORIZED SHARES. The Corporation shall have
the authority to issue forty-five million (45,000,000) shares of stock,
consisting of forty million (40,000,000) shares of Common Stock, $.01 par value
per share ("Common Stock"), and five million (5,000,000) shares of Preferred
Stock, $.01 par value per share ("Preferred Stock"). The aggregate par value of
all authorized shares of stock having par value is $450,000. If shares of one
class of stock are classified or reclassified into shares of another class of
stock pursuant to Sections 6.2, 6.3 or 6.4 of this Article VI, the number of
authorized shares of the former class shall be automatically decreased and the
number of shares of the latter class shall be automatically increased, in each
case by the number of shares so classified or reclassified, so that the
aggregate number of shares of stock of all classes that the Corporation has
authority to issue shall not be more than the total number of shares of stock
set forth in the first sentence of this paragraph.
-5-
<PAGE>
Section 6.2 COMMON STOCK. Subject to the provisions of
Article VII, each share of Common Stock shall entitle the holder thereof to one
vote. The Board of Directors may reclassify any unissued shares of Common Stock
from time to time in one or more classes or series of stock.
Section 6.3 PREFERRED STOCK. The Board of Directors may
classify any unissued shares of Preferred Stock and reclassify any previously
classified but unissued shares of Preferred Stock of any series from time to
time, in one or more classes or series of stock.
Section 6.4 CLASSIFIED OR RECLASSIFIED SHARES. Prior to
issuance of classified or reclassified shares of any class or series, the Board
of Directors by resolution shall: (a) designate that class or series to
distinguish it from all other classes and series of stock of the Corporation;
(b) specify the number of shares to be included in the class or series; (c) set
or change, subject to the provisions of Article VII and subject to the express
terms of any class or series of stock of the Corporation outstanding at the
time, the preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms and
conditions of redemption for each class or series; and (d) cause the Corporation
to file articles supplementary with the State Department of Assessments and
Taxation of Maryland ("SDAT"). Any of the terms of any class or series of stock
set or changed pursuant to clause (c) of this Section 6.4 may be made dependent
upon facts or events ascertainable outside the Charter (including determinations
by the Board of Directors or other facts or events within the control of the
Corporation) and may vary among holders thereof, provided that the manner in
which such facts, events or variations shall operate upon the terms of such
class or series of stock is clearly and expressly set forth in the articles
supplementary filed with the SDAT.
Section 6.5 CHARTER AND BYLAWS. All persons who shall
acquire stock in the Corporation shall acquire the same subject to the
provisions of the Charter and the Bylaws.
ARTICLE VII
RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES
Section 7.1 DEFINITIONS. For the purpose of this Article
VII, the following terms shall have the following meanings:
-6-
<PAGE>
AGGREGATE STOCK OWNERSHIP LIMIT. The term "Aggregate Stock
Ownership Limit" shall mean not more than five percent in value of the aggregate
outstanding shares of Capital Stock. The value of the outstanding shares of
Capital Stock shall be determined by the Board of Directors of the Corporation
in good faith, which determination shall be conclusive for all purposes hereof.
BENEFICIAL OWNERSHIP. The term "Beneficial Ownership" shall
mean ownership of Capital Stock by a Person, whether the interest in the shares
of Capital Stock is held directly or indirectly (including by a nominee), and
shall include interests that would be treated as owned through the application
of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The
terms "Beneficial Owner," "Beneficially Owns" and "Beneficially Owned" shall
have the correlative meanings.
BUSINESS DAY. The term "Business Day" shall mean any day,
other than a Saturday or Sunday, that is neither a legal holiday nor a day on
which banking institutions in New York City are authorized or required by law,
regulation or executive order to close.
CAPITAL STOCK. The term "Capital Stock" shall mean all classes or
series of stock of the Corporation, including, without limitation, Common Stock
and Preferred Stock.
CHARITABLE BENEFICIARY. The term "Charitable Beneficiary"
shall mean one or more beneficiaries of the Trust as determined pursuant to
Section 7.3.6, provided that each such organization must be described in Section
501(c)(3) of the Code and contributions to each such organization must be
eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the
Code.
CHARTER. The term "Charter" shall mean the charter of the
Corporation, as that term is defined in the MGCL.
COMMON STOCK OWNERSHIP LIMIT. The term "Common Stock Ownership
Limit" shall mean not more than five percent (in value or in number of shares,
whichever is more restrictive) of the aggregate outstanding shares of Common
Stock of the Corporation. The number and value of outstanding shares of Common
Stock of the Corporation shall be determined by the Board of Directors of the
Corporation in good faith, which determination shall be conclusive for all
purposes hereof.
CONSTRUCTIVE OWNERSHIP. The term "Constructive Ownership"
shall mean ownership of Capital Stock by a Person, whether the interest in the
shares of Capital Stock is held directly or
-7-
<PAGE>
indirectly (including by a nominee), and shall include interests that would be
treated as owned through the application of Section 318(a) of the Code, as
modified by Section 897(c)(6)(C) of the Code. The terms "Constructive Owner,"
"Constructively Owns" and "Constructively Owned" shall have the correlative
meanings.
EXCEPTED HOLDER. The term "Excepted Holder" shall mean a
stockholder of the Corporation for whom an Excepted Holder Limit is created by
these Articles or by the Board of Directors pursuant to Section 7.2.7.
EXCEPTED HOLDER LIMIT. The term "Excepted Holder Limit" shall
mean, provided that the affected Excepted Holder agrees to comply with the
requirements established by the Board of Directors pursuant to Section 7.2.7,
and subject to adjustment pursuant to Section 7.2.8, the percentage limit
established by the Board of Directors pursuant to Section 7.2.7.
INITIAL DATE. The term "Initial Date" shall mean the date upon
which the Articles of Amendment and Restatement containing this Article VII are
filed with the SDAT.
MARKET PRICE. The term "Market Price" on any date shall mean,
with respect to any class or series of outstanding shares of Capital Stock, the
Closing Price for such Capital Stock on such date. The "Closing Price" on any
date shall mean the last sale price for such Capital Stock, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, for such Capital Stock, in either case as reported in
the principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the NYSE or, if such Capital Stock
is not listed or admitted to trading on the NYSE, as reported on the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which such Capital Stock is listed
or admitted to trading or, if such Capital Stock is not listed or admitted to
trading on any national securities exchange, the last quoted price, or, if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or, if such system is no longer in use,
the principal other automated quotation system that may then be in use or, if
such Capital Stock is not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in such Capital Stock selected by the Board of Directors of the
Corporation or, in the event that no trading price is available
-8-
<PAGE>
for such Capital Stock, the fair market value of the Capital Stock, as
determined in good faith by the Board of Directors of the Corporation.
MGCL. The term "MGCL" shall mean the Maryland General
Corporation Law, as amended from time to time.
NYSE. The term "NYSE" shall mean the New York Stock Exchange.
PERSON. The term "Person" shall mean an individual,
corporation, partnership, estate, trust (including a trust qualified under
Sections 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set
aside for or to be used exclusively for the purposes described in Section 642(c)
of the Code, association, private foundation within the meaning of Section
509(a) of the Code, joint stock company or other entity and also includes a
group as that term is used for purposes of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended, and a group to which an Excepted Holder Limit
applies.
PROHIBITED OWNER. The term "Prohibited Owner" shall mean, with
respect to any purported Transfer, any Person who, but for the provisions of
Section 7.2.1, would Beneficially Own or Constructively Own shares of Capital
Stock, and if appropriate in the context, shall also mean any Person who would
have been the record owner of the shares that the Prohibited Owner would have so
owned.
REIT. The term "REIT" shall mean a real estate investment
trust within the meaning of Section 856 of the Code.
RESTRICTION TERMINATION DATE. The term "Restriction
Termination Date" shall mean the first day after the Initial Date on which the
Corporation determines pursuant to Section 5.6 of the Charter that it is no
longer in the best interests of the Corporation to attempt to, or continue to,
qualify as a REIT or that compliance with the restrictions and limitations on
Beneficial Ownership, Constructive Ownership and Transfers of shares of Capital
Stock set forth herein is no longer required in order for the Corporation to
qualify as a REIT.
TENANT. The term "Tenant" shall mean a tenant, subtenant or
any other Person that is a subtenant through a chain of subtenancies of a
property owned by the Corporation.
TRANSFER. The term "Transfer" shall mean any issuance, sale,
transfer, gift, assignment, devise or other disposition, as well as any other
event that causes any Person to acquire Beneficial Ownership or Constructive
Ownership, or any agreement to take any such actions or cause any such
-9-
<PAGE>
events, of Capital Stock or the right to vote or receive dividends on Capital
Stock, including (a) the granting or exercise of any option (or any disposition
of any option), (b) any disposition of any securities or rights convertible into
or exchangeable for Capital Stock or any interest in Capital Stock or any
exercise of any such conversion or exchange right and (c) Transfers of interests
in other entities that result in changes in Beneficial or Constructive Ownership
of Capital Stock; in each case, whether voluntary or involuntary, whether owned
of record, Constructively Owned or Beneficially Owned and whether by operation
of law or otherwise. The terms "Transferring" and "Transferred" shall have the
correlative meanings.
TRUST. The term "Trust" shall mean any trust provided for in
Section 7.3.1.
TRUSTEE. The term "Trustee" shall mean a Person unaffiliated
with the Corporation and a Prohibited Owner that is appointed by the Corporation
to serve as trustee of a Trust.
Section 7.2 CAPITAL STOCK.
Section 7.2.1 OWNERSHIP LIMITATIONS. During the
period commencing on the Initial Date and prior to the Restriction Termination
Date:
(a) BASIC RESTRICTIONS.
(i) (1) No Person, other than
an Excepted Holder, shall Beneficially Own or Constructively Own shares of
Capital Stock in excess of the Aggregate Stock Ownership Limit, (2) no Person,
other than an Excepted Holder, shall Beneficially Own or Constructively Own
shares of Common Stock in excess of the Common Stock Ownership Limit and (3) no
Excepted Holder shall Beneficially Own or Constructively Own shares of Capital
Stock in excess of the Excepted Holder Limit for such Excepted Holder.
(ii) No Person shall Beneficially
or Constructively Own shares of Capital Stock to the extent that such Beneficial
or Constructive Ownership of Capital Stock would result in the Corporation being
"closely held" within the meaning of Section 856(h) of the Code (without regard
to whether the ownership interest is held during the last half of a taxable
year), or otherwise failing to qualify as a REIT (including, but not limited to,
Beneficial or Constructive Ownership that would result in the Corporation owning
(actually or Constructively (substituting, solely for purposes of this
determination, "Section 856(d)(5)" for Section 897(c)(6)(C)" in the definition
of Constructive Ownership)) an interest in a tenant that is described in Section
856(d)(2)(B) of the Code if the income derived by the Corporation from such
tenant
-10-
<PAGE>
would cause the Corporation to fail to satisfy any of the gross income
requirements of Section 856(c) of the Code).
(iii) Subject to Section 7.4 of the
Charter, any Transfer of shares of Capital Stock (whether or not such Transfer
is the result of a transaction entered into through the facilities of the NYSE
or any other national securities exchange or automated inter-dealer quotation
system) that, if effective, would result in the Capital Stock being beneficially
owned by less than 100 Persons (determined under the principles of Section
856(a)(5) of the Code) shall be void AB INITIO, and the intended transferee
shall acquire no rights in such shares of Capital Stock.
(b) TRANSFER IN TRUST. Subject to Section
7.4 of the Charter, if any Transfer of shares of Capital Stock (whether or not
such Transfer is the result of a transaction entered into through the facilities
of the NYSE or any other national securities exchange or automated inter-dealer
quotation system) occurs which, if effective, would result in any Person
Beneficially Owning or Constructively Owning shares of Capital Stock in
violation of Section 7.2.1(a)(i) or (ii),
(i) then that number of shares of
the Capital Stock the Beneficial or Constructive Ownership of which otherwise
would cause such Person to violate Section 7.2.1(a)(i) or (ii)(rounded to the
next higher number of whole shares) shall be automatically transferred to a
Trust for the benefit of a Charitable Beneficiary, as described in Section 7.3,
effective as of the close of business on the Business Day prior to the date of
such Transfer, and such Person shall acquire no rights in such shares; or
(ii) if the transfer to the Trust
described in clause (i) of this sentence would not be effective for any reason
to prevent the violation of Section 7.2.1(a)(i) or (ii), then the Transfer of
that number of shares of Capital Stock that otherwise would cause any Person to
violate Section 7.2.1(a)(i) or (ii) shall be void AB INITIO, and the intended
transferee shall acquire no rights in such shares of Capital Stock.
Section 7.2.2 REMEDIES FOR BREACH. If the Board of
Directors of the Corporation or any duly authorized committee thereof shall at
any time determine in good faith that a Transfer or other event has taken place
that results in a violation of Section 7.2.1 or that a Person intends to acquire
or has attempted to acquire Beneficial or Constructive Ownership of any shares
-11-
<PAGE>
of Capital Stock in violation of Section 7.2.1 (whether or not such violation is
intended), the Board of Directors or a committee thereof shall take such action
as it deems advisable to refuse to give effect to or to prevent such Transfer or
other event, including, without limitation, causing the Corporation to redeem
shares, refusing to give effect to such Transfer on the books of the Corporation
or instituting proceedings to enjoin such Transfer or other event; PROVIDED,
HOWEVER, that any Transfer or attempted Transfer or other event in violation of
Section 7.2.1 shall automatically result in the transfer to the Trust described
above, and, where applicable, such Transfer (or other event) shall be void AB
INITIO as provided above irrespective of any action (or non-action) by the Board
of Directors or a committee thereof.
Section 7.2.3 NOTICE OF RESTRICTED TRANSFER. Any
Person who acquires or attempts or intends to acquire Beneficial Ownership or
Constructive Ownership of shares of Capital Stock that will or may violate
Section 7.2.1(a) or any Person who would have owned shares of Capital Stock that
resulted in a transfer to the Trust pursuant to the provisions of Section
7.2.1(b) shall immediately give written notice to the Corporation of such event,
or in the case of such a proposed or attempted transaction, give at least 15
days prior written notice, and shall provide to the Corporation such other
information as the Corporation may request in order to determine the effect, if
any, of such Transfer on the Corporation's status as a REIT.
Section 7.2.4 OWNERS REQUIRED TO PROVIDE
INFORMATION. From the Initial Date and prior to the Restriction Termination
Date:
(a) every Person who Beneficially Owns
more than five percent (or such lower percentage as required by the Code or the
Treasury Regulations promulgated thereunder) of the outstanding shares of
Capital Stock, within 30 days after the end of each taxable year, shall give
written notice to the Corporation stating the name and address of such owner,
the number of shares of Capital Stock Beneficially Owned and a description of
the manner in which such shares are held. Each such Person shall provide to the
Corporation such additional information as the Corporation may request in order
to determine the effect, if any, of such Beneficial Ownership on the
Corporation's status as a REIT and to ensure compliance with the Aggregate Stock
Ownership Limit; and
(b) each Person who is a Beneficial or
Constructive Owner of Capital Stock and each Person (including the stockholder
of record) who is holding Capital Stock
-12-
<PAGE>
for a Beneficial or Constructive Owner shall provide to the Corporation such
information as the Corporation may request, in good faith, in order to determine
the Corporation's status as a REIT and to comply with requirements of any taxing
authority or governmental authority or to determine such compliance.
Section 7.2.5 REMEDIES NOT LIMITED. Subject to
Sections 5.6 and 7.4 of the Charter, nothing contained in this Section 7.2 shall
limit the authority of the Board of Directors of the Corporation to take such
other action as it deems necessary or advisable to protect the Corporation and
the interests of its stockholders in preserving the Corporation's status as a
REIT.
Section 7.2.6 AMBIGUITY. In the case of an ambiguity
in the application of any of the provisions of this Section 7.2, Section 7.3, or
any definition contained in Section 7.1, the Board of Directors of the
Corporation shall have the power to determine the application of the provisions
of this Section 7.2 or Section 7.3 with respect to any situation based on the
facts known to it. In the event Section 7.2 or 7.3 requires an action by the
Board of Directors and the Charter fails to provide specific guidance with
respect to such action, the Board of Directors shall have the power to determine
the action to be taken so long as such action is not contrary to the provisions
of Sections 7.1, 7.2 or 7.3.
Section 7.2.7 EXCEPTIONS.
(a) Subject to Section 7.2.1(a)(ii), the
Board of Directors of the Corporation, in its sole discretion, may exempt a
Person from the Aggregate Stock Ownership Limit and the Common Stock Ownership
Limit, as the case may be, and may establish or increase an Excepted Holder
Limit for such Person if:
(i) the Board of Directors obtains
such representations and undertakings from such Person as are reasonably
necessary to ascertain that no individual's Beneficial or Constructive Ownership
of such shares of Capital Stock will violate Section 7.2.1(a)(ii);
(ii) such Person does not and
represents that it will not own, actually or Constructively, an interest in a
Tenant of the Corporation (or a Tenant of any entity owned or controlled by the
Corporation) that would cause the Corporation to own, actually or
Constructively, more than a 9.9% interest (as set forth in Section 856(d)(2)(B)
of the Code) in such Tenant and the Board of Directors obtains such
representations and undertakings from such Person
-13-
<PAGE>
as are reasonably necessary to ascertain this fact (for this purpose, a Tenant
from whom the Corporation (or an entity owned or controlled by the Corporation)
derives (and is expected to continue to derive) a sufficiently small amount of
revenue such that, in the opinion of the Board of Directors of the Corporation,
rent from such Tenant would not adversely affect the Corporation's ability to
qualify as a REIT need not be treated as a Tenant of the Corporation); and
(iii) such Person agrees that any
violation or attempted violation of such representations or undertakings (or
other action which is contrary to the restrictions contained in Sections 7.2.1
through 7.2.6) will result in such shares of Capital Stock being automatically
transferred to a Trust in accordance with Sections 7.2.1(b) and 7.3.
(b) Prior to granting any exception
pursuant to Section 7.2.7(a), the Board of Directors of the Corporation may
require a ruling from the Internal Revenue Service, or an opinion of counsel, in
either case in form and substance satisfactory to the Board of Directors in its
sole discretion, as it may deem necessary or advisable in order to determine or
ensure the Corporation's status as a REIT. Notwithstanding the receipt of any
ruling or opinion, the Board of Directors may impose such conditions or
restrictions as it deems appropriate in connection with granting such exception.
(c) Subject to Section 7.2.1(a)(ii), an
underwriter which participates in a public offering or a private placement of
Capital Stock (or securities convertible into or exchangeable for Capital Stock)
may Beneficially Own or Constructively Own shares of Capital Stock (or
securities convertible into or exchangeable for Capital Stock) in excess of the
Aggregate Stock Ownership Limit, the Common Stock Ownership Limit, or both such
limits, but only to the extent necessary to facilitate such public offering or
private placement.
(d) The Board of Directors may only reduce
the Excepted Holder Limit for an Excepted Holder: (1) with the written consent
of such Excepted Holder at any time, or (2) pursuant to the terms and conditions
of the agreements and undertakings entered into with such Excepted Holder in
connection with the establishment of the Excepted Holder Limit for that Excepted
Holder. No Excepted Holder Limit shall be reduced to a percentage that is less
than the Common Stock Ownership Limit.
-14-
<PAGE>
Section 7.2.8 INCREASE IN AGGREGATE STOCK OWNERSHIP
AND COMMON STOCK OWNERSHIP Limits. The Board of Directors may from time to time
increase the Common Stock Ownership Limit and the Aggregate Stock Ownership
Limit.
Section 7.2.9 LEGEND. Each certificate for shares of
Capital Stock shall bear substantially the following legend:
The shares represented by this certificate are subject to restrictions
on Beneficial and Constructive Ownership and Transfer for the purpose
of the Corporation's maintenance of its status as a Real Estate
Investment Trust under the Internal Revenue Code of 1986, as amended
(the "Code"). Subject to certain further restrictions and except as
expressly provided in the Corporation's Charter, (i) no Person may
Beneficially or Constructively Own shares of the Corporation's Common
Stock in excess of five percent (in value or number of shares) of the
outstanding shares of Common Stock of the Corporation unless such
Person is an Excepted Holder (in which case the Excepted Holder Limit
shall be applicable); (ii) no Person may Beneficially or Constructively
Own shares of Capital Stock of the Corporation in excess of five
percent of the value of the total outstanding shares of Capital Stock
of the Corporation, unless such Person is an Excepted Holder (in which
case the Excepted Holder Limit shall be applicable); (iii) no Person
may Beneficially or Constructively Own Capital Stock that would result
in the Corporation being "closely held" under Section 856(h) of the
Code or otherwise cause the Corporation to fail to qualify as a REIT;
and (iv) no Person may Transfer shares of Capital Stock if such
Transfer would result in the Capital Stock of the Corporation being
owned by fewer than 100 Persons. Any Person who Beneficially or
Constructively Owns or attempts to Beneficially or Constructively Own
shares of Capital Stock which causes or will cause a Person to
Beneficially or Constructively Own shares of Capital Stock in excess or
in violation of the above limitations must immediately notify the
Corporation. If any of the restrictions on transfer or ownership are
violated, the shares of Capital Stock represented hereby will be
automatically transferred to a Trustee of a Trust for the benefit of
one or more Charitable Beneficiaries. In addition, upon the occurrence
of certain events, attempted Transfers in violation of the restrictions
described above may be void AB INITIO. All capitalized terms in this
legend have the meanings defined in the Charter, as the same may be
amended from time to time, a copy of which, including the restrictions
on transfer and ownership, will be furnished to each holder of Capital
Stock of the Corporation on request and without charge.
Instead of the foregoing legend, the certificate may state
that the Corporation will furnish a full statement about certain restrictions on
transferability to a stockholder on request and without charge.
-15-
<PAGE>
Section 7.3 TRANSFER OF CAPITAL STOCK IN TRUST.
Section 7.3.1 OWNERSHIP IN TRUST. Upon any
purported Transfer or other event described in Section 7.2.1(b) that would
result in a transfer of shares of Capital Stock to a Trust, such shares of
Capital Stock shall be deemed to have been transferred to the Trustee as trustee
of a Trust for the exclusive benefit of one or more Charitable Beneficiaries.
Such transfer to the Trustee shall be deemed to be effective as of the close of
business on the Business Day prior to the purported Transfer or other event that
results in the transfer to the Trust pursuant to Section 7.2.1(b). The Trustee
shall be appointed by the Corporation and shall be a Person unaffiliated with
the Corporation and any Prohibited Owner. Each Charitable Beneficiary shall be
designated by the Corporation as provided in Section 7.3.6.
Section 7.3.2 STATUS OF SHARES HELD BY THE TRUSTEE.
Shares of Capital Stock held by the Trustee shall be issued and outstanding
shares of Capital Stock of the Company. The Prohibited Owner shall have no
rights in the shares held by the Trustee. The Prohibited Owner shall not benefit
economically from ownership of any shares held in trust by the Trustee, shall
have no rights to dividends or other distributions and shall not possess any
rights to vote or other rights attributable to the shares held in the Trust.
Section 7.3.3 DIVIDEND AND VOTING RIGHTS. The
Trustee shall have all voting rights and rights to dividends or other
distributions with respect to shares of Capital Stock held in the Trust, which
rights shall be exercised for the exclusive benefit of the Charitable
Beneficiary. Any dividend or other distribution paid prior to the discovery by
the Corporation that the shares of Capital Stock have been transferred to the
Trustee shall be paid by the recipient of such dividend or distribution to the
Trustee upon demand and any dividend or other distribution authorized but unpaid
shall be paid when due to the Trustee. Any dividend or distribution so paid to
the Trustee shall be held in trust for the Charitable Beneficiary. The
Prohibited Owner shall have no voting rights with respect to shares held in the
Trust and, subject to Maryland law, effective as of the date that the shares of
Capital Stock have been transferred to the Trustee, the Trustee shall have the
authority (at the Trustee's sole discretion) (i) to rescind as void any vote
cast by a Prohibited Owner prior to the discovery by the Corporation that the
shares of Capital Stock have been transferred to the Trustee and (ii) to recast
such vote in accordance with the desires of the Trustee acting for the benefit
of the Charitable Beneficiary; provided, however, that if the Corporation has
-16-
<PAGE>
already taken irreversible corporate action, then the Trustee shall not have the
authority to rescind and recast such vote. Notwithstanding the provisions of
this Article VII, until the Corporation has received notification that shares of
Capital Stock have been transferred into a Trust, the Corporation shall be
entitled to rely on its share transfer and other stockholder records for
purposes of preparing lists of stockholders entitled to vote at meetings,
determining the validity and authority of proxies and otherwise conducting votes
of stockholders.
Section 7.3.4 SALE OF SHARES BY TRUSTEE. Within 20
days of receiving notice from the Corporation that shares of Capital Stock have
been transferred to the Trust, the Trustee of the Trust shall sell the shares
held in the Trust to a person, designated by the Trustee, whose ownership of the
shares will not violate the ownership limitations set forth in Section 7.2.1(a).
Upon such sale, the interest of the Charitable Beneficiary in the shares sold
shall terminate and the Trustee shall distribute the net proceeds of the sale to
the Prohibited Owner and to the Charitable Beneficiary as provided in this
Section 7.3.4. The Prohibited Owner shall receive the lesser of (1) the price
paid by the Prohibited Owner for the shares or, if the Prohibited Owner did not
give value for the shares in connection with the event causing the shares to be
held in the Trust (E.G., in the case of a gift, devise or other such
transaction), the Market Price of the shares on the day of the event causing the
shares to be held in the Trust and (2) the price per share received by the
Trustee from the sale or other disposition of the shares held in the Trust. Any
net sales proceeds in excess of the amount payable to the Prohibited Owner shall
be immediately paid to the Charitable Beneficiary. If, prior to the discovery by
the Corporation that shares of Capital Stock have been transferred to the
Trustee, such shares are sold by a Prohibited Owner, then (i) such shares shall
be deemed to have been sold on behalf of the Trust and (ii) to the extent that
the Prohibited Owner received an amount for such shares that exceeds the amount
that such Prohibited Owner was entitled to receive pursuant to this Section
7.3.4, such excess shall be paid to the Trustee upon demand.
Section 7.3.5 PURCHASE RIGHT IN STOCK TRANSFERRED TO
THE TRUSTEE. Shares of Capital Stock transferred to the Trustee shall be deemed
to have been offered for sale to the Corporation, or its designee, at a price
per share equal to the lesser of (i) the price per share in the transaction that
resulted in such transfer to the Trust (or, in the case of a devise or gift, the
Market Price at the time of such devise or gift) and (ii) the Market Price on
the date the Corporation, or its
-17-
<PAGE>
designee, accepts such offer. The Corporation shall have the right to accept
such offer until the Trustee has sold the shares held in the Trust pursuant to
Section 7.3.4. Upon such a sale to the Corporation, the interest of the
Charitable Beneficiary in the shares sold shall terminate and the Trustee shall
distribute the net proceeds of the sale to the Prohibited Owner.
Section 7.3.6 DESIGNATION OF CHARITABLE
BENEFICIARIES. By written notice to the Trustee, the Corporation shall designate
one or more nonprofit organizations to be the Charitable Beneficiary of the
interest in the Trust such that (i) the shares of Capital Stock held in the
Trust would not violate the restrictions set forth in Section 7.2.1(a) in the
hands of such Charitable Beneficiary and (ii) each such organization must be
described in Section 501(c)(3) of the Code and contributions to each such
organization must be eligible for deduction under each of Sections 170(b)(1)(A),
2055 and 2522 of the Code.
Section 7.4 NYSE TRANSACTIONS. Nothing in this Article VII
shall preclude the settlement of any transaction entered into through the
facilities of the NYSE or any other national securities exchange or automated
inter-dealer quotation system. The fact that the settlement of any transaction
occurs shall not negate the effect of any other provision of this Article VII
and any transferee in such a transaction shall be subject to all of the
provisions and limitations set forth in this Article VII.
Section 7.5 ENFORCEMENT. The Corporation is authorized
specifically to seek equitable relief, including injunctive relief, to enforce
the provisions of this Article VII.
Section 7.6 NON-WAIVER. No delay or failure on the part of
the Corporation or the Board of Directors in exercising any right hereunder
shall operate as a waiver of any right of the Corporation or the Board of
Directors, as the case may be, except to the extent specifically waived in
writing.
ARTICLE VIII
AMENDMENTS
The Corporation reserves the right from time to time to make
any amendment to its Charter, now or hereafter authorized by law, including any
amendment altering the terms or contract rights, as expressly set forth in this
Charter, of any shares of outstanding stock. All rights and powers
-18-
<PAGE>
conferred by the Charter on stockholders, directors and officers are granted
subject to this reservation. Any amendment to Section 5.7 or any other provision
of the Charter requiring a vote of stockholders by a percentage greater than 66
2/3% must be approved by the greater of (i) the vote required by such provision
or (ii) the affirmative vote of at least two-thirds (66 2/3%) of all votes
entitled to be cast on the matter.
ARTICLE IX
LIMITATION OF LIABILITY
To the maximum extent that Maryland law in effect from time to
time permits limitation of the liability of directors and officers of a
corporation, no director or officer of the Corporation shall be liable to the
Corporation or its stockholders for money damages. Neither the amendment nor
repeal of this Article IX, nor the adoption or amendment of any other provision
of the Charter or Bylaws inconsistent with this Article IX, shall apply to or
affect in any respect the applicability of the preceding sentence with respect
to any act or failure to act which occurred prior to such amendment, repeal or
adoption.
THIRD: The amendment to and restatement of the Charter as
hereinabove set forth has been duly advised by the Board of Directors and
approved by the stockholders of the Corporation as required by law.
FOURTH: The current address of the principal office of the
Corporation is as set forth in Article IV of the foregoing amendment and
restatement of the Charter.
FIFTH: The name and address of the Corporation's current
resident agent is as set forth in Article IV of the foregoing amendment and
restatement of the Charter.
SIXTH: The number of directors of the Corporation and the
names of those currently in office are as set forth in Article V of the
foregoing amendment and restatement of the Charter.
SEVENTH: The total number of shares of stock which the
Corporation had authority to issue immediately prior to this amendment and
restatement was 10,000,000 shares of Common Stock, $1.00 par value, and
5,000,000 shares of Preferred Stock, $1.00 par value per share, having an
aggregate par value of $15,000,000.
-19-
<PAGE>
EIGHTH: The total number of shares of stock which the
Corporation has authority to issue, pursuant to the Charter of the Corporation
as hereby amended and restated, is 40,000,000 shares of Common Stock, $.01 par
value per share, and 5,000,000 shares of Preferred Stock, $.01 par value per
share, having an aggregate par value of $450,000.
NINTH: The undersigned President acknowledges these Articles
of Amendment and Restatement to be the corporate act of the Corporation and as
to all matters or facts required to be verified under oath, the undersigned
President acknowledges that to the best of his knowledge, information and
belief, these matters and facts are true in all material respects and that this
statement is made under the penalties for perjury.
-20-
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these Articles
of Amendment and Restatement to be signed in its name and on its behalf by its
President and attested to by its Secretary on this _____ day of October, 1997.
ATTEST: EQUITY ONE, INC.
- -------------------------- By:
Chaim Katzman, Secretary -------------------------- (SEAL)
Doron Valero, Executive Vice President
-21-
EXHIBIT 3.2
EQUITY ONE, INC.
AMENDED AND RESTATED BYLAWS
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office of the
Corporation shall be located at such place or places as the Board of Directors
may designate.
Section 2. ADDITIONAL OFFICES. The Corporation may have
additional offices at such places as the Board of Directors may from time to
time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE. All meetings of stockholders shall be held at
the principal office of the Corporation or at such other place within the United
States as shall be stated in the notice of the meeting.
Section 2. ANNUAL MEETING. An annual meeting of the stockholders
for the election of directors and the transaction of any business within the
powers of the Corporation shall be held on a date and at the time set by the
Board of Directors.
Section 3. SPECIAL MEETINGS. The president, chief executive
officer or Board of Directors may call special meetings of the stockholders.
Special meetings of stockholders may also be called by the secretary of the
Corporation upon the written request of the holders of shares entitled to cast
not less than a majority of all the votes entitled to be cast at such meeting.
Such request shall state the purpose of such meeting and the matters proposed to
be acted on at such meeting. The secretary shall inform such requesting
stockholders of the reasonably estimated cost of preparing and mailing notice of
the meeting and, upon payment to the Corporation by such stockholders of such
costs, the secretary shall give notice to each stockholder entitled to receive
notice of the meeting.
Section 4. NOTICE. Not less than ten nor more than 90 days
before each meeting of stockholders, the secretary shall give to each
stockholder entitled to vote at such meeting and to each stockholder not
entitled to vote who is entitled to notice of the meeting, written or printed
notice stating the time and place of the meeting and, in the case of a special
meeting or as otherwise may be required by any applicable statute, the purpose
for which the meeting is called, either by mail or by presenting it to such
stockholder personally or by leaving it at his residence or usual place of
business. If mailed, such notice shall be deemed to be given when deposited in
the United States mail addressed to the stockholder at his post office address
as it appears on the records of the Corporation, with postage thereon prepaid.
-1-
<PAGE>
Section 5. SCOPE OF NOTICE. Any business of the Corporation may
be transacted at an annual meeting of stockholders without being specifically
designated in the notice, except such business as is required by any statute to
be stated in such notice. No business shall be transacted at a special meeting
of stockholders except as specifically designated in the notice.
Section 6. ORGANIZATION. At every meeting of stockholders, the
chairman of the board, if there be one, shall conduct the meeting or, in the
case of vacancy in office or absence of the chairman of the board, one of the
following officers present shall conduct the meeting in the order stated: the
vice chairman of the board, if there be one, the president, the vice presidents
in their order of rank and seniority, or a chairman chosen by the stockholders
entitled to cast a majority of the votes which all stockholders present in
person or by proxy are entitled to cast, shall act as chairman, and the
secretary, or, in his absence, an assistant secretary, or in the absence of both
the secretary and assistant secretaries, a person appointed by the chairman
shall act as secretary.
Section 7. QUORUM. At any meeting of stockholders, the presence
in person or by proxy of stockholders entitled to cast a majority of all the
votes entitled to be cast at such meeting shall constitute a quorum; but this
section shall not affect any requirement under any statute or the charter of the
Corporation for the vote necessary for the adoption of any measure. If, however,
such quorum shall not be present at any meeting of the stockholders, the
stockholders entitled to vote at such meeting, present in person or by proxy,
shall have the power to adjourn the meeting from time to time to a date not more
than 120 days after the original record date without notice other than
announcement at the meeting. At such adjourned meeting at which a quorum shall
be present, any business may be transacted which might have been transacted at
the meeting as originally notified.
Section 8. VOTING. The affirmative vote of at least 66 2/3% of
all the votes cast at a meeting of stockholders duly called and at which a
quorum is present shall be sufficient to elect a director. Each share may be
voted for as many individuals as there are directors to be elected and for whose
election the share is entitled to be voted. The affirmative vote of at least 66
2/3% of the votes cast at a meeting of stockholders duly called and at which a
quorum is present shall be sufficient to approve any other matter which may
properly come before the meeting, unless more than 66 2/3% of the votes cast is
required by statute or by the charter of the Corporation. Unless otherwise
provided in the charter, each outstanding share, regardless of class, shall be
entitled to one vote on each matter submitted to a vote at a meeting of
stockholders.
Section 9. PROXIES. A stockholder may cast the votes entitled to
be cast by the shares of the stock owned of record by him either in person or by
proxy executed in writing by the stockholder or by his duly authorized agent.
Such proxy shall be filed with the secretary of the Corporation before or at the
time of the meeting. No proxy shall be valid after eleven months from the date
of its execution, unless otherwise provided in the proxy.
Section 10. VOTING OF STOCK BY CERTAIN HOLDERS. Stock of the
Corporation registered in the name of a corporation, partnership, trust or other
entity, if entitled to be voted, may be voted by the president or a vice
president, a general partner or trustee thereof, as the case may be, or a proxy
appointed by any of the foregoing individuals, unless some other person who has
been appointed
-2-
<PAGE>
to vote such stock pursuant to a bylaw or a resolution of the governing body of
such corporation or other entity or agreement of the partners of a partnership
presents a certified copy of such bylaw, resolution or agreement, in which case
such person may vote such stock. Any director or other fiduciary may vote stock
registered in his name as such fiduciary, either in person or by proxy.
Shares of stock of the Corporation directly or indirectly owned
by it shall not be voted at any meeting and shall not be counted in determining
the total number of outstanding shares entitled to be voted at any given time,
unless they are held by it in a fiduciary capacity, in which case they may be
voted and shall be counted in determining the total number of outstanding shares
at any given time.
The Board of Directors may adopt by resolution a procedure by
which a stockholder may certify in writing to the Corporation that any shares of
stock registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth the
class of stockholders who may make the certification, the purpose for which the
certification may be made, the form of certification and the information to be
contained in it; if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date or closing
of the stock transfer books within which the certification must be received by
the Corporation; and any other provisions with respect to the procedure which
the Board of Directors considers necessary or desirable. On receipt of such
certification, the person specified in the certification shall be regarded as,
for the purposes set forth in the certification, the stockholder of record of
the specified stock in place of the stockholder who makes the certification.
Notwithstanding any other provision of the charter of the
Corporation or these Bylaws, Title 3, Subtitle 7 of the Corporations and
Associations Article of the Annotated Code of Maryland (or any successor
statute) shall not apply to any acquisition by any person of shares of stock of
the Corporation. This section may be repealed, in whole or in part, at any time,
whether before or after an acquisition of control shares and, upon such repeal,
may, to the extent provided by any successor bylaw, apply to any prior or
subsequent control share acquisition.
Section 11. INSPECTORS. At any meeting of stockholders, the
chairman of the meeting may appoint one or more persons as inspectors for such
meeting. Such inspectors shall ascertain and report the number of shares
represented at the meeting based upon their determination of the validity and
effect of proxies, count all votes, report the results and perform such other
acts as are proper to conduct the election and voting with impartiality and
fairness to all the stockholders.
Each report of an inspector shall be in writing and signed by
him or by a majority of them if there is more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority shall be
the report of the inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of the voting shall
be PRIMA FACIE evidence thereof.
Section 12. NOMINATIONS AND PROPOSALS BY STOCKHOLDERS.
(a) ANNUAL MEETINGS OF STOCKHOLDERS. (1 1) Nominations of
persons for election to the Board of Directors and the proposal of business to
be considered by the stockholders may be made at an annual meeting of
stockholders (i) pursuant to the Corporation's notice of meeting, (ii) by or at
the direction of the
-3-
<PAGE>
Board of Directors or (iii) by any stockholder of the Corporation who was a
stockholder of record both at the time of giving of notice provided for in this
Section 12(a) and at the time of the annual meeting, who is entitled to vote at
the meeting and who complied with the notice procedures set forth in this
Section 12 (a).
(2) For nominations or other business to
be properly brought before an annual meeting by a stockholder pursuant to clause
(iii) of paragraph (a)(1) of this Section 12, the stockholder must have given
timely notice thereof in writing to the secretary of the Corporation and such
other business must otherwise be a proper matter for action by stockholders. To
be timely, a stockholder's notice shall be delivered to the secretary at the
principal executive offices of the Corporation not later than the close of
business on the 60th day nor earlier than the close of business on the 90th day
prior to the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is advanced by
more than 30 days or delayed by more than 60 days from such anniversary date or
if the Corporation has not previously held an annual meeting, notice by the
stockholder to be timely must be so delivered not earlier than the close of
business on the 90th day prior to such annual meeting and not later than the
close of business on the later of the 60th day prior to such annual meeting or
the tenth day following the day on which public announcement of the date of such
meeting is first made by the Corporation. In no event shall the public
announcement of a postponement or adjournment of an annual meeting to a later
date or time commence a new time period for the giving of a stockholder's notice
as described above. Such stockholder's notice shall set forth (i) as to each
person whom the stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors in an election
contest, or is otherwise required, in each case pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") (including
such person's written consent to being named in the proxy statement as a nominee
and to serving as a director if elected); (ii) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and of the beneficial owner, if any, on whose behalf the proposal is
made; and (iii) as to the stockholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made, (x) the name
and address of such stockholder, as they appear on the Corporation's books, and
of such beneficial owner and (y) the number of shares of each class of stock of
the Corporation which are owned beneficially and of record by such stockholder
and such beneficial owner.
(3) Notwithstanding anything in the
second sentence of paragraph (a)(2) of this Section 12 to the contrary, in the
event that the number of directors to be elected to the Board of Directors is
increased and there is no public announcement by the Corporation naming all of
the nominees for director or specifying the size of the increased Board of
Directors at least 70 days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Section 12(a)
shall also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the secretary at
the principal executive offices of the Corporation no later than the close of
business on the tenth day following the day on which such public announcement is
first made by the Corporation.
(b) SPECIAL MEETINGS OF STOCKHOLDERS. Only such business shall
be conducted at a special meeting of the stockholders as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting. Nominations
of persons for election to the Board of Directors may be made at a special
-4-
<PAGE>
meeting of stockholders at which directors are to be elected (i) pursuant to the
Corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) provided that the Board of Directors has determined that
directors shall be elected at such special meeting, by any stockholder of the
Corporation who is a stockholder of record both at the time of giving of notice
provided for in this Section 12(b) and at the time of the special meeting, who
is entitled to vote at the meeting and who complied with the notice procedures
set forth in this Section 12(b). In the event the Corporation calls a special
meeting of stockholders for the purpose of electing one or more directors to the
Board of Directors, any such stockholder may nominate a person or persons (as
the case may be) for election to such position as specified in the Corporation's
notice of meeting, if the stockholder's notice containing the information
required by paragraph (a)(2) of this Section 12 shall be delivered to the
secretary at the principal executive offices of the Corporation not earlier than
the close of business on the 90th day prior to such special meeting and not
later than the close of business on the later of the 60th day prior to such
special meeting or the tenth day following the day on which public announcement
is first made of the date of the special meeting and of the nominees proposed by
the Board of Directors to be elected at such meeting. In no event shall the
public announcement of a postponement or adjournment of a special meeting to a
later date or time commence a new time period for the giving of a stockholder's
notice as described above.
(c) GENERAL. (1) Only such persons who are nominated
in accordance with the procedures set forth in this Section 12 shall be eligible
to serve as directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section 12. The chairman of the meeting shall
have the power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made or proposed, as the case may
be, in accordance with the procedures set forth in this Section 12 and, if any
proposed nomination or business is not in compliance with this Section 12, to
declare that such nomination or proposal shall be disregarded.
(2) For purposes of this Section 12,
"public announcement" shall mean disclosure in a press release reported by the
Dow Jones News Service, Associated Press or comparable news service or in a
document publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing
provisions of this Section 12, a stockholder shall also comply with all
applicable requirements of state law and of the Exchange Act and the rules and
regulations thereunder with respect to the matters set forth in this Section 12.
Nothing in this Section 12 shall be deemed to affect any rights of stockholders
to request inclusion of proposals in, or the right of the Corporation to omit a
proposal from, the Corporation's proxy statement pursuant to Rule 14a-8 under
the Exchange Act.
Section 13. VOTING BY BALLOT. Voting on any question or in any
election may be VIVA VOCE unless the presiding officer shall order or any
stockholder shall demand that voting be by ballot.
-5-
<PAGE>
ARTICLE III
DIRECTORS
Section 1. GENERAL POWERS. The business and affairs of the
Corporation shall be managed under the direction of its Board of Directors.
Section 2. NUMBER AND TENURE. At any regular meeting or at any
special meeting called for that purpose, the Board of Directors may establish,
increase or decrease the number of directors, provided that the number thereof
shall never be less than the minimum number required by the Maryland General
Corporation Law, nor more than 15, and further provided that the tenure of
office of a director shall not be affected by any decrease in the number of
directors. The Board of Directors shall be classified, with respect to the terms
for which they severally hold office, into three classes, as nearly equal in
number as possible, one class ("Class A") to hold office initially for a term
expiring at the next succeeding annual meeting of stockholders, another class
("Class B") to hold office initially for a term expiring at the second
succeeding annual meeting of stockholders and another class ("Class C") to hold
office initially for a term expiring at the third succeeding annual meeting of
stockholders, with the members of each class to hold office until their
successors are duly elected and qualify. At each annual meeting of the
stockholders, the successors to the class of directors whose term expires at
such meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the year of their
election and until their successors are elected and qualify.
Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the
Board of Directors shall be held immediately after and at the same place as the
annual meeting of stockholders, no notice other than this Bylaw being necessary.
The Board of Directors may provide, by resolution, the time and place, either
within or without the State of Maryland, for the holding of regular meetings of
the Board of Directors without other notice than such resolution.
Section 4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the chairman of the board,
president or by a majority of the directors then in office. The person or
persons authorized to call special meetings of the Board of Directors may fix
any place, either within or without the State of Maryland, as the place for
holding any special meeting of the Board of Directors called by them.
Section 5. NOTICE. Notice of any special meeting of the Board of
Directors shall be delivered personally or by telephone, facsimile transmission,
United States mail or courier to each director at his business or residence
address. Notice by personal delivery, by telephone or a facsimile transmission
shall be given at least two days prior to the meeting. Notice by mail shall be
given at least five days prior to the meeting and shall be deemed to be given
when deposited in the United States mail properly addressed, with postage
thereon prepaid. Telephone notice shall be deemed to be given when the director
is personally given such notice in a telephone call to which he is a party.
Facsimile transmission notice shall be deemed to be given upon completion of the
transmission of the message to the number given to the Corporation by the
director and receipt of a completed answer-back indicating receipt. Neither the
business to be transacted at, nor the purpose of, any annual, regular or special
meeting of the Board of Directors need be stated in the
-6-
<PAGE>
notice, unless specifically required by statute or these Bylaws.
Section 6. QUORUM. Eighty percent of the directors shall
constitute a quorum for transaction of business at any meeting of the Board of
Directors, provided that, if less than a majority of such directors are present
at said meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice, and provided further that if, pursuant
to the charter of the Corporation or these Bylaws, the vote of a majority of a
particular group of directors is required for action, a quorum must also include
a majority of such group.
The directors present at a meeting which has been duly called
and convened may continue to transact business until adjournment,
notwithstanding the withdrawal of enough directors to leave less than a quorum.
Section 7. VOTING. The action of not less than eighty percent
(80%) of the entire Board of Directors shall be the action of the Board of
Directors, unless the concurrence of a greater proportion is required for such
action by the Company's Charter, these Bylaws or applicable statute.
Section 8. TELEPHONE MEETINGS. Directors may participate in a
meeting by means of a conference telephone or similar communications equipment
if all persons participating in the meeting can hear each other at the same
time. Participation in a meeting by these means shall constitute presence in
person at the meeting.
Section 9. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting, if a consent in writing to such action is signed by each
director and such written consent is filed with the minutes of proceedings of
the Board of Directors.
Section 10. VACANCIES. If for any reason any or all the
directors cease to be directors, such event shall not terminate the Corporation
or affect these Bylaws or the powers of the remaining directors hereunder (even
if fewer than three directors remain). Any vacancy on the Board of Directors for
any cause other than an increase in the number of directors shall be filled by
the affirmative vote of eighty percent of the remaining directors. Any vacancy
in the number of directors created by an increase in the number of directors may
be filled by the entire Board of Directors. Any individual so elected as
director shall hold office until the next annual meeting of stockholders and
until his successor is elected and qualifies.
Section 11. COMPENSATION. Directors shall not receive any stated
salary for their services as directors but, by resolution of the Board of
Directors, may receive compensation per year and/or per meeting and/or per visit
to real property or other facilities owned or leased by the Corporation and for
any service or activity they performed or engaged in as directors. Directors may
be reimbursed for expenses of attendance, if any, at each annual, regular or
special meeting of the Board of Directors or of any committee thereof and for
their expenses, if any, in connection with each property visit and any other
service or activity they performed or engaged in as directors; but nothing
herein contained shall be construed to preclude any directors from serving the
Corporation in any other capacity and receiving compensation therefor.
-7-
<PAGE>
Section 12. LOSS OF DEPOSITS. No director shall be liable for
any loss which may occur by reason of the failure of a bank, trust company,
savings and loan association, or other institution with whom moneys or stock of
the Corporation have been deposited.
Section 13. SURETY BONDS. Unless required by law, no director
shall be obligated to give any bond or surety or other security for the
performance of any of his duties.
Section 14. RELIANCE. Each director, officer, employee and agent
of the Corporation shall, in the performance of his duties with respect to the
Corporation, be fully justified and protected with regard to any act or failure
to act in reliance in good faith upon the books of account or other records of
the Corporation, upon an opinion of counsel or upon reports made to the
Corporation by any of its officers or employees or by the adviser, accountants,
appraisers or other experts or consultants selected by the Board of Directors or
officers of the Corporation, regardless of whether such counsel or expert may
also be a director.
Section 15. CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS. The directors shall have no responsibility to devote their full time to
the affairs of the Corporation. Any director or officer, employee or agent of
the Corporation, in his personal capacity or in a capacity as an affiliate,
employee, or agent of any other person, or otherwise, may have business
interests and engage in business activities similar to or in addition to or in
competition with those of or relating to the Corporation.
ARTICLE IV
COMMITTEES
Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Board of
Directors may appoint from among its members, an Executive Committee, an Audit
and Review Committee, a Compensation Committee and other committees, composed of
one or more directors, to serve at the pleasure of the Board of Directors.
Section 2. POWERS. The Board of Directors may delegate to
committees appointed under Section 1 of this Article any of the powers of the
Board of Directors, except as prohibited by law.
Section 3. MEETINGS. Notice of committee meetings shall be given
in the same manner as notice for special meetings of the Board of Directors. All
of the members of the committee shall be required for the transaction of
business at any meeting of the committee, and the unanimous act of the committee
members shall be the act of such committee. The Board of Directors may designate
a chairman of any committee, and such chairman or any two members of any
committee may fix the time and place of its meeting unless the Board shall
otherwise provide. In the absence of any member of any such committee, the
members thereof present at any meeting, whether or not they constitute a quorum,
may appoint another director to act in the place of such absent member. Each
committee shall keep minutes of its proceedings.
Section 4. TELEPHONE MEETINGS. Members of a committee of the
Board of Directors may participate in a meeting by means of a conference
telephone, video conference or similar
-8-
<PAGE>
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means shall
constitute presence in person at the meeting.
Section 5. INFORMAL ACTION BY COMMITTEES. Any action required or
permitted to be taken at any meeting of a committee of the Board of Directors
may be taken without a meeting, if a consent in writing to such action is signed
by each member of the committee and such written consent is filed with the
minutes of proceedings of such committee.
Section 6. VACANCIES. Subject to the provisions hereof, the
Board of Directors shall have the power at any time to change the membership of
any committee, to fill all vacancies, to designate alternate members to replace
any absent or disqualified member or to dissolve any such committee.
ARTICLE V
OFFICERS
Section 1. GENERAL PROVISIONS. The officers of the Corporation
shall include a chief executive officer, a president, a secretary and a
treasurer and may include a chairman of the board, a vice chairman of the board,
one or more vice presidents, a chief operating officer, a chief financial
officer, one or more assistant secretaries and one or more assistant treasurers.
In addition, the Board of Directors may from time to time appoint such other
officers with such powers and duties as they shall deem necessary or desirable.
The officers of the Corporation shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after each annual
meeting of stockholders. If the election of officers shall not be held at such
meeting, such election shall be held as soon thereafter as may be convenient.
Each officer shall hold office until his successor is elected and qualifies or
until his death, resignation or removal in the manner hereinafter provided. Any
two or more offices except president and vice president may be held by the same
person. In its discretion, the Board of Directors may leave unfilled any office
except that of president, treasurer and secretary. Election of an officer or
agent shall not of itself create contract rights between the Corporation and
such officer or agent.
Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the
Corporation may be removed by the Board of Directors if in its judgment the best
interests of the Corporation would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed. Any
officer of the Corporation may resign at any time by giving written notice of
his resignation to the Board of Directors, the chairman of the board, the
president or the secretary. Any resignation shall take effect at any time
subsequent to the time specified therein or, if the time when it shall become
effective is not specified therein, immediately upon its receipt. The acceptance
of a resignation shall not be necessary to make it effective unless otherwise
stated in the resignation. Such resignation shall be without prejudice to the
contract rights, if any, of the Corporation.
Section 3. VACANCIES. A vacancy in any office may be filled by
the Board of Directors for the balance of the term.
Section 4. CHIEF EXECUTIVE OFFICER. The Board of Directors may
designate a chief executive officer. In the absence of such designation, the
chairman of the board shall be the chief
-9-
<PAGE>
executive officer of the Corporation. The chief executive officer shall have
general responsibility for implementation of the policies of the Corporation, as
determined by the Board of Directors, and for the management of the business and
affairs of the Corporation.
Section 5. CHIEF OPERATING OFFICER. The Board of Directors may
designate a chief operating officer. The chief operating officer shall have the
responsibilities and duties as set forth by the Board of Directors and the chief
executive officer.
Section 6. CHIEF FINANCIAL OFFICER. The Board of Directors may
designate a chief financial officer. The chief financial officer shall have the
responsibilities and duties as set forth by the Board of Directors and the chief
executive officer.
Section 7. CHAIRMAN OF THE BOARD. The Board of Directors shall
designate a chairman of the board. The chairman of the board shall preside over
the meetings of the Board of Directors and of the stockholders at which he shall
be present. The chairman of the board shall perform such other duties as may be
assigned to him or them by the Board of Directors.
Section 8. PRESIDENT. The president or chief executive officer,
as the case may be, shall in general supervise and control all of the business
and affairs of the Corporation. In the absence of a designation of a chief
operating officer by the Board of Directors, the president shall be the chief
operating officer. He may execute any deed, mortgage, bond, contract or other
instrument, except in cases where the execution thereof shall be expressly
delegated by the Board of Directors or by these Bylaws to some other officer or
agent of the Corporation or shall be required by law to be otherwise executed;
and in general shall perform all duties incident to the office of president and
such other duties as may be prescribed by the Board of Directors from time to
time.
Section 9. VICE PRESIDENTS. In the absence of the president or
in the event of a vacancy in such office, the vice president (or in the event
there be more than one vice president, the vice presidents in the order
designated at the time of their election or, in the absence of any designation,
then in the order of their election) shall perform the duties of the president
and when so acting shall have all the powers of and be subject to all the
restrictions upon the president; and shall perform such other duties as from
time to time may be assigned to him by the president or by the Board of
Directors. The Board of Directors may designate one or more vice presidents as
executive vice president or as vice president for particular areas of
responsibility.
Section 10. SECRETARY. The secretary shall (a) keep the minutes
of the proceedings of the stockholders, the Board of Directors and committees of
the Board of Directors in one or more books provided for that purpose; (b) see
that all notices are duly given in accordance with the provisions of these
Bylaws or as required by law; (c) be custodian of the corporate records and of
the seal of the Corporation; (d) keep a register of the post office address of
each stockholder which shall be furnished to the secretary by such stockholder;
(e) have general charge of the share transfer books of the Corporation; and (f)
in general perform such other duties as from time to time may be assigned to him
by the chief executive officer, the president or by the Board of Directors.
Section 11. TREASURER. The treasurer shall have the custody of
the funds and
-10-
<PAGE>
securities of the Corporation and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. In the absence of a designation of a chief financial officer by the
Board of Directors, the treasurer shall be the chief financial officer of the
Corporation.
The treasurer shall disburse the funds of the Corporation as may
be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and Board of Directors, at the
regular meetings of the Board of Directors or whenever it may so require, an
account of all his transactions as treasurer and of the financial condition of
the Corporation.
If required by the Board of Directors, the treasurer shall give
the Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, moneys and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
assistant secretaries and assistant treasurers, in general, shall perform such
duties as shall be assigned to them by the secretary or treasurer, respectively,
or by the president or the Board of Directors. The assistant treasurers shall,
if required by the Board of Directors, give bonds for the faithful performance
of their duties in such sums and with such surety or sureties as shall be
satisfactory to the Board of Directors.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS. The Board of Directors may authorize any
officer or agent to enter into any contract or to execute and deliver any
instrument in the name of and on behalf of the Corporation and such authority
may be general or confined to specific instances. Any agreement, deed, mortgage,
lease or other document executed by one or more of the directors or by an
authorized person shall be valid and binding upon the Board of Directors and
upon the Corporation when authorized or ratified by action of the Board of
Directors.
Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or agent of the
Corporation in such manner as shall from time to time be determined by the Board
of Directors.
Section 3. DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may designate.
-11-
<PAGE>
ARTICLE VII
STOCK
Section 1. CERTIFICATES. Each stockholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
shares of each class of stock held by him in the Corporation. Each certificate
shall be signed by the chief executive officer, the president or a vice
president and countersigned by the secretary or an assistant secretary or the
treasurer or an assistant treasurer and may be sealed with the seal, if any, of
the Corporation. The signatures may be either manual or facsimile. Certificates
shall be consecutively numbered; and if the Corporation shall, from time to
time, issue several classes of stock, each class may have its own number series.
A certificate is valid and may be issued whether or not an officer who signed it
is still an officer when it is issued. Each certificate representing shares
which are restricted as to their transferability or voting powers, which are
preferred or limited as to their dividends or as to their allocable portion of
the assets upon liquidation or which are redeemable at the option of the
Corporation, shall have a statement of such restriction, limitation, preference
or redemption provision, or a summary thereof, plainly stated on the
certificate. If the Corporation has authority to issue stock of more than one
class, the certificate shall contain on the face or back a full statement or
summary of the designations and any preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends and other
distributions, qualifications and terms and conditions of redemption of each
class of stock and, if the Corporation is authorized to issue any preferred or
special class in series, the differences in the relative rights and preferences
between the shares of each series to the extent they have been set and the
authority of the Board of Directors to set the relative rights and preferences
of subsequent series. In lieu of such statement or summary, the certificate may
state that the Corporation will furnish a full statement of such information to
any stockholder upon request and without charge. If any class of stock is
restricted by the Corporation as to transferability, the certificate shall
contain a full statement of the restriction or state that the Corporation will
furnish information about the restrictions to the stockholder on request and
without charge.
Section 2. TRANSFERS. Upon surrender to the Corporation or the
transfer agent of the Corporation of a stock certificate duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, the Corporation shall issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
The Corporation shall be entitled to treat the holder of record
of any share of stock as the holder in fact thereof and, accordingly, shall not
be bound to recognize any equitable or other claim to or interest in such share
or on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of the State of
Maryland.
Notwithstanding the foregoing, transfers of shares of any class
of stock will be subject in all respects to the charter of the Corporation and
all of the terms and conditions contained therein.
Section 3. REPLACEMENT CERTIFICATE. Any officer designated by
the Board of Directors may direct a new certificate to be issued in place of any
certificate previously issued by the Corporation alleged to have been lost,
stolen or destroyed upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing the
issuance of a new
-12-
<PAGE>
certificate, an officer designated by the Board of Directors may, in his
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or the owner's legal
representative to advertise the same in such manner as he shall require and/or
to give bond, with sufficient surety, to the Corporation to indemnify it against
any loss or claim which may arise as a result of the issuance of a new
certificate.
Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
The Board of Directors may set, in advance, a record date for the purpose of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders or determining stockholders entitled to receive payment of any
dividend or the allotment of any other rights, or in order to make a
determination of stockholders for any other proper purpose. Such date, in any
case, shall not be prior to the close of business on the day the record date is
fixed and shall be not more than 90 days and, in the case of a meeting of
stockholders, not less than ten days, before the date on which the meeting or
particular action requiring such determination of stockholders of record is to
be held or taken.
In lieu of fixing a record date, the Board of Directors may
provide that the stock transfer books shall be closed for a stated period but
not longer than 20 days. If the stock transfer books are closed for the purpose
of determining stockholders entitled to notice of or to vote at a meeting of
stockholders, such books shall be closed for at least ten days before the date
of such meeting.
If no record date is fixed and the stock transfer books are not
closed for the determination of stockholders, (a) the record date for the
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day on which the notice of
meeting is mailed or the 30th day before the meeting, whichever is the closer
date to the meeting; and (b) the record date for the determination of
stockholders entitled to receive payment of a dividend or an allotment of any
other rights shall be the close of business on the day on which the resolution
of the directors, declaring the dividend or allotment of rights, is adopted.
When a determination of stockholders entitled to vote at any
meeting of stockholders has been made as provided in this section, such
determination shall apply to any adjournment thereof, except when (i) the
determination has been made through the closing of the transfer books and the
stated period of closing has expired or (ii) the meeting is adjourned to a date
more than 120 days after the record date fixed for the original meeting, in
either of which case a new record date shall be determined as set forth herein.
Section 5. STOCK LEDGER. The Corporation shall maintain at its
principal office or at the office of its counsel, accountants or transfer agent,
an original or duplicate share ledger containing the name and address of each
stockholder and the number of shares of each class held by such stockholder.
Section 6. FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board of
Directors may issue fractional stock or provide for the issuance of scrip, all
on such terms and under such conditions as they may determine. Notwithstanding
any other provision of the charter or these Bylaws, the Board of Directors may
issue units consisting of different securities of the Corporation. Any security
issued in a unit shall have the same characteristics as any identical securities
issued by the Corporation, except that the Board of Directors may provide that
for a specified period securities of the Corporation issued in such unit may be
transferred on the books of the Corporation only in such unit.
-13-
<PAGE>
ARTICLE VIII
ACCOUNTING YEAR
The Board of Directors shall have the power, from time to time,
to fix the fiscal year of the Corporation by a duly adopted resolution.
ARTICLE IX
DISTRIBUTIONS
Section 1. AUTHORIZATION. Dividends and other distributions upon
the stock of the Corporation may be authorized and declared by the Board of
Directors, subject to the provisions of law and the charter of the Corporation.
Dividends and other distributions may be paid in cash, property or stock of the
Corporation, subject to the provisions of law and the charter.
Section 2. CONTINGENCIES. Before payment of any dividends or
other distributions, there may be set aside out of any assets of the Corporation
available for dividends or other distributions such sum or sums as the Board of
Directors may from time to time, in its absolute discretion, think proper as a
reserve fund for contingencies, for equalizing dividends or other distributions,
for repairing or maintaining any property of the Corporation or for such other
purpose as the Board of Directors shall determine to be in the best interest of
the Corporation, and the Board of Directors may modify or abolish any such
reserve in the manner in which it was created.
ARTICLE X
INVESTMENT POLICY
Subject to the provisions of the charter of the Corporation, the
Board of Directors may from time to time adopt, amend, revise or terminate any
policy or policies with respect to investments by the Corporation as it shall
deem appropriate in its sole discretion.
ARTICLE XI
SEAL
Section 1. SEAL. The Board of Directors may authorize the
adoption of a seal by the Corporation. The seal shall contain the name of the
Corporation and the year of its incorporation and the words "Incorporated
Maryland." The Board of Directors may authorize one or more duplicate seals and
provide for the custody thereof.
Section 2. AFFIXING SEAL. Whenever the Corporation is permitted
or required to affix its seal to a document, it shall be sufficient to meet the
requirements of any law, rule or regulation relating to a seal to place the word
"(SEAL)" adjacent to the signature of the person authorized to execute
-14-
<PAGE>
the document on behalf of the Corporation.
ARTICLE XII
INDEMNIFICATION AND ADVANCE OF EXPENSES
To the maximum extent permitted by Maryland law in effect from
time to time, the Corporation shall indemnify and, without requiring a
preliminary determination of the ultimate entitlement to indemnification, shall
pay or reimburse reasonable expenses in advance of final disposition of a
proceeding to (a) any individual who is a present or former director or officer
of the Corporation and who is made a party to the proceeding by reason of his
service in that capacity or (b) any individual who, while a director of the
Corporation and at the request of the Corporation, serves or has served another
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, partner,
managing member or trustee of such corporation, real estate investment trust,
partnership, joint venture, trust, employee benefit plan or other enterprise and
who is made a party to the proceeding by reason of his service in that capacity.
The Corporation may, with the approval of its Board of Directors, provide such
indemnification and advance for expenses to a person who served a predecessor of
the Corporation in any of the capacities described in (a) or (b) above and to
any employee or agent of the Corporation or a predecessor of the Corporation.
Neither the amendment nor repeal of this Article, nor the
adoption or amendment of any other provision of the Bylaws or charter of the
Corporation inconsistent with this Article, shall apply to or affect in any
respect the applicability of the preceding paragraph with respect to any act or
failure to act which occurred prior to such amendment, repeal or adoption.
ARTICLE XIII
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the
charter of the Corporation or these Bylaws or pursuant to applicable law, a
waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Neither the business to be transacted
at nor the purpose of any meeting need be set forth in the waiver of notice,
unless specifically required by statute. The attendance of any person at any
meeting shall constitute a waiver of notice of such meeting, except where such
person attends a meeting for the express purpose of objecting to the transaction
of any business on the ground that the meeting is not lawfully called or
convened.
ARTICLE XIV
AMENDMENT OF BYLAWS
The Board of Directors shall have the exclusive power to adopt,
alter or repeal any provision of these Bylaws and to make new Bylaws.
-15-
TEMPORARY CERTIFICATE--EXCHANGEABLE FOR DEFINITIVE ENGRAVED CERTIFICATE
WHEN READY FOR DELIVERY
[Equity One, Inc. Logo]
NUMBER SHARES
EQUITY ONE, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
CUSIP 294752 10 0
COMMON STOCK
SEE REVERSE FOR IMPORTANT NOTICE ON
TRANSFER RESTRICTIONS AND OTHER INFORMATION
THIS CERTIFIES THAT
IS THE OWNER OF
fully-paid and non-assessable shares of the COMMON STOCK, $.01 par value, of
EQUITY ONE, INC. (THE "CORPORATION") TRANSFERABLE ON THE BOOKS OF THE
CORPORATION BY THE HOLDER HEREOF IN PERSON OR BY ITS DULY AUTHORIZED ATTORNEY
UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED. THIS CERTIFICATE AND THE
SHARES REPRESENTED HEREBY ARE ISSUED AND SHALL BE SUBJECT TO ALL OF THE
PROVISIONS OF THE AMENDED AND RESTATED ARTICLES OF INCORPORATION AND BYLAWS
OF THE CORPORATION, EACH AS FROM TIME TO TIME AMENDED (COPIES OF WHICH ARE ON
FILE WITH THE TRANSFER AGENT), TO ALL OF WHICH THE HOLDER BY ACCEPTANCE HEREOF
ASSENTS. THIS CERTIFICATE IS NOT VALID UNTIL COUNTERSIGNED AND REGISTERED BY
THE TRANSFER AGENT AND REGISTRAR.
WITNESS THE FACSIMILE SEAL OF THE CORPORATION AND THE FACSIMILE
SIGNATURES OF ITS DULY AUTHORIZED OFFICERS.
DATED:
/s/ ([Illegible]
SECRETARY)
/s/ ([Illegible]
PRESIDENT AND
CHIEF EXECUTIVE OFFICER)
COUNTERSIGNED AND REGISTERED
AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK, N.Y.)
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE>
EQUITY ONE, INC.
The Corporation will furnish to any stockholder, on request and without
charge, a full statement of the information required by Section 2-211(b) of the
Corporation and Associations Article of the Annotated Code of Maryland with
respect to the designations and any preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends and other
distributions, qualifications, and terms and conditions of redemption of the
stock of each class which the Corporation has authority to issue and if the
Corporation is authorized to issue any preferred or special class in series, (i)
the differences in the relative rights and preferences between the shares of
each series to the extent set, and (ii) the authority of the Board of Directors
to set such rights and preferences of subsequent series. The foregoing summary
does not purport to be complete and is subject to and qualified in its entirety
by reference to the Articles of Amendment and Restatement to the Articles of
Incorporation of the Corporation (the "Charter"), a copy of which will be sent
without charge to each stockholder who so requests. Such request must be made to
the Secretary of the Corporation at its principal office or to the Transfer
Agent.
The shares represented by this certificate are subject to restrictions
on Beneficial and Constructive Ownership and Transfer for the purpose of the
Corporation's maintenance of its status as a Real Estate Investment Trust under
the Internal Revenue Code of 1986, as amended. Subject to certain further
restrictions and except as expressly provided in the Corporation's Charter, (i)
no Person may Beneficially or Constructively Own shares of the Corporation's
Common Stock in excess of 5.0 percent (in value or number of shares) of the
outstanding shares of Common Stock of the Corporation (unless such Person is an
Excepted Holder (in which case the Excepted Holder Limit shall be applicable);
(ii) no Person may Beneficially or Constructively own shares of Capital Stock of
the Corporation in excess of 5.0 percent of the value of the total outstanding
shares of Capital Stock of the Corporation, unless such Person is an Excepted
Holder (in which case the Excepted Holder Limit shall be applicable); (iii) no
Person may Beneficially or Constructively own Capital Stock that would result in
the Corporation being "closely held" under Section 856(h) of the Code or
otherwise cause the Corporation to fail to qualify as a REIT; and (iv) no Person
may transfer shares of Capital Stock if such transfer would result in the
Capital Stock of the Corporation being owned by fewer than 100 Persons. Any
Person who Beneficially or Constructively Owns or attempts to Beneficially or
Constructively Own shares of Capital Stock which causes a Person to Beneficially
or Constructively Own shares of Capital Stock which causes or will cause a
Person to Beneficially or Constructively Own shares of Capital Stock in excess
or in violation of the above limitations must immediately notify the
Corporation. If any of the restrictions on transfer or ownership are violated,
the shares of Capital Stock represented hereby will be automatically transferred
to a Trustee of a Trust for the benefit of one or more Charitable Beneficiaries.
In addition, upon the occurrence of certain events, attempted Transfers in
violation of the restrictions described above may be void AB INITIO. All
capitalized terms in this legend have the meanings defined in the Charter of the
Corporation, as the same may be amended from time to time, a copy of which,
including the restrictions on transfer and ownership will be furnished to each
stockholder of Capital Stock of the Corporation on request and without charge.
The Corporation has the authority to issue securities of more than one
class. The Corporation will furnish to any stockholder upon request and without
charge a full statement of the designations, preferences, limitations, and
relative rights of the shares of each class authorized to be issued and, with
respect to classes of shares that may be issued in series, the variations and
the relative rights and preferences between the shares of each series, so far as
the same have been fixed and determined.
KEEP THIS CERTIFICATE IN A SAFE PLACE, IF IT IS LOST, STOLEN OR DESTROYED,
THE COMPANY WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE
OF A REPLACEMENT CERTIFICATE.
The following abbreviations, when used in the inscription of the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship
and not as tenants in common
UNIT GIFT MIN ACT - ______________Custodian______________
(Cust) (Minor)
under Uniform Gifts to Minors
Act_________________________
(State)
Additional abbreviations may also be used though not in the above list.
<PAGE>
FOR VALUE RECEIVED,_______________________HEREBY SELL, ASSIGN AND TRANSFER UNTO
- -------------------------------------------------------------------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
_____________________________________________SHARES OF THE COMMON STOCK OF THE
CORPORATION REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY IRREVOCABLY
CONSTITUTE AND APPOINT ______________________________________________________
ATTORNEY TO TRANSFER THE SAID SHARES OF STOCK ON THE BOOKS OF THE WITHIN NAMED
CORPORATION WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED________________________
________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED: ________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17AD-15.
EXHIBIT 5.1
October 20, 1997
Equity One, Inc.
777 17th Street, Penthouse
Miami Beach, Florida 33139
RE: EQUITY ONE, INC.
Gentlemen:
On August 20, 1997, Equity One, Inc., a Maryland corporation (the
"Company"), filed with the Securities and Exchange Commission a Registration
Statement on Form S-11 (Registration No. 333-3977) (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Act"). Such
Registration Statement relates to the sale by the Company of up to 5,405,000
shares (the "Shares") of the Company's Common Stock, par value $0.01 per share
(the "Common Stock"). We have acted as counsel to the Company in connection with
the preparation and filing of the Registration Statement.
In connection therewith, we have examined and relied upon copies of (i)
the Company's Articles of Amendment and Restatement to the Company's Articles of
Incorporation and the Company's Amended and Restated Bylaws; (ii) resolutions of
the Company's Board of Directors authorizing the offering and the issuance of
the Shares to be sold by the Company and related matters; (iii) the Registration
Statement and all amendments and exhibits thereto; and (iv) such other documents
and instruments as we have deemed necessary for the expression of opinions
herein contained. In making the foregoing examinations, we have assumed the
genuineness of all signatures and the authenticity of all documents submitted to
us as originals, and the conformity to original documents of all documents
submitted to us as certified or photostatic copies. As to various questions of
fact material to this opinion, we have relied, to the extent we deemed
reasonably appropriate, upon representations or certificates of officers or
directors of the Company, without independently verifying the accuracy of such
documents, records and instruments.
Based upon the foregoing examination, we are of the opinion that the
Shares have been duly and validly authorized and, when issued and delivered in
accordance with the terms of the Underwriting Agreement filed as Exhibit 1.1 to
the Registration Statement, will be validly issued, fully paid and
nonassessable.
<PAGE>
Equity One, Inc.
October 20, 1997
Page 2
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our name under the caption "Legal
Matters" in the prospectus comprising a part of the Registration Statement. In
giving such consent, we do not thereby admit that we are included within the
category of persons whose consent is required under Section 7 of the Act or the
rules and regulations promulgated thereunder.
Very truly yours,
GREENBERG TRAURIG HOFFMAN
LIPOFF ROSEN & QUENTEL, P.A.
EXHIBIT 8.1
_________ __, 1997
_____________________________
_____________________________
_____________________________
_____________________________
Re: Federal Income Tax Considerations Relating to Equity One, Inc.
Ladies and Gentlemen:
We have acted as counsel to Equity One, Inc., a Maryland corporation
(the "Company"), in connection with the proposed issuance of its common stock in
a registered public offering and the preparation and filing of Amendment No. 3
to Registration Statement No. 333-33977 on Form S-11 to be filed by the Company
with the Securities and Exchange Commission on November __, 1997 (the
"Registration Statement") and the prospectus contained therein (the
"Prospectus"). This opinion is provided to you pursuant to section 6.(d)(viii),
(xiv) and (xv) of the underwriting agreement dated _____ __, 1997 between Credit
Suisse First Boston Corporation, as representative of the several underwriters,
and the Company.
In rendering our opinion, we have reviewed the Registration Statement
and the Prospectus and the documents attached as exhibits thereto, and we have
assumed that the statements therein are and will remain true, correct and
complete and that actions described in the Prospectus have been or will be taken
as described. In addition, we have reviewed documentation of the Company and
presentations and summaries of information regarding the Company's income,
assets, operations, records and other matters. We have assumed the conformity to
the originals of all documents submitted to us as copies and the authenticity of
the originals of all of those documents. We have assumed that all factual
matters in documents submitted to us and all of the other information furnished
to us are true, correct and complete. Further, we have relied on letters from
Deloitte & Touche LLP, the Company's accountants, dated May 10, 1996 and October
21, 1997 to, respectively, a major stockholder of the Company and the Company's
Board of Directors, respectively, regarding the Company's compliance with the
requirements of the Internal Revenue Code of 1986, as amended (the "Code") to be
treated as a real estate investment trust ("REIT") for federal income tax
purposes for the Company's taxable years ending December 31, 1995 and December
31, 1996 and in respect of the period ending June 30, 1997, and we have assumed
the accuracy of the information provided by the Company on which those letters
were based. Finally, we have assumed that representations made by the Company to
us in the letter attached hereto are true, accurate and complete.
Based on the foregoing, in reliance thereon and subject thereto, and
based on the Code, the Treasury regulations promulgated thereunder,
administrative pronouncements of the Internal Revenue Service and judicial
decisions, all as in effect on the date hereof, it is our opinion that:
1. The statements set forth in the Prospectus under the caption
"Federal Income Tax Considerations", insofar as they purport to describe the
matters of law referred to therein,
<PAGE>
__________________________
___________ __, 1997
Page 2
represent the material federal income tax considerations relevant to purchasers
of Common Stock, other than existing stockholders of the Company.
2. The Company has been organized in conformity with the requirements
for qualification as a REIT under the Code with the taxable year of the Company
starting January 1, 1995, and the method of operation of the Company and its
subsidiaries since January 1, 1995 has enabled the Company, and the proposed
method of operation of the Company will enable the Company, to meet the
requirements for qualification and taxation as a REIT under the Code.
3. Since the date of the Company's REIT election, each subsidiary of
the Company at all times has qualified to be treated as a "qualified REIT
subsidiary" within the meaning of section 856(i) of the Code.
The foregoing opinions are limited to the matters expressly set forth,
and no opinion is to be implied or inferred beyond the matters expressly stated.
These opinions speak only as of the date hereof and are based solely on legal
authorities as they currently exist. Those legal authorities are subject to
change either prospectively or retroactively, and we assume no obligation to
update or supplement these opinions. In addtion, any variation or difference in
the facts from those set forth or assumed herein may affect the conclusions
stated herein. Finally, the Company's qualification and taxation as a REIT
depend on the Company's ability to meet (through actual operating results,
distribution levels, diversity of stock ownership and other factors) the various
qualification tests imposed under the Code, the results of which we have not
investigated independently and will not investigate independently, and some of
which are outside the control of the Company to satisfy. Accordingly, no
assurance can be given that the actual results of the Company's operations for
any taxable year have satisfied or will satisfy the REIT qualification tests
under the Code.
These opinions are furnished to you for use in connection with the
Registration Statement and the Prospectus. We hereby consent to the filing of
this opinion as an exhibit to the Registration Statement. We also consent to the
references to the name of our firm under the heading "Federal Income Tax
Considerations" in the Registration Statement and Prospectus.
Very truly yours,
CES/cb
Enclosure
EXHIBIT 10.4
EQUITY ONE, INC.
1995 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
The purpose of this Plan is to further the growth of Equity
One, Inc., a Maryland corporation (the "Company"), by offering an incentive to
directors, officers and other key employees of he Company to continue in the
employ of the Company, and to increase the interest of these employees in the
Company, through additional ownership of its common stock.
2. DEFINITIONS
Whenever used in this Plan, the following terms shall have the
meanings set forth in this Section:
(a) "Board of Directors" means the Board of Directors of the
Company.
(b) "Change of Control" means the acquisition by any person or
group (as that term is defined in the Securities Exchange Act of 1934 (the
"Exchange Act"), and the rules promulgated pursuant to that act) in a single
transaction or a series of transactions of thirty percent (30%) or more in
voting power of the outstanding stock of the Company and a change of the
composition of the Board of Directors so that, within two years after the
acquisition took place, a majority of the members of the Board of Directors of
the Company, or of any corporation with which the Company may be consolidated or
merged, are persons who were not directors or officers of the Company or one of
its Subsidiaries immediately prior to the acquisition, or to the first of a
series of transactions which resulted in the acquisition of thirty percent (30%)
or more in voting power of the outstanding stock of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) "Committee" means the Stock Option Committee of the
Company.
(e) "Common Stock" means the common stock, par value $1.00 per
share, of the Company.
(f) "Date of Grant" means, as the case may be: (i) the date
fixed in this Plan for mandatory grants of Options; (2) the date the Committee
approves the grant of an Opinion pursuant to this Plan; or (3) such later date
as may be specified by the Committee as the date a particular Option granted
pursuant to this Plan will become effective.
(g) "Employee" means any person employed by the Company
within the meaning of Section 3401(c) of the Code and the regulations
promulgated thereunder. For purposes of any Non-Qualified Option only, any
officer or director of the Company shall be considered an Employee even if he is
not an employee within the meaning of the first sentence of this subsection.
<PAGE>
(h) "Exercise Price" means the price per share which must be
paid upon exercise of an Option. The Exercise Price may be paid in cash,
property (including Common Stock) or a combination of both cash and property, as
determined by the Employee upon exercise of the Option and as set forth in
Section 9(c) hereof.
(i) "Fair Market Value" means: (i) if the Common Stock is
traded in a market in which actual transactions are reported, the mean of the
high and low prices at which the Common Stock is reported to have traded on the
relevant date in all markets on which trading in the Common Stock is reported
or, if there is no reported sale of the Common Stock on the relevant date, the
mean of the highest reported bid price and lowest reported asked price for the
Common Stock on the relevant date; (ii) if the Common Stock is Publicly Traded
but only in markets in which there is no reporting of actual transactions, the
mean of the highest reported bid price and the lowest reported asked price for
the Common Stock on the relevant date; or (iii) if the Common Stock is not
Publicly Traded, the value of a share of Common Stock as determined by the most
recent valuation prepared by an independent expert at the request of the
Committee.
(j) "General Corporate Transaction" means any (i)
reorganization or liquidation of the Company, (ii) reclassification of the
Company's capital stock, (iii) merger of the Company with or into another
corporation, or (iv) the sale of all or substantially all the assets of the
Company, which results in a significant number of Employees being transferred to
a new employer or discharged or in the creation or severance of a
parent-subsidiary relationship.
(k) "Incentive Stock Option" means any Option which, at the
time of the grant, is an incentive stock option within the meaning of Section 42
of the Code.
(l) "Non-Qualified Option" means any Option that is not an
Incentive Stock Option pursuant to the terms of this Plan.
(m) "Option" means any option granted pursuant to this Plan,
including any Reload Options as defined herein.
(n)"Publicly Traded" means that a class of stock is required
to be registered pursuant to Section 12 of the Exchange Act, or that stock of
that class has been sold within the preceding 12 months in the underwritten
public offering, or stock that is regularly traded in a public market.
(o) "Reload Option" means an Option granted to an Employee
equal to the number of shares of already owned Common Stock delivered by the
Employee to pay for the exercise of an Option, as more fully described in
Section 15 below.
(p) "Retirement" means a Termination of Employment by reason
of an Employee's retirement at a time when the Employee is at least 65 years
old, older than by reason of a termination by resignation, discharge, death or
Total Disability or the resignation, failure to stand for re-election or
dismissal from the Board of Directors.
(q) "Special Corporate Transaction" means any (i) merger of
the Company into another corporation, (ii) any consolidation of two or more
corporations (including the Company)
-2-
<PAGE>
into another corporation, (iii) any purchase or acquisition of property or stock
by the Company, (iv) any separation of the Company (including a spin-off or
other distribution of stock or property by the Company), (v) any reorganization
of the Company (whether or not such reorganization comes within the definition
of such term in Section 368 of the Code), or (vi) any partial or complete
liquidation by the Company, if such action by the Company results in a
significant number of Employees being transferred to a new employer or
discharged or in the creation or severance of a parent-subsidiary relationship.
(r) "Subsidiary" means any corporation that is a subsidiary
with regard to the Company as that term is defined in Section 424(f) of the
Code.
(s) "Termination of Employment" means the time when the
employee-employer relationship between an Employee and the Company ceases to
exist for any reason including, but not limited to, a termination by
resignation, discharge, death, Total Disability or Retirement or the
resignation, failure to stand for re-election or dismissal from the Board of
Directors.
(t) "Total Disability" means the inability of an Employee to
perform the material duties of his or her job by reason of a medically
determinable physical or mental impairment that can be expected to result in
death or that has lasted or can be expected to last for a continuous period of
not less than 12 months. All determinations as to the date and extent of
disability of an Employee will be made in accordance with the written policy
pertaining to Employee disability, if any, of the Company by which the Employee
is employed. In the absence of a written policy pertaining to Employee
disability, all determinations as to the date and extent of disability of an
Employee will be made by the Committee in its sole and absolute discretion. In
making its determination, the Committee may consider the opinion of the personal
physician of the Employee or the opinion of an independent licensed physician of
the Company's choosing.
3. EFFECTIVE DATE OF THE PLAN
The "Effective Date" of this Plan is January 1, 1996. This
Plan shall become effective on the Effective Date, subject to approval of the
Plan not later than 12 months from the Effective Date, by the affirmative vote
or consent of the holders of a majority of the shares of voting stock of the
Company outstanding at the time of the approval.
4. ADMINISTRATION OF THE PLAN
The Committee shall be responsible for the administration of
the Plan, and shall grant Options pursuant to this Plan. Subject to the express
provisions of this Plan, the Committee shall have full authority to interpret
this Plan, to prescribe, amend and rescind rules and regulations relating to it,
and to make all other determinations which it believes to be necessary or
advisable in administering this Plan. The determinations of the Committee on the
matters referred to in this Section shall be conclusive. The Committee may not
amend this Plan. No member of the Committee shall be liable for any act or
omission in connection with the administration of this Plan unless it resulted
from the member's willful misconduct.
-3-
<PAGE>
5. THE COMMITTEE
The Committee shall consist of not fewer than two members of
the Board of Directors, none of whom may be executive officers of the Company.
The Committee shall hold its meeting at such times and places as it may
determine and shall maintain written minutes of its meetings. A majority of the
members of the Committee shall constitute a quorum at any meeting of the
Committee. All determinations of the Committee shall be made by the unanimous
vote or consent of the members of the Committee. The members of the Committee
may participate in a meeting of the Committee in person or by conference
telephone or similar communications equipment by means of which all members can
hear each other. Any decision or determination by written consent of all of the
members of the Committee shall be as effective as if it had been made by a vote
of the members who participating in a meeting.
6. STOCK SUBJECT TO THE PLAN
The maximum number of shares of Common Stock as to which
Options may be granted pursuant to this Plan is 500,000 shares. The maximum
number of shares of such Common Stock shall be reduced each year by the required
or discretionary grant of Options as provided herein (including Reload Options
as described in Section 15 below). If any Option expires or is canceled without
being exercised in full, the number of shares as to which the Option is not
exercised will once again become shares as to which new Options may be granted.
The Common Stock that is issued on exercise of Options may be authorized but
unissued shares or shares that have been issued and reacquired by the Company.
7. PERSONS ELIGIBLE TO RECEIVE OPTIONS
Options may be granted only to Employees, as defined in
Section 2(h) above.
8. GRANTS OF OPTIONS
(a) IN GENERAL. Except as otherwise provided herein
(including but not limited to subsection (b) of this Section 8 and Section 15
hereof, pertaining to Reload Options), the Committee shall have complete
discretion to determine when and to which Employees Options are to be granted,
the number of shares of Common Stock as to which Options granted to each
Employee will relate, whether Options granted to an Employee will be Incentive
Stock Options or Non-Qualified Options or partly Incentive Stock Options and
partly Non-Qualified Options and, subject to the limitations in Sections 9 and
10 below, the Exercise Price and the term of Options granted to an Employee. Any
Options that are not designated as Incentive Stock Options when they are granted
shall be Non-Qualified Options. No grant of an Incentive Stock Option may be
conditioned upon a Non-Qualified Option's having yet been exercised in whole or
in part, and no grant of a Non-Qualified Option may be conditioned upon an
Incentive Stock Option's having not been exercised in whole or in part.
Notwithstanding the foregoing, from the date that the Company registers a class
of equity securities under Section 12(g) of the Exchange Act, directors who are
members of the Committee shall not receive options pursuant to the Plan other
than pursuant to subsection (b) below, so long as they are serving on the
Committee, and may not have received options pursuant to the Plan other than
pursuant to subsection (b) below, or pursuant to
-4-
<PAGE>
any other plan of the Company, during the period which is the shorter of (i) the
12 month period immediately prior to their becoming a member of the Committee,
or (ii) the period that the Company has been subject to Section 12(g).
(b) MANDATORY GRANT OF NON-EMPLOYEE DIRECTOR OPTIONS. Each
calendar year during the term of this Plan, commencing on the date of the next
annual meeting of shareholders of the Company, and continuing on each subsequent
annual meeting, there shall be granted to each director of the Company who is
not otherwise an Employee (as defined in the first sentence of Section 2(h)
hereof) as compensation for serving during the next calendar year as a director
Options to acquire that number of shares of Common Stock set forth in the
schedule immediately below. Notwithstanding any vesting provisions provided
elsewhere in this Plan or in the Stock Option Agreement, Options granted to
directors hereunder shall vest one year from the Date of Grant, and shall be
granted for a term of ten years. Options granted to directors hereunder shall be
Non-Qualified Options. The schedule for grant of the Options described herein
are as follows:
AMOUNT OF SHARES
SUBJECT TO OPTION
FOR ACTING
DATE OF GRANT AS A DIRECTOR
- ------------- -----------------
Date of the next annual meeting of _______ Shares
shareholders and each subsequent annual
meeting of shareholders during the term of
this Plan
9. OPTION PROVISIONS
(a) EXERCISE PRICE. The Exercise Price of each Option shall
be as determined by the Committee; provided, however, that in the case of
Incentive Stock Options, the Exercise Price shall not be less than one hundred
percent (100%) of the Fair Market Value of the Common Stock on the Date of Grant
of the Option; and, provided further, however, that notwithstanding the
foregoing, the Exercise Price of Non-Qualified Options for directors granted
pursuant to Section 8(b) above shall be one hundred percent (100%) of the Fair
Market Value or the Common Stock on the Date of Grant of the Option. The
Exercise Plan of any Reload Options shall be as determined pursuant to Section
15 of this Plan.
(b) TERM. The term of each Option shall be as determined by
the Committee, but in no event shall the term of an Option (whether or not an
Incentive Stock Option) be longer than ten years from the Date of Grant;
provided, however, that the term of any Reload Options shall be determined as
provided in Section 15 of this Plan.
(c) MANNER OF EXERCISE. An Option that has vested pursuant
to the terms of this Plan may be exercised in whole or in part, in increments of
a minimum of 100 shares, at any time, or from time to time, during its term. To
exercise an Option, the Employee exercising the Option must deliver to the
Company, at its principal office:
-5-
<PAGE>
(i) a written notice of exercise of the
Option, which states the extent to which the Option is being exercised and which
is executed by the Employee;
(ii) a check in an amount, or Common Stock
with a Fair Market Value, equal to the Exercise Price of the Option times the
number of shares being exercised, or a combination of the foregoing; and
(iii) a check equal to any withholding
taxes the Company is required to pay as a result of the exercise of the Option
by the Employee.
The day on which the Company receives
all of the items specified in this subsection shall be the date on which the
Option is exercised to the extent described in the notice of exercise.
(d) DELIVERY OF STOCK CERTIFICATES. As promptly as
practicable after an Option is exercised, the Company shall cause the transfer
agent to deliver to the Employee who exercises the Option certificates,
registered in that person's name, representing the number of shares of Common
Stock that were purchased by the exercise of the Option. Unless the Common Stock
was issued in a transaction that was registered pursuant to the Securities Act
of 1933, as amended (the "Securities Act"), each certificate may bear a legend
to indicate that, if the Common Stock represented by the certificate was issued
in a transaction that was not registered pursuant to the Securities Act, the
Common Stock may only be sold or transferred in a transaction that is registered
pursuant to the Securities Act or is exempt from the registration requirements
of the Securities Act.
(e) VESTING OF OPTIONS. Except as otherwise provided in this
Plan, the Options granted hereunder to Employees shall be subject to such
conditions as to vesting as shall be determined by the Committee, in its sole
and absolute discretion, at the Date of Grant of the Option, and the terms of
such vesting shall be clearly set forth in the instrument granting the Option;
provided, however, that upon a Change of Control, any Options that have not yet
vested in accordance with the terms of this Plan and the Stock Option Agreement
shall vest upon such Change of Control. An Option shall "vest" at such time as
it becomes exercisable in accordance with this Plan and the Stock Option
Agreement. Upon exercise of an Option and the delivery of the stock certificates
as provided herein, the Common Stock acquired upon exercise of the Option shall
not be subject to forfeiture by the Employee for any reason whatsoever.
Notwithstanding any of the foregoing, an officer, director or person who
beneficially owns ten percent (10%) or more of the Common Stock (including
Options to acquire Common Stock) shall not sell or otherwise dispose of Common
Stock acquired upon exercise of an Option granted hereunder until at least six
months shall elapse from the latter of (i) the Effective Date of the Plan, or
(ii) the Date of Grant of the Option to the date of sale or other disposition of
the Common Stock acquired upon exercise of the Option.
(f) NONTRANSFERABILITY OF OPTIONS. During the lifetime of a
person to whom an Option is granted pursuant to this Plan, the Option may be
exercised only by that person or by his or her guardian or legal representative.
An Option may not be assigned, transferred, sold, pledged or hypothecated in any
way: shall not be subject to levy or execution or disposition under the
-6-
<PAGE>
Bankruptcy Code of 1978, as amended, or any other state or federal law granting
relief to creditors, whether now or hereafter in effect; and shall not be
transferable otherwise than by will or the laws of descent and distribution. The
Company will not recognize any attempt to assign, transfer, sell, pledge,
hypothecate or otherwise dispose of an Option contrary to the provisions of this
Plan, or to levy any attachment, execution or similar process upon any Option
and, except as expressly stated in this Plan, the Company shall not be required
to, and shall not, issue Common Stock on the exercise of an Option to anyone who
claims to have acquired that Option from the person to whom it was granted in
violation of this subsection.
(g) RETIREMENT OF HOLDER OF OPTION. If there is a
Termination of Employment of an Employee to whom an Option has been granted due
to Retirement, each Incentive Stock Option held by the retired Employee, whether
or not then vested, may be exercised until the earlier of: (x) the end of the
three month period immediately following the date of such Termination of
Employment; or (y) the expiration of the term specified in the Option. In the
case of a Non-Qualified Option, there shall be substituted the words, "the end
of the 12 month period" for the words "the end of the three month period" in the
immediately preceding sentence.
(h) TOTAL DISABILITY OF HOLDER OF OPTION. If there is a
Termination of Employment of an Employee to whom an Option has been granted by
reason of his or her Total Disability, each Option held by the Employee, whether
or not then vested, may be exercised until the earlier of: (x) the end of the 12
month period immediately following the date of such Termination of Employment;
or (y) the expiration of the term specified in the Option.
(i) DEATH OF HOLDER OF OPTION. If there is a Termination of
Employment of an Employee to whom an Option has been granted by reason of (i)
his or her death, or (ii) the death of a former Employee within three months
following the date of his or her Retirement (or, in the case of a Non-Qualified
Option, within 12 months following the date of his or her Retirement), or (iii)
the death of a former Employee within 12 months following the date of his or her
Termination of Employment by reason of Total Disability, then each Option held
by the person at the time of his or her death, whether or not then vested, may
be exercised by the person or persons to whom the Option shall pass by will or
by the laws of descent and distribution (but by no other persons) until the
earlier of: (x) the end of the 12 month period immediately following the date of
death (or such longer period as is permitted by the Committee); and (y) the
expiration of the term specified in the Option, provided, however, that in no
event is the term of the Option to be deemed to expire prior to the end of three
months from the date of death of the Employee.
(j) TERMINATION OF EMPLOYMENT OTHER THAN FOR RETIREMENT,
DEATH OR DISABILITY. If there is a Termination of Employment of an Employee to
whom an Option has been granted pursuant to this Plan for any reason other than
the Retirement, death or Total Disability of the Employee, then all Options held
by such Employee which are then vested may be exercised until the earlier of:
(x) the three month period immediately following the date of such Termination of
Employment; or (y) the expiration of the term specified in the Option.
(k) STOCK OPTION AGREEMENT. As promptly as practicable after
an Employee is granted an Option pursuant to this Plan, the Committee shall send
the Employee a document setting forth the terms and conditions of the grant. The
form of grant document shall be
-7-
<PAGE>
substantially as set forth in Exhibit "A" attached hereto. Each Option granted
pursuant to this Plan must be clearly identified as to whether it is or is not
an Incentive Stock Option and shall set forth all other terms and conditions
relating to the exercise thereof. In the case of an Incentive Stock Option, the
document shall include all terms and provisions that the Committee determines to
be necessary or desirable in order to qualify the Option as an Incentive Stock
Option within the meaning of Section 422 of the Code. If an Employee is granted
an Incentive Stock Option and a Non-Qualified Option at the same time, the
Committee shall send the Employee a separate document relating to each of the
Incentive Stock Option and the Non-Qualified Option.
10. SPECIAL PROVISIONS RELATING TO INCENTIVE STOCK OPTIONS
No Incentive Stock Option may be granted pursuant to this Plan
after ten years from the first to occur of: (i) the date this Plan is adopted by
the Board of Directors; or (ii) the date of this Plan is approved by the
shareholders of the Company. No Incentive Stock Option may be exercised after
the expiration of ten years from the Date of Grant or such shorter period as is
provided herein. Notwithstanding Sections 8(b) and 15 hereof, Incentive Stock
Options may not be granted to an Employee who, at the time the Option is
granted, owns more than ten percent (10%) of the total combined voting power of
the stock of the Company, unless: (i) the purchase price of the Common Stock
pursuant to the Incentive Stock Option is at least one hundred ten percent
(110%) of the Fair Market Value of the Common Stock on the Date of Grant; and
(ii) the Incentive Stock Option by its terms is not exercisable after the
expiration of five years from the Date of Grant. The Committee is authorized,
pursuant to the last sentence of Section 422(b) of the Code, to provide at the
time an Option is granted, pursuant to the terms of such Option, that such
Option shall not be treated as an Incentive Stock Option even though it would
otherwise qualify as an Incentive Stock Option. The terms of any Incentive Stock
Option granted hereunder shall, in the hands of any individual grantee thereof,
be subject to the dollar limitations set forth in Section 422(d) of the Code
(pertaining to the $100,000 per year limitation).
11. RECAPITALIZATION
(a) IN GENERAL. If the Company increases the number of
outstanding shares of Common Stock through a stock dividend or a stock split, or
reduces the number of outstanding shares of Common Stock through a combination
of shares or similar recapitalization then, immediately after the record date
for the change: (i) the number of shares of Common Stock issuable on the
exercise of each outstanding Option granted pursuant to this Plan (whether or
not then vested) shall be increased in the case of a stock dividend or a stock
split, or decreased in the case of a combination or similar recapitalization
that reduces the number of outstanding shares, by a percentage equal to the
percentage change in the number of outstanding shares of Common Stock as a
result of the stock dividend, stock split, combination or similar
recapitalization; (ii) the Exercise Price of each outstanding Option granted
pursuant to this Plan (whether or not then vested) shall be adjusted so that the
total amount to be paid upon exercise of the Option in full will not change; and
(iii) the number of shares of Common Stock that may be issued on exercise of
Options granted pursuant to this Plan (whether or not then vested) and that are
outstanding or remain available for grant shall be increased or decreased by a
percentage equal to the percentage change in the number of outstanding shares of
Common Stock. Any fractional shares will be rounded up to whole shares.
-8-
<PAGE>
(b) GENERAL CORPORATE TRANSACTIONS. If, as a result of a
General Corporate Transaction while an Option granted pursuant to this Plan is
outstanding (whether or not then vested), and the holders of the Common Stock
become entitled to receive, with respect to their Common Stock, securities or
assets other than, or in addition to, their Common Stock, then upon exercise of
that Option the holder shall receive what the holder would have received if the
holder had exercised the Option immediately before the first General Corporate
Transaction that occurred while the Option was outstanding and as if the Company
had not disposed of anything the holder would have received as a result of that
and all subsequent General Corporate Transactions. The Company shall not agree
to any General Corporate Transaction unless the other party to the General
Corporate Transaction agrees to make available, on exercise of the Options
granted pursuant to this Plan that are outstanding at the time of the General
Corporate Transaction, the securities or other assets the holders of those
Options are entitled pursuant to this subsection to receive.
(c) SPECIAL CORPORATE TRANSACTIONS. If a Special Corporate
Transaction occurs while an Option granted pursuant to this Plan is outstanding
(whether or not then vested) and the Fair Market Value of the Common Stock after
giving effect to the Special Corporate Transaction is less than the Exercise
Price of any outstanding Option, then the Exercise Price of such Option shall be
reduced to such Fair Market Value.
(d) OTHER ADJUSTMENTS. The Committee shall also make or
provide for such adjustments in the maximum number of Common Stock specified in
Section 6 of this Plan as the Committee may in good faith determine to be
appropriate in order to reflect any transaction or event described in this
Section. 11
12. RIGHTS OF OPTION HOLDER
(a) SHAREHOLDER. The holder of an Option (whether or not
then vested) shall not have any rights as a shareholder by reason of holding
that Option. Upon exercise of an Option granted pursuant to this Plan, the
holder shall be deemed to acquire the rights of a shareholder when, but not
before, the issuance of Common Stock as a result of the exercise is recorded in
the stock transfer records of the Company.
(b) EMPLOYMENT. Nothing in this Plan or in the grant of an
Option shall confer upon any Employee the right to continue in the employ of the
Company or shall interfere with or restrict in any way the rights of the Company
to discharge any Employee at any time for any reason whatsoever, with or without
cause.
13. LAWS AND REGULATIONS
(a) IN GENERAL. The obligation of the Company to sell and
deliver shares of Common Stock on vesting and exercise of Options granted
pursuant to this Plan shall be subject to the condition that counsel for the
Company be satisfied that the sale and delivery thereof will not violate the
Securities Act or any other applicable laws, rules or regulations. In addition,
the Company may, as a condition to such sale and delivery, require the Employee
to represent and warrant at the time of any such exercise that the shares are
being purchased only for investment
-9-
<PAGE>
and without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required pursuant
to such securities laws.
(b) Rule 16b-3. This Plan is intended to meet the
requirements of Rule 16b-3 in order to provide directors and executive officers
with certain exemptions from the application of Section 16(b) of the Exchange
Act.
14. WITHHOLDING OF TAXES
(a) IN GENERAL. In addition to the requirement set forth in
Section 9(c) above that, in order to exercise an Option granted pursuant to this
Plan, a person must make a payment to the Company or authorize withholding in
order to enable the Company to pay any withholding taxes due as a result of the
exercise of that Option, if an Employee who exercised an Incentive Stock Option
disposes of shares of Common Stock acquired through exercise of that Incentive
Stock Option either (x) within two years after the Date of Grant of the
Incentive Stock Option or (y) within one year after the issuance of the shares
on exercise of the Incentive Stock Option then, promptly thereafter, the
Employee shall notify the Company of the occurrence of the event and the amount
realized upon the disposition of such Common Stock by the Employee, and pay any
federal, state or other taxes due as a result thereof.
(b) Withholding of Taxes. If, whether because of a
disposition of Common Stock acquired on exercise of an Incentive Stock Option,
the exercise of a Non-Qualified Option or otherwise, the Company becomes
required to pay withholding taxes to any federal, state or other taxing
authority and the Employee fails to provide the Company with the funds with
which to pay that withholding tax, then the Company may withhold, subject to
applicable state law, up to 50% of each payment of salary or bonus to the
Employee (which will be in addition to any other required or permitted
withholding), until the Company has been reimbursed for the entire withholding
tax it was required to pay.
15. RELOAD OPTIONS
(a) GRANT. Whenever an Employee holding any Option
outstanding pursuant to this Plan (including Reload Options previously granted
pursuant to this Section 15) exercises the Option and makes payment of the
Exercise Price pursuant to Section 9(c)(ii) hereof, in whole or in part, by
tendering Common Stock previously held by the Employee, then the Company shall
grant to the Employee a Reload Option for the number of shares of Common Stock
that is equal to the number of shares tendered by the Employee on payment of the
Exercise Price of the Option being exercised.
(b) RELOAD OPTION EXERCISE PRICE. Subject to Section 10
hereof, the Reload Option Exercise Price per share shall be an amount equal to
the Fair Market Value per share of the Company's Common Stock, determined as of
the date of receipt by the Company of the notice by the Employee to exercise the
Option.
(c) TERM OF RELOAD OPTION. Subject to Section 10 hereof, the
exercise period of the Reload Option shall expire, and the Reload Option shall
no longer be exercisable, on the
-10-
<PAGE>
later to occur of (i) the expiration date of the originally surrendered Option
or (ii) one year from the date of grant of the Reload Option.
(d) RESTRICTION ON EXERCISE. Any Reload Option granted
pursuant to this Section 15 shall vest immediately upon grant pursuant to
Subsection (a) above.
(e) OTHER TERMS OF RELOAD OPTIONS. All other terms of the
Reload Options granted hereunder shall be identical to the terms and conditions
of the original Option, the exercise of which gives rise to the grant of the
Reload Option.
16. RESERVATION OF SHARES
The Company shall at all times keep reserved for issuance on
exercise of Options granted pursuant to this Plan a number of authorized but
unissued or reacquired shares of Common Stock equal to the maximum number of
shares the Company may be required to issue on exercise of outstanding Options
(whether or not then vested) granted pursuant to this Plan.
17. AMENDMENT OF THE PLAN
The Board of Directors may, at any time and from time to time,
modify or amend this Plan in any respect effective at any date the Board of
Directors determines; provided, however, that, without the approval of the
shareholders of the Company the Board of Directors may not: (i) increase the
maximum number of shares of Common Stock that may be issued on exercise of
Options (whether or not then vested) granted pursuant to this Plan; (ii) change
the categories of Employees eligible to receive Options; (iii) extend the period
during which Options (whether or not then vested) may be exercised; (iv) change
the provisions fixing the minimum Exercise Price; or (v) change the provisions
as to termination of Options. No modification or amendment of this Plan shall,
without the consent of the holder of an outstanding Option (whether not then
vested), adversely affect the holder's rights pursuant to that Option.
18. TERMINATION OF THE PLAN
The Board of Directors may suspend or terminate this Plan at
any time or from time to time, but no such action shall adversely affect the
rights of a person holding an outstanding Option, whether or not then vested,
granted pursuant to this Plan prior to that date.
<PAGE>
AMENDMENT TO EQUITY ONE, INC.
1995 STOCK OPTION PLAN
THIS AMENDMENT to the Equity One, Inc. Stock Option Plan is made as of
this ____ day of October 1997 by Equity One, Inc.
W I T N E S S E T H
WHEREAS, effective as of January 1, 1996, EQUITY ONE, INC. (the
"Company"), adopted the EQUITY ONE, INC. 1995 STOCK OPTION PLAN (the "Plan");
and
WHEREAS, the Board of Directors of the Company (the "Board") desires to
amend the Plan in order for the Plan to comply with certain rules and
regulations promulgated under the Securities Exchange Act of 1934, as amended,
and certain other rules and regulations;
WHEREAS, as required by Section 16 of the Plan, the Board has
authorized and approved the terms of said amendments to the Plan;
NOW, THEREFORE, effective as of October __, 1997, the Plan is hereby
amended as follows:
1. OPERATIVE AMENDMENTS:
A. Section 2 of the Plan is amended by deleting the
definition of the term "Committee" set forth in paragraph (c) and substituting
in its place the following definition:
(c) "Committee" means a committee designated
by the Board to administer the Plan; provided, however, that the Committee shall
consist of at least two directors, each of whom shall be (i) a "non-employee
director" within the meaning of Rule 16b-3 under the Exchange Act, unless
administration of the Plan by "non-employee directors" is not then required in
order for exemptions under Rule 16b-3 to apply to transactions under the Plan,
and (ii) an "outside director" within the meaning of Section 162(m) of the Code,
unless administration of the Plan by "outside directors" is not then required in
order to qualify for tax deductibility under Section 162(m) of the Code. For
purposes hereof, the Company's Compensation Committee shall initially administer
the Plan.
B. Section 2 of the Plan is amended by deleting the
definition of the term "Fair Market Value" in paragraph (i) and substituting in
its place the following definition:
(i) "Fair Market Value" of a Share on any date
of reference shall be the "Closing Price" (as defined below) of the Common Stock
on the business day immediately preceding such date, unless the Committee in its
sole discretion shall determine
<PAGE>
otherwise in a fair and uniform manner. For the purpose of determining Fair
Market Value, the "Closing Price" of the Common Stock on any business day shall
be (i) if the Common Stock is listed or admitted for trading on any United
States national securities exchange, or if actual transactions are otherwise
reported on a consolidated transaction reporting system, the last reported sale
price of Common Stock on such exchange or reporting system, as reported in any
newspaper of general circulation, (ii) if the Common Stock is quoted on the
National Association of Securities Dealers Automated Quotations System
("Nasdaq"), or any similar system of automated dissemination of quotations of
securities prices in common use, the last reported sale price of Common Stock
for such day on such system, or (iii) if neither clause (i) or (ii) is
applicable, the mean between the high bid and low asked quotations for the
Common Stock as reported by the National Quotation Bureau, Incorporated if at
least two securities dealers have inserted both bid and asked quotations for
Common Stock on at least five of the ten preceding days. If neither (i), (ii),
or (iii) above is applicable, then Fair Market Value shall be determined in good
faith by the Committee in a fair and uniform manner.
C. Section 2 of the Plan is amended by deleting the
definition of the term "Option" set forth in paragraph (m) and substituting in
its place the following definition:
(m) "Option" means any option granted pursuant
to this Plan.
D. Section 2 of the Plan is amended by deleting the definition
of the term "Publicly Traded" set forth in paragraph (n), "Reload Option" set
forth in paragraph (o), and "Special Corporate Transaction" set forth in
paragraph (q) of such section.
E. Section 2 of the Plan is amended by adding the
following defined terms:
(u) "Director" means a member of the Board.
(v) "Optionee" means a person to whom an Option
is granted under this Plan or any person who succeeds to the rights of such
person under the Plan by reason of the death of such person.
(w) "Share(s)" means a share of Common Stock.
(x) "Subsidiary" means any corporation (other
than the Company) in any unbroken chain of corporations beginning with the
Company if, at the time of granting of the Option, each of the corporations
other than the last corporation in the unbroken chain owns stock possessing 50
percent or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
F. Section 6 of the Plan is amended by deleting
such section in its entirety and inserting in lieu thereof the following:
<PAGE>
The Company may grant to Optionees from time to time
Options to purchase a aggregate of up to 1,000,000 Shares from authorized and
unissued Shares. If any Option granted under the Plan shall terminate, expire,
or be cancelled or surrendered as to any Shares, new Options may thereafter be
granted covering such Shares. The maximum number of shares of such Common Stock
shall be reduced each year by the required or discretionary grant of Options as
provided herein.
G. Section 7 of the Plan is amended by deleting
reference to "Section 2(h)" and inserting in its place "Section 2(g)".
H. Section 8 of the Plan is amended by deleting
subsection (a) in its entirety and inserting in lieu thereof the following:
(a) IN GENERAL. Except as otherwise provided
herein, the Committee shall have complete discretion to determine when and to
which Employees Options are to be granted, the number of shares of Common Stock
as to which Options granted to each Employee will relate, whether Options
granted to an Employee will be Incentive Stock Options or Non-Qualified Options
or partly Incentive Stock Options and partly Non-Qualified Options and, subject
to the limitations in Section 9 and 10 below, the Exercise Price and the term of
Options granted to an Employee. Any Options that are not designated as Incentive
Stock Options when they are granted shall be Non-Qualified Options. No grant of
an Incentive Stock Option may be conditioned upon a Non-Qualified Option's
having yet been exercised in whole or in part, and no grant of a Non-Qualified
Option may be conditioned upon an Incentive Stock Option's having not been
exercised in whole or in part. Notwithstanding the foregoing, from the date that
the Company registers a class of equity securities under Section 12 of the
Exchange Act, directors who are members of the Committee shall not receive
options pursuant to the Plan other than pursuant to subsection (b) below, so
long as they are serving on the Committee, and may not have received options
pursuant to the Plan other than pursuant to subsection (b) below, or pursuant to
any other plan of the Company, during the period which is the shorter of (i) the
12 month period immediately prior to their becoming a member of the Committee,
or (ii) the period that the Company has been subject to Section 12.
I. Section 8 of the Plan is amended by adding the
following subsection (d) at the end thereof:
(d) EMPLOYEE LIMITS. Notwithstanding any other
provision of this Plan, and in addition to any other requirements of this Plan,
the aggregate number of Shares with respect to which Options may be granted to
any one Employee may not exceed 35% of the total number of Options available for
grant under the Plan.
J. Section 9 of the Plan is amended by deleting
subsection (b) in its entirety and inserting in lieu thereof the following:
<PAGE>
(b) TERM. The term of each Option shall be as
determined by the Committee, but in no event shall the term of an Option
(whether or not an Incentive Stock Option) be longer than ten years from the
Date of Grant.
K. Section 9 of the Plan is amended by deleting
subsection (c) in its entirety and inserting in lieu thereof the following:
(c) MANNER OF EXERCISE. Unless further
limited by the Committee in any Option, the option price of any Shares purchased
shall be paid (i) in cash, (ii) by certified or official bank check, (iii) by
money order, (iv) with Shares owned by the Employee that have been owned by the
Employee for more than 6 months on the date of surrender or such other period as
may be required to avoid a charge to the Company's earnings for financial
accounting purposes, (v) by authorization for the Company to withhold Shares
issuable upon exercise of the Option, (vi) by arrangement with a broker that is
acceptable to the Committee where payment of the Option price is made pursuant
to an irrevocable direction to the broker to deliver all or part of the proceeds
from the sale of the Option Shares to the Company in payment of the Option
price, or (vii) any combination of the foregoing. The Committee in its sole
discretion may accept a personal check in full or partial payment of any Shares.
If the exercise price is paid in whole or in part with Shares, the value of the
Shares surrendered shall be their Fair Market Value on the date the Option is
exercised. The Company in its sole discretion may, on an individual basis or
pursuant to a general program established in connection with this Plan, and
subject to applicable law, lend money to an Employee, guarantee a loan to an
Employee, or otherwise assist an Employee to obtain the cash necessary to
exercise all or a portion of an Option granted hereunder or to pay any tax
liability of the Employee attributable to such exercise. If the exercise price
is paid in whole or part with Employee 's promissory note, such note shall (i)
provide for full recourse to the maker, (ii) be collateralized by the pledge of
the Shares that the Employee purchases upon exercise of such Option, (iii) bear
interest at a rate no less than the prime rate of the Company's principal
lender, and (iv) contain such other terms as the Board in its sole discretion
shall reasonably require.
L. Section 9 of the Plan is amended by deleting
subsection (e) in its entirety and inserting in lieu thereof the following:
(e) EXERCISABILITY OF OPTIONS. Except as provided herein, any
Option shall become exercisable in such amounts, at such intervals and upon such
terms as the Committee shall provide in such Option.
(i) The expiration date of an Option shall be
determined by the Committee at the time of grant, but in no event shall an
Option be exercisable after the expiration of 10 years from the date of grant of
the Option.
(ii) Unless otherwise provided in any Option,
each outstanding Option shall become immediately fully exercisable:
(a) upon a Change of Control;
<PAGE>
(b) the shareholders of the Company shall
approve a plan of merger, consolidation, reorganization, liquidation or
dissolution in which the Company does not survive (unless the approved
merger, consolidation, reorganization, liquidation or dissolution is
subsequently abandoned); or
(c) if the shareholders of the Company shall
approve a plan for the sale, lease, exchange or other disposition of
all or substantially all the property and assets of the Company (unless
such plan is subsequently abandoned);
(iii) Except with respect to an Option granted
pursuant to Section 10 of this Plan, the Committee may in its sole discretion
accelerate the date on which any Option may be exercised and may accelerate the
vesting of any Shares subject to any Option or previously acquired by the
exercise of any Option.
M. Section 9 of the Plan is amended by deleting
subsection (j) in its entirety and inserting in lieu thereof the following:
(j) TERMINATION OF EMPLOYMENT OTHER THAN FOR
RETIREMENT, DEATH OR DISABILITY.
(i) If there is Termination of Employment of
an Employee to whom an Option has been granted pursuant to
this Plan for any reason other than Retirement, death, Total
Disability of the Employee or Cause (as defined below), than
all Options held by such Employee which are then vested may be
exercised until the earlier of: (x) the three month period
immediately following the date of such Termination of
Employment; or (y) the expiration of the term as specified in
the Option. For purposes of this Plan, "Cause" shall mean the
termination of the Optionee's employment (or, in the case of
non-employee Directors, the removal of the Optionee as a
Director) by reason of any act or any failure to act, by the
Optionee that constitutes (1) misfeasance or malfeasance in
connection with the performance by him of his duties and
responsibilities as an employee or Director of the Company;
(2) fraud, embezzlement or breach of trust; (3) any criminal
act other than minor traffic infractions; or (4) the willful
or knowing refusal by the Optionee to perform substantially
all or any portion of his duties and responsibilities as an
employee or Director of the Company
(ii) The unexercised portion of any Option
shall automatically and without notice terminate and become
null and void immediately upon the Termination of Employment
for Cause.
N. Section 11 of the Plan is amended by deleting
subsection (c) in its entirety.
O. Section 15 of the Plan is deleted in its entirety.
<PAGE>
2. OTHER TERMS AND PROVISIONS. Except as otherwise specifically amended
hereunder, all other terms and conditions of the Plan shall remain in full force
and effect. Unless otherwise expressly stated herein to the contrary, all
capitalized terms used herein shall have the meanings ascribed to them in the
Plan.
EXHIBIT 10.6
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of
January 1, 1996, by and between EQUITY ONE, INC., a Maryland corporation (the
"Company"), CHAIM KATZMAN ("Katzman"), GAZIT HOLDINGS, INC. ("Gazit"), DAN
OVERSEAS LIMITED ("Dan"), M.G.N. OIL & GAS RESOURCES) LTD. ("MGN"), ELI MACABY
("Macaby"), DORON VALERO ("Valero") and David Voolkan ("Voolkan") (individually,
each is referred to as "Holder" and collectively as "Holders").
R E C I T A L S:
A. Katzman presently owns 25,000 shares of the Company, and is
entitled to purchase shares of common stock from the Company, pursuant to
107,500 Series A and 44,167 Series B stock options, and 100,000 shares of common
stock pursuant to certain stock options issued, or to be issued by the Company
to Katzman (the "Shares"); and
B. Gazit presently owns 1,014,470 shares of the Common Stock ($1.00 par
value) of the Company, and is entitled to purchase shares of common stock from
the Company, pursuant to 200,000 Series A stock options and 321,826 Series B
stock options issued by the Company to Gazit (the "Shares"); and
C. Dan presently owns 597,309 shares of the Common Stock ($1.00 par
value) of the Company, and is entitled to purchase shares of common stock from
the Company, pursuant to 60,000 Series A stock options and 174,207 Series B
stock options issued by the Company to Dan (the "Shares"); and
D. MGN presently owns _______ shares of the Common Stock ($1.00 par
value) of the Company, and is entitled to purchase shares of common stock from
the Company, pursuant to _________ Series A stock options and ________ Series B
stock options issued by the Company to MGN (the "Shares"); and
E. Valero presently owns 72,000 shares of common stock of the Company,
and is entitled to purchase shares of common stock from the Company pursuant to
24,000 Series B stock options issued by the Company to Valero and is entitled to
purchase 75,000 shares of common stock pursuant to stock options issued by the
Company to Valero (the "Shares"); and
F. Voolkan presently is entitled to purchase 25,000 shares of common
stock from the Company, pursuant to stock options issued by the Company to
Voolkan (the "Shares"); and
G. Macaby presently is entitled to purchase 25,000 shares of common
stock from the Company, pursuant to stock options issued by the Company to
Macaby (the "Shares"); and
<PAGE>
H. The Company desires to grant to the Holders certain registration
rights as set forth herein with respect to the Shares (collectively, the
"Registrable Securities").
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto mutually agree as follows:
1. REGISTRATION RIGHTS
1.1 PIGGYBACK REGISTRATION. If at any time during the three year
period following completion of the purchase of any of the Shares, the Company
proposes to register any of its securities under the Securities Act of 1933, as
amended (the "Securities Act") (except pursuant to a Registration Statement on
Form S-4 or S-8) (either on behalf or on the behalf of any Selling Shareholder),
the Company shall give written notice at least twenty (20) days prior to the
filing of each such registration statement, to the Holder(s) of its intention to
do so and shall inquire whether the Holder(s) desire to include any of their
Registrable Securities therein. If any Holders of the Registrable Securities
notify the Company in writing within ten (10) days after any such notice of its
or their desire to include any of the Registrable Securities in such proposed
registration statement, the Company shall afford the Holder or Holders of the
Registrable Securities the opportunity to have any such Registrable Securities
registered under such registration statement at the Company's cost and expense
and at no cost or expense to the Holder or Holders provided, however, that:
1.1.1 If, at any time after giving such written notice
of its intention to register any of its securities and prior to the effective
date of the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register such securities, and
to withdraw the registration statement, at its sole election, the Company may
give written notice of such determination to each Holder and thereupon shall be
relieved of its obligation to register any Shares in connection with such
registration (but not from its obligation to register the Shares in a subsequent
registration pursuant to the demand registration rights granted herein).
1.2 MANDATORY REGISTRATION. If Requisite Holders shall give
written notice to the Company at any time within the period (the "Registration
Period") commencing after the consummation of the Offering and terminating at
the expiration of the earliest to occur of (a) the sale of all the Registrable
Securities pursuant to a registration statement filed in connection with the
registration rights set forth in this Agreement or (b) the receipt by the
holder(s) of opinion(s) from counsel that the Registrable Securities may be
publicly sold pursuant to Rule 144(k) of the Rules and Regulations of the Act
and applicable state securities registration requirements without any limitation
on the amount of Registrable Securities sold, to the effect that such Holder
contemplates the transfer of all or any part of his or her Registrable
Securities under such circumstances that a public distribution (within the
meaning of the Act) of Registrable Securities will be involved, then within one
hundred and
2
<PAGE>
twenty (120) days after receipt of such notice, the Company shall file either a
post-effective amendment to any existing applicable registration statement or a
new registration statement pursuant to the Securities Act, to the end that the
Registrable Securities may be sold under the Securities Act as promptly as
practicable thereafter, and the Company will-use its best efforts to cause such
post-effective amendment or new registration statement to become effective,
provided that such Holder shall furnish the Company with appropriate information
(relating to the intentions of such Holder, including the number of Registrable
Securities to be registered and the intended method of distribution thereof) in
connection therewith as the Company shall reasonably request in writing.
Within ten (10) days after receiving any notice pursuant to this
Section 1.2, the Company shall give written notice to the other Holders of
Registrable Securities, advising that the Company is proceeding with such
registration and offering to include therein the Registrable Securities of such
other Holder, provided that within thirty (30) days after the date on which the
Company shall have given notice, the Holders shall notify the Company in writing
that they desire to have their Registrable Securities included in such
registration statement and shall promptly furnish the Company with such
appropriate information (relating to the intentions of such Holders, including
the number of Registrable Securities to be registered and the intended method of
distribution thereof) in connection therewith as the Company shall reasonably
request in writing.
1.3 OPTION TO INCLUDE SHARES IN OFFERING. The Company shall not
be required to include any of the Holders' Shares in an underwritten offering
pursuant to this Section 1 unless such Holders accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it (provided such terms are usual and customary for selling shareholders) and
agree to execute and/or deliver such documents in connection with such
registration as the Company or the managing underwriter may reasonably request.
1.4 COOPERATION. Each Holder will cooperate with the Company in
all respects in connection with this Agreement, including timely supplying all
information reasonably requested by the Company and executing and returning all
documents reasonably requested in connection with the registration and sale of
the Registrable Securities.
1.5 AGREEMENTS AMONG SHAREHOLDERS. The Company, in any Offering
or registration of any of the Shares, shall abide by any limitations or
preferences in that certain Stockholders' Agreement by and among the Holders
dated , attached as Exhibit "A", any agreement or other document by and among
the Company and any of the Holders or by and among the Holders.
2. UNDERWRITER'S "HOLD BACK". Notwithstanding the provisions of Section
1, if in the written opinion of the Company's managing underwriter, if any, for
such offering, the inclusion of all or a portion of the Registrable Securities
requested to be registered, when added to the securities being registered by the
Company or any selling shareholder, will exceed the
3
<PAGE>
maximum amount o(pound) the Company's securities which can be marketed (i) at a
price reasonably related to their then current market value, or (ii) without
materially adversely affecting the entire offering, then the Company may exclude
from such offering all or a portion of the Registrable Securities requested to
be registered as required by the managing underwriter.
If securities are proposed to be offered for sale pursuant to such
registration statement by other shareholders of the Company and the total number
of securities to be offered by the Holders of the Registrable Securities and
such other selling shareholders is required to be reduced pursuant to a request
from the managing underwriter (which request shall be made only for the reasons
and in the manner set forth above) the aggregate number of Registrable
Securities to be offered by the Holders pursuant to such registration statement
shall equal the number which bears the same ratio to the maximum number of
securities as are included in the registration statement (including those of the
Holders) as the original number of Registrable Securities proposed to be sold by
the Holders bears to the total original number of securities proposed to be
offered by the Holders and the other selling shareholder. In such event the
Holder(s) shall retain any remaining demand registration rights for their
remaining Registrable Securities as set forth in Section 1.2 hereof.
3. REGISTRATION PROCEDURES. If and whenever the Company is required by
any of the provisions of Section 1 to use its reasonable best efforts to effect
the registration of any of the Registrable Securities under the Securities Act,
the Company shall (except as otherwise provided in this Agreement), as
expeditiously as possible:
3.1 prepare and file with the U.S. Securities and Exchange
Commission (the "Commission") a registration statement with respect to such
securities and use its reasonable best efforts to cause such registration
statement to become effective and remain effective until all the Registrable
Securities have been sold or (ii) the date all of the Holders hereof receive an
opinion of counsel that the Registrable Securities may be sold under the
provisions of Rule 144(k) of the Rules and Regulations of the Securities Act
without any limitations on the number of Registrable Securities sold;]
3.2 prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and-
to comply with the provisions of the Securities Act with respect to the sale or
other disposition of all securities covered by such registration statement
whenever the Holder or Holders of such securities shall desire to sell or
otherwise dispose of the same;
3.3 furnish to each Holder such number of copies of a
registration statement and prospectus, including a preliminary prospectus or any
amendment or supplement to any prospectus, in conformity with the requirements
of the Securities Act, and such other documents, as such Holder may reasonably
request in order to facilitate the public sale or other disposition of the
securities owned by such Holder;
4
<PAGE>
3.4 use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as each Holder shall request, and do any and
all other acts and things which may be necessary or advisable to enable such
Holder to consummate the public sale or other disposition in such jurisdictions
of the securities owned by such Holder, except that the Company shall not for
any such purpose be required to qualify to do business as a foreign corporation
in any jurisdiction, wherein it is not so qualified or to file therein any
general consent to service of process;
3.5 otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
shareholders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months, beginning with the first fiscal quarter
beginning after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11.(a) of the Securities Act;
3.6 use its best efforts to list such securities on any
securities exchange on which any stock of the Company is then listed, if the
listing of such securities is then permitted under the rules of such exchange;
3.7 enter into and perform its obligations under an
underwriting agreement, if the offering is an underwritten offering, in usual
and customary form, with the managing underwriter or underwriters of such
underwritten offering;
3.8 notify each Holder covered by such registration statement,
at any time when a prospectus relating thereto covered by such registration
statement is required to be delivered under the Securities Act, of the happening
of any event of which it has knowledge as a result of which the prospectus
included in such 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 not misleading in the
light of the circumstances then existing; and
3.9 take such other actions as shall be reasonably requested
by any Holder to facilitate the registration of the Registrable Securities.
4. EXPENSES. All expenses incurred in any registration of the Holders'
Registrable Securities under this Agreement shall be paid by the Company,
including, without limitation, printing expenses, fees and disbursements of
counsel for the Company, expenses of any special audits to which the Company
shall agree or which shall be necessary to comply with governmental requirements
in connection with any such registration, all registration and filing fees for
the Holders' Registrable Securities under federal and state securities laws, and
expenses of complying with the securities or blue sky laws of any jurisdictions
pursuant to Subsection 3.4; provided, however, the Company shall not be liable
for:
5
<PAGE>
4.1 any discounts or commissions to any underwriter in
connection with the sale of such Holders' Registrable Securities;
4.2 any stock transfer taxes incurred with respect to
Registrable Securities sold in the Offering; or
4.3 the fees and expenses of counsel for any Holder, provided
that the Company will pay the costs and expenses of Company counsel when the
Company's counsel is representing any or all selling shareholders.
5. INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Section 1:
5.1 COMPANY INDEMNITY. Without limitation of any other
indemnity provided to any Holder, either in connection with the Offering or
otherwise, to the extent permitted by law, the Company shall indemnify and hold
harmless each Holder, its Affiliates (as defined in the Securities Act)
officers, directors and partners of each Holder, any Underwriter (as defined in
the Securities Act) for such Holder, and each person, if any, who controls such
Holder or Underwriter (within the meaning of the Securities Act or the
Securities Exchange Act of 1934 (the "Exchange Act")), against any losses,
claims, damages or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively, a " Violation " ):
5.1.1 any untrue statement or alleged untrue
statement of a material fact contained in such registration statements including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto;
5.1.2 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,
not misleading; or
5.1.3 any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law, and the Company shall reimburse each such Holder,
Affiliate, officer or director or partner, Underwriter or controlling person for
any legal or other expenses incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company shall not be liable to any Holder in any such case for any such
loss, claim, damage, liability or action to the extent that it arises out of or
is based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder or any other officer, director or controlling
person thereof.
6
<PAGE>
5.2 HOLDER INDEMNITY. Each Holder shall indemnify and hold harmless the
Company, its Affiliates, officers, directors, shareholders and representatives,
any Underwriter and each person, if any, who controls the Company or the
Underwriter, against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the Exchange
Act or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
statements or information provided by such Holder to the Company in connection
with the offer or sale of the Registrable Securities.
5.3 NOTICE; RIGHT TO DEFEND. Promptly after receipt by an indemnified
party under this Section S of notice of the commencement of any action
(including any governmental action), such indemnified party shall, if a claim in
respect thereof is to be made against any indemnifying party under this Section
5, deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in and if
the indemnifying party agrees in writing that it will be responsible for any
costs, expenses, judgments, damages and losses incurred by the indemnified party
with respect to such claim, jointly with any other indemnifying party similarly
noticed, to assume the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party shall have the right to
retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if the indemnified party reasonably believes that
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall relieve such indemnifying party of any liability to the indemnified
party under this Section S only if and to the extent that such failure is
prejudicial to its ability to defend such action, and the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 5.
5.4 CONTRIBUTION. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party thereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand, and of the indemnified party on the other
hand, in connection with the statements or omissions which resulted in such
loss, liability, claim, damage or expense as well as any other relevant
equitable considerations. The relevant fault of the indemnifying party and the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Notwithstanding the foregoing, the amount any party shall
be obligated
7
<PAGE>
With a copy to:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
or at such other address as it may have furnished in writing to the Holders of
the Registrable Securities at the time outstanding.
if to any Person who is the registered Holder of any
Registrable Securities, to the address of such Holder as it
appears in the stock ledger of the Company.
Any notice so addressed, when mailed by registered or
certified mail, shall be deemed to be given three days after so mailed, and,
when telegraphed or telexed or delivered by hand shall be deemed to be given
immediately.
9. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, this Agreement shall inure to the benefit of and be binding upon the
successors and assigns of the Company and each of the Holders. Each of the
parties hereto may assign its rights pursuant to this Agreement to any entity
controlled by such party itself or together with other parties to this
Agreement.
10. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof. It
supersedes all prior negotiations, letters and understandings relating to the
subject matter hereof.
11. AMENDMENT AND WAIVER. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, but only with the
written consent of the Company and the Holders of the Registrable Securities
representing a majority of the Registrable Securities; provided, however, that
no such amendment or waiver shall take away any registration right of any Holder
of Registrable Securities or reduce the amount of reimbursable costs to any
Holder of Registrable Securities in connection with any registration hereunder
without the consent of such Holder. No delay on the part of any party in the
exercise of any right, power or remedy shall operate as a waiver thereof, nor
shall any single or partial exercise by any party of any right, power or remedy
preclude any other or further exercise thereof, or the exercise of any other
right, power or remedy.
12. CHOICE OF LAW. This Agreement will be interpreted, construed and
enforced in accordance with the laws of the State of Florida, without giving
effect to the application of conflicts of laws.
9
<PAGE>
10
<PAGE>
17. BINDING NATURE. This Agreement will be binding upon and will inure
to the benefit of any successor or successors of the parties hereto.
18. NO THIRD-PARTY BENEFICIARIES. No person shall be deemed to possess
any third party beneficiary right pursuant to this Agreement. It is the intent
of the parties hereto that no direct benefit to any third party is intended or
implied by the execution of this Agreement.
19. COUNTERPARTS. One or more counterparts of this Agreement may be
signed by the parties, each of which shall be an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the date and year first above written.
COMPANY:
EQUITY ONE, INC., a Maryland
corporation
By: /S/ CHAIM KATZMAN
---------------------------
Name CHAIM KATZMAN
Title:_____________________
HOLDERS:
/s/ CHAIM KATZMAN
-----------------------------
Name: CHAIM KATZMAN
/s/ DAVID VOOLKAN
-----------------------------
Name: DAVID VOOLKAN
GAZIT HOLDINGS, INC
/s/ CHAIM KATZMAN
-----------------------------
Name: CHAIM KATZMAN
11
<PAGE>
-----------------------------
Name: DORON VALERO
DAN OVERSEAS LTD.
By: /s/ ILLEGIBLE
-------------------------
Name: ________________________
M.G.N. (OIL & GAS RESOURCES) LTD.
By: /s/ ILLEGIBLE
-------------------------
Name: ________________________
12
EXHIBIT 10.8
PROMISSORY NOTE
$1,128,750.00 Miami, Florida
June, 17, 1996
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
EQUITY ONE, INC., a Maryland corporation, at Penthouse 777 17th Street, Miami
Beach, Florida 33139, or at such other place as shall be designated by the
holder of this note in writing, the sum of ONE MILLION ONE HUNDRED TWENTY-EIGHT
THOUSAND SEVEN HUNDRED FIFTY AND NO/100 DOLLARS ($1,128,750.00) together with
interest thereon from the date hereof at 6.86 PERCENT (6.86%) per annum (if
blank, the interest rate shall be the seven-year U.S. Treasury Bill rate on the
date hereof or, if no rate is available on the date hereof, on the last day
prior to the hereof when the rate is determinable), calculated on the basis of
a 360 day year, counting the actual number of days elapsed, provided, however,
that the interest rate hereunder, shall not exceed the maximum rate of interest
allowed, from time to time, by law.
Interest hereunder shall be payable annually commencing on the 5th day
of January, 1997, and on the same day of each year thereafter. The maker is not
required to make any payment of principal prior to the maturity date hereof. All
principal outstanding hereunder, together with all accrued and unpaid interest,
and any other payments due hereunder, shall be payable on June 16, 2003.
Any and all payments shall be applied first to accrued interest, and
the remainder, if any, to reduction of principal. If any installment of
principal or interest is not paid when due, or upon any default in the
performance of any of the covenants or agreements of this note, or of any
instrument now or hereafter evidencing or securing this note or the obligation
represented hereby, the entire Indebtedness (including principal and interest)
remaining unpaid shall, at the option of the holder, become immediately due,
payable and collectible. The principal, or any installment of principal, and
deferred interest shall bear interest at three percent (3.00%) over the rate
hereof from maturity until paid, accruing at such rate even after entry of final
judgment for payment of same.
<PAGE>
Each maker and every endorser severally waives demand, protest and
notice of maturity, nonpayment or protest and all requirements necessary to hold
each of them liable as makers and endorsers. Each maker and endorser further
agrees, jointly and severally, to pay all costs and expenses of collection,
including reasonable attorney's fees, and specifically including cost, expenses
and reasonable attorney's fees on appeal and in supplementary proceedings for
collection of judgments. In the event the principal of this note or any payment
of principal or interest thereon is not paid at the respective maturity thereof,
or in the event it becomes necessary to protect the security hereof, wherether
suit be brought or not.
All endorsers hereby expressly consent that the holder may, without
notice to or consent of the said endorsers, from time to time extend the time
for payment of the whole or any part of the indebtedness or liability of the
maker of this note without impairing the liability of said endorsers.
The liability of each maker and endorser on this note shall be absolute
and unconditional and without regard to the liability of any other party hereto.
In addition to the acceleration rights set forth hereinabove, the
holder hereof shall be entitled to accelerate the entire unpaid balance and any
acrued interest hereunder, forthwith as against the makers hereof and any
endorsers, upon the occurrence of any of the following events: (a) the
dissolution of any corporation liable for the payment hereof; (b) in the event
any party liable for the payment hereof shall become insolvent, make a general
assignment for the benefit of creditors or if any bankruptcy, insolvency or
reorganization proceeding of any nature under Federal or State statutes be
commenced by or against any of them, or in the event a receiver shall be
appointed, or a writ or order of attachment or garnishment be issued or made
against any of the property, assets or Income of any of them, and such writ,
order, receiver or proceeding is not terminated or removed within thirty (30)
days thereafter, and (c) failure of any party obligated hereunder to do all
things necessary to preserve and maintain the value and collectibility of any
collateral now or hereafter securing the obligations created hereunder.
Nothing contained in this note, nor any instrument or transaction
related to it, shall be construed or so operate as to require the maker, or any
person liable for the payment of the loan made pursuant to this note, to pay
interest in an amount or at a rate greater than the maximum allowed by law.
Should any interest or other charges paid by the maker, or any parties liable
for the payment of the loan made pursuant to this note, result in the
computation or earning of interest in excess of the
<PAGE>
maximum lawful rate, then any and all of that exccess shall be and is waived by
the holder of this note, and all excess shall be automatically credited against
and in reduction of the principal balance, and any portion of the excess that
exceeds the principal balance shall be paid by the holder to the maker and any
parties liable for the payment of the loan made pursuant to this note, it being
the intent of the parties that under no circumstances shall the maker, or any
parties liable for a payment of the loan hereunder, be required to pay interest
in exccess of the maximum rate allowed by law.
This Note is secured by certain stock of Equity One, Inc. which has
been pledged as collateral (the "Pledged Stock") and which is more particularly
described in that cetain Stock Pledge Agreement of even date herewith. The
holder shall be under no duty to enforce payment out of the collateral securing
this note, although the obligor herein may, at his option, tender for payment of
any amounts due under this note such portions of stock in Equity One, Inc. held
by the obligor as the obligor shall, in his sole discretion, so tender for
payment.
The obligor hereunder may prepay this note at any time, in whole or in
part, without penalty or premium. At the obligor's sole option, the obligor may
use for payment of the amounts payable under this Note, including amounts due at
maturity, all or any portion of the Pledged Stock, and such Pledged Stock used
for payment herein shall be valued at (i) if the issuer's stock is listed and
traded on a securities exchange, at the price per share equal to the average
closing price over the 45 trading days preceding the date the Pledged Stock is
tendered for payment by the Pledgor, (ii) if the issuer's stock is not listed
and traded on a securities exchange, the price per share equal to the price per
share of a third-party, arms' length sale of stock of Equity One, Inc., in
similar quantities during the six-month period immediately preceding the tender,
or (iii) if the price cannot be determined pursuant to (i) or (ii) above, the
fair market value as determined by an appraiser acceptable to both parties. If
the parties are unable to appoint or agree upon a mutually acceptable appraiser
within ten (10) days after notice is given of the proposed tender, the matter
shall be submitted to binding arbitration by the American Arbitration
Association who shall appoint one (1) arbitrator pursuant to the Rules of
Commercial Arbitration within seven (7) days after submission and said
arbitrator shall determine the fair market value of the Pledged Stock tendered
by utulizing a nationally recognized, reputable investment banking firm. The
determination of fair market value must be completed within thirty (30) days
after the appointment of an arbitrator and the arbitrator's findings shall be
final. The proceeedings shall take place in Miami, Florida in the English
language and each pary shall pay one-half (1/2) the cost of the
<PAGE>
proceedings and the appraisal. The Pledgor shall be permitted to tender up to
the number of shares of the Pledged Stock required to pay to the Pledgee the
amounts due under the Promissory Note and this Agreement.
WAIVER OF JURY TRIAL. THE HOLDER AND THE BORROWER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY MAY HAVE TO A TRIAL BY JURY IN
REPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION
HEREWITH, OR ANY COURSE OR CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE BANK ENTERING INTO THIS AGREEMENT.
/s/ CHAIM KATZMAN
-----------------------------
CHAIM KATZMAN
EXHIBIT 10.10
PROMISSORY NOTE
$396,000.00 Miami, Florida December 30, 1996
FOR VALUE RECEIVED, the undersigned promises to pay to the order of EQUITY
ONE, INC., a Maryland Corporation, the principal sum of THREE HUNDRED NINETY
SIX THOUSAND DOLLARS ($396,000.00), together with interest thereon from date,
at the rate of five and one-quarter (5.25%) percent per annum until maturity,
payable interest only in the sum of Twenty Thousand Seven Hundred Ninety
($20,790.00) Dollars per year, commencing December 30, 1997 and each December
30, thereafter until the 30th of December, 2002, at which time the entire
principal balance, that is the sum of $396,000.00 plus accrued interest, shall
be paid in full; said principal and interest being payable in lawful money of
the United States or its equivalent, payable to
EQUITY ONE, INC.
777 17th Street
Penthouse
Miami Beach, Florida 33139
This note may prepaid, in part or in full, without prepayment penalty. Any
payment received more than ten (10) days after the due date shall be subject to
a five (5%) late fee. In the event any payment is not received within thirty
(30) days of the due date, then in such event, the borrower shall be deemed in
default, the interest rate thereafter will automatically increase to the maximum
rate then permitted by law.
This note is secured by a Stock Pledge Agreement of even date herewith and
is to be construed and enforced according to the laws of the State of Florida.
All of the covenants, conditions, and agreements contained in the Stock Pledge
Agreement and any other document evidencing the loan are hereby made a part
of this instrument.
The holder hereof shall have the optional right to declare the principal
sum disbursed hereunder and all accrued interest thereon to be due and forthwith
payable in advance of the maturity date fixed herein upon the failure of the
undersigned to pay, when due, any one of the installments of interest or, at the
option of the holder, upon the occurrence of any other event of default by the
undersigned in the Stock Pledge Agreement 30 days written notice from the Holder
to Maker. Failure to exercise this option with respect to any failure or breach
by the Holder shall not constitute a waiver of the right as to any subsequent
failure or breach.
In no event shall interest (including any charge or fee held to be interest
by a court of competent jurisdiction) accrue to be payable herein in excess of
the highest contract rate allowable
Initials /s/ DV
------------
Page 1 of 2
<PAGE>
by law for the time such indebtedness shall be outstanding and unpaid, and if
by reason of the acceleration of maturity of such indebtedness, or for any
other reason, interest in excess of the highest legal rate shall be due or paid,
any such excess shall constitute and be treated as a payment on the principal
hereof and shall operate to reduce such principal by the amount of such excess,
or if in excess of the principal indebtedness, such excess shall be waived or
refunded to the maker.
Each maker and endorser severally waives demand, protest, notice of
maturity and notice of nonpayment and all requirements necessary to hold each of
them liable as makers and endorser.
Each maker and endorser further agrees, jointly and severally, to pay all
costs of collection, including a reasonable attorney's fee in case the principal
of this note or any payment on the principal or any interest thereon is not paid
at the respective maturity thereof, or in cash it becomes necessary to protect
the security hereof, whether suit be brought or not.
Upon default, this note and deferred interest payments shall bear interest
at the maximum rate allowed by law.
The Lender and the Maker specifically agree that they waive all rights to
rely on or enforce any oral statements made prior to or subsequent to the
signing of this document.
The Lender and the Maker hereby knowingly, voluntarily and intentionally
waive the right either may have to a trial by jury with respect to any
litigation based hereon, or arising out of, under or in connection with this
document, and any agreement contemplated to be executed in conjunction herewith,
or any course of conduct, course of dealing, statements (whether verbal or
written) or actions of either party made before, during, or after the execution
of this document.
Venue and jurisdiction shall be in Dade County, Florida, for any
affirmative or defensive legal proceeding in connection with this document
and/or any other document signed by the borrower in favor of the Lender.
/s/ Doron Valero
---------------------------
DORON VALERO
Page 2 of 2
EXHIBIT 10.13
INVESTMENT CONTRACT
Made and entered into on the 21st day of May 1996
Between
M.G.N. GAS AND PETROLEUM RESOURCES LTD.
a public company registered in Israel for itself
or for a company under its full control
["Magan"]
OF THE FIRST PART:
And
DAN OVERSEAS LTD.
a company incorporated on the island of Jersey
["Dan"]
OF THE SECOND PART:
And
GAZIT HOLDINGS INC.
a company incorporated in the State of Florida, United States
["Gazit"]
OF THE THIRD PART:
And
EQUITY ONE INC.
a company incorporated in the State of Maryland, United States
["Equity"]
OF THE FOURTH PART:
And
A COMPANY IN FORMATION
represented by Eli Makabi and Dori Segal
["the Other Company"]
OF THE FIFTH PART:
WHEREAS Equity wishes to allot shares and options to Magan in accordance with
the provisions of this Contract; and
WHEREAS Magan wishes to acquire shares and options from Equity in accordance
with the provisions of this Contract; and
WHEREAS Dan, Magan and Gazit are desirous of regulating the relationship
between them as shareholders in Equity, all in accordance with the
matters set forth in this Contract;
1
<PAGE>
NOW THEREFORE IT IS DECLARED, AGREED AND STIPULATED BY THE
PARTIES AS FOLLOWS:
1. DEFINITIONS AND INTERPRETATIONS
1.1 In this Contract and in the appendices hereto the following terms will
have the meanings set opposite them, provided that such meaning
reconciles with the content or context:
1.1.1 "DATE OF COMMENCEMENT OF VALIDITY" - the date on which this
Contract will come into force in accordance with the provisions
of Clause 13.7 below, if this Contract comes into force.
1.1.2 "RELATED PARTIES" - Magan, Dan and Gazit.
1.1.3 "THE MAGAN GROUP" - Magan and/or foreign subsidiaries which are
wholly-owned by Magan, as Magan shall direct.
1.1.4 "THE EQUITY GROUP" - Equity and its subsidiaries, jointly.
1.1.5 "THE OPINION" - an opinion in regard to the value of the shares
of Equity, which was prepared by Giza Economic Counseling and
Financial Management [1988] Ltd. ["Giza"].
1.2 The preamble to this contract and the appendices hereto constitute an
integral part of the Contract.
1.3 The dividing of the contract into clauses and the giving of headings
to the clauses have been done as place-finders and solely for the sake
of convenience, and no use shall be made thereof for purposes of
interpretation.
2. REPRESENTATIONS BY EQUITY
By its signature to this Agreement, Equity declares that:
2.1 Its contracting under this Contract and the implementation of the
provisions hereof fo not conflict with and/or run contrary to Equity's
founding documents, to an agreement to which Equity is a party and/or
to any obligation imposed on Equity, whether pursuant to an agreement
or by operation of law. There is no legal or other bar to Equity's
contracting under this contract.
2.2 The registered capital of Equity is comprised of 10,000,000 ordinary
shares of 1 US dollar par value each 5,000,000 preference shares of
1 US dollar par value each and 5,000,000 Excess shares of 1 US dollar
par value each.
2.3 The issued capital of Equity is 2,258,904 ordinary shares of 1 US
dollar par value each, which are held by the shareholders mentioned in
APPENDIX A to
2
<PAGE>
this contract, in the quantities set forth in the aforesaid appendix. In
addition Equity has allotted to some of its shareholders options Series
A and Series B. The condition for the exercise of the aforeaid options
and the list of persons who hold such options are set forth in APPENDIX
B to this Contract.
2.4 Entering into this Contract and the implementation of the provisions
hereof will not prejudice Equity's classification as a REIT or its
ability to benefit from being classified as an REIT in the future, in
accordance with the provisions of the law in the United States
prevailing at the date of signing of this Contract, provided that if all
the parties to this Contract do not agree to the contrary, all Equity
shares which are acquired pursuant to this Contract will be held by
Magan's American subsidiary.
2.5 All the data given by Equity to Giza for purposes of preparing the
opinion are data which were checked and verified by Equity and were
found to be correct.
2.6 Equity's Memorandum and Articles of Association are attached to this
Contract as APPENDIX C.
2.7 The consolidated audited financial statements as at December 31, 1996
and the reviewed consolidated statements as at March 31, 1996 of Equity
are attached to this contract as APPENDIX D AND E respectively. These
statements were prepared in accordance with accepted accounting
principals [US GAAP], and they fairly and properly reflect Equity's
assets and liabilities at the dates mentioned therein, and Equity's
business results for the periods mentioned therein. Since the date of
the financial statements there has been no adverse material change in
Equity's state of business.
2.8 APPENDIX F, which is attached to this Contract, properly describes the
real estate assets of the Equity Group.
2.9 APPENDIX G, which is attached to this Contract, describes the material
agreements to which the Equity Group is a party. Apart from the
aforesaid agreements, the Equity Group is not bound by any contract or
obligation likely to be considered as material.
2.10 The charges over the assets of the Equity Group are correctly described
in APPENDIX H which is attached to this Contract. Apart from the
aforesaid charges, no other charges are imposed over the assets of the
Equity Group.
2.11 The pending lawsuits against the Equity Group are described in
APPENDIX I which is attached to this Contract. Apart from the aforesaid
lawsuits, the Equity Group is not a party to any legal proceedings,
and it is not aware of any legal proceedings in which a third party is
due to take action or threatens to take action against the Equity Group.
3
<PAGE>
2.12 APPENDIX J, which is attached to this Contract, gives details of the
transactions which the Equity Group has made with related parties in
Equity.
2.13 APPENDIX K to this contract gives details of the guarantees which
Equity has given to secure the obligations of other parties.
3. REPRESENTATIONS BY MAGAN
By its signature to this Contract, Magan declares that:
3.1 Its contracting under this contract and the implementation of the
provisions hereof do not conflict with and/or run contrary to Magan's
founding documents, to an agreement to which Magan is a party and/or
to any obligations imposed on Magan, whether pursuant to an agreement
or by operation of law. there is no legal or other bar to Magan's
contracting under this Contract.
3.2 Magan's audit committee and the board of directors of Magan have
approved Magan's entering into this contract and the purchase of the
shares pursuant hereto. Copies of the minutes of the meeting at which
the aforesaid resolutions were passed are attached to this Contract as
APPENDIX L.
3.3 Magan is aware that the other shareholders in Equity and Equity are
likely to be deemed to be controlling shareholders in Magan, within
the definition of this term under the Securities Regulations
[Restrictions in regard to a Conflict of Interest between a Company and
a Controlling Shareholder therein], 5754-1994. Magan has taken all the
steps required for purposes of its contracting under this Contract.
3.4 The effecting of the investment in the share capital of Equity in
accordance with the provisions of this Contract has been approved
pursuant to a personal permit from the Bank of Israel, a copy of which
is attached to this Contract as APPENDIX M.
4. REPRESENTATIONS BY GAZIT AND DAN
By their signatures to this contract, each of the companies Gazit and Dan
separately declares that:
4.1 The contractual arrangement under this Contract and the implementation
of the provisions hereof are not in conflict with and/or contrary to
its founding documents, to an agreement to which it is party and/or
to any obligation imposed on it, whether pursuant to an agreement or by
operation of law. There is no legal or other bar to its contracting
under this Contract.
4.2 Danbar Resources and Gazit will hold the shares of the Other Company in
such matter that Gazit will hold shares representing 50.86% of the
issued capital of the Other Company, while Danbar Resources will hold
shares representing 49.14% of the issued capital of the Other Company.
4
<PAGE>
5. ALLOTMENT OF SHARES
5.1 Equity will allot to a subsidiary of Magan (in accordance with Clause
2.4 above) which Magan undertakes to form and establish up to Date of
Commencement of Validity (in this Contract jointly - "Magan"), 1,000,000
ordinary shares of one US dollar par value each ["the Acquired Shares"].
After the allotment of the shares as aforesaid, the shares of Equity
will be held by the shareholders mentioned in APPENDIX N to this
Contract in the quantities mentioned in the aforesaid appendix. The
above-mentioned shares will be alloted in the stages and at the times at
which the consideration in respect thereof is paid, as more fully
described in clause 5.3 below.
5.2 At the time of each allotment, Equity will transfer to Magan a signed
share certificate in the name of Magan, in respect of the Acquired
Shares. Equity will take action to register Magan as the owner of the
Acquired Shares in Equity's shareholders register, and in any other data
base in which such registration is required.
5.3 In consideration for the allotment of the shares as mentioned in Clause
5.1 above, Magan will pay Equity an amount of 24,750,000 [twenty-four
million seven hundred and fifty thousand] US dollars. The aforesaid
amount will be paid by way of a bank transfer to Equity's bank account.
Magan will pay each portion of the consideration mentioned in this
Clause 5.3 where same has been increased at a rate of 9.7% in respect
of each year [or at a pro rata lower rate in respect of portion of a
year] reckoned as from December 10, 1995 until the date of actual
payment. The amount in respect of each share will be reduced by the
amount of the dividend per share which is distributed at any time from
December 10, 1995 until the date of actual payment.
5.4 The amount of the consideration will be paid by Magan in installments
and at the times to be specified by Equity. Magan is granted the right
to anticipate the date of payment of any installment, but not to defer
such date.
Notwithstanding the foregoing, Equity will not be entitled to demand
payment of any such amount until after the Date of Commencement of
Validity. After such date Equity will be entitled to demand payment of
the consideration as aforesaid in one amount or in installments, at any
time. Magan will be obliged to make payment of the consideration in
accordance with Equity's demand within 14 days from the date it receives
a written demand from Equity to do so, provided that Magan will not be
deemed to have breached the provisions of this Contract if it pays an
amount of 8,000,000 (eight million) dollars up to the end of 18 months
from the date this Contract comes into force in accordance with the
provisions of Clause 13.7 below, and in addition an amount of 6,000,000
(six million) dollars up to the end of 30 months from the date this
Contract comes into force.
5.5 At the time of signing of this Contract Magan will give Equity a loan
in an amount of up to 5,000,000 (five million) dollars in accordance
with a
5
<PAGE>
demand from Equity, bearing interest at a rate of 7% per annum. The
interest in respect of the aforesaid loan will be paid only on the
date of repayment of the aforesaid loan, if this loan is repaid. Should
this Contract come into force in accordance with the contents of Clause
13.7 below, the amount of the loan will be treated as having been
invested from the outset in the purchase of Equity shares, on the date
the loan is given. In such event Equity will allot to Magan that
portion of the allotted shares it is obliged to issue in respect of the
aforesaid payment. Should this Contract be canceled in accordance with
the provisions of Clause 13.7 below, Equity will repay the aforesaid
loan, together with interest accrued thereon, within 30 months from the
date on which Magan instructs it in writing to do so.
6. ALLOTMENT OF OPTIONS
6.1 At the Date of Commencement of Validity, Equity will allot Magan
200,000 options (Series B) in consideration for 1,760,000 (one million
seven hundred and sixty thousand) US dollars, which will be paid by way
of a bank transfer to Equity's bank account. The options (Series B)
which are allotted in accordance with the foregoing will rank pari passu
with the options (Series B) in Equity's capital. The conditions of the
aforesaid options are set forth in Appendix "B" to this Contract.
6.2 On the Date of Commencement of Validity, Equity will issue Magan with
a signed letter of allotment in the name of Magan in respect of the
options allotted as aforesaid.
7. APPOINTMENT OF DIRECTORS
7.1 Dan, Gazit and the Other Company shall, with effect from the date on
which Magan actually pays Equity the consideration due pursuant to this
Contract on respect of 400,000 of the Acquired Shares and in respect of
the options allotted pursuant to Clause 6.1 above ("THE DETERMINING
DATE"), grant Magan a sole right to vote all their shares in Equity in
connection with the appointment of directors in Equity, at least until
May 2001 ["THE APPOINTMENT PERIOD"]. For purposes of the foregoing Dan,
Gazit and the Other Company will, at the Determining Date transfer to
Magan a power of attorney in the text attached to this Contract as
APPENDIX "O", pursuant to which Magan, or its ubsidiary, alone will be
entitled to vote the shares of Dan, Gazit and the Other Company at any
general meeting of shareholders in Equity in connection with the
appointment of directors in Equity.
7.2 the Related Parties will take action to convene a general meeting of
shareholders in Equity on or before June 20, 1996, for purposes of
amending Equity's Articles of Association. The Related Parties will
vote at the aforesaid general meeting in favor of passing a resolution
for the amendment of Equity's Articles of Association in accordance
with the matters set forth in APPENDIX "P" to this Contract.
6
<PAGE>
7.3 Any prior agreement or accord which applied between the parties prior
to the signing of this Contract, and which relates to the appointment
of directors in Equity, will automatically be canceled on the
Determining Date.
8. ESTABLISHMENT OF NEW CORPORATION
The Related Parties will take steps for the establishment of a new
corporation to be held jointly by Magan and the Other Company, which will be
incorporated in the United States [in this Contract -"THE NEW CORPORATION"].
The rights in the New Corporation will be conferred on Magan and the Other
Company in a manner whereby Magan will have 45% of the rights in the New
Corporation and the Other Company will have 55% of the rights in the New
Corporation. Magan will have the right to appoint 2 members to the board of
directors of the New Corporation, and the Other Company will have the right
to appoint 4 members to the board of directors of the New Corporation.
9. ALLOTMENT OF OPTIONS TO THE NEW CORPORATION
9.1 Magan and the Other Company will, on the Determining Date, grant the
New Corporation an option unlimited in time to oblige them to sell the
New Corporation shares in Equity which are owned by them, in
consideration for the grant of rights in the New Corporation, all in
accordance with the matters specified below:
9.1.1 Magan will grant the New Corporation an option to compel it to
sell up to 900,000 ordinary shares of 1 dollar par value of Equity.
9.1.2 The Other Company will grant the New Corporation an option to
compel it to sell up to 1,100,000 ordinary shares of 1 dollar par
value of Equity.
The aforesaid shares will be transferred against the grant of rights in
the New Corporation.
9.2 The number of shares which will be obtained on the exercise of the
option referred to in Clause 9.1 above will be subject to the
adjustments required in every case of the issue of bonus shares or
a rights issue by Equity, so that following such issue, the
percentage which the exercise shares represent in the total shares
forming part of the issued capital of Equity will not change.
9.3 The New Corporation will be entitled to exercise the otion mentioned in
Clause 9.1 at any time, by sending written notice to a party who has
granted the option, at least 7 days prior to the date intended for
exercise of the option. Should the New Corporation exercise an option
granted to it by any of the parties, it shall be under obligation also to
exercise, concurrently and in the same percentages, the options granted
to it by the other party, in a manner whereby the ratio of the options
exercised which were granted by a party out of the total options given by
that party will be identical in respect of Magan and the Other Company.
7
<PAGE>
9.4 As security for the fulfillment of their obligations pursuant to Clause
9.1 above, Magan and the Other Company will lodge with a trustee to be
agreed upon by the parties ("THE TRUSTEE") Equity shares and/or options
of Series A or B for the purchase of such shares ("DEPOSIT SHARES") on a
basis that Magan will lodge with the Trustee 900,000 Deposit Shares and
the Other Company will lodge with the Trustee 1,100,000 Deposit Shares
(collectively in this Contract-"THE BLOCKED SHARES").
The parties undertake to deposit with the Trustee, at any time this is
demanded by the New Corporation, amounts which will be sufficient in
exercise the options they have lodged with the Trustee, in the event
that they have lodged such options.
Magan and the Other Company hereby irrevocable instruct the Trustee to
act in respect of the Blocked Shares as follows:
9.4.1 The parties will not be entitled to instruct the Trsutee to sell
the Blocked Shares, in whole or in part, at any time whatsoever,
unless they have received written approvals from Magan and the
Other Company.
9.4.2 Any dividend which is remitted to the Trustee in respect of the
Blocked Shares shall be transfered by him, immediately upon
receipt thereof, to the parties, in a manner whereby the amount
of the dividend in respect of the shares lodged in trust will be
transferred to each party.
9.4.3 In the event that bonus shares are distributed in respect of the
Blocked Shares, the Trustee shall also hold the bonus shares in
trust on behalf of the shareholder who lodged with him the Blocked
Shares in respect of which the bonus shares were received. All the
provisions of this Clause 9.4 shall also correspondingly apply to
any bonus shares which may be distributed as aforesaid.
9.4.4 the Trustee shall not exercise any rights which are offered to him
in connection with the Blocked shares, unless he receives a
written instruction to do so from Magan and the Other Company.
9.4.5 the Trustee shall transfer the Blocked Shares to the New
Corporation, in the event that the New Corporation notifies him
of the exercise of the option conferred on it in accordance with
the provisions of Clauses 9.1 and 9.3 above, provided that the
Trustee is satisfied that the New Corporation has complied with
all the conditions set forth in Clauses 9.1 and 9.3 above in
connection with the exercise of the aforesaid options.
9.5 Should the New Corporation request to sell any quantity of Equity shares
out of the shares which will be transferred to it following the exercise
of the option as aforesaid, or if the Magan Group should wish to sell
any quantity
8
<PAGE>
of Equity shares, the New Corporation and/or Magan will be required to
cause the entity seeking to purchase the shares from them to offer to
the Other Company to sell such entity 600,000 Equity shares
simultaneously [subject to adjustments in the case of a distribution of
bonus shares, a rights issue or a stock split] ["THE OBLIGATION SHARES"],
on the same conditions as the conditions of purchase of the shares from
the New Corporation and/or the Magan Group. If such entity is not
prepared to purchase all the shares offered by the New Corporation and/or
the Magan Group as well as all the Obligation Shares, the parties will
take steps in order first to sell the Obligation Shares and only
thereafter the shares of the New Corporation and/or the Magan Group.
The New Corporation and/or the Magan Group will act in accordance with
this clause in every case they wish to sell Equity shares, even if, in
previous instances in which they sold such shares, the Other Company
waived its right to sell shares simultaneously in accordance with the
foregoing.
9.6 Should the New Corporation exercise the options mentioned in Clause 9.1
prior to the end of the Appointment Period, the New Corporation will
give Magan, at the time of exercise of the option, an irrevocable power
of attorney in the text prescribed in APPENDIX O to this Contract,
pursuant to which a right will conferred on Magan to vote the aforesaid
shares in favor of the appointment of its candidates as directors of
Equity. The aforesaid power of attorney will remain in force at least
until May 1, 2001.
9.7 Equity will be entitled to object to the exercise of the option referred
to in Clause 9.1 if, in its opinion, such exercise would prejudice
Equity's status as a REIT.
10. GIVING OF LOANS
Gazit, Dan, Equity and Magan wwill be entitled to grant one another loans in
amounts of up to 3,000,000 (three million) dollars, for a period of up to 6
months. A party which receives such loans shall pay interest in respect
thereof at the average rate of debit and credit interest at Bank Leumi le-
Israel B.M. The shares of the parties in Equity shall be given as collateral
security for repayment of any such loan, in a manner that a party will be
entitled to receive a loan in an amount equivalent to the value of Equity's
shares it puts up as collateral, on a basis that the value of such shares
will be determined by multiplying the total number of shares by an amount of
12.38 dollars per share.
11. REGISTRATION RIGHTS
Equity will grant its shareholders "registration rights", all in accordance
with the matters set forth in APPENDIX R to this Contract. The aforesaid
Appendix R gives priority to the Other Company in respect of the sale of
600,000 Equity shares. In the case that this preferential right is
exercised, the number of shares which are subject to the preferential right
in accordance with Clause 9.5 above will be reduced.
9
<PAGE>
12. GRANT OF PUT OPTION
Gazit and Dan will take steps for the cancellation of the Put Option granted
to Mr. Doron Valero to sell to Equity shares of Equity which are owned by
him. Gazit and Dan will indemnify Equity in respect of any amount Equity is
called upon to pay by virtue of the non-compliance with their obligation to
cancel the aforesaid option.
13. MISCELLANEOUS
13.1 Upon the signing of this Contract, Clauses 5.2, 5.3 and 6 of the
agreement signed on October 17, 1994 between Dan, Equity, Gazit and
Magan pursuant to which purchased 530,000 Equity shares, will be
canceled. In addition, at the time of signing of this Contract, Clauses
5 and 7 of an agreement dated January 22, 1993 between Dan, Equity and
Gazit, pursuant to which Dan purchased 200,000 shares and 60,000
options of Equity, will be canceled.
13.2 The parties will take all the other necessary steps (including the
effecting of payments, bearing of expenses, signing of additional
documents and production of any approval) which may be required for the
inplementation and execution of this Contract in the letter and spirit
hereof.
13.3 Equity will furnish Magan, Dan, Gazit and the Other Company will all
information and/or any document which may be required and will act to
the best of its ability, in order to assist Magan in complying with
reporting obligations and the other obligations imposed on it by virtue
of it being a public company whose securities are traded on the Tel
Aviv Stock Exchange Ltd. Without derogating from the generality of the
foregoing, Equity will, at its expense, prepare and furnish Magan with
financial statements required by Magan for purposes of consolidating
the data of Equity in Magan's financial statements, all of which will
be done at reasonable times and in a manner which will enable Magan to
comply with its aforesaid obligations fully and punctually.
13.4 The consent of any of the parties to deviate from any condition in this
Contract in a particular instance, or a series of instances, will not
consitute a precedent and no equivalent inference will be drawn from it
in respect of any other instance in the future.
13.5 Should any of the parties fail to enforce, or be late in enforcing, any
of the rights conferred on it pursuant to this Contract and/or
accordingly to law, in a particular instance or series of instances,
this shall not be deemed to be a waiver of the aforesaid right or of
any other rights.
13.6 Notices in connection with this Contract shall be sent by registered
post or facsimile or shall be delivered by hand according to the
addresses of the parties set forth in this Contract [or any other
address in regard to which appropriate written notice is given], and
any such notice shall be deemed to
10
<PAGE>
have been delivered to its destination at the earlier of the following
times: upon the actual delivery thereof [or its being offered for
delivery to the addressee, in the case of a refusal to accept
delivery], or after the elapse of three [3] business days from the date
on which it was delivered for posting by registered post.
13.7 This Contract will come not force only if and when Magan receives an
amount of at least NIS 20,000,000 as the net consideration in respect
of shares it will issue. Should Magan not receive such amount of
consideration on or before September 30, 1996, this Contract will be
canceled. Notwithstanding the foregoing, the provisions of Clause 5.5
above in regard to the giving of a loan to Equity by Magan and the
repayment of the loan will remain in force even if the provisions of
this Contract are canceled. Magan will do its best to ensure that the
issue of securities is in a manner which makes it possible for this
Contract to come into force in the manner described above.
13.8 The provisions of this Contract shall be deemed to be mutual and
reciprocal provisions.
13.9 The validity of this Agreement is conditional upon its being duly
approved by a general meeting of shareholders of Gazit Inc.
IN WITNESS WHEREOF THE PARTIES HAVE HEREUNTO SIGNED ON
THE DATE FIRST AFOREWRITTEN
(-) (-)
- ----------------------------- ---------------------------
Magan Gas and Peetroleum Equity One Inc.
Resources Ltd.
(-) (-)
- ----------------------------- ---------------------------
Gazit Holdings Inc. Dan Overseas Ltd.
(-)
- -----------------------------
The Other Company
Company being formed by
Eli Makabi and Dori Segal
11
EXHIBIT 10.14
SHAREHOLDERS AGREEMENT
Made and entered into on May 21, 1996
Between
GAZIT INC. ["GAZIT"]
And
DANBAR RESOURCES AND DEVELOPMENT LTD. ["DANBAR RESOURCES"]
1. GENERAL
1.1 Gazit and Danbar Resources hold, themselves and/or through companies
under their control, shares and warrants of Equity One Inc. ["EQUITY"]
and shares of companies which hold shares and warrants of Equity,
including shares of Magan - Gas and Petroleum Resources Ltd.
1.2 Gazit and Danbar Resources have reached agreement regarding the
invoking of arrangements pursuant to which Gazit and Danbar Resources
will jointly control Magan and Equity, in equal shares. For this
purpose the arrangements set forth below have been prescribed.
2. DEFINITIONS AND INTERPRETATION
2.1 In this Agreement the following expressions will have the meanings set
opposite them, if such meaning reconciles with the content and context:
2.1.1 "DANBAR GROUP" - Danbar Resources and its subsidiaries or
companies under its control.
2.1.2 "GAZIT GROUP" - Gazit and its subsidiaries or companies
under its control.
2.1.3 "JOINT COMPANIES" - Private companies which hold shares
and/or warrants of Equity [including
Equity], in which the Danbar Group and
the Gazit Group hold their issued
capital; private companies in which the
Danbar Group holds the issued capital
thereof but in which the Gazit Group
has been granted an option to purchase
of the shares thereof, and also private
companies the issued capital of which is
held by the Gazit Group, but the Danbar
Group has been granted an option to
purchase some of the shares therein.
1
<PAGE>
2.1.4 "EQUITY - Equity One Inc.
2.1.5 "MAGAN" - Magan - Gas and Petroleum Resources
Ltd.
2.1.6 "THE TRUSTEE" - A trustee agreed upon between the
parties.
2.1.7 "DANBAR'S - Eli Makabi or any other person in
REPRESENTATIVE" regard to whom Danbar Resources
gives written notice to the Trustee.
2.1.8 "GAZIT'S - Haim Katzman or any other person in
REPRESENTATIVE" regard to whom Gazit gives written
notice to the Trustee.
2.1.9 "THE POWER OF - A power of attorney which Danbar
ATTORNEY" Group and the Gazit Group have
granted to Magan in connection with
the appointment of directors in Equity.
A copy of the power of attorney is
attached to this Contract as APPENDIX
A.
2.1.10 The division of the Agreement into clauses and the insertion
of headings to the clauses have been done as place-finders
and for the sake of convenience only, and no use shall be
made thereof for purposes of interpretation.
3. VOTING AT GENERAL MEETINGS AND APPOINTMENT OF DIRECTORS
3.1 The parties undertake to act in such a manner that the board of
directors of Equity will be comprised of nine members, of whom four
members will be appointed on the recommendation of Danbar Resources;
four members who will be appointed on the recommendation of Gazit; and
one member who will be appointed on the joint recommendation of Danbar
Resources and Gazit. The appointment of directors shall be effected in
accordance with the principles set forth above and in the manner
described in Clause 4.1.1 below. The provisions of this Clause 3.1 and
the provisions of Clause 4.1.1 below shall only apply when the
validity of the Power of Attorney expires.
3.2 The parties undertake to act in a manner that on the board of
directors of each of the Joint Companies, excluding Equity, the number
of directors who will be appointed on the recommendation of Danbar
Resources will be the same as the number of directors who will be
appointed on the recommendation of Gazit. The appointment of directors
will be effected in accordance with the principles set forth above and
in the manner stipulated in Clause 4.1.2 below.
2
<PAGE>
3.3 If for any reason the term of office of any of the directors presently
serving on the board of directors of Magan, whose names are set forth
in APPENDIX B to this Contract, should be terminated for any reason,
Gazit will be entitled to order the appointment of another director in
place of the director whose term of office has been terminated. In
such event Gazit and Danbar Resources will vote all their shares in
Magan in favor of the appointment of such candidate as Gazit directs
as aforesaid. Any substitute director who may be appointed as
aforesaid shall be deemed to have been included from the outset in
Appendix B to this Contract, so that if his term in office is for any
reason terminated, Gazit will have the right to appoint another person
in his place, in accordance with the provision of this clause.
3.4 The parties will act to coordinate their attitudes with regard to
voting their shares on any matter put to the vote at general meetings
of shareholders of each of the Joint Companies and of Magan [except in
connection with matters regulated pursuant to Clauses 3.1 to 3.3
above]. The voting of the parties shares will be effected in
accordance with the attitude of the parties jointly, in accordance
with the matters set forth in Clause 4.1.5 below.
This Clause 3.4 will also apply to the parties in connection with
their shares in Equity also if and when Equity becomes a public
company, until such time as the parties have otherwise agreed in
writing.
4. TRANSFER OF SHARES INTO TRUST: BLOCKING OF SHARES
On the Determining Date, the Danbar Resources Group and the Gazit Group
will each transfer to the Trustee ordinary shares of NIS 1 par value of
Magan, out of the Magan shares owned by them, which represent 12.55% of the
issued capital of Magan on a full dilution, and in a manner whereby in
aggregate ordinary shares of NIS 1 par value representing 25.1% of the
issued capital of Magan, on a full dilution, will be transferred to the
Trustee. In addition the parties will act in such manner that on the
aforesaid date all the shares of the Danbar Group and all the shares of the
Gazit Group in the remaining Joint Companies will be transferred to the
Trustee [shares to be held by the Trustee in accordance with the provisions
of this clause will henceforth be referred to as - "THE BLOCKED SHARES"].
In every instance that Magan issues additional securities, so that the
percentage which the blocked Magan shares represents constitutes less than
25% of the issued share capital of Magan on a full dilution, the parties
will, in equal proportions, lodge additional shares with the Trustee,
within 30 days from the date on which Magan issues such securities, so that
after the lodgment of the additional shares the blocked Magan shares will
represent 25.1% of the issued capital of the Company on a full dilution.
Danbar Resources, in its own name and on behalf of the remaining companies
which constitute the Danbar Group, and Gazit in its own name and on behalf
of all the remaining companies which constitute the Gazit Group, hereby
give the Trustee irrevocable instructions to act in connection with the
Blocked Shares as follows:
3
<PAGE>
4.1 In every case a general meeting of shareholders is held in any of the
Joint Companies, the Trustee shall vote the Blocked Shares as follows:
4.1.1 Should a general meeting of shareholders be held in Equity
for the appointment of directors in Equity, the Trustee will
vote all the blocked Equity shares in favor of the
appointment of up to four directors who are recommended by
Danbar's representative, and up to four directors who are
recommended by Gazit's representative. In addition, the
Trustee shall vote in favor of the appointment of an
additional director who is recommended in writing by
Danbar's representative and Gazit's representative jointly.
The provisions of this Clause 4.1.1 will apply only after
the validity of the Power of Attorney expires.
4.1.2 If a general meeting of shareholders is held in any of the
Joint Companies, excluding Equity, for purposes of
appointing directors, the Trustee shall vote all the Blocked
Shares of the relevant company in favor of the appointment
of representatives recommended by Danbar's representative
and representatives recommended by Gazit's representative,
so that all the directors in such company will be appointed
in accordance with a recommendation of the aforesaid
representatives and in a manner whereby the number of
directors to be appointed pursuant to a recommendation by
Danbar's representatives will be equal to the number of
directors to be appointed pursuant to a recommendation of
Gazit's representative.
4.1.3 If by the time a general meeting of any of the Joint
Companies is convened the Trustee has not received a
recommendation from a representative of one of the parties
for the appointment of directors, or if a representative of
one of the parties should recommend a smaller number of
directors than the number of directors he is entitled to
recommend, this shall in no way prejudice the right of the
other party's representative to recommend the appointment of
all the directors he is entitled to recommend in accordance
with the provisions of this Clause 4.1
4.1.4 Should a general meeting of the shareholders of Magan be
held for purposes of appointing directors in Magan, the
Trustee shall vote all the blocked Magan shares in the
manner described in Clause 3.3 above.
4.1.5 At any general meeting of one of the joint companies and
Magan, the Trustee shall vote in any matter [except in
connection with the appointment of directors], in such way
as the representatives of Danbar and of Gazit shall jointly
instruct him in writing. Should the Trustee not receive
instructions in writing in connection with the manner in
which he votes, signed by representatives of Danbar and
Gazit, prior to the convening of a general meeting of any of
the Joint Companies, the
4
<PAGE>
Trustee shall vote at such meeting against the passing of
any resolution put to the vote.
4.1.6 The Danbar Resources Group and the Gazit Group shall
themselves vote their shares in any of the Joint Companies
and in Magan which have not been lodged in trust in
accordance with the provisions of this Agreement. If there
are such shares then at any general meeting of each of the
Joint Companies and Magan, in a manner as Danbar Resources
and Gazit shall instruct the Trustee to act in accordance
with the matters above.
4.2 The Trustee shall not sell the Blocked Shares, in whole or in part, at
any time, unless he receives approval for doing so from Danbar
Resources and Gazit jointly and in writing. The Trustee shall allow
the parties to cause a pledge of the shares lodged by them in trust,
in favor of a financial institution or trust company for purposes of
securing a series/several series of debentures, provided that in the
terms and condition of the pledge of such shares the financial
institution or the trust company in favor of whom the shares are
pledged will undertake that in any event that the pledge should be
realized in respect of the shares, the financial institution or the
trust company will make an offer to the other party to purchase from
it the pledged shares at the lower of the following prices: the price
on the Stock Exchange [if the shares of such company are traded on the
Stock Exchange] or at a price which reflects the equity capital of the
relevant company, whichever is the lower.
4.3 Any dividend which is transferred to the Trustee in respect of the
Blocked Shares shall be transferred by him, immediately upon receipt
thereof, to the owner of the shares who lodged with him the shares in
respect of which the dividend was received.
4.4 If bonus shares should be distributed in respect of any of the Blocked
Shares, the Trustee shall also hold the bonus shares in trust for the
owner of the shares who deposited with him Blocked Shares in respect
of which the bonus shares were received. All the provisions of this
clause will apply respectively also to the bonus shares which are
distributed as aforesaid.
4.5 The Trustee shall not exercise any rights offered to him in connection
with the Blocked Shares, unless he receives a written instruction to
do so, both from Danbar Resources and from Gazit. In the event that
both Danbar Resources and Gazit should instruct the Trustee to
exercise rights, but in a number which is not equal, the Trustee shall
exercise the rights as if both parties had given the Trustee an
instruction to exercise rights in the number mentioned in the notice
of the party who gave an instruction to exercise rights in the smaller
number. The shares which will be received from the exercise of rights
as aforesaid shall also be lodged with the Trustee and the provisions
of this Clause 4 shall apply to them.
5
<PAGE>
5. COORDINATION IN REGARD TO BUYING AND SELLING OF SECURITIES
5.1 The parties shall coordinate between them any operation in connection
with the securities of Magan and of Equity. A party wishing to buy or
sell shares shall offer the other party to participate in an equal
proportion in the purchase or sale of the shares. A party will be
entitled to buy or sell shares as aforesaid even if the other party
does not accept the offer to participate in the purchase or sale of
the shares as aforesaid.
5.2 Notwithstanding the contents of Clause 5.1 above, until such time as
the total quantity of Equity shares to be sold by the parties jointly
reaches 800,000 shares, the Gazit Group will be obliged to make
whomever Danbar Resources may direct a party to transaction for the
sale of Equity shares, only in respect of one share to be sold by
whomsoever Danbar Resources may direct as against every 2 shares the
Gazit Group may sell. The Danbar Group will be obliged to offer
whomsoever Gazit may direct to participate in such transactions in a
manner whereby whomever Gazit may direct may sell 2 shares against
each share the Danbar Group may sell.
5.3 Should Gazit exchange Equity shares in its ownership for shares of
Magan which are allotted to it under a private placement by Magan, the
provisions of Clause 5.2 above will apply, mutatis mutandis, to the
Magan shares in a quantity which is equal to the quantity allotted
within the scope of the private placement. In such case the quantity
of Equity shares mentioned in Clause 5.2 above will be reduced by the
number equivalent to the quantity of Equity shares transferred to
Magan by Gazit.
5.4 It is clarified that for purposes of sales subject to Clause 5.1 to
5.3 above, if one of the parties should purchase Magan shares or
Equity shares in a transaction in which the other party does not wish
to participate, this will not have the effect of altering the ratios
for the sale of shares in later transactions, and the ratio will
remain 1:1, or 1:2, as the case may be.
5.5 For purposes of this Clause 5 - shares shall include convertible
securities or securities exercisable for shares.
6. GRANT OF POWER OF ATTORNEY BY HIAM KATMAN
Hiam Katzman hereby grants the Trustee an irrevocable power of attorney to
vote his shares in Equity in his name and stead at general meetings of
shareholders of Equity. The Trustee shall vote the aforesaid shares in
accordance with the provisions of Clauses 4.1.1 and 4.1.5 above. The
aforesaid undertaking shall apply, so long as Hiam Katzman holds such
shares, to all Haim Katzman's shares in Equity, as applicable from time to
time.
6
<PAGE>
7. PROHIBITION ON HOLDING OF SHARES
Each of the parties undertakes not to hold shares or other rights in any
corporation whatsoever which will hold Equity shares on its behalf,
directly or indirectly, except with the written consent of the other party.
Should a party hold shares or rights of such corporation, following the
receipt of consent from the other party in accordance with the matters set
forth above, such party shall cause the corporation in question [excluding
Magan] to transfer a power of attorney to the Trustee, pursuant to which
the Trustee will be entitled to vote all shares of such corporation at a
meeting of shareholders of Equity. The Trustee shall vote all the shares of
such corporation in accordance with the matters set forth in Clauses 4.1.1
and 4.1.5 above.
8. ADDITIONAL OPERATIONS
The parties will take and will cause companies under their control to take
all the steps required for purposes of the implementation and execution of
this Agreement.
9. COMING INTO FORCE OF THE AGREEMENT
This Agreement will come into force only if and when the Investment
Contract signed on May 21, 1996 between Magan, Dan Overseas Ltd., Gazit
Holdings Inc., Equity and a company in the course of formation which is due
to be founded by Danbar Resources and Gazit, comes into force.
The validity of this Agreement is also conditional upon the due approval of
the Agreement by a general meeting of shareholders of Gazit Inc.
IN WITNESS WHEREOF THE PARTIES HAVE HEREUNTO SIGNED:
(-) (-)
-------------- --------------
Danbar Resources Gazit Inc.
and Development Ltd.
I agree to the contents of Clause 6 above:
(-)
--------------
Haim Katzman
7
EXHIBIT 10.24
MORTGAGE
PROMISSORY NOTE
$ 7.000.000.00 Miami, Florida August 19, 1997
FOR VALUE RECEIVED, the undersigned promises to pay to the order of ISIDORO
LERMAN, TRUSTEE, the principal sum of SEVEN MILLION DOLLARS ($7,000,000.00),
together with interest thereon from date, at the rate of seven (7.00%) percent
per annum until maturity, payable interest only in the sum of forty thousand
eight hundred thirty three Dollars and thirty three cents ($40,833.33) per
month; commencing September 19, 1997 and the 19th of each month thereafter until
February 19, 1998 when the entire principal balance plus accrued interest shall
be due and payable; Said principal and interest being payable in lawful money of
the United States or its equivalent, at
c/o DAVID FELDMAN, ESQUIRE
407 LINCOLN ROAD
SUITE 701
MIAMI BEACH, FLORIDA 33139
This note may be prepaid, in part or in full, without prepayment penalty.
In the event any payment is not received within ten (10) days of the due date,
then in such event, the borrower shall be deemed in default.
The holder hereof shall have the optional right to declare the principal
sum disbursed hereunder and all accrued interest thereon to be due and forthwith
payable in advance of the maturity date fixed herein upon the failure of the
undersigned to pay, when due, any one of the installments of interest or, at the
option of the holder, upon the occurrence of any other event of default by the
undersigned in the Mortgage securing this Note after 10 days written notice from
the Holder to Maker. Failure to exercise this option with respect to any
failure or breach by the undersigned shall not constitute a waiver of the right
as to any subsequent failure or breach.
In no event shall interest (including any charge or fee held to be interest
by a court of competent jurisdiction) accrue to be payable herein in excess of
the highest contract rate allowable by law for the time such indebtedness shall
be outstanding and unpaid, and if by reason of the acceleration of maturity of
such indebtedness, or for any other reason, interest in excess of the highest
legal rate shall be due or paid, any such excess shall constitute and be treated
as a payment on the principal hereof and shall operate to reduce such principal
by the amount of such excess, or if in excess of the principal indebtedness,
such excess shall be waived or refunded to the maker.
Page 1 of 2
<PAGE>
Each maker and endorser severally waives demand, protest, notice of
maturity and notice of nonpayment and all requirements necessary to hold each
of them liable as makers and endorser.
Each maker and endorser further agrees, jointly and severally, to pay all
costs of collection, including a reasonable attorney's fee in case the principal
of this note or any payment on the principal or any interest thereon is not paid
at the respective maturity thereof, or in case it becomes necessary to protect
the security hereof, whether suit be brought or not.
Upon default, this note and deferred interest payments shall bear interest
at the maximum rate allowed by law.
This note is secured by a first mortgage of even date herewith and is to be
construed and enforced according to the laws of the State of Florida; upon
default in the payment of principal and/or interest due on any note secured by
said Mortgage, all notes so secured and remaining unpaid shall forthwith become
due and payable notwithstanding their tenor.
All of the covenants, conditions, and agreements contained in the Mortgage
Agreement and any other document evidencing the loan are hereby made a part of
this instrument.
The Lender and the Maker specifically agree that they waive all rights to
rely on or enforce any oral statements made prior to or subsequent to the
signing of this document.
The Lender and the Maker hereby knowingly, voluntarily and intentionally
waive the right either may have to a trial by jury with respect to any
litigation based hereon, or arising out of, under or in connection with this
document, and any agreement contemplated to be executed in conjunction herewith,
or any course of conduct, course of dealing, statements (whether verbal or
written) or actions of either party made before, during, or after the execution
of this document.
Venue and jurisdiction shall be in Dade County, Florida, for any
affirmative or defensive legal proceeding in connection with this document
and/or any other document signed by the mortgagors, and/or borrowers in favor of
the Lender.
EQUITY ONE (SKY LAKE) INC.
By: /s/ Doron Valero
----------------------------------
DORON VALERO, VICE PRESIDENT
Corporate Seal
Page 2 of 2
EXHIBIT 10.25
OFF. REC 17761PG0701
97R379727 1997 AUG 21 11:
DOCSTPMTG 24,500.00 INTNG 14,000.
HARVEY RUVIN, CLERK DADE COUNTY,
MORTGAGE DEED
THIS MORTGAGE DEED, made and executed the l9 day of AUGUST, 1997, by
EQUITY ONE (SKY LAKE) INC., a Florida corporation, whose post office address is
777 17th Street Penthouse Miami Beach, Florida 33139 hereinafter called the
Mortgagor, which term shall include the heirs, legal representatives, successors
and assigns of the said Mortgagor wherever the context so requires or admits, to
ISIDORO LERMAN, TRUSTEE. whose post office address is c/o DAVID FELDMAN. ESQUIRE
407 Lincoln Road, Suite 701, Miami Beach, Florida 33139 hereinafter called the
Mortgagee, which term shall include the heirs, legal representatives, successors
and assigns of the said Mortgagee wherever the context so requires or admits.
WITNESSETH: That for divers good and valuable considerations, and also
in consideration of the aggregate sum named in the promissory note of even date
herewith hereinaRer described, the said Mortgagor does hereby grant, bargain,
sell, alien, remise, release, convey and confirm unto the said Mortgagee, his
heirs, successors and assigns, all the certain piece..., parcel... or tract...
of land, of which the said Mortgagor is now seized and possessed and in actual
possession, situate in the County of DADE and State of Florida, described as
follows:
SEE LEGAL DESCRIPTION ATTACHED AS EXHIBIT "A"
THIS IS A FIRST MORTGAGE in the amount of $7,000,000.00; which sum is
due and payable no later than February 19, 1998.
In the event the above described property is sold or conveyed in any
manner, this mortgage shall become due and payable at once at the option of the
mortgagee.
TOGETHER with all structures and improvements now and hereafter on said
land and the fixtures attached thereto; and the easements, riparian and littoral
rights and appurtenances thereunto belonging, or in any wise appertaining; and
all rents, issues, proceeds and profits accruing and to accrue from said
premises; and all gas and electric fixtures, heaters, air conditioning
equipment, machinery, boilers, ranges, elevators and motors, plumbing fixtures
and hardware, window screens, screen doors, venetian blinds, storm shutters and
awnings, pool pumps and motors and all other heating, cooking, refrigerating,
plumbing, cooling, ventilating, irrigating and power systems and appliances
which are now or may hereafter pertain to or be used with, in or on said
premises though they may be either detached or detachable.
TOGETHER with all furniture, furnishings, fixtures, and equipment
contained in or appurtenant to said premises, or which may hereafter from time
to time be placed therein, and any substitution or replacement thereof.
TO HAVE AND TO HOLD the same, together with all and singular the
tenements, hereditaments and appurtenances thereunto belonging or in anywise
appertaining and the reversions, remainder and remainders, rents, issues and
profits thereof and also all the estate, right, title, interest, property,
possession, claim and demand whatsoever as well in law as in equity of the said
Mortgagor in and to the same and every part and parcel thereof unto the said
Mortgagee, and his heirs, successors and assigns, in fee simple.
And said Mortgagor, for itself, and its legal representatives,
successors and assigns, hereby covenants with said Mortgagee, his heirs, legal
representatives, successors and assigns, that said Mortgagor is indefeasibly
seized of said land in fee simple; that the said Mortgagor has full power and
lawful right to convey the same in fee simple as aforesaid; that it shall be
lawful for said Mortgagee, his heirs, legal representatives, successors and
assigns, at all times peaceably and quietly to enter upon, hold, occupy and
enjoy said land and every part thereof; that said land is free from all
encumbrances; that said Mortgagor, its heirs, legal representatives, successors
and assigns, will make such further assurances to perfect the fee simple title
to said land in said Mortgagee, his heirs, legal representatives, successors and
assigns, as may reasonably be required; and that said Mortgagor does hereby
fully warrant the title to said land and every part thereof and will defend the
same against the
Page -1-
<PAGE>
OFF. REC 17761PG0702
lawful claims of all persons whomsoever.
PROVIDED ALWAYS, That if said Mortgagor shall pay unto the said
Mortgagee the certain promissory note, dated on even dated herewith and
incorporated by reference herein, and shall duly, promptly and fully perform,
discharge, execute, effect, complete, comply with and abide by each and every
the stipulations, agreements, conditions and covenants of said promissory note
and of this mortgage, then this mortgage and the estate hereby created shall
cease and be null and void.
It is understood that each of the words, "note," "mortgagor" and
"mortgagee" respectively and the pronouns referring thereto, whether in the
singular or plural anywhere in this mortgage, shall be singular if one only and
shall be plural jointly and severally, if more than one, and shall be masculine,
feminine and/or neuter, wherever the context so implies or admits.
And said Mortgagor for themselves, and theirs, legal representatives,
successors and assigns:
1. To pay all and singular the principal and interest and the various
and sundry sums of money payable by virtue of said promissory note, and this
mortgage, each and every, promptly on the days respectively the same severally
become due.
2. To pay all and singular the taxes, assessments, levies, liabilities,
obligations and encumbrances of every nature and kind now on said described
property, and/or that hereafter may be imposed, suffered, placed, levied or
assessed thereupon, and/or that hereafter may be levied or assessed upon this
mortgage and/or the indebtedness secured hereby, each and every, when due and
payable according to law, before they become delinquent, and before any interest
attaches or any penalty is incurred; and in so far as any thereof is of record
the same shall be promptly satisfied and discharged of record and the original
official document (such as, for instance, the tax receipt or the satisfaction
paper officially endorsed or certified) shall be placed in the hands of said
Mortgagee within ten days next after payment; and in the event that any thereof
is not so paid, satisfied and discharged, said Mortgagee may at any time pay the
same or any part thereof without waiving or affecting any option, lien, equity
or right under or by virtue of this mortgage, and the full amount of each and
every such payment shall be immediately due and payable and shall bear interest
from the date thereof until paid at the maximum legal rate and together with
such interest shall be secured by the lien of this mortgage.
3. To place and continuously keep on the Property a general liability
policy in the usual standard policy form, and shall contain the usual standard
mortgagee clause making the loss under said policies, each and every, payable to
said Mortgagee; and, not less than 30 days in advance of the expiration of each
policy, to deliver to said Mortgagee a renewal thereof, together with a receipt
for the premium of such renewal; and in the event said Mortgagor shall for any
reason fail to keep the said premises so insured, or fall to deliver promptly
any of said policies of insurance to said Mortgagee, or fail promptly to pay
fully any premium therefor, or in any respect fail to perform, discharge,
execute, effect, complete, comply with and abide by this covenant, or any part
hereof, said Mortgagee may place and pay for such insurance or any part thereof
without waiving or affecting any option, lien, equity or right under or by
virtue of this mortgage, and the full amount of each and every such payment
shall be immediately due and payable and shall bear interest from the date
thereof until: paid at the maximum legal rate and together with such interest
shall be secured by the lien of this mortgage. Buyer shall reasonably insure
such portions of the Property occupied by Tenants.
4. To perform, comply with and abide by all the stipulations,
agreements, conditions, and covenants set forth in the Promissory Note or Notes
secured hereby and this Mortgage.
5. To pay all and singular the costs, charges and expenses, including
reasonable lawyer's fees and cost of abstracts of title, incurred or paid at any
time by said Mortgagee because and/or in the event of the failure on the part of
the said Mortgagor to duly, promptly and fully perform, discharge, execute,
effect, complete, comply with and abide by each and every the stipulations,
agreements, conditions and covenants of said promissory note, and this mortgage,
any or either, and said costs, charges and expenses, each and every, shall be
immediately due and payable, whether or not there be notice, demand, attempt to
collect or suit pending; and the full amount of each and every
Page -2-
<PAGE>
OFF. REC 17761PG0703
such payment shall bear interest from the date thereof until paid at the
maximum legal rate; and all said costs, charges and expenses so incurred or
paid, together with such interest, shall be secured by the lien of this
mortgage.
6. That (a) in the event of any breach of this mortgage or default on
the part of the Mortgagor, or (b) in the event any of said sums of money herein
referred to be not promptly and fully paid within ten days next after the same
severally become due and payable, without demand or notice, or (c) in the event
each and every the stipulations, agreements, conditions and covenants of said
promissory note and this mortgage, any or either are not duly, promptly and
fully performed, discharged, executed, effected, completed, complied with and
abided by, then, in either or any such event, the said aggregate sum mentioned
in said promissory note then remaining unpaid, with interest accrued, and all
moneys secured hereby, shall become due and payable forthwith, or thereafter, at
the option of said Mortgagee, as fully and completely as if all of the said sums
of money were originally stipulated to be paid on such day, anything in said
promissory note, and/or in this mortgage to the contrary notwithstanding; and
thereupon or thereafter at the option of said Mortgagee, without notice or
demand, suit at law or in equity, theretofore, or thereafter begun, may be
prosecuted as if all moneys secured hereby had matured prior to its institution.
7. In the event the Mortgagor, shall fail to pay any charges or
obligations required to be paid by the Mortgagor hereunder, within the time set
forth for such payment, the Mortgagee shall have the right to pay such charge or
obligation without waiving or affecting the option of the Mortgagee to consider
this mortgage in default. Every such payment so made shall bear interest at the
maximum default rate as provided in the Promissory Note secured hereby, and
every such payment shall be deemed additional monies owed by the Mortgagor to
the Mortgagee, shall be payable on demand of the mortgagee therefore and shall
be secured by the lien of this Mortgage.
8. In the event of a default in any of the terms of this Mortgage
and/or the filing of any suit upon this mortgage, or to foreclose it, or to
reform it, and/or to enforce payment of any claims hereunder, said Mortgagee
shall apply to the court having jurisdiction thereof for the appointment of a
Receiver. Such court shall forthwith appoint a Receiver of said mortgaged
property all and singular, including all and singular the rents, income,
profits, issues and revenues from whatever source derived, each and every of
which, it being expressly understood, is hereby mortgaged as if specifically set
forth and described in the granting and habendum clause hereof, and such
Receiver shall have all the broad and effective functions and powers in anywise
entrusted by a court to a Receiver, and such appointment shall be made by such
court as an admitted equity and a matter of absolute right to said Mortgagee,
and without reference to the adequacy of the value of the property mortgaged or
to the solvency or insolvency of said Mortgagor and/or of the defendants, and
that such rents, profits, income, issues and revenues shall be applied by such
Receiver according to the lien and/or equity of said Mortgagee and the practice
of such court.
9. All rents, deposits, revenues and profits arising out of the
operation of the mortgaged property are, by the terms hereof, assigned to the
Mortgagee as further security for the payment of the indebtedness secured
hereby, and no other instrument or documents need to be executed by the
Mortgagor to effect such assignment. Any subsequent assignment of the rents,
deposits, revenues, and profits of the mortgaged property, or any part thereof,
shall at all times be inferior and subordinate to the assignment granted hereby
and to the rights of the Mortgage hereunder. This assignment shall continue in
effect until the indebtedness secured by this Mortgage is paid in full.
10. If all or any part of the property or an interest therein is sold,
transferred, encumbered, or if there is a change of ownership of the mortgaged
premises or of any property encumbered by this mortgage without the Mortgagee's
prior written consent, Mortgagee may, at Mortgagee's option, declare all the
sums secured by this Mortgage to be immediately due and payable. The Mortgagee
shall have waived such option to accelerate if, prior to the sale, transfer,
encumbrance, or change of ownership, the Mortgagee, in his sole and absolute
discretion, and the person to whom the property is to be sold, encumbered, or
transferred reach agreement in writing that the credit of such person is
satisfactory to Mortgagee and that the interest payable on the sums secured by
this Mortgage shall be at such rate as the Mortgagee shall request.
1 1. In the event the ownership of the mortgaged premises, or any part
thereof, becomes
Page -3-
<PAGE>
OFF. REC 17761PG0703
vested in a person or entity other than the Mortgagor, the Mortgagee may,
without notice to the Mortgagor, deal with such successor or successors in
interest with reference to this Mortgage and the debt hereby secured, in the
same manner as with the Mortgagor, without in any way vitiating or discharging
the Mortgagor's liability hereunder or upon the debt hereby secured. No sale of
the premises hereby mortgaged and no forbearance on the part of the Mortgagee,
and no extension of the time for the payment of the debt hereby secured given by
the Mortgagee, shall operate to release, discharge, modify, change, or affect
the original liability of the Mortgagor herein, either in whole or in part.
12. Time is of the essence and no waiver of any obligation hereunder,
or of the obligation secured hereby, shall at any time hereafter be held to be a
waiver of the terms hereof or of the Note secured hereby.
13. If foreclosure proceedings are instituted on any mortgage inferior
to this Mortgage or if any foreclosure proceeding is instituted on any lien of
any kind, the Mortgagee may at its option immediately or thereafter declare this
Mortgage and the indebtedness secured hereby, due and payable. If there is any
mortgage superior to this Mortgage, then failure to pay said mortgage when due
and in accordance with its terms or failure to abide by the terms at its option,
may immediately or thereafter declare this Mortgage and the indebtedness hereby
secured, due and payable. Any modification of any mortgage superior to this
Mortgage or waiver of any principal or interest payments on any note or mortgage
superior to this Mortgage, including but not limited to the granting and
acceptance of future advanced pursuant thereto, shall be deemed a breach of the
terms and covenants of this Mortgage and the Mortgagee hereof may at is option
declare this Mortgage and the indebtedness secured hereby due and payable.
14. In order to accelerate the maturity of the indebtedness hereby
secured because of the failure of the Mortgagor to pay any tax assessment,
liability, obligation, or encumbrance upon said property as herein provided, it
shall not be necessary nor requisite that the Mortgagee shall first pay same.
15. The mailing of written notice of demand, addressed to the owner of
record of the mortgaged premises, directed to the said owner at the last address
actually furnished to the Mortgagee or directed to the said owner at said
mortgaged premises, and mailed by United States Certified Mail, Return Receipt
Requested, shall be sufficient notice and demand in any case arising under this
instrument and required by the provisions hereof or by law. Notice to Mortgagee
if required hereunder, shall be deemed properly given when forwarded by
Certified Mail, Return Receipt Requested, with sufficient postage affixed
thereto and addressed to c/o DAVID FELDMAN, ESQUIRE 407 LINCOLN ROAD, SUITE 701
MIAMI BEACH, FLORIDA 33139.
16. If the validity or lien of this Mortgage or the Promissory Note
secured hereby be contested by litigation or otherwise, or if any action or
proceeding shall be commenced in which the Mortgagee is made a party, the
Mortgagor agree to pay the Mortgagee the cost of defending the same, including a
reasonable attorney's fee and attorneys' fees on appeal, together with interest
at the maximum default rate as provided in the Promissory Note secured hereby.
17. In the event that Mortgagor shall: (1) consent to the appointment
of a receiver, trustee, or liquidator of all or a substantial part of Mortgagor
assets, or (2) be adjudicated at bankruptcy or admit in writing its inability to
pay its debts as they become due, or (3) make a general assignment for the
benefit of creditors, or (4) file a petition or answer seeking reorganization or
arrangement with creditors, or to take advantage of any insolvency law, or (5)
file an answer admitting the material allegations of a petition filed against
the Mortgagor in any bankruptcy, reorganization or insolvency proceedings, or
(6) take any action for the purpose of effecting any of the foregoing, or (7)
any order, judgment, or decree shall be entered upon an application of a
creditor of the Mortgagor by a court of competent jurisdiction approving a
Petition seeking appointment of a receiver or trustee of all or a substantial
part of the Mortgagor's assets and such order, judgment, or decree shall
continue unstated and in effect for any period of thirty (30) consecutive days,
the Mortgagee may declare the Promissory Note hereby secured forthwith due and
payable, whereupon the principal of and the interest accrued on the Promissory
Note and all other sums hereby secured shall become forthwith due and payable as
if all of the said sums of money were originally stipulated to be paid
Page -4-
<PAGE>
OFF. REC 17761PG0705
on such day; and thereupon the Mortgagee without notice or demand may prosecute
a suit at law and/or in equity as if all monies secured hereby had matured prior
to its institution.
18. In the event the premises hereby mortgaged, or any part thereof,
shall be condemned and taken under the power of eminent domain, the Mortgagee
shall have the right to demand that all damages awarded for the taking of or
damages to said premises shall be paid to the Mortgagee, its successors or
assigns, up to the amount then unpaid on this Mortgage, and may be applied
against the payment or payments last payable thereon.
19. The Mortgagor will, at the cost of the Mortgagor, and without
expense to the Mortgagee, do, execute, acknowledge, and deliver all and every
such further acts deeds, conveyances, mortgages, assignments, notices of
assignments, transfers, and assurances as the Mortgagee shall from time to time
require, for the better assuring, conveying, assigning, transferring and
confirming unto the Mortgagee the property and rights hereby conveyed or
assigned or intended now or hereafter so to be.
20. The Mortgagor will pay, form time to time when the same shall
become due, all claims and demands of mechanics, materialmen, laborers, and
others which, if unpaid, might result in, or permit the creation of, a lien on
the mortgaged property, whether paramount or subordinate to this Mortgage, or
any part thereof, or on the revenues, rents, issues, income and profits arising
therefrom, and in general will do or cause to be done everything necessary so
that the lien of this Mortgage shall be fully preserved, at the cost of the
Mortgagor, without expense to the Mortgagee.
21. The claims of mechanics, materialmen and/or laborers which may give
rise to mechanics' liens shall be released, discharged or bonded by Mortgagor
with a cash or surety bond in the amount required by law for the bonding of
mechanics' liens within thirty (30) days of the recording of the claim of lien.
22. This Mortgage shall constitute a security agreement under the
Uniform Commercial Code as it presently exists and may hereafter exist in the
State of Florida. The Mortgagor hereby gives and grants unto the Mortgagee a
security interest in and to the furniture, fixtures, essential equipment,
inventory, licenses, permits and contract rights necessary and normally used in
the operation of the mortgaged premises. Mortgagor further agrees to execute and
deliver to the Mortgagee, simultaneously with the execution and delivery of this
Mortgage, or at any other time at the request of Mortgagee, any and all Uniform
Commercial Code Financing Statements reasonably required by the Mortgagee to
effect the purposes and intent of this paragraph.
23. In the event any one or more of the provisions contained in this
Mortgage or in the Promissory Note or in any other loan document shall for any
reason be held to be inapplicable, invalid, illegal or unenforceable in any
respect, such inapplicability, invalidity, illegality, or unenforceability
shall, at the option of the Mortgagee, not affect any other provision of this
Mortgage, but this Mortgage shall be construed as if such inapplicable, invalid,
illegal, or unenforceable provision had never been contained herein or therein.
24. This Mortgage or any of the terms hereunder cannot be modified
orally.
25. Acceptance by the Mortgagee of any payment which is less than full
payment of all amounts due and payable at the time of such payment, even if made
by one other than the obligor, shall not constitute a waiver of the Mortgagee's
right to exercise its option to declare the whole of the principal sum then
remaining unpaid, together with all accrued interest thereon, immediately due
and payable without notice, or any other rights of the Mortgagee except as to
the extent otherwise provided by law.
26. The Mortgagee and the Mortgagor specifically agree that they waive
all rights to rely on or enforce any oral statements made prior to or subsequent
to the signing of this document.
27. The Mortgagee and the Mortgagor hereby knowingly, voluntarily and
intentionally waive the right either may have to a trial by jury with respect to
any litigation based hereon, or arising out of, under or in connection with this
document, and any agreement contemplated to be
Page -5-
<PAGE>
OFF. REC 17761PG0706
executed in conjunction herewith, or any course of conduct, course of dealing,
statements (whether verbal or written) or actions of either party made before,
during, or after the execution of this document.
28. Venue and jurisdiction shall be in Dade County, Florida, for any
affirmative or defensive legal proceeding in connection with this document
and/or any other document signed by the Mortgagors in favor of the Mortgagee.
29. Mortgagor agrees to duly, promptly and fully perform, discharge,
execute, effect, complete, comply with and abide by each and every stipulations,
agreements, conditions and covenants in said promissory note and in this
mortgage set forth.
30. It is mutually covenanted and agreed by and between the Mortgagor
and the Mortgagee that this mortgage and the note secured hereby constitute a
Florida contract and shall be construed according to the laws of that State.
31. Mortgagor and Mortgagee acknowledge that Mortgagor intends and
shall commence demolition of various portions of the Property, specifically the
parcel known as the Home Depot building and the portion of the Mall west from
the parcel known as the East Mall, excluding the operating out parcels, and such
demolition or remodeling shall not constitute a breach of any of Mortgagor's
obligations hereunder.
IN WITNESS WHEREOF, the said Mortgagor has executed this Mortgage under
seal on the day and year herein first above written.
Signed, sealed and delivered in
the presence of:
CORPORATE SEAL
EQUITY ONE (SKY LAKE) INC.,
a Florida corporation
By: /s/ DORON VALERO
------------------
Doron Valero,
Vice President
/s/ [illegible]
- ----------------------
Witness #1 - Signature
/s/ ALAN J MARCUS
- ----------------------
Witness #2 - Printed Name
State of Florida )
County of Dade )
Before me personally appeared DORON VALERO, VICE PRESIDENT OF EQUITY ONE
(SKY LAKE) INC., a Florida Corporation, to me, or ( ) who presented as
Identification: ___________ to me well known and known to be the individual
described in and who executed the foregoing instrument, and acknowledged before
me that he executed the same in his capacity as of ficer of named Corporation
for the purposes therein expressed.
WITNESS my hand and of ficial seal this 19 day of August, 1997.
/s/ [illegible]
-------------------------------
Seal Notary Public State of Florida
THIS INSTRUMENT PREPARED BY:
ALAN J. MARCUS, ESQUIRE
20803 Biscayne Blvd. Suite 301
Aventura, Florida 33180
SEAL
----
ALAN J. MARCUS
MY COMMISSION EXPIRES
AUGUST 13, 2001
#CC 648469
BONDED THRU NOTARY PUBLIC UNDERWRITERS
NOTARY PUBLIC, STATE OF FLORIDA
Page -6-
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 2 to Registration Statement
333-33977 of Equity One, Inc. and subsidiaries on Form S-11 of our report dated
February 15, 1997 (July 15, 1997 as to Note 10) appearing in the Prospectus
relating the consolidated financial statements of Equity One, Inc. as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996, which is part of this Registration Statement, and of our
report dated February 15, 1997 relating to the financial statement schedule
appearing elsewhere in this Registration Statement.
We also consent to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
Deloitte & Touche
Miami, Florida
October 10, 1997
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 2 to Registration Statement
333-33977 of Equity One, Inc. and subsidiaries on Form S-11 of our report dated
October 1, 1997 relating to the statement of revenues and certain expenses of
Lantana Village Square for the year ended December 31, 1996 appearing elsewhere
in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
Deloitte & Touche
Miami, Florida
October 10, 1997
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 2 to Registration Statement
333-33977 of Equity One, Inc. and subsidiaries on Form S-11 of our report dated
July 22, 1997 relating to the statement of revenues and certain expenses of
West Lake Plaza Shopping Center for the year ended December 31, 1996 appearing
elsewhere in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
Deloitte & Touche
Miami, Florida
October 10, 1997
EXHIBIT 23.2
November 6, 1997
Equity One, Inc.
777 17th Street
Miami Beach, Florida 33139
Re: REGISTRATION STATEMENT ON FORM S-11
Ladies and Gentlemen:
We hereby consent to the use of the name of our firm in the prospectus
contained in the Registration Statement on Form S-11 (Registration No.
333-33977) of Equity One, Inc. under the caption "Legal Matters." In giving this
consent, we do not admit that we are within the category of persons whose
consent is required by Section 7 of the Securities Act of 1933, as amended, or
the rules and regulations promulgated thereunder.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll
EXHIBIT 23.4
CONSENT OF ROBERT CHARLES LESSER & CO.
The undersigned, an authorized officer of Robert Charles Lesser & Co.,
does hereby consent to the use of certain information prepared by us included in
the section of the Company's Registration Statement on Form S-11 relating to the
Company's initial public offering of its common stock, and in the Prospectus
contained therein proposed to be circulated in connection with such offering,
and all amendments thereto.
Executed this 22nd day of October, 1997
ROBERT CHARLES LESSER & CO.
By: /s/ Len Bogorad
--------------------------------
Name: Len Bogorad
Title: Senior Vice President
