<PAGE> 1
As filed with the Securities and Exchange Commission on December 22, 1995
Registration No. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------
EASTGROUP PROPERTIES
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Maryland 6798 13-2711135
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification No.) Identification No.)
</TABLE>
300 One Jackson Place
188 East Capitol Street
Jackson, Mississippi 39201-2195
(601) 354-3555
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
DAVID H. HOSTER II, President
300 One Jackson Place
188 East Capitol Street
Jackson, Mississippi 39201-2195
(601) 354-3555
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------
COPIES TO:
JOSEPH P. KUBAREK, Esq. DANIEL G. HISE, Esq.
Jaeckle, Fleischmann & Mugel Butler, Snow, O'Mara, Stevens & Cannada, PLLC
800 Fleet Bank Building 17th Floor, Deposit Guaranty Plaza
Twelve Fountain Plaza 210 East Capitol Street, P.O. Box 22567
Buffalo, New York 14202 Jackson, Mississippi 39225-2567
(716) 856-0600 (601) 948-5711
Approximate date of commencement of proposed sale to the public: As
promptly as practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
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============================================================================================================================
Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities Registered Offering Price Per Aggregate Offering Price Registration Fee
to be Registered Unit(1) (1)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Beneficial Interest,
$1.00 par value per share . . . 682,344 Shares $21.00 $14,329,224 $4,941.11
============================================================================================================================
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(1) For purposes of calculating the registration fee pursuant to Rule 457(f),
the offering price is based on the closing of the shares of beneficial interest
of EastGroup Properties as reported by the New York Stock Exchange, on December
20, 1995, which was $21.00.
The Registrant 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 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
================================================================================
<PAGE> 2
CROSS REFERENCE SHEET PURSUANT TO RULE 404(a)
SHOWING THE LOCATION IN THE PROSPECTUS
OF THE INFORMATION REQUIRED BY PART I OF FORM S-4
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FORM S-4 ITEM LOCATION IN PROSPECTUS
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A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement
and Outside Front Cover Page
of Prospectus . . . . . . . . . . . . . . Outside front cover page.
2. Inside Front and Outside Back Cover Pages
of Prospectus . . . . . . . . . . . . . . AVAILABLE INFORMATION; INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE; TABLE OF CONTENTS.
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information . . . . . . PROXY STATEMENT/ PROSPECTUS SUMMARY.
4. Terms of the Transaction . . . . . . . . INTRODUCTION--The Merger Agreement; THE MERGER;
DESCRIPTION OF CAPITAL STOCK OF EASTGROUP; DIFFERENCES
IN SHAREHOLDERS' RIGHTS; APPENDIX A.
5. Pro Forma Financial Information . . . . . INDEX TO FINANCIAL STATEMENTS.
6. Material Contacts with the Company Being
Acquired . . . . . . . . . . . . . . . . THE MERGER--Background of the Merger; THE MERGER--LNH
Directors' Reasons for Recommending the Merger.
7. Additional Information Required for
Reoffering by Persons and Parties Deemed to
be Underwriters . . . . . . . . . . . . . Not applicable.
8. Interests of Named Experts
and Counsel . . . . . . . . . . . . . . Not applicable.
</TABLE>
ii
<PAGE> 3
<TABLE>
<CAPTION>
FORM S-4 ITEM LOCATION IN PROSPECTUS
------------- ----------------------
<S> <C> <C>
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities . . . . . . . . . . . . . . INDEMNIFICATION PROVISIONS.
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3
Registrants . . . . . . . . . . . . . . . INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE;
AVAILABLE INFORMATION; INFORMATION CONCERNING
EASTGROUP; MARKET PRICES AND DIVIDENDS.
11. Incorporation of Certain Information by
Reference . . . . . . . . . . . . . . . . INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE;
INFORMATION CONCERNING EASTGROUP
12. Information with Respect to S-2 or S-3
Registrants . . . . . . . . . . . . . . . Not applicable.
13. Incorporation of Certain Documents by
Reference . . . . . . . . . . . . . . . . INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.
14. Information with Respect to Registrants
Other than S-3 or S-2 Registrants . . . . Not applicable.
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3
Companies . . . . . . . . . . . . . . . . Not applicable.
</TABLE>
iii
<PAGE> 4
<TABLE>
<CAPTION>
FORM S-4 ITEM LOCATION IN PROSPECTUS
------------- ----------------------
<S> <C> <C>
16. Information with Respect to S-2 or S-3
Companies . . . . . . . . . . . . . . . . INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE;
AVAILABLE INFORMATION; INFORMATION CONCERNING LNH;
MARKET PRICES AND DIVIDENDS.
17. Information with Respect to Companies Other
Than S-3 or S-2 Companies . . . . . . . . Not applicable.
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited . . . INTRODUCTION; VOTING AND PROXY INFORMATION; THE MERGER-
-No Dissenters' Rights; THE MERGER--Interest of LNH
Management and EastGroup in the Merger; THE MERGER--
Board of Trustees and Management of EastGroup;
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or
in an Exchange Offer . . . . . . . . . . Not applicable.
</TABLE>
iv
<PAGE> 5
LNH REIT, INC.
300 ONE JACKSON PLACE
188 EAST CAPITOL STREET
JACKSON, MISSISSIPPI 39201-2195
____________, 1996
Dear Shareholder:
A special meeting of shareholders of LNH REIT, Inc. ("LNH") will be
held on __________, 1996. The purpose of the meeting is to vote on a merger
(the "Merger") of LNH with and into EastGroup-LNH Corporation ("Sub"), a
wholly-owned subsidiary of EastGroup Properties ("EastGroup"). The proposed
transaction would result in LNH being acquired by EastGroup and the
shareholders of LNH receiving, in exchange for each share of common stock of
LNH, the number of shares of beneficial interest of EastGroup ("EastGroup
Shares"), determined by dividing the value $8.10 by the average closing price
for EastGroup Shares for the 10 trading days preceding the closing of the
transaction (the "Exchange Ratio"). As a result of the transaction, EastGroup
will succeed to the operations and assets of LNH and LNH will cease to be a
reporting company under the Securities Exchange Act of 1934, as amended.
The proposed Merger has been approved by LNH's Board of Directors,
which believes the transaction to be in the best interest of LNH and its
shareholders and recommends a vote FOR its approval. The reasons for this
belief are set forth in "The Merger--LNH Directors' Reasons for Recommending
the Merger" in the accompanying Proxy Statement/Prospectus. The investment
banking firm of Rauscher Pierce Refsnes, Inc. has issued its opinion to LNH, a
copy of which is attached as Appendix B to this Proxy Statement/Prospectus,
that the consideration to be received by LNH shareholders in the Merger is fair
to the shareholders of LNH from a financial point of view.
The proposed transaction is very important to you as a shareholder.
Therefore, whether or not you plan to attend the meeting, I urge you to give
your immediate attention to the proposal. Please review the enclosed
materials, sign and date the enclosed proxy card and return it promptly in the
enclosed postage-paid envelope.
Very truly yours,
LELAND R. SPEED
Chairman of the Board of Directors
<PAGE> 6
LNH REIT, INC.
300 ONE JACKSON PLACE
188 EAST CAPITOL STREET
JACKSON, MISSISSIPPI 39201-2195
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON ____________, 1996
To the Shareholders:
Notice is hereby given that a special meeting of shareholders of LNH
REIT, Inc. ("LNH") will be held at LNH's offices, 300 One Jackson Place, 188
East Capitol Street, Jackson, Mississippi on ___________, 1996 at ____ a.m.,
local time, for the following purpose:
To consider and act on a proposal to approve the Agreement and Plan of
Merger dated as of December 22, 1995 among LNH, EastGroup-LNH Corporation
("Sub"), and EastGroup Properties ("EastGroup"), pursuant to which, among other
things, (i) LNH will be merged with and into Sub (the "Merger"), (ii) each
outstanding share of common stock of LNH will be converted into the right to
receive the number of shares of beneficial interest of EastGroup ("EastGroup
Shares"), determined by dividing the value $8.10 by the average closing price
for EastGroup Shares for the 10 trading days preceding the closing of the
transaction (the "Exchange Ratio"), and (iii) LNH will cease to exist as a
separate legal entity.
Only shareholders of record at the close of business on ____________,
1996 are entitled to notice of and to vote at the meeting and any adjournment
thereof.
Dissenting shareholders will not have appraisal rights in connection
with the Merger.
By Order of the Board of Directors
N. Keith McKey
Senior Vice-President, Chief Financial
Officer and Secretary
DATE: ____________, 1996
________________________________________________________________________________
THIS IS AN IMPORTANT MEETING. SHAREHOLDERS ARE URGED TO VOTE BY SIGNING,
DATING AND RETURNING THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE TO WHICH NO
POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES.
________________________________________________________________________________
<PAGE> 7
PROXY STATEMENT OF LNH REIT, INC.
AND
PROSPECTUS OF EASTGROUP PROPERTIES
This Proxy Statement/Prospectus is being furnished to the shareholders of LNH
REIT, Inc. ("LNH") in connection with the solicitation of proxies by the Board
of Directors of LNH for use at the special meeting of its shareholders to be
held __________, 1996, to consider and vote on a proposal to approve and adopt
the Agreement and Plan of Merger dated December 22, 1995 (the "Merger
Agreement"), a copy of which is attached hereto as Appendix A. Pursuant to the
Merger Agreement, LNH will be merged (the "Merger") with and into EastGroup-LNH
Corporation ("Sub"), a wholly-owned subsidiary of EastGroup Properties
("EastGroup"). In the Merger, each share of common stock, $0.50 par value per
share, of LNH ("LNH Shares"), will be converted into the right to receive the
number of shares of beneficial interest, $1.00 par value per share, of
EastGroup ("EastGroup Shares"), determined by dividing the value $8.10 by the
average closing price for EastGroup Shares for the 10 trading days preceding
the closing of the Merger (the "Exchange Ratio"). As a result of the Merger,
LNH will cease to be a reporting company under the Securities Exchange Act of
1934, as amended.
This document also constitutes a Prospectus of EastGroup covering the
EastGroup Shares to be issued upon consummation of the Merger. EastGroup is a
Maryland real estate investment trust ("REIT"), with its principal executive
offices located at 300 One Jackson Place, 188 East Capitol Street, Jackson,
Mississippi 39201-2195, telephone number (601) 354-3555. Sub was formed for
the purpose of effecting the Merger. The principal executive offices of LNH
are also located at 300 One Jackson Place, 188 East Capitol Street, Jackson,
Mississippi 39201-2195, and the telephone number of LNH is (601) 354-3555.
___________________________________
NEITHER THIS TRANSACTION NOR THE SHARES OF BENEFICIAL INTEREST OF EASTGROUP
HAVE BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION.
THE COMMISSION HAS NOT PASSED UPON THE FAIRNESS OF THIS TRANSACTION NOR UPON
THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
___________________________________
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS
NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
___________________________________
Consummation of the Merger is subject to the affirmative approval of the
holders of at least two-thirds of the LNH Shares outstanding and entitled to
vote, and certain other conditions. EastGroup owns 515,200 of the LNH Shares
entitled to vote (23.42% of the LNH Shares entitled to vote). The directors
and officers of LNH do not own any of the LNH Shares entitled to vote.
EastGroup's trustees and officers have indicated they intend to vote in favor
of the Merger.
The date of this Proxy Statement/Prospectus is _____________, 1996. This
Proxy Statement/Prospectus is first being mailed to shareholders of LNH on or
about _____________, 1996.
<PAGE> 8
AVAILABLE INFORMATION
EastGroup and LNH are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "SEC"). Such reports, proxy
statements and other information may be inspected at and, upon payment of the
SEC's customary charges, copies obtained from, the Public Reference Section of
the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549. Such reports, proxy
statements and other information are also available for inspection and copying
at prescribed rates at the SEC's regional offices in New York, New York (Seven
World Trade Center, 15th Floor, New York, New York 10007), and in Chicago,
Illinois (Suite 1400, Northwestern Atrium Center, 500 West Madison Street,
Chicago, Illinois 60551-2511).
EastGroup and LNH have filed with the SEC a Registration Statement on Form
S-4 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to shares of EastGroup to be issued in the
Merger. This Proxy Statement/Prospectus constitutes the Prospectus of
EastGroup filed as part of the Registration Statement. As permitted by the
rules and regulations of the SEC, this Proxy Statement/Prospectus omits certain
information contained in the Registration Statement, and reference is made to
the Registration Statement and the exhibits listed therein, which can be
inspected at the public reference facilities of the SEC noted above, and copies
of which can be obtained from the SEC at prescribed rates as indicated above.
No person has been authorized to give any information or to make any
representation other than as contained herein in connection with the matters
described herein and, if given or made, such information or representation must
not be relied upon as having been authorized by EastGroup or LNH. Neither the
delivery hereof nor any distribution of securities made hereunder shall, under
any circumstances, create an implication that there has been no change in the
facts herein set forth since the date hereof. This Proxy Statement/Prospectus
does not constitute an offer to sell or a solicitation of an offer to buy the
securities offered by this Proxy Statement/Prospectus or a solicitation of a
proxy in any jurisdiction where, or to any person to whom, it is unlawful to
make such an offer or solicitation.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Incorporated into this Proxy Statement/Prospectus by reference are the
documents listed below filed by EastGroup under the Securities Exchange Act of
1934, as amended. Copies of any such documents, other than exhibits to such
documents, are available without charge to each person to whom a copy of this
Proxy Statement/Prospectus has been delivered upon written or oral request of
such person from EastGroup, 300 One Jackson Place, 188 East Capitol Street,
Jackson, Mississippi 39201-2195, Attention: Chief Financial Officer, telephone
number (601) 354-3555. In order to insure timely delivery of the documents,
requests should be received by ______________, 1996.
ii
<PAGE> 9
The following documents or portions thereof are hereby incorporated into this
Proxy Statement/Prospectus by reference:
1. EastGroup's 1994 Annual Report to Shareholders.
2. EastGroup's Annual Report on Form 10-K for the year ended December
31, 1994.
3. EastGroup's Form 10-K/A (Amendment No. 1 to 1994 Form 10-K) dated
March 31, 1995.
4. EastGroup's Quarterly Report on Form 10-Q for the quarters ended
March 31, 1995, June 30, 1995 and September 30, 1995.
5. EastGroup's Form 10-Q/A (Amendment No. 1 to Form 10-Q for the quarter
ended March 31, 1995) dated May 16, 1995.
6. EastGroup's Proxy Statement, dated April 27, 1995, used in connection
with the 1995 Annual Meeting of Shareholders of EastGroup.
7. LNH's 1994 Annual Report to Shareholders.
8. LNH's Annual Report on Form 10-KSB for the year ended December 31,
1994.
9. LNH's Quarterly Report on Form 10-QSB for the quarters ended March
31, 1995, June 30, 1995 and September 30, 1995.
10. LNH's Form 10-QSB/A (Amendment No. 1 to Form 10-QSB for the quarter
ended March 31, 1995) dated May 16, 1995.
11. LNH's Current Report on Form 8-K dated April 20, 1995.
12. LNH's Proxy Statement dated April 27, 1995, used in connection with
the 1995 Annual Meeting of Shareholders.
13. LNH'S Current Report on Form 8-K dated December 15, 1995.
14. The Agreement and Plan of Merger dated as of December 22, 1995 among
LNH, Sub and EastGroup.
All documents filed by LNH or EastGroup pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Proxy Statement/Prospectus
and prior to the date of the meetings shall be deemed to be incorporated by
reference herein and to be a part hereof from the respective dates of the
filing thereof. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement/Prospectus to the extent that a
statement contained herein, or in any other subsequently filed document that
also is or is deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Proxy Statement/Prospectus.
iii
<PAGE> 10
TABLE OF CONTENTS
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Page
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PROXY STATEMENT/PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . 1
LNH REIT, Inc. and EastGroup Properties . . . . . . . . . . 1
Date, Time and Place of Shareholders' Meeting . . . . . . . 1
Record Date; Securities Entitled to Vote . . . . . . . . . . 1
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . 2
Certain Effects of the Merger . . . . . . . . . . . . . . . 2
Benefits to LNH Affiliates and Conflicts of Interest . . . . 2
Required Votes . . . . . . . . . . . . . . . . . . . . . . . 3
Management's Recommendation . . . . . . . . . . . . . . . . 3
LNH Fairness Opinion . . . . . . . . . . . . . . . . . . . . 3
Federal Tax Consequences . . . . . . . . . . . . . . . . . . 4
Conditions to Closing . . . . . . . . . . . . . . . . . . . 4
No Dissenters' Rights . . . . . . . . . . . . . . . . . . . 4
Special Considerations . . . . . . . . . . . . . . . . . . . 4
Market Prices . . . . . . . . . . . . . . . . . . . . . . . 5
Stock Certificates . . . . . . . . . . . . . . . . . . . . . 6
Differences in Shareholders' Rights . . . . . . . . . . . . 7
Unaudited Pro Forma Consolidated Selected Financial Data . . 7
Selected Comparative Per Share Data . . . . . . . . . . . . 8
SPECIAL CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . 10
Benefits to LNH Affiliates and Conflicts of Interest . . . . 10
Certain Effects of the Merger . . . . . . . . . . . . . . . 10
Risks of Real Estate Ownership . . . . . . . . . . . . . . . 11
Uncertain Market for and Price of EastGroup Shares . . . . . 11
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . 11
No Dissenters' Rights . . . . . . . . . . . . . . . . . . . 12
Continuation of REIT Status . . . . . . . . . . . . . . . . 12
Nature of Investment and Terms of Shares . . . . . . . . . . 12
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
The Merger Agreement . . . . . . . . . . . . . . . . . . . . 13
VOTING AND PROXY INFORMATION . . . . . . . . . . . . . . . . . . . . 16
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Background of the Merger . . . . . . . . . . . . . . . . . . 19
</TABLE>
iv
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<TABLE>
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LNH Directors' Reasons for Recommending the Merger . . . . . 23
EastGroup's Reasons for Effecting the Merger . . . . . . . . 23
LNH Fairness Opinion . . . . . . . . . . . . . . . . . . . . 23
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Operations Following the Merger . . . . . . . . . . . . . . 26
Expense-Sharing Arrangements . . . . . . . . . . . . . . . . 26
Federal Income Tax Consequences . . . . . . . . . . . . . . 28
Taxation of EastGroup . . . . . . . . . . . . . . . . . . . 29
Taxation of the Shareholders of a REIT . . . . . . . . . . . 31
Accounting Treatment . . . . . . . . . . . . . . . . . . . . 32
No Dissenters' Rights . . . . . . . . . . . . . . . . . . . 32
Restrictions on Resales of Securities . . . . . . . . . . . 32
Board of Trustees and Management of EastGroup . . . . . . . 33
Interest of LNH Management and EastGroup in the Merger . . . 35
INFORMATION CONCERNING LNH . . . . . . . . . . . . . . . . . . . . . 36
INFORMATION CONCERNING EASTGROUP . . . . . . . . . . . . . . . . . . 37
MARKET PRICES AND DIVIDENDS . . . . . . . . . . . . . . . . . . . . . 39
EastGroup Shares . . . . . . . . . . . . . . . . . . . . . . 39
LNH Shares . . . . . . . . . . . . . . . . . . . . . . . . . 40
DIFFERENCES IN SHAREHOLDERS' RIGHTS . . . . . . . . . . . . . . . . . 41
DESCRIPTION OF CAPITAL STOCK OF EASTGROUP . . . . . . . . . . . . . . 42
INDEMNIFICATION PROVISIONS . . . . . . . . . . . . . . . . . . . . . 43
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
REPORTS TO SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . 44
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . F-1
</TABLE>
APPENDIX A Agreement and Plan of Merger among EastGroup Properties,
EastGroup-LNH Corporation and LNH REIT, Inc. dated as of
December 22, 1995
v
<PAGE> 12
APPENDIX B Opinion of Rauscher Pierce Refsnes, Inc. dated as of__________,
1995
APPENDIX C Form of tax Opinion of Jaeckle, Fleischmann & Mugel dated as of
___________, 1995 as to certain tax matters
vi
<PAGE> 13
PROXY STATEMENT/PROSPECTUS SUMMARY
The following summary is a selective outline of certain information
from this Proxy Statement/Prospectus and is qualified in its entirety by the
more detailed information and financial statements included or incorporated
herein by reference.
LNH REIT, INC. AND EASTGROUP PROPERTIES
LNH. LNH REIT, Inc. ("LNH") (formerly known as L&N Housing Corp.) is
a Maryland corporation qualified as a real estate investment trust ("REIT")
under the Internal Revenue Code of 1986, as amended (the "Code"). LNH's
primary investments consist of mortgage loans, real estate and shares of a
REIT. The principal executive offices of LNH are located at 300 One Jackson
Place, 188 East Capitol Street, Jackson, Mississippi 39201, and its telephone
number is (601) 354-3555.
EastGroup. EastGroup Properties ("EastGroup") is a Maryland REIT
which is qualified under the Code. EastGroup owns a balanced portfolio of
income producing real estate properties, with a primary emphasis on industrial
buildings, garden apartment complexes and selected office properties in the
southeastern and southwestern United States. At October 10, 1995, EastGroup
owned or had an interest in ten apartment complexes, twenty one industrial
facilities and three office buildings. For more information regarding
EastGroup, see the 1994 Annual Report to Shareholders of EastGroup that
accompanies this Proxy Statement/Prospectus. EastGroup-LNH Corporation
("Sub"), is a wholly-owned subsidiary of EastGroup formed on September 29, 1995
for the purpose of effecting the Merger (as defined below). EastGroup s
offices are located at 300 One Jackson Place, 188 East Capitol Street, Jackson,
Mississippi 39201. Its telephone number is (601) 354-3555.
DATE, TIME AND PLACE OF SHAREHOLDERS' MEETING
The special meeting of the shareholders of LNH will be held on
______________, 1996 at _____ a.m., local time, at 300 One Jackson Place, 188
East Capitol Street, Jackson, Mississippi (the "Meeting"). The purpose of the
Meeting is to consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger dated as of December 22, 1995 among LNH, Sub and
EastGroup (the "Merger Agreement").
RECORD DATE; SECURITIES ENTITLED TO VOTE
The record date for the Meeting is ___________, 1996; holders of the
2,200,000 shares of common stock, $0.50 par value per LNH Share, of LNH
outstanding ("LNH Shares"), are entitled to one vote per LNH Share.
1
<PAGE> 14
THE MERGER
Under the terms of the Merger Agreement, LNH will be merged with and
into Sub (the "Merger"), EastGroup will succeed to the operations and assets of
LNH and LNH will cease to exist as a separate legal entity. Upon consummation
of the Merger, each outstanding LNH Share will be converted into the right to
receive a certain amount of shares of beneficial interest, $1.00 par value per
share, of EastGroup ("EastGroup Shares"), based on an exchange ratio (the
"Exchange Ratio"). The Exchange Ratio will be determined by dividing the value
$8.10 by the average closing price for EastGroup Shares for the ten trading
days preceding the closing of the Merger (the "Closing Price"). No fractional
EastGroup Shares will be issued but, in lieu thereof, each holder of LNH Shares
otherwise entitled to receive a fractional EastGroup Share will be paid cash in
an amount equal to the Closing Price. The currently outstanding EastGroup
Shares will not be exchanged in the Merger. See "Introduction--The Merger
Agreement."
CERTAIN EFFECTS OF THE MERGER
If the Merger is approved, shareholders of LNH will become
shareholders of EastGroup. Other than LNH's officers and directors, the
shareholders of LNH who currently beneficially own ___% of the outstanding LNH
Shares will only own ___% of the EastGroup Shares outstanding after the Merger
and, accordingly, will have less voting power and less of a percentage interest
in the LNH assets which will become assets of EastGroup by reason of the
Merger. See "Special Considerations--Certain Effects of the Merger."
BENEFITS TO LNH AFFILIATES AND CONFLICTS OF INTEREST
Two members of the four-person Board of Directors of LNH (Messrs.
Speed and Bailey) are also members of the Board of Trustees of EastGroup, and
have abstained from voting on the Merger as members of LNH's Board. Three
officers of LNH were also officers of EastGroup at the time the Merger was
proposed and negotiated. The Special Committee of the LNH Board of Directors
received much of the financial, economic and other data upon which it relied in
its decision making process from management personnel of LNH who are also
management personnel of EastGroup. See "Special Considerations -- Benefits to
LNH Affiliates and Conflicts of Interest."
Additionally, according to the terms of the Merger Agreement,
EastGroup has agreed to indemnify each of the members of the Board of Directors
of LNH against certain liabilities, including any liability arising under the
Merger Agreement or in connection with the Merger.
EastGroup and LNH, along with four other companies, were parties to
expense-sharing arrangements. As contemplated by the expense-sharing
arrangements, the executive officers of LNH also served as executive officers
of EastGroup and the other participants. These expense-sharing arrangements
terminated on December 31, 1994. See "The Merger -- Expense-Sharing
Arrangements." Pursuant to an Administration Agreement (defined herein),
EastGroup and LNH were parties to certain arrangements concerning the
administration of LNH. The Administration Agreement was terminated effective
March 31, 1995. Additionally, pursuant to
2
<PAGE> 15
a Management Agreement, EastGroup, through its wholly-owned subsidiary EGP
Managers, Inc. ("EGP Managers"), provides management services to LNH. See "The
Merger -- Expense-Sharing Arrangements."
The relationships described above may have resulted or may result in
the directors and officers of LNH having a conflict of interest with the
shareholders of LNH in the negotiation, proposal, recommendation and
consummation of the Merger. In this regard, the idea of combining LNH and
EastGroup originated with the common management. The transaction was first
proposed, however, by a special committee of EastGroup's disinterested trustees
to a committee of LNH's disinterested directors, and the structure and terms of
the Merger were negotiated by these two committees, with common management
providing to those committees economic analyses and information regarding the
companies' respective assets.
REQUIRED VOTES
The proposal to approve and adopt the Merger Agreement must be
approved by the affirmative vote of the holders of at least two-thirds of the
outstanding LNH Shares entitled to vote. As of the date hereof, the directors
and officers of LNH and members of their immediate families do not beneficially
own any of the outstanding LNH Shares. As of the date hereof, EastGroup owns
515,200 of the outstanding LNH Shares (23.42% of the outstanding LNH Shares).
EastGroup's officers and trustees have indicated that they intend to vote all
of the LNH Shares held by them in favor of the Merger. See "Voting and Proxy
Information."
MANAGEMENT'S RECOMMENDATION
The directors of LNH are of the opinion that the Merger is fair to and
in the best interests of both LNH and its shareholders, and have unanimously
recommended (with Messrs. Speed and Bailey abstaining) to LNH's shareholders
that they vote in favor of the Merger. The Board of Directors believes that
the Merger will: tend to maximize the value of LNH's assets; result in LNH
shareholders owning a portion of the equity interest in a more viable entity
with greater financial resources than LNH; and enable LNH shareholders to
participate in the ownership of a larger and more diversified real estate
investment trust than LNH. See "The Merger--LNH Directors' Reasons for
Recommending the Merger."
LNH FAIRNESS OPINION
Rauscher Pierce Refsnes, Inc. ("Rauscher Pierce") has rendered an
opinion to the Board of Directors of LNH that the consideration to be received
by the holders of LNH Shares in the Merger is fair from a financial point of
view to such shareholders. A copy of the opinion is included as Appendix B
hereto. Rauscher Pierce's opinion was based on Rauscher Pierce's review and
analysis of (i) the trading histories of LNH Shares and EastGroup Shares prior
to and after the public announcement of the proposed Merger on September 6,
1995 and the announcement of the revised agreement in principle on December 6,
1995; (ii) LNH's quarterly operating results for the quarters ended March 31,
1995, June 30, 1995 and September 30, 1995
3
<PAGE> 16
plus LNH's operating results for the years ended December 31, 1992, 1993, and
1994; (iii) EastGroup's quarterly operating results for the quarters ended
March 31, 1995, June 30, 1995 and September 30, 1995 plus EastGroup's operating
results for the years ended December 31, 1992, 1993 and 1994; (iv) the fact
that the Merger would be submitted to a vote of the shareholders of LNH; (v)
the fact that the transaction is intended to be tax-free; and (vi) certain
other matters and other factors as Rauscher Pierce deemed relevant. See "The
Merger--LNH Fairness Opinion."
FEDERAL TAX CONSEQUENCES
LNH has received an opinion of Jaeckle, Fleischmann & Mugel that no
gain or loss will be recognized by the holders of LNH Shares to the extent they
receive EastGroup Shares in the Merger in exchange for their LNH Shares, and
that such shareholders' basis in the EastGroup Shares received by such LNH
shareholders in the Merger will be the same as their basis in the LNH Shares
exchanged. See "The Merger--Federal Income Tax Consequences."
CONDITIONS TO CLOSING
Consummation of the Merger is subject to a number of conditions,
including the approval of the Merger Agreement by the holders of two-thirds of
the outstanding LNH Shares and the continued accuracy of the representations
and warranties of EastGroup, Sub and LNH as of the effective date of the
Merger. The representations and warranties relate to, among other things, the
absence of any material adverse changes in the business or assets of EastGroup
or LNH. The Merger may also be abandoned at any time prior to its consummation
by the agreement of the Board of Trustees of EastGroup and the Board of
Directors of LNH. See "Introduction-- The Merger Agreement."
NO DISSENTERS' RIGHTS
If the Merger is approved, such approval will bind all the
shareholders of LNH, including those who vote against the Merger or abstain or
fail to return a completed Proxy. No holder of LNH Shares will have any
dissenters' rights in connection with, or as a result of, the matters to be
acted upon relating to the Merger at the Meeting. See "The Merger--No
Dissenters' Rights."
SPECIAL CONSIDERATIONS
Two members of LNH's four-person Board of Directors are members of
EastGroup's Board of Trustees. Each of the members of the Board of Directors
of LNH will enter into an indemnification agreement with EastGroup pursuant to
which EastGroup will agree to indemnify such persons against certain
liabilities, including any liability arising under the Merger Agreement or in
connection with the Merger. Additionally, three of the officers of LNH also
serve as officers of EastGroup. The Special Committee of the LNH Board of
Directors received
4
<PAGE> 17
much of the financial, economic and other data upon which it relied in its
decision making process from management personnel of LNH who are also
management personnel of EastGroup. The relationships described above may
result in the directors and officers of LNH having a conflict of interest with
the shareholders of LNH in the negotiation, proposal, recommendation and
consummation of the Merger. See "Special Considerations--Benefits to LNH
Affiliates and Conflicts of Interest."
Risks Associated with Real Estate. Shareholders of LNH and EastGroup
should be aware that there are certain risks inherent in the ownership of real
estate and the securities of companies that own real estate, and that
EastGroup's assets and LNH's assets may have particular risks associated with
them. These risks include, among others: adverse changes in general or local
economic conditions; adverse changes in interest rates and in the availability
of permanent mortgage funds which may render the acquisition, sale or
refinancing of properties difficult or unattractive; existing laws, rules and
regulations and judicial decisions regarding liability for a variety of
potential problems related to real estate generally; adverse changes in real
estate, zoning, environmental or land-use laws; increases in real property
taxes and federal or local economic or rent controls; other governmental rules;
increases in operating costs and the need for additional capital and tenant
improvements; the supply of and demand for properties; possible insolvencies
and other material defaults by tenants; overbuilding in certain markets;
ability to obtain or maintain full occupancy of properties or to provide for
adequate maintenance or insurance; the presence of hazardous waste materials;
mechanics liens resulting from construction; property related claims and
litigation; fiscal policies; and acts of God. The illiquidity of real estate
investments generally impairs the ability of real estate owners to respond
quickly to changed circumstances. See "Special Considerations--Risks of Real
Estate Ownership."
MARKET PRICES
EastGroup Shares are traded on the New York Stock Exchange ("NYSE")
under the symbol "EGP." LNH Shares are traded on NYSE under the symbol
"LHC." The following table shows the sales prices of EastGroup Shares and LNH
Shares as reported by NYSE, on the dates indicated.
5
<PAGE> 18
<TABLE>
<CAPTION>
Closing
Price
-------------
<S> <C>
September 5, 1995, the last trading day before LNH and EastGroup issued a joint press
release announcing that they had agreed in principle to the Merger(1):
EastGroup Share $ 19.875
LNH Share 6.50
December 21, 1995, the most recent trading day prior to the date of this Proxy
Statement/Prospectus with respect to which it is practicable to provide market price
information(1):
EastGroup Share $ 20.875
LNH Share 7.50
</TABLE>
- ----------------
(1) Price per share as of a particular day reflects the last reported
transaction in the indicated shares on or before that day.
EastGroup paid a quarterly dividend of $0.45 per EastGroup Share for
the last quarter of 1994 and the first and second quarter of 1995. EastGroup
increased the quarterly dividend to $0.47 per EastGroup Share for the third
quarter of 1995 and paid $0.47 for the fourth quarter of 1995. LNH paid a
quarterly dividend of $0.14 per LNH Share for the first and second quarter of
1994, $0.09 per LNH Share for the third and last quarter of 1994 and for the
first, second and third quarter of 1995, and $0.15 for the fourth quarter of
1995. LNH paid a special dividend of $1.50 per LNH Share in the third quarter
of 1994 and a special dividend of $0.66 per LNH Share in the first quarter of
1995. See "Market Prices and Dividends" for more information regarding
historical market prices and dividends.
STOCK CERTIFICATES
Promptly after the Effective Time, EastGroup shall cause its transfer
agent KeyCorp Shareholder Services, Inc. (the "Exchange Agent"), to mail to
each record holder, as of the Effective Time, of an outstanding certificate or
certificates which immediately prior to the Effective Time represented LNH
Shares (the "Certificate(s)"), a form Letter of Transmittal and instructions
for use in effecting the surrender of the Certificate and for receiving any
payment for fractional shares. Upon surrender to the Exchange Agent of a
Certificate, together with such Letter of Transmittal duly executed, the holder
of such Certificate shall be entitled to receive in exchange therefor a
certificate or certificates representing EastGroup Shares and cash and such
surrendered Certificate shall then be cancelled. Shareholders of LNH who fail
to deliver their LNH Share certificates and Letter of Transmittal to the
Exchange Agent will not receive their EastGroup Share certificates, nor any
dividends with respect to such EastGroup Shares, unless and until such LNH
Share certificates are forwarded to the Exchange Agent. Upon the Exchange
Agent's receipt of the LNH Share certificates and Letter of Transmittal, the
LNH shareholder will receive all unpaid dividends, if any, with respect to such
LNH Shares, without
6
<PAGE> 19
interest. Shareholders who are unable to locate their LNH Share certificates
may contact the Exchange Agent at the address indicated in the Letter of
Transmittal for assistance. Shareholders of EastGroup will not need to
exchange their share certificates. See "Introduction--The Merger
Agreement--Exchange of Shares."
DIFFERENCES IN SHAREHOLDERS' RIGHTS
The laws and charter documents governing the rights of shareholders of
EastGroup differ in certain respects from those governing the rights of
shareholders of LNH. For example, shareholders of EastGroup are limited by
EastGroup's Restated Declaration of Trust, as amended (the "EastGroup
Declaration"), to vote only on the election and removal of trustees, amendment
of the EastGroup Declaration and termination of EastGroup. LNH shareholders,
however, are not restricted by LNH's Articles of Incorporation, as amended (the
"LNH Articles"), as to those matters upon which LNH shareholders may vote.
UNAUDITED PRO FORMA CONSOLIDATED SELECTED FINANCIAL DATA
The selected pro forma financial data that appears below is based on
LNH's and EastGroup's historical financial data as adjusted to give effect to
the Merger on the basis described in the notes to the Pro Forma Consolidated
Financial Statements (Unaudited). See "Information Concerning EastGroup."
This information is not necessarily indicative of the results that actually
would have occurred and should be read in conjunction with the Pro Forma
Financial Statements (Unaudited) included elsewhere in this Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
Twelve Months Ended Nine Months Ended
December 31, 1994 for September 30, 1995 for EastGroup
EastGroup and LNH(1) and LNH(1)
--------------------- --------------------------------
(In thousands, except per share data)
<S> <C> <C>
Unaudited Pro Forma Consolidated
Operation Data:
Net Revenues $26,815 $24,214
Expenses 22,086 20,441
Income from operations 4,729 3,773
Income from operations per share of
beneficial interest 0.99 0.77
Weighted average number of shares
of beneficial interest outstanding 4,763 4,874
</TABLE>
7
<PAGE> 20
<TABLE>
<CAPTION>
As of September 30, 1995 for
EastGroup and LNH(1)
-----------------------------
(In thousands)
<S> <C>
Unaudited Pro Forma Consolidated
Balance Sheet Data:
Total assets $176,559
Total liabilities 81,668
Shareholders' equity 94,891
</TABLE>
(1) EastGroup and LNH have a December 31 fiscal year.
SELECTED COMPARATIVE PER SHARE DATA
The following tables set forth certain information concerning
EastGroup Shares and LNH Shares. Entries captioned "EastGroup pro forma
consolidated" is EastGroup's and LNH's historical data combined and adjusted to
give effect to the Merger on the basis described in the notes to the Pro Forma
Consolidated Financial Statements (Unaudited). LNH's equivalent pro forma
consolidated per share data is determined by multiplying the EastGroup pro
forma consolidated data by .3857, which is the number of EastGroup Shares which
will be exchanged for one LNH Share in the Merger (based on EastGroup's market
price on December 20, 1995 of $21.00 per share).
The following data should be read in conjunction with the Pro Forma
Consolidated Financial Statements (Unaudited) included elsewhere in this Proxy
Statement/Prospectus, EastGroup's Consolidated Financial Statements
incorporated by reference in this Proxy Statement/Prospectus and LNH's
Financial Statements incorporated by reference in this Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
As of September 30, 1995
for EastGroup and LNH
------------------------
<S> <C>
Book value per share of beneficial interest:
EastGroup historical $19.22
EastGroup pro forma consolidated 19.46
Book value per share of common stock:
LNH historical 10.85
LNH equivalent pro forma consolidated 7.51
</TABLE>
8
<PAGE> 21
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 31,1994 September 30, 1995
---------------------------------------------
<S> <C> <C>
EastGroup:
Historical net income per share of
beneficial interest $1.74 $1.14
Pro forma consolidated net income per
share of beneficial interest 1.51 1.18
Historical consolidated cash dividends
declared per share of beneficial interest 1.31 1.37
</TABLE>
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 31,1994 September 30, 1995
---------------------------------------------
<S> <C> <C>
LNH:
Historical net income per share of
common stock $0.12 $0.52
Equivalent pro forma consolidated net
income per share of common stock 0.58 0.46
Historical cash dividends declared per
share of common stock 1.96 0.93
Equivalent pro forma consolidated cash
dividends declared per share of common stock
0.51 0.53
</TABLE>
9
<PAGE> 22
SPECIAL CONSIDERATIONS
In analyzing the Merger, shareholders of LNH should consider, among
other factors, the following:
BENEFITS TO LNH AFFILIATES AND CONFLICTS OF INTEREST
Two members of the four-person Board of Directors of LNH (Messrs.
Speed and Bailey) are also members of the Board of Trustees of EastGroup, and
have abstained from voting on the Merger as members of LNH's Board. Three
officers of LNH are also officers of EastGroup. The Special Committee of the
LNH Board of Directors received much of the financial, economic and other data
upon which it relied in its decision making process from management personnel
of LNH who are also management personnel of EastGroup.
Additionally, pursuant to the Merger Agreement, EastGroup has agreed
to indemnify each of the members of the Board of Directors of LNH against
certain liabilities, including any liability arising under the Merger Agreement
or in connection with the Merger.
EastGroup and LNH, along with four other companies, were parties to
expense-sharing arrangements pursuant to which certain executive officers of
LNH also served as executive officers of EastGroup. These expense-sharing
arrangements were terminated on December 31, 1994. See "The Merger --
Expense-Sharing Arrangements." Pursuant to an Administration Agreement,
EastGroup and LNH were parties to certain arrangements concerning the
administration of LNH. The Administration Agreement was terminated effective
March 31, 1995. Additionally, pursuant to a Management Agreement, EastGroup's
wholly-owned subsidiary, EGP Managers, is currently responsible for the
management of LNH subject to the oversight of LNH's Board of Directors. See
"The Merger -- Expense-Sharing Arrangements."
The relationships described above may have resulted or may result in
the directors and officers of LNH having a conflict of interest with the
shareholders of LNH in the negotiation, proposal, recommendation and
consummation of the Merger.
CERTAIN EFFECTS OF THE MERGER
If the Merger is approved, shareholders of LNH will become
shareholders of EastGroup. Other than LNH's officers and directors, the
shareholders of LNH who currently beneficially own ____% of the outstanding LNH
Shares will only own ____% of EastGroup Shares outstanding after the Merger
and, accordingly, will have less voting power and less of a percentage interest
in LNH assets which will become assets of EastGroup by reason of the Merger.
10
<PAGE> 23
RISKS OF REAL ESTATE OWNERSHIP
EastGroup's assets primarily consist of equity investments in various
types of real property. If the Merger is consummated, shareholders of LNH will
become shareholders of EastGroup, which will own all of the outstanding stock
of Sub, and Sub, by operation of law, will own all of the assets of LNH. As a
result, shareholders of LNH will be, as shareholders of EastGroup, subject to
the risks inherent in the ownership and management of real property owned by
both LNH and EastGroup. These risks include, among others: adverse changes in
general or local economic conditions; adverse changes in interest rates and in
the availability of permanent mortgage funds which may render the acquisition,
sale or refinancing of properties difficult or unattractive; existing law,
rules and regulations and judicial decisions regarding liability for a variety
of potential problems related to real estate generally; adverse changes in real
estate, zoning, environmental or land-use laws; increases in real property
taxes and federal or local economic or rent controls; other governmental rules;
increases in operating costs and the need for additional capital and tenant
improvements; the supply of and demand for properties; possible insolvencies
and other material defaults by tenants; overbuilding in certain markets;
ability to obtain or maintain full occupancy of properties or to provide for
adequate maintenance or insurance; the presence of hazardous waste materials;
mechanics liens resulting from construction; property related claims and
litigation; fiscal policies; and acts of God. The illiquidity of real estate
investments generally impairs the ability of real estate owners to respond
quickly to changed circumstances.
UNCERTAIN MARKET FOR AND PRICE OF EASTGROUP SHARES
There can be no assurance as to the trading volume or price of
EastGroup Shares after the Merger. Events outside the control of EastGroup and
LNH which would adversely affect the market value of their existing real estate
and other investments, as well as the market value of LNH Shares and EastGroup
Shares, may occur during the period from the date of this Proxy
Statement/Prospectus to the date the Merger is consummated or thereafter.
DIVIDENDS
EastGroup has paid 63 consecutive quarterly cash distributions to its
shareholders. From December 1994 until September 1995, EastGroup paid a
quarterly distribution of $0.45 per EastGroup Share. Based on improvements in
EastGroup's funds from operations, in September 1995, the Board of Trustees
raised EastGroup's quarterly distribution from $0.45 to $0.47 per EastGroup
Share. EastGroup's distribution rate of $0.47 per EastGroup Share ($1.88 on an
annualized basis) represents an annual dividend yield (based upon the
December 21, 1995 EastGroup Share price of $20.875) of 9.0%. Dividends paid
during the twelve months ended June 30, 1995 totaled $1.80 per EastGroup Share,
or 78% of EastGroup's funds from operations per EastGroup Share for the same
period. EastGroup intends to maintain a conservative dividend policy, with
cash dividends representing between 75% and 85% of funds
11
<PAGE> 24
from operations per EastGroup Share. For federal income tax purposes,
EastGroup has determined that of the $1.74 per EastGroup Share distributed in
1994, all was ordinary income. See "The Merger--Taxation of EastGroup."
NO DISSENTERS' RIGHTS
Shareholders of LNH who vote against the Merger (or do not vote) will
be bound by the results of the vote if LNH's shareholders approve the Merger.
Dissenting shareholders will not have appraisal rights in connection with, or
as a result of, the matters to be acted upon relating to the Merger at the
Meeting. See "The Merger--No Dissenters' Rights."
CONTINUATION OF REIT STATUS
EastGroup is a REIT. If the Merger is approved, the shareholders of
LNH will become shareholders of EastGroup and, consequently, will continue to
experience the tax benefits available to REITs. See "The Merger -- Taxation of
EastGroup" and "The Merger -- Taxation of the Shareholders of a REIT."
NATURE OF INVESTMENT AND TERMS OF SHARES
If the Merger is consummated, the rights of the holders of LNH Shares
that are converted into EastGroup Shares pursuant to the Merger will be
governed by the Maryland General Corporation Law and Maryland Real Estate
Investment Trusts Law and the rights of holders of EastGroup Shares will differ
from the rights of holders of LNH Shares by virtue of different provisions
appearing in the charter documents of these two companies and different
statutory provisions. For example, shareholders of EastGroup are limited by
the EastGroup Declaration to vote only on the election and removal of trustees,
amendment of the EastGroup Declaration and termination of EastGroup. LNH
shareholders, however, are not restricted by the LNH Articles or by Maryland
Law as to those matters upon which LNH shareholders may vote. See "Differences
in Shareholders' Rights."
12
<PAGE> 25
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to the shareholders
of LNH in connection with the solicitation of proxies by the Board of Directors
of LNH for use at the Meeting, which will be held on ______________, 1996, at
___________, local time, at LNH's offices, 300 One Jackson Place, 188 East
Capitol Street, Jackson, Mississippi, and at all adjournments and postponements
thereof.
As set forth more fully below, at the Meeting, the holders of LNH
Shares will be asked to consider and vote upon a proposal to approve and adopt
the Merger Agreement. A copy of the Merger Agreement is attached as Appendix A
to this Proxy Statement/Prospectus, and is hereby incorporated by this
reference into this Proxy Statement/Prospectus. Upon satisfaction of certain
conditions set forth therein, the Merger Agreement provides for, among other
things, (i) the merger of LNH with and into Sub, (ii) the conversion of each
LNH Share outstanding into the right to receive a certain amount of EastGroup
Shares based upon the Exchange Ratio (as defined below); and (iii) LNH's
ceasing to exist as a separate legal entity.
THE MERGER AGREEMENT
The statements and descriptions contained in this Proxy
Statement/Prospectus with respect to the terms and conditions of the Merger
Agreement are intended only as a general discussion of the Merger Agreement and
are qualified in their entirety by the detailed provisions set forth in the
Merger Agreement reprinted as Appendix A. Each shareholder of LNH is advised
to read the Merger Agreement carefully.
General. The Merger Agreement provides that, subject to the approval
and adoption thereof by the shareholders of LNH and the satisfaction of the
other conditions set forth therein, LNH will be merged with and into Sub and
LNH will cease to exist as a separate legal entity. At the time the Merger
becomes effective, each LNH Share will be converted into the right to receive a
certain number of EastGroup Shares based on the following Exchange Ratio. The
Exchange Ratio is the number of EastGroup Shares determined by dividing $8.10
by the average closing price for EastGroup Shares for the 10 trading days
preceding the closing of the Merger (the "Closing Price"). It is the intention
of the parties to consummate the Merger as soon as possible following adoption
and approval of the Merger Agreement by the shareholders of LNH and
satisfaction of all conditions (or, to the extent permitted, waiver thereof) to
the parties' respective obligations to consummate the Merger. The Merger will
become effective when Articles of Merger are filed with the Secretary of State
of the State of Maryland and any other necessary documents are so filed (the
"Effective Time"), which will occur on or about the date of the Meeting.
Exchange of Shares. At the Effective Time, each outstanding LNH Share
will be converted into the right to receive a certain amount of EastGroup
Shares based on the Exchange
13
<PAGE> 26
Ratio. No fractional EastGroup Shares will be issued but, in lieu thereof,
each holder of LNH Shares entitled to receive a fractional EastGroup Share will
be paid cash in an amount equal to the value of such fractional share, which
value will be based on the Closing Price. No interest will be paid or accrued
on any cash amounts payable in lieu of fractional shares.
Each holder of one or more certificates that represent LNH Shares
prior to the Effective Time will be required to surrender such stock
certificate(s), together with a duly executed Letter of Transmittal, to the
Exchange Agent, in order to receive a new certificate representing the number
of whole EastGroup Shares into which such LNH Shares were converted in the
Merger and the cash payable with respect to any fractional shares, as set forth
in the Merger Agreement. From and after the Effective Time of the Merger,
until so surrendered, each certificate that theretofore represented LNH Shares
will be deemed for all purposes to evidence the number of whole shares of
EastGroup into which such LNH Shares were converted in the Merger, except that
dividends, if any, with respect to such LNH Shares will not be paid until the
certificates for LNH Shares are forwarded to the Exchange Agent together with a
properly completed Letter of Transmittal, at which time the shareholder will
receive all unpaid dividends, if any, with respect to such LNH Shares, without
interest. Accompanying this Proxy Statement/Prospectus is a form of Letter of
Transmittal which sets forth instructions concerning procedures to be followed
for the submission of LNH Share certificates to the Exchange Agent after the
Effective Time.
If a new certificate representing EastGroup Shares is to be issued in
the name of a person other than the one to whom the surrendered LNH Share
certificate is registered on the stock transfer books of LNH immediately prior
to the Effective Time, it will be a condition of such issuance that the
certificate so surrendered be properly endorsed or otherwise be in proper form
for transfer and that the person requesting such issuance either pay to the
Exchange Agent any transfer or other taxes required by reason of the issuance
to a person other than the registered owner of the certificate or establish
that such tax has been paid or is not applicable.
At and after the Effective Time, there will be no transfers of LNH
Shares on the books of LNH.
Conditions to the Merger. The obligations of EastGroup, Sub and LNH
to effect the Merger are subject to the fulfillment or waiver of, among others,
the following conditions: (i) no "stop order" shall be in effect with respect
to the Registration Statement of which this Proxy Statement/Prospectus forms a
part and there shall be no proceeding instituted or threatened by the SEC or
any state to suspend the effectiveness thereof; (ii) the holders of outstanding
LNH Shares shall have approved the Merger Agreement as required by LNH's
organization documents and Maryland law; (iii) all necessary permits,
authorizations, regulatory approvals and consents necessary for the
consummation of the Merger shall have been received; and (iv) the Effective
Time shall have occurred on or before April 15, 1996.
The obligations of EastGroup and Sub to effect the Merger are also
subject to the fulfillment or waiver of certain additional conditions,
including the following: (i) the material
14
<PAGE> 27
accuracy of the representations and warranties made by LNH in the Merger
Agreement; (ii) the material compliance by LNH with all agreements contained in
the Merger Agreement required to be performed by it prior to the Effective
Time; (iii) the absence of any action or proceeding that seeks to restrain,
enjoin or otherwise prohibit the Merger; (iv) the receipt by EastGroup of an
opinion of counsel to LNH as to certain specified matters, including LNH's good
standing and existence, and LNH's authorization, execution and delivery of the
Merger Agreement; (v) the receipt of all permits, authorizations, regulatory
approvals and consents from third parties necessary for consummation of the
Merger; and (vi) the absence of any material adverse developments with respect
to the business or assets of LNH.
The obligation of LNH to consummate the Merger is also subject to the
fulfillment or waiver of certain additional conditions, including the
following: (i) the material accuracy of the representations and warranties
made by EastGroup and Sub in the Merger Agreement; (ii) the material compliance
by EastGroup and Sub with all agreements contained in the Merger Agreement
required to be performed by them prior to the Effective Time; (iii) the absence
of any action or proceeding that seeks to restrain, enjoin or otherwise
prohibit the Merger; (iv) the receipt by LNH of an opinion of counsel to
EastGroup and Sub as to certain specified matters, including the good standing
and existence of EastGroup and Sub, and the due authorization, execution and
delivery by EastGroup and Sub of the Merger Agreement; (v) the confirmation by
Rauscher Pierce of its fairness opinion described below as of the day before
the date of the Effective Time; (vi) the receipt of all permits,
authorizations, regulatory approvals and consents from third parties necessary
for consummation of the Merger; and (vii) the absence of any material adverse
development with respect to the business or assets of EastGroup.
Amendment and Termination of the Merger Agreement. The Merger
Agreement may be amended at any time, whether before or after approval of the
Merger Agreement by LNH shareholders, by LNH, EastGroup and Sub; provided,
however, that after any such approval, no amendment shall be made without the
further approval of LNH shareholders if it decreases the number of EastGroup
Shares to be exchanged for LNH Shares or adversely affects the rights of LNH
shareholders.
The Merger Agreement may be terminated by the mutual consent of the
Boards of Trustees and Directors of EastGroup, Sub and LNH at any time prior to
the Effective Time, whether before or after approval of the Merger Agreement by
the shareholders of LNH. In addition, the Merger Agreement may be terminated
(i) by EastGroup or LNH if the Effective Time has not occurred on or before
April 15, 1996, (ii) by the Board of Trustees of EastGroup if the conditions to
its closing are not satisfied prior to the Effective Time, or (iii) by the
Board of Directors of LNH if the conditions to its closing are not satisfied
prior to the Effective Time.
In the event either EastGroup or LNH elects to terminate the Merger
Agreement because the other party has breached any covenant in the Merger
Agreement or any representation or warranty by the other party is untrue in any
material respect, the party in breach shall pay to the non-terminating party
its out-of-pocket expenses incurred in connection with the Merger and the non-
terminating party will have any other remedy available at law or in equity.
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<PAGE> 28
If the Merger is consummated, EastGroup has agreed to indemnify each
person who becomes an employee, agent, officer or trustee of EastGroup with
respect to claims arising after the Effective Time, and LNH has agreed to
indemnify each person who was an employee, agent, officer or director of LNH
prior to the Effective Time with respect to claims arising in connection with
such person's service. EastGroup has also agreed to assume any liability of
LNH pursuant to such indemnification to the extent of any distributions from
LNH to EastGroup or any affiliate or to the extent of any claim against any
person indemnified by LNH arising under the Merger Agreement or pursuant to the
Merger.
No business will be presented, or be in order for consideration, at
the Meeting other than the proposal described above and such matters as may be
necessary in connection therewith.
EastGroup is not required to submit the Merger to its shareholders for
approval under Maryland law or under the EastGroup Declaration and EastGroup
has elected not to do so.
VOTING AND PROXY INFORMATION
The Board of Directors of LNH has fixed the close of business on
__________, 1996 as the record date for determining the holders of LNH Shares
entitled to receive notice of and to vote at the Meeting (the "Record Date").
At the close of business on the Record Date, there were outstanding 2,200,000
LNH Shares, the only outstanding securities of LNH entitled to vote at the
Meeting. Approval of the Merger will require the affirmative vote of the
holders of at least two-thirds of the outstanding LNH Shares.
The accompanying proxy is solicited on behalf of the Board of
Directors of LNH and is revocable at any time before it is exercised. A proxy
may be revoked by written notice of revocation or by a later dated proxy, in
either case delivered to the Secretary of LNH. Attendance at the Meeting will
not automatically revoke a proxy, but a shareholder in attendance may request a
ballot and vote in person, thereby revoking a prior granted proxy.
All outstanding LNH Shares represented by properly executed and
unrevoked proxies received in the accompanying form in time for the Meeting
will be voted. Shareholders may (i) vote "FOR" approval of the Merger
Agreement, (ii) vote "AGAINST" approval of the Merger Agreement, or (iii)
"ABSTAIN" from voting on the Merger Agreement. A vote to abstain from voting
on the Merger Agreement (as well as a failure to vote at all) would have the
effect of a vote against the Merger Agreement. LNH Shares will be voted as
instructed in the accompanying proxy. If no instructions are given, the shares
will be voted for approval of the Merger Agreement.
A proxy submitted by a shareholder may indicate that all or a portion
of LNH Shares represented by such proxy are not being voted by such
shareholder. This could occur, for example, when a broker is not permitted to
vote shares held in street name in the absence of
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<PAGE> 29
instructions from the beneficial owner of the shares (a "broker non-vote").
Broker non-votes will be counted in determining whether a quorum is present at
the Meeting, but such shares will not be counted as having voted for or
against the Merger and will have the effect of having been voted against the
Merger Agreement, as approval of the Merger Agreement will require the
affirmative vote of two-thirds of the outstanding LNH Shares.
The following table sets forth information concerning ownership of LNH
Shares by each person known to LNH to be the beneficial owner of more than five
percent of the outstanding LNH Shares based on public filings with the SEC as
of the Record Date.
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent of
of Beneficial Owner Beneficial Ownership Class
- --------------------------------------------------------------- -------------------- ----------
<S> <C> <C>
EastGroup . . . . . . . . . . . . . . . . . . . . . . . . . . 515,200(1) 23.42%
300 One Jackson Place
188 East Capitol Street
Jackson, Mississippi 39201
Cardinal Portfolios Company and others . . . . . . . . . . . . 139,600(2) 6.35%
500 Crescent Court
Suite 250
Dallas, Texas 75201
Dimensional Fund Advisors Inc. . . . . . . . . . . . . . . . . 139,100(3) 6.32%
1299 Ocean Avenue
Suite 650
Santa Monica, California 90401
Spiritas, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 110,800(1) 5.04%
5219 Second Avenue
Dallas, Texas 75210
</TABLE>
- ----------------------
(1) Based upon an amended Schedule 13D filed with the SEC.
(2) Based upon an amended Schedule 13D filed with the SEC by Cardinal
Portfolios Company ("Cardinal") and certain individuals and entities
that have business and personal relationships with the principals of
Cardinal.
(3) As disclosed in a filing with the SEC dated February 11, 1992, on
Schedule 13G by Dimensional Fund Advisors Inc. ("Dimensional"), as
registered investment advisor, Dimensional is deemed to have
beneficial ownership of 139,100 LNH Shares, all of
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<PAGE> 30
which LNH Shares are held in portfolios of DFA Investment Dimensions
Group, Inc., a registered open end investment company, or the DFA
Group Trust and DFA Participation Group Trust, investment vehicles for
qualified employee benefit plans, for all of which Dimensional serves
as investment manager. Dimensional disclaims beneficial ownership of
all such LNH Shares.
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<PAGE> 31
THE MERGER
BACKGROUND OF THE MERGER
In 1992, EastGroup and Walker Investments, L.P. and affiliated entities
(collectively the "Walker Interests") began to purchase LNH Shares in open
market transactions. At the time of these purchases Lomas Financial Corporation
("LFC") was under court protection from its creditors under Chapter 11 of the
United States Bankruptcy Code. LFC owned 16% of the outstanding LNH Shares. In
early 1992, EastGroup and the Walker Interests entered into an agreement with
LFC pursuant to which the Walker Interests and EastGroup jointly purchased the
LNH Shares owned by LFC (75% by the Walker Interests, 25% by EastGroup), and a
partnership affiliated with EastGroup and Walker became the manager for LNH
under the Management Agreement as part of the purchase. As a result of the
purchase of LNH Shares from LFC, EastGroup and the Walker Interests jointly
owned 23.12% of the outstanding LNH Shares.
In March 1995, EastGroup announced that it had agreed to purchase the
383,775 LNH Shares owned by the Walker Interests for $7.50 per LNH Share in
cash. At the same time, EastGroup also agreed to purchase the Walker
Interests' share of the partnership that was the manager under the Management
Agreement for $183,738 in cash. As a result of these transactions, which were
consummated in April 1995, EastGroup became the beneficial owner of a total of
515,200 LNH Shares (23.42%). At the time that management proposed that
EastGroup purchase the LNH Shares from the Walker Interests, management also
suggested that a future business combination transaction between LNH and
EastGroup might be appropriate. When it announced the agreements with the
Walker Interests, EastGroup also announced that it had formed a Special
Committee comprised of independent trustees (Alexander G. Anagnos and Harold B.
Judell) to consider EastGroup's future strategy for its investment in LNH.
EastGroup also disclosed at that time that its future strategy with respect to
LNH could include a business combination transaction in which EastGroup would
be the surviving entity. LNH formed a similar committee, comprised of Robert
Ted Enloe and George R. Farish.
During early April 1995, both Special Committees requested that
management provide them with information with respect to LNH, EastGroup, their
assets and the historic prices of LNH Shares and EastGroup Shares. EastGroup's
Special Committee held a meeting by telephone on April 13, 1995, in which
Messrs. Anagnos and Judell participated along with counsel and N. Keith McKey,
Chief Financial Officer of both LNH and EastGroup. Mr. McKey answered the
EastGroup Special Committee's questions about the financial position and
results of operations of both LNH and EastGroup. The EastGroup Special
Committee requested that management provide it with additional information with
respect to LNH's assets.
On May 1, 1995, the EastGroup Special Committee held another meeting
by telephone, in which Messrs. Anagnos and Judell participated. Also present
were counsel, Mr. McKey and David H. Hoster II, President of EastGroup and
Executive Vice President of LNH. The Special
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<PAGE> 32
Committee conducted a detailed review of LNH's assets, and asked questions of
the members of management present. In particular, the Special Committee looked
into the situation with respect to the Cowesett Corners investment, which is a
mortgage loan made by LNH secured by a shopping center in Rhode Island. The
borrower with respect to this loan had sought protection under the United
States Bankruptcy Code, and the Special Committee was concerned as to the value
of LNH's investment.
Later on May 1, 1995, the full EastGroup Board of Trustees held a
meeting at which the EastGroup Special Committee discussed its findings with
respect to LNH and recommended that EastGroup propose a business combination
transaction to LNH if acceptable terms could be negotiated. The Board decided
that EastGroup should hold off making such a proposal to LNH until legal
decisions with respect to Cowesett were rendered and the status of certain
other business combination transactions that EastGroup was studying became
clearer.
In mid-August 1995, common management suggested that it might be
appropriate for EastGroup to consider whether to propose a business combination
to LNH. The EastGroup Special Committee requested further information with
respect to LNH and also directed management to prepare financial analyses with
respect to a merger between LNH and EastGroup. The EastGroup Special Committee
met by telephone on August 28, 1995. Messrs. Anagnos and Judell, counsel, and
Messrs. McKey and Hoster participated in the meeting. After a discussion of
the present situation with respect to Cowesett Corners and the financial
analysis, the EastGroup Special Committee decided that it would like to meet
with the LNH Special Committee. Counsel to EastGroup communicated to counsel
for LNH the EastGroup Special Committee's desire to meet LNH's Special
Committee.
The LNH Special Committee met by teleconference on August 31, 1995.
Messrs. Farish and Enloe participated at the meeting, and also present was LNH
Counsel. Counsel reported that EastGroup management had requested the LNH
Special Committee to give preliminary consideration to a merger of LNH into
EastGroup based upon a ratio that would assume a value of LNH in the $7.50 per
share range and the value of EastGroup in the $20.00 per share range. After a
discussion of the assumed ratio, the Committee concluded that they were not
presently discouraged by the values of the assumed ratio, and that they saw
merit in the idea of a possible combination with EastGroup.
On September 6, 1995, the LNH Special Committee met again in Jackson,
Mississippi. Present at the meeting were Messrs. Farish, Enloe (via
telephone) and LNH counsel. Also present (via telephone) for a portion of the
meeting was Mr. G. Clyde Buck of Rauscher Pierce. The Committee discussed at
length specific assets of LNH. Mr. Farish gave a summary of the report on the
Cowesett Corners property that had been given to the full LNH Board of
Directors at its regular meeting earlier in the day. According to that report,
a third party had made a preliminary offer to purchase the property, but
consummation of the purchase was subject to many contingencies.
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<PAGE> 33
Simultaneously, the EastGroup Special Committee was also meeting in
Jackson, Mississippi. Present at the meeting were Messrs. Anagnos and Judell
and EastGroup counsel. Following discussion, the EastGroup Special Committee
proposed that there be a merger of LNH into EastGroup in which each LNH Share
would be valued at $7.50. Assuming a value per EastGroup Share of $20.00, the
shares of LNH would be exchanged for EastGroup Shares in the merger at a ratio
of one LNH Share for each .375 EastGroup Shares. This proposal was
communicated to the LNH Special Committee.
Following the discussion of the proposal of the EastGroup Special
Committee, the LNH Special Committee offered a counter-proposal whereby each
LNH Share would be converted into EastGroup Shares at a value of $8.40 per LNH
Share. The EastGroup Special Committee met separately to consider the
proposal, and decided that they could not recommend a transaction at that
exchange ratio because it would be dilutive to EastGroup's shareholders on a
funds from operations per share basis. Counsel for EastGroup met with the LNH
Special Committee and its counsel to explain EastGroup's position.
The LNH Special Committee once again met separately. With the
participation of Mr. Buck, the LNH Special Committee discussed a number of
factors, and sought additional information from LNH's Chief Financial Officer
and from EastGroup Counsel. After that meeting, counsel to EastGroup again met
with the LNH Special Committee and LNH's counsel, at which time the LNH Special
Committee proposed that there be a merger of LNH into EastGroup in which each
LNH Share would be valued at $7.75. The EastGroup Special Committee decided it
could recommend a merger of LNH into an EastGroup wholly-owned subsidiary in
which each LNH Share was converted into EastGroup Shares with a value of $7.75;
provided, however, that the exchange ratio would not be greater than four
tenths of one (0.4) EastGroup Share or less than three hundred seventy five
thousandths of one (0.375) EastGroup Share. On September 6, 1995, the
agreement in principle between the Special Committees was publicly announced.
The LNH Special Committee met again on October 27, 1995 by
teleconference. Present were Messrs. Farish and Enloe, and also present was
LNH Counsel. Following a discussion of the possible sale of the Cowesett
Corners property, and related issues, the LNH Special Committee decided to make
alternative proposals to the EastGroup Special Committee regarding the terms of
the merger, as follows: (1) assuming a sale of the Cowesett Corners property
prior to the merger with EastGroup, there would be an exchange of shares at the
previously agreed values, and the shareholders of LNH would also receive cash
equal to the amount realized from the sale of Cowesett Corners in excess of its
current net asset value; or (2) if no sale occurred, the exchange ratio in the
merger would be based upon a value of $8.00 per LNH Share.
The EastGroup Special Committee met by telephone on October 30, 1995
to consider the desire of the LNH Special Committee to revise the terms of the
Merger. Messrs. Anagnos, Judell and McKey and EastGroup counsel were present
at the meeting. The EastGroup Special Committee discussed the LNH Special
Committee's proposal and asked questions about the Cowesett Corners situation,
the complicated nature of the proposal made by the LNH Special
21
<PAGE> 34
Committee, and the probability that the sale of Cowesett Corners would actually
take place. The EastGroup Special Committee decided that it would not agree to
a transaction in which consideration other than EastGroup Shares would be paid
by EastGroup. The EastGroup Special Committee decided to propose to LNH a
transaction in which each LNH Share would be converted into EastGroup Shares
with a value of $8.00, with floor and ceiling ratios of .368 and .393.
On November 3, 1995, the LNH Special Committee met to consider the
response of the EastGroup Special Committee to its October 27 proposal.
Present by teleconference were Messrs. Farish and Enloe, and also present was
LNH Counsel. Present for a portion of the meeting (via telephone) was Mr. Buck
of Rauscher Pierce. Following discussion, Mr. Enloe suggested that it would be
valuable for the LNH Special Committee to be furnished with an analysis by the
Chief Financial Officer of LNH as to what LNH might reasonably expect to
realize if all of its assets were liquidated within the next several months.
The LNH Special Committee determined to request such an analysis prior to
making any additional proposals to the EastGroup Special Committee.
The LNH Special Committee met again on November 30, 1995, by
teleconference. Present were Messrs. Farish and Enloe, and also present was
Mr. McKey, Chief Financial Officer of LNH. Mr. Farish reported that LNH was in
the process of foreclosure on the Cowesett Corners property, and would take
title to it. Mr. Farish also reported that a potential buyer was still
interested in the property, but that any sale of the property in the near
future was not certain. There followed a discussion of the liquidation
analysis furnished to the LNH Special Committee by Mr. McKey. The Committee
determined that for a number of reasons it would be preferable for LNH to
combine with EastGroup rather than undertake other strategic alternatives.
(See "LNH Directors' Reasons for Recommending the Merger.") The LNH Special
Committee determined to propose that LNH merge into EastGroup based upon a
valuation of $8.10 per LNH Share and $21.00 per EastGroup Share, with floor and
ceiling ratios of .375 and .40.
The EastGroup Special Committee met by telephone on December 4, 1995
to consider the proposal of the LNH Special Committee. Present at the meeting
were Messrs. Anagnos and Judell and EastGroup counsel. The EastGroup Special
Committee once again analyzed the Cowesett Corners situation, the present price
of EastGroup Shares and the other assets of LNH. The EastGroup Special
Committee decided to request that management do an analysis of the effect that
the proposed merger as revised would have on EastGroup's funds from operations
per share. If that analysis showed that the proposed merger would not be
dilutive to EastGroup's funds from operations per share, the EastGroup Special
Committee would accept the proposal by the LNH Special Committee.
On December 6, 1995, the LNH Special Committee met in Atlanta,
Georgia. The LNH Special Committee determined that the shareholders should be
offered a specific dollar value of EastGroup Shares for their LNH Shares and
that the final exchange ratio should not be subject to a collar. They also
requested the 30 day trading period be reduced to 10 days. Later on
22
<PAGE> 35
December 6, 1995, the LNH Special Committee met with the EastGroup Special
Committee, and the two special committees reached the revised agreement in
principle on the Merger. The revised agreement in principle was announced on
December 6, 1995. On December 22, 1995, the Merger Agreement was executed by
the parties.
LNH DIRECTORS' REASONS FOR RECOMMENDING THE MERGER
As a result of the decrease in the amount of LNH's assets during
recent years, the directors considered whether it was in the best interest of
LNH's shareholders to maintain its status as a separate public company with all
of the costs attached thereto or conbine with EastGroup. The Merger will allow
LNH to avoid what would probably be an indefinitely extended process of
liquidating its assets, with no assurance that those assets could be liquidated
at values approximating their current net asset values on the books of LNH, or
that they could be liquidated at all. During such an uncertain process, LNH
would continue to incur fixed costs of managing its residual assets. Ownership
of EastGroup Shares would provide LNH Shareholders with an immediate increase
in dividend income, improved liquidity and significantly greater potential for
market value appreciation. LNH's directors also considered the fact that the
Merger is a tax-free reorganization, that the price offered by EastGroup
represented a premium over the prevailing market price for LNH Shares and that
the price offered by EastGroup for LNH Shares exceeded the price paid by
EastGroup to the Walker Interests.
EASTGROUP'S REASONS FOR EFFECTING THE MERGER
The Merger will have the effect of increasing the number of
outstanding EastGroup Shares, which is in accordance with EastGroup's strategy
of increasing its market capitalization. Since LNH has no debt, the Merger
will decrease EastGroup's debt-to-equity ratio, and adding LNH's assets to
EastGroup's portfolio will increase EastGroup's liquidity. Also, as a result
of the Merger, LNH will cease to be a publicly held company and the cost
attendant thereto will be saved, benefitting the shareholders of EastGroup
because EastGroup is a 23% shareholder in LNH and EastGroup's shareholders are
bearing their proportionate share of the cost of maintaining LNH as a public
company.
LNH FAIRNESS OPINION
LNH engaged Rauscher Pierce on October 19, 1995 to evaluate the
fairness from a financial point of view of the consideration to be received in
the Merger by the shareholders of LNH. Rauscher Pierce has not performed
investment banking services for LNH or EastGroup during the past five years,
but it has performed investment banking services for The Parkway Company, First
Continental Real Estate Investment Trust and Eastover Corporation. The Parkway
Company and Eastover Corporation were parties to the Expense-Sharing Agreement
described below, and First Continential Real Estate Investment Trust was merged
into The Parkway Company. See "--Expense-Sharing Arrangements". LNH agreed to
pay Rauscher Pierce a fee of $50,000 plus reasonable out-of-pocket expenses for
its services. LNH agreed
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<PAGE> 36
to pay Rauscher Pierce 50% of such amount when it engaged Rauscher Pierce and
the remaining 50% upon the delivery of Rauscher Pierce's opinion or termination
of the transaction.
LNH interviewed three investment banking firms with which it was
familiar with a view to selecting one firm to opine on the fairness of the
Merger, and selected Rauscher Pierce on the basis of Rauscher Pierce's general
reputation. As part of Rauscher Pierce's investment banking business, Rauscher
Pierce is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements, and valuations for estate, corporate and other purposes.
On December 21, 1995, Rauscher Pierce delivered to the Board of
Directors of LNH its written opinion dated December 21, 1995 setting forth its
opinion that, based on its review and on the information provided to it by LNH
and EastGroup, the consideration to be received by shareholders of LNH in the
Merger is fair to LNH and its shareholders from a financial point of view. A
copy of Rauscher Pierce's opinion is reproduced as Appendix B to this Proxy
Statement/Prospectus and should be read in its entirety.
Rauscher Pierce's opinion was based on Rauscher Pierce's review and
analysis of, among other things: (i) the trading histories of LNH Shares and
EastGroup Shares prior to and after the public announcement of the proposed
Merger; (ii) LNH's quarterly operating results for the quarters ended March 31,
1995, June 30, 1995, September 30, 1995 and yearly operating results for the
years ended December 31, 1992, 1993 and 1994; (iii) EastGroup's quarterly
operating results for the quarters ended March 31, 1995, June 30, 1995 and
September 30, 1995 plus EastGroup's operating results for the years ended
December 31, 1992, 1993 and 1994; (iv) the fact that the Merger would be
submitted to a vote of the shareholders of LNH; (v) the fact that the
transaction is intended to be tax-free; and (vi) certain other matters and
other factors as Rauscher Pierce deemed relevant such as the lack of
indications of interest in LNH's assets from any third party.
As part of its review, Rauscher Pierce reviewed: (i) drafts of the
Agreement and Plan of Merger subsequently dated December 22, 1995 and entered
into by EastGroup, Sub and LNH; (ii) an analysis dated November 8, 1995,
prepared by LNH, of the values of assets and liabilities of LNH and EastGroup
with adjustments for the estimated fair market value of certain assets;
(iii) EastGroup's recent annual and quarterly reports filed pursuant to the
Exchange Act; (iv) LNH's recent annual and quarterly reports filed pursuant to
the Exchange Act; (v) EastGroup's Notice of Annual Meeting and Proxy Statement
dated April 27, 1995; (vi) LNH's Notice of Annual Meeting and Proxy Statement
dated April 27, 1995; and (vii) a draft of this Registration Statement on Form
S-4. In addition, representatives of Rauscher Pierce discussed with management
of EastGroup and LNH the respective outlooks for future operating results, the
assets and liabilities of both companies, various matters disclosed in the
documents Rauscher Pierce reviewed as described above, and other matters
Rauscher Pierce considered relevant to its review.
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<PAGE> 37
Stock Trading Histories. As noted above, Rauscher Pierce reviewed the
trading histories of LNH Shares and EastGroup Shares prior to and after the
September 6, 1995 public announcement that EastGroup and LNH had agreed in
principal to the proposed Merger. Based on such review, Rauscher Pierce
observed that the $8.10 per LNH Share in market value of EastGroup Shares to
be issued represented a 27% premium to LNH shareholders over the 6.375
average price during July 1995 of LNH Shares and an 8% premium over the highest
price of LNH Shares during the past 12 months of $7.50 per LNH Share.
Annual and Quarterly Operating Results. Rauscher Pierce reviewed
LNH's and EastGroup's quarterly operating results as set forth in their
quarterly reports on Form 10-Q for the quarters ended March 31, 1995, June 30,
1995 and September 30, 1995 plus their annual reports and Form 10-K for the
years ended December 31, 1992, 1993 and 1994.
Submission to a Vote of LNH's Shareholders. Rauscher Pierce noted
that the Merger will be submitted to a vote of LNH's Shareholders.
No Unrecognized Value. Rauscher Pierce noted that there is no
potential source of substantial "hidden" or "unrecognized value" in LNH that
would suddenly make the assets of LNH much more valuable in the future.
No Dilution. Rauscher Pierce considered certain specific information
regarding the potential dilution per EastGroup Share from such items as
outstanding options, stock appreciation rights and incentive compensation
units. Assuming the exercise of all such items, the resulting dilution of
approximately 0.19% was considered by Rauscher Pierce to be immaterial to the
analysis of the fairness of the Merger.
Rauscher Pierce also noted that although the estimated liquidation
value per share of LNH's assets exceeds the $8.10 per share price established
in the Merger Agreement, the distribution of such liquidation proceeds would be
taxable to LNH's shareholders. The Merger is intended to be a reorganization
under the Code, resulting in no taxable income being recognized by LNH's
shareholders and a carryover tax basis in the EastGroup shares received in the
Merger.
Rauscher Pierce indicated that based upon its review and analysis and
considering the lack of other interested buyers of LNH, the consideration to be
received in the Merger by the shareholders of LNH was fair to LNH's
shareholders from a financial point of view.
Neither LNH, EastGroup nor any other person imposed any limitation of
any nature on the scope or any other aspect of Rauscher Pierce's review.
Rauscher Pierce did not independently verify the accuracy of any of the
information provided to it by EastGroup or LNH, and did not make an independent
evaluation or appraisal of specific real estate holdings or other assets of
EastGroup or LNH. The consideration to be paid to LNH shareholders upon
consummation of the Merger was determined by negotiations between directors and
officers of LNH and trustees and officers of EastGroup; Rauscher Pierce did not
recommend the amount.
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<PAGE> 38
OPERATIONS FOLLOWING THE MERGER
If the Merger Agreement is approved by the shareholders of LNH,
EastGroup will survive as the parent corporation, and LNH will merge with and
into Sub, which will succeed to all of the assets and liabilities of LNH.
EastGroup, both directly and through its subsidiaries, will continue to
actively seek new investment properties to add to its portfolio of real estate
properties. See "Information Concerning EastGroup."
EXPENSE-SHARING ARRANGEMENTS
Description of Arrangements. Until December 31, 1994, EastGroup had
an expense-sharing agreement with Congress Street Properties, Inc. ("Congress
Street"), The Parkway Company ("Parkway"), and Eastover Corporation
("Eastover") pursuant to which the participants shared administrative offices
at the same location in Jackson, Mississippi and common officers and other
personnel, subject to the authority of the board of each member company to
elect or appoint and remove its officers in accordance with its certificate of
incorporation, declaration of trust or other charter documents and applicable
law. EB, Inc. ("EB") had a separate administrative agreement with Congress
Street which allowed EB to participate in the expense-sharing arrangement on
the same basis as the companies which were parties to the expense-sharing
agreement. Under this arrangement, the participants shared the cost of the
common officers and other employees and of shared facilities and activities.
These common costs were initially paid by Congress Street, which served as the
administrator of the arrangement, and the other participants paid Congress
Street an annual fee (on a monthly basis) of one-half of one percent of their
assets which were publicly-traded securities. After these fees and any profits
of Eastover Realty Corporation, a real estate company that was a subsidiary of
Congress Street, were subtracted from total common costs, the remaining common
costs were allocated on a monthly basis among EastGroup, Parkway, Congress
Street, Eastover and EB (collectively, the "Expense-Sharing Participants") in
proportion to their assets other than publicly-traded securities, based on
their balance sheets as contained in their most recent SEC filings. Certain
costs which the common officers believed to be particularly attributable to
each member company were not shared. These non-allocable costs included but
were not limited to directors' and trustees' fees, legal, audit and stock
transfer expenses, stationery and items of similar nature. Since the
allocation formula was not based upon actual costs incurred by each member
company, the allocation may have, from time to time, resulted in a greater or
lesser charge to each member company than would have resulted if actual costs
to each member company were allocated.
In connection with the business combinations involving the
Expense-Sharing Participants (i.e., Congress Street merged with a wholly-owned
subsidiary of Parkway on November 29, 1994, Eastover combined with EastGroup on
December 22, 1994 and EB combined with Parkway on April 27, 1995), the above
described expense-sharing arrangements terminated on December 31, 1994, except
that EastGroup had the responsibility for managing LNH under the
26
<PAGE> 39
prior administration agreement between LNH and Congress Street. See "--
Administration Agreement." Since that date, Parkway and EastGroup each have
their own respective officers and employees, who do not serve as officers or
employees of the other company, except for Leland R. Speed, who continues to
serve as the Chief Executive Officer of both companies, and a small number of
clerical and support staff employees. The officers of EastGroup also continue
to serve as officers of LNH; in addition, the President of Parkway--Steven G.
Rogers--continues to serve as an officer of LNH. David H. Hoster II and N.
Keith McKey, who formerly served as officers of all the Expense-Sharing
Participants, now serve as officers of EastGroup and LNH and not Parkway.
EastGroup, LNH and Parkway continue to share the same leased office space at
One Jackson Place in Jackson, Mississippi and share the services of Mr. Speed
and certain clerical and support staff employees and expenses related thereto
are shared among Parkway and EastGroup (except for certain costs which can be
attributed to either company based on its actual use of the services involved).
LNH's costs are paid as provided in the Management Agreement (described below).
LNH Management Agreement. LNH has no salaried employees; its officers
are elected by the Board of Directors solely to facilitate the execution of
commitments and other obligations on behalf of LNH. Except for certain
benefits received pursuant to the Incentive Compensation Plan effective October
1, 1993, none of the officers of LNH receives any remuneration from LNH in his
or her capacity as an officer of LNH. EGP Managers provides all executive and
administrative personnel, office space and general services required by LNH.
Management services for LNH are rendered by EGP Managers under a
Management Agreement. Until April 3, 1995, the manager, pursuant to the
Management Agreement, was LNH REIT Managers, a Mississippi general partnership
in which Walker Managers, L.P. ("Walker") and EGP Managers were equal
partners. In connection with EastGroup's purchase of 383,775 LNH Shares for
$7.50 in cash per LNH Share from affiliates of Walker, EGP Managers purchased
Walker's one-half interest in LNH REIT Managers, and EGP Managers replaced LNH
REIT Managers as manager under the Management Agreement. EGP Managers is
entitled to receive a basic annual fee (the "Basic Fee"), payable in monthly
installments, equal to the sum of 1.25% of the first $100,000,000 or portion
thereof of LNH's Invested Assets (as defined in the Management Agreement),
1.125% of the second $100,000,000 or portion thereof, 1.00% of the third
$100,000,000 or portion thereof, 0.875% of the fourth $100,000,000 or portion
thereof and 0.75% of the portion (if any) of Invested Assets exceeding
$400,000,000.
EGP Managers may also receive incentive compensation equal to the
excess, if any, of (x) the Average Annual Incentive Fee (as defined below) for
the period from May 26, 1981 (the date on which LNH received the net proceeds
of the public offering of LNH Shares), to the end of any fiscal year,
multiplied by the number of 12-month fiscal years and fractions thereof in such
period, over (y) the aggregate amount of incentive fee, if any, earned by the
manager in prior years. The "Average Annual Incentive Fee" at the end of any
fiscal year will be equal to the sum of:
27
<PAGE> 40
(i) 10% of the amount by which the Average Annual Net Profit (as
defined in the Management Agreement) from May 26, 1981, to such time exceeds
12% of the Average Net Worth (as defined in the Management Agreement) for such
period; and
(ii) 5% of the amount by which the Average Annual Net Profit from
May 26, 1981, to such time exceeds 17% of the Average Net Worth for such
period; and
(iii) 5% of the amount by which the Average Annual Net Profit from
May 26, 1981, to such time exceeds 22% of the Average Net Worth for such
period.
During the year ended December 31, 1994, LNH paid Management Fees of
$338,000. EGP Managers did not receive incentive compensation in the fiscal
year ended December 31, 1994, and is not expected to receive incentive
compensation in the current fiscal year. Effective July 1, 1994, EGP Managers
agreed to amend the Management Agreement to provide that the Management Fee
paid by LNH will not exceed $29,167 per month. The Management Agreement will
be terminated on the Effective Date.
Administration Agreement. Effective April 22, 1992, LNH REIT Managers
entered into an administration agreement (the "Administration Agreement"), with
Congress Street. Under the Administration Agreement, Congress Street (and
later EastGroup) administered the day-to-day business of LNH in return for a
$125,000 annual fee, payable by LNH's manager. In connection with the
termination of the expense-sharing arrangements described above, EastGroup
assumed Congress Street's duties under the Administration Agreement. The
Administration Agreement was terminated effective March 31, 1995.
FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a discussion of certain federal income tax
consequences of the Merger generally applicable to EastGroup, LNH and their
respective shareholders. This discussion has been prepared by and is based on
an opinion rendered by Jaeckle, Fleischmann & Mugel, counsel to LNH, a copy of
which is attached as Appendix C.
Effect of the Merger. LNH has received an opinion from Jaeckle,
Fleischmann & Mugel, based on the terms of the Merger Agreement and certain
related factual representations and assumptions that:
(i) The Merger will constitute a reorganization within the meaning
of section 368(a) of the Code, and EastGroup, LNH and Sub will
each be a party to the reorganization within the meaning of
section 368(b) of the Code.
(ii) No gain or loss will be recognized by EastGroup, LNH or Sub in
the Merger.
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<PAGE> 41
(iii) No gain or loss will be recognized by the holders of LNH
Shares upon their receipt of EastGroup Shares in exchange for
their LNH Shares, except that holders of LNH Shares who
receive cash proceeds from the sale of fractional interests in
EastGroup Shares will recognize gain or loss equal to the
difference between such proceeds and the tax basis allocated
to their fractional share interests and such gain or loss will
constitute capital gain or loss if their LNH Shares are held
as a capital asset at the Effective Time.
(iv) The aggregate tax basis of the EastGroup Shares (including
fractional share interests treated as received) received by
the holders of LNH Shares will be the same as the aggregate
tax basis of their LNH Shares.
(v) The holding period of the EastGroup Shares in the hands of the
holders of LNH Shares will include the holding period of their
LNH Shares, provided such LNH Shares are held as a capital
asset at the Effective Time.
In rendering the foregoing opinions, counsel has relied upon
information contained in this document and the Merger Agreement, and upon the
representations by EastGroup, Sub and LNH set forth in their respective
officers' certificates dated the date of such opinion.
TAXATION OF EASTGROUP
Since its inception, EastGroup has elected to be taxed as a REIT under
the Code. To qualify as a REIT for a taxable year, EastGroup must meet certain
requirements. Generally, at the end of each calendar quarter at least 75% of
the value of its total assets must consist of real estate assets, cash or
governmental securities and not more than 25% of the value of its total assets
may consist of securities that are not counted as good assets under the
foregoing 75% test. EastGroup may not own more than 10% of the outstanding
voting securities of any corporation and may not own securities of any one
issuer comprising more than 5% of the total value of its assets; shares of
qualified REITs and of certain wholly-owned subsidiaries, such as the Sub, are
exempt from these prohibitions.
The Code also places restrictions on a REIT's sources of income. It
requires that in each taxable year at least 95% of EastGroup's gross income be
derived from certain real estate activities, plus dividends, interest or gains
from disposition of stock or securities. Additionally, gross income from the
sale or other disposition of stock and securities held for less than one year
and of real property held for less than four years must comprise less than 30%
of the gross income for each taxable year of EastGroup. For each taxable year,
at least 75% of a REIT's gross income must be derived from specified real
estate sources. Real estate income for purposes of those requirements includes
gains from the sale of real property not held primarily for sale to customers
in the ordinary course of business, dividends on REIT shares, interest on loans
secured by mortgages on real property, certain rents from real property and
income from foreclosure property. For rents to qualify, they may not be based
on the income or profits of any person, except that they may be based on a
fixed percentage or percentages of gross income
29
<PAGE> 42
or receipts, and the REIT may not manage the property or furnish services to
tenants except (i) through an independent contractor which is paid an
arm's-length fee and from which the REIT derives no income, or (ii) for any
services performed which are of a type customarily rendered in connection with
the rental of space for occupancy only and are not otherwise considered
rendered to the occupant. The requirements that must be satisfied for income
to be within the 75% class of gross income are highly technical and not always
consistent with normal real estate practice.
EastGroup must satisfy certain ownership restrictions that limit (i)
concentration of ownership of shares by a few individuals and (ii) ownership by
or common ownership of EastGroup of its tenants. The shares of EastGroup must
be held by at least 100 shareholders. No more than 50% in value of the
outstanding shares may be owned actually or constructively by five or fewer
individuals or certain other entities at any time during the last half of
EastGroup's taxable year. Accordingly, EastGroup's Declaration of Trust, as
amended, authorizes EastGroup to redeem its shares if directors are of the good
faith opinion that the beneficial ownership of EastGroup has become
concentrated to such an extent as to jeopardize its REIT classification.
However, because the Code imposes broad attribution rules in determining
constructive ownership, no assurances can be given that the restrictions of the
Declaration of Trust, as amended, will be effective in maintaining EastGroup's
REIT status.
So long as EastGroup qualifies for taxation as a REIT and distributes
at least 95% of its real estate investment trust taxable income (computed
without respect to net capital gains or the dividends received deduction) for
its taxable year to its shareholders annually, EastGroup will not be subject to
federal income tax on that portion of such income distributed to shareholders.
Any undistributed taxable income or gain, however, will be taxed to EastGroup
at regular corporate rates. In addition, EastGroup may be subject to other
special income and excise taxes in certain circumstances.
If EastGroup fails to qualify as a REIT for any taxable year and
certain relief provisions do not apply, EastGroup will be subject to federal
income tax (including the alternative minimum tax) on its taxable income at
regular corporate rates and it will not receive a deduction for dividends paid
to its shareholders. Distributions to shareholders will be taxable as ordinary
income to the extent of current and accumulated earnings and profits and,
subject to certain limitations, will be eligible for the corporate dividends
received deduction, but there can be no assurance that any such distributions
would be made. Failure to qualify as a REIT could result in EastGroup
significantly reducing its distributions and incurring substantial indebtedness
or liquidating substantial investments in order to pay the resulting taxes. In
addition, EastGroup would not be eligible to elect REIT status for the four
subsequent taxable years, unless its failure to qualify was due to reasonable
cause, and not to willful neglect, and certain other requirements were
satisfied. In order to renew its REIT qualification, EastGroup would be
required to distribute all of its current and accumulated earnings and profits,
which distributions would be taxable as ordinary income to its shareholders,
and EastGroup might be subject to taxation on any unrealized gain inherent in
its assets.
30
<PAGE> 43
TAXATION OF THE SHAREHOLDERS OF A REIT
Distributions made to its shareholders out of current or accumulated
earnings and profits of EastGroup (including earnings and profits from LNH)
will generally be taxed to them as ordinary income. A distribution by
EastGroup of net capital gains will generally be treated as a capital gain to
shareholders to the extent properly designated by EastGroup as a capital gain
dividend. Capital gains of corporations are generally taxed in the same manner
as ordinary income except that capital losses are deductible only to the extent
of capital gains. Under Section 291 of the Code, however, corporate
shareholders may be required to treat up to 20% of any such capital gain as
ordinary income. For noncorporate taxpayers, net capital gains are taxed at a
maximum rate of 28%, while short-term capital gains and ordinary income are
taxed at a maximum rate of 39.6%. However, because of certain limitations on
itemized deductions and personal exemptions, the effective rate may be higher
in certain circumstances. Except to a very limited extent, capital losses of
noncorporate taxpayers are deductible only to the extent of capital gains.
Neither distributions of earnings and profits nor capital gains dividends are
eligible for the dividends-received deduction for corporations. Any loss on a
sale of shares of a REIT which were held for six months or less and with
respect to which a capital gain dividend was received will be treated as a
long-term capital loss, up to the amount of the capital gain dividend received
with respect to such shares. A distribution in excess of current or
accumulated earnings and profits will constitute a nontaxable return of
capital, to the extent of the shareholder's basis in his shares of the REIT,
and is applied to reduce the shareholder's basis in such shares. To the
extent such a distribution is greater than such basis, it will be treated as
capital gain to those shareholders holding their shares as capital assets.
EastGroup will notify each shareholder as to the portions of each distribution
which, in its judgment, constitute ordinary income, capital gain or return of
capital. Should EastGroup incur ordinary or capital losses, shareholders will
not be entitled to include such losses in their own income tax returns.
THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION
ONLY. IT DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN TAX ASPECTS OF THE
MERGER OR REIT OPERATIONS. THE DISCUSSION IS BASED ON CURRENTLY EXISTING
PROVISIONS OF THE CODE, EXISTING AND PROPOSED TREASURY REGULATIONS THEREUNDER
AND CURRENT ADMINISTRATIVE RULINGS AND COURT DECISIONS. THE OPINIONS OF
COUNSEL DESCRIBED ABOVE ARE NOT BINDING UPON THE INTERNAL REVENUE SERVICE AND
NO RULINGS OF THE INTERNAL REVENUE SERVICE HAVE BEEN OR WILL BE SOUGHT OR
OBTAINED. THERE IS NO ASSURANCE THAT THE INTERNAL REVENUE SERVICE WILL AGREE
WITH THE OPINIONS DESCRIBED ABOVE. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE
AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF THIS DISCUSSION.
ANY SUCH CHANGE MAY OR MAY NOT BE RETROACTIVE AND COULD AFFECT THE TAX
CONSEQUENCES OF THE MERGER AND QUALIFICATION AND TAXATION OF EASTGROUP AS A
REIT. EACH HOLDER OF LNH SHARES SHOULD CONSULT HIS OR HER OWN TAX ADVISOR WITH
RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER
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<PAGE> 44
AND THE OWNERSHIP OF EASTGROUP SHARES TO SUCH HOLDER, INCLUDING THE APPLICATION
AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.
ACCOUNTING TREATMENT
The Merger will be accounted for as a "purchase" transaction.
NO DISSENTERS' RIGHTS
Shareholders of LNH who vote against the Merger (or abstain or fail to
vote at all) will nevertheless be bound by the results of the vote if LNH's
shareholders approve the Merger. Dissenting shareholders do not have appraisal
rights in connection with the Merger.
RESTRICTIONS ON RESALES OF SECURITIES
The EastGroup Shares to be issued pursuant to the Merger Agreement have
been registered under the Securities Act. Under present law, any public
reoffering or sale of such shares by any person who is not an "affiliate" of
LNH at the time the Merger Agreement is submitted to a vote of LNH's
shareholders will not have restrictions thereon. Also, under present law, any
public reoffering or sale of such shares by any person who is an "affiliate" of
LNH at the time the Merger Agreement is submitted to a vote of LNH's
shareholders ("LNH Affiliate") will require either (i) the further registration
of such shares under the Securities Act, (ii) compliance with Rule 145
promulgated under the Securities Act, which permits sales under certain
conditions, as discussed below, or (iii) the availability of another exemption
from such further registration. In very general terms, under Rule 145,
assuming that the LNH Affiliate is not, at any time, an affiliate of EastGroup,
the LNH Affiliate may publicly sell such EastGroup Shares if the LNH Affiliate:
(1) (a) sells during any three-month period no more than the number of
EastGroup Shares permitted under Rule 144(e) (which is generally the greater of
(i) 1% of the total number of EastGroup Shares outstanding, or (ii) the average
weekly volume of trading of EastGroup Shares for the four calendar weeks prior
to the sale); (b) sells in a "brokers' transaction" (which means, generally,
that the broker can do no more than execute the order as agent for the seller,
can receive no more than the usual broker's commission, cannot solicit orders
to buy in connection with the transaction, and does not believe that the seller
is an underwriter of the securities being sold); (c) does not solicit orders to
buy in connection with the transaction and does not make any payment in
connection with such sale to anyone other than the selling broker; and (d)
sells at a time when there is adequate current public information about
EastGroup (which will be satisfied so long as EastGroup Shares remain
registered under the Exchange Act and EastGroup continues to file the necessary
reports under the Exchange Act); or (2) (a) holds the EastGroup Shares for at
least two years and (b) sells at a time where there is adequate public
information about EastGroup (as in 1(d) above); or (3) holds the EastGroup
Shares for at least three years.
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<PAGE> 45
BOARD OF TRUSTEES AND MANAGEMENT OF EASTGROUP
The following table describes the present trustees and executive
officers of EastGroup:
<TABLE>
<CAPTION>
Name, Position and Tenure with Principal Occupation and Business
EastGroup Age Experience for the Past Five Years (1)
- ------------------------------------------ --- --------------------------------------------------
<S> <C> <C>
Leland R. Speed 62 Chief Executive Officer of LNH since 1992, EB from
Chief Executive Officer since 1988 1993 to 1995, Eastover from 1977 to 1994, Congress
and Managing Trustee since 1978 Street from 1984 to 1994, EastPark Realty Trust from
1983 to 1990, Rockwood National Corporation from 1980
to 1994, Parkway and EastGroup.(2)(3)(4)
David H. Hoster II 50 Executive Vice President of EB until 1995, Parkway,
President and Trustee since 1993 Congress Street and Eastover until 1994; President of
EastGroup since 1993 and Executive Vice President of
EastGroup from 1988 to 1993 and Rockwood National
Corporation from 1988 to 1994; President of EastPark
Realty Trust from 1976 to 1990; Executive Vice
President of LNH until 1995 and President of LNH
since 1995.(2)(3)(4)
N. Keith McKey 44 Executive Vice President since 1993 and Chief
Executive Vice President, Chief Financial Officer of EastGroup since 1992; Senior
Financial Officer and Secretary Vice President since 1988 and Chief Financial Officer
since 1993 and Secretary since 1992; Executive Vice President of
Parkway from 1993 to 1994 and Chief Financial Officer
of Parkway from 1992 to 1994; Senior Vice President
of Congress Street and Eastover until 1994; Chief
Financial Officer and Secretary of Congress Street
and Eastover from 1992 to 1994; Senior Vice President
until 1994 and Chief Financial Officer and Secretary
from 1992 to 1994 of Rockwood National
Corporation.(2)(3)(4)
Alexander G. Anagnos 68 Financial Advisor with WR Family Associates.
Trustee since 1994
</TABLE>
33
<PAGE> 46
<TABLE>
<CAPTION>
Name, Position and Tenure with Principal Occupation and Business
EastGroup Age Experience for the Past Five Years (1)
- ------------------------------------------ --- --------------------------------------------------
<S> <C> <C>
H.C. Bailey, Jr. 55 President of H.C. Bailey Company (real estate
Trustee since 1980 development and investment); President of Bailey
Mortgage Company (mortgage banking) until 1992;
Chairman of the Board and Chief Executive Officer and
President of Security Savings & Loan Association
until 1992; Director of EB until 1995; Director of
LNH since 1992.(5)
Harold B. Judell 80 Senior partner in the law firm of Foley & Judell LLP
Trustee since 1981 (municipal bond attorneys).
David M. Osnos 63 Partner in the law firm of Arent, Fox, Kintner,
Trustee since 1993 Plotkin & Kahn.
John N. Palmer 60 Chairman of Mobile Telecommunication Technologies
Trustee since 1994 Corp. since 1989.
</TABLE>
_______________________
(1) Unless otherwise stated, each nominee has held the positions indicated
for at least the past five years.
(2) Each of these companies was or is primarily engaged in the real estate
business.
(3) The Expense-Sharing Participants are the companies that formerly
participated in the expense-sharing arrangements described above under
"Expense-Sharing Arrangements." The date indicated in the table as the
date an executive officer began serving as such for the Expense-Sharing
Participants indicates generally that the officer began serving as such
for the companies that were participants at that time. Service as an
executive officer for a company that became an Expense-Sharing
Participant after that date began generally at the time the company
became a participant.
(4) Rockwood National Corporation, through its subsidiaries, is engaged in
the real estate business in New Orleans, Louisiana. Rockwood National
Corporation ceased participating in the expense sharing arrangements
described above under "Expense-Sharing Arrangements" on June 28, 1994
and no longer shares common management with EastGroup and LNH.
(5) Security Savings & Loan Association was seized by the Resolution Trust
Company in 1992.
34
<PAGE> 47
INTEREST OF LNH MANAGEMENT AND EASTGROUP IN THE MERGER
If the Merger is approved and consummated, LNH will be merged with and
into Sub, which is a wholly-owned subsidiary of EastGroup. As a result,
EastGroup will own all of the assets of LNH.
35
<PAGE> 48
INFORMATION CONCERNING LNH
The following information regarding LNH is supplementary to the
information contained in LNH's Annual Report to Shareholders for the year ended
December 31, 1994 and LNH's Form 10-QSB for the quarter ended September 30,
1995, which accompany this Proxy Statement/Prospectus and are incorporated
herein by reference. Shareholders should refer to the Annual Report and Form
10-QSB for financial statements regarding LNH and Management's Discussion and
Analysis of Financial Condition and Results of Operations with respect to LNH.
Recent Developments
Cowesett Mortgage. As disclosed in LNH's most recent Form 10-Q, the
borrower with respect to the mortgage secured by the Cowesett Corners Shopping
Center in Warwick, Rhode Island, petitioned for relief under Chapter 11 of the
United States Bankruptcy Code on February 11, 1995. After various motions with
respect to whether LNH and its co-investor should be able to foreclose on the
Cowesett Corners Shopping Center and sell it at public auction, an agreement
was reached and approved by the Court pursuant to which the Cowesett Corners
Shopping Center was to be sold to an unrelated third party and LNH and its
co-investor would release their lien on the Cowesett Corners Shopping Center in
return for a cash payment of $13,250,000, of which $6,625,000 was to be paid to
LNH. The potential purchaser of the Cowesett Corners Shopping Center decided
not to proceed with the transaction. Because the proposed sale did not take
place by the November 30, 1995 deadline, LNH and its co-investor foreclosed
their lien on the property and took title to the property on December 1, 1995.
Liberty Corners. On December 6, 1995, LNH's management and Audit
Committee, based upon management's evaluation of operations in 1995 to date and
projected operations for 1996, decided to record a write-down with respect to
LNH's carrying value of the Liberty Corners Shopping Plaza to $4,650,000. This
write-down will be reflected in the Company's December 31, 1995 financial
statements. The resulting carrying value of Liberty Corners is management's
best estimate of the property's net realizable value.
36
<PAGE> 49
INFORMATION CONCERNING EASTGROUP
The following information regarding EastGroup is supplementary to the
information contained in EastGroup's Annual Report or Form 10-K and Annual
Report to Shareholders for the year ended December 31, 1994 and EastGroup's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1995, which
are incorporated herein by reference.
Recent Developments
Purchase of LNH Shares. In April 1995, EastGroup purchased 383,775
shares (17.4%) of LNH for $7.50 per LNH Share in cash and a one-half interest
of LNH REIT Managers. As a result of this purchase, EastGroup owns 515,200 LNH
Shares (23.42%). See "The Merger -- Background of the Merger."
Purchase of Shares of Copley Properties, Inc. In April 1995, EastGroup
acquired 187,000 shares (5.2%) of common stock, $1.00 par value per share, of
Copley Properties, Inc. ("Copley"), a Boston-based REIT with a portfolio of 13
industrial properties and two office buildings located in Maryland, Georgia,
Florida, Arizona and California. On May 24, 1995, EastGroup proposed an offer
to merge with Copley pursuant to which Copley shareholders would receive an
amount of EastGroup Shares having a value of $12.00 for each Copley share held
by such shareholder. After not receiving a formal response from Copley,
EastGroup withdrew its offer on June 8, 1995. Since then, EastGroup purchased
an additional 342,000 shares of Copley increasing EastGroup's ownership to
529,000 shares of Copley (14.76%). On November 15, 1995, EastGroup made a
preliminary proposal to Copley pursuant to which Copley would be merged into
EastGroup or a wholly-owned subsidiary of EastGroup in a transaction in which
each Copley share would be converted into EastGroup shares with a value of
$13.50 to $14.00.
Purchase of Additional Building at JetPort Commerce Park. In September
1995, EastGroup acquired a 75 percent ownership interest in a 40,200 square
foot multi-tenant industrial building at the JetPort Commerce Park, located in
Tampa, Florida, for a purchase price of approximately $807,000. This
acquisition increases EastGroup's ownership to nine buildings at the JetPort
Commerce Park with a total of 219,900 square feet and also increases
EastGroup's ownership of industrial facilities in the Tampa market to 515,900
square feet.
Sale of SunChase Apartments. In October 1995, EastGroup sold SunChase
Apartments, a 224 unit apartment complex located in Corpus Christi, Texas, for
an aggregate purchase price of $4,580,000 in cash. As a result of this sale,
EastGroup will record a gain of approximately $1,895,000 ($0.45 per EastGroup
Share) in the fourth quarter of 1995. The net proceeds from this sale were
used to reduce EastGroup's outstanding variable rate debt.
Sale of Cascade VII. In October 1995, EastGroup sold Cascade VII, a
20,000 square foot office building in Columbus, Ohio, for $1,600,000 which
resulted in no gain or loss on the
37
<PAGE> 50
transaction. The net proceeds from this sale were used to reduce EastGroup's
outstanding variable rate debt.
38
<PAGE> 51
MARKET PRICES AND DIVIDENDS
EASTGROUP SHARES
On May 3, 1994 EastGroup Shares became listed on the NYSE under the
symbol "EGP." Prior to this date EastGroup Shares were listed on the American
Stock Exchange under the symbol "EGP." As of December 19, 1995, there were
4,231,656 EastGroup Shares outstanding held of record by approximately 802
shareholders.
The following table sets forth the high and low sales prices during and
the cash distributions paid by EastGroup for the calendar quarters specified:
<TABLE>
<CAPTION>
Distribution
Quarter Ended High Low Paid Per Share
- ----------------------------------------------------- ------ ------- --------------
<S> <C> <C> <C>
March 31, 1993 . . . . . . . . . . . . . . . . . . . $20-1/4 $16-1/2 $0.38
June 30, 1993 . . . . . . . . . . . . . . . . . . . . 19-1/8 17 0.38
September 30, 1993 . . . . . . . . . . . . . . . . . 23-5/8 18-1/4 0.38
December 31, 1993 . . . . . . . . . . . . . . . . . . 24-1/4 20-1/8 0.41
March 31, 1994 . . . . . . . . . . . . . . . . . . . 21-1/8 19 0.43
June 30, 1994 . . . . . . . . . . . . . . . . . . . . 20-7/8 18-1/4 0.43
September 30, 1994 . . . . . . . . . . . . . . . . . 19-7/8 18-3/8 0.43
December 31, 1994 . . . . . . . . . . . . . . . . . . 19-3/4 16-1/2 0.45
March 31, 1995 . . . . . . . . . . . . . . . . . . . 19-5/8 17-1/4 0.45
June 30, 1995 . . . . . . . . . . . . . . . . . . . . 20 18-3/8 0.45
September 30, 1995 . . . . . . . . . . . . . . . . . 20-3/4 19 0.47
December 31, 1995 . . . . . . . . . . . . . . . . . . 22-3/8 20-1/4 0.47
(through December 21, 1995)
</TABLE>
On September 5, 1995, the most recent trading day on which EastGroup
Shares traded prior to the public announcement as to the agreement in principle
between EastGroup and LNH regarding the Merger (which occurred on September 6,
1995), the closing price for EastGroup Shares on NYSE was $19.875. On December
4, 1995, the most recent trading day on which EastGroup Shares traded prior to
the public announcement as to the revised agreement in principle between
EastGroup and LNH regarding the Merger (which occurred on December 6, 1995),
the closing price for EastGroup Shares on NYSE was $21.00. As of
December 21, 1995, the most recent trading day as to which it is
practicable to provide market price information, the closing price for
EastGroup Shares on NYSE was $20.875 per share.
39
<PAGE> 52
LNH SHARES
LNH Shares are traded on the NYSE under the symbol "LHC." As of
December 19, 1995 there were 2,200,000 LNH Shares outstanding held of record by
approximately 515 shareholders.
The following table sets forth, for the periods indicated, the high and
low sales prices for LNH Shares and the cash distributions paid by LNH for the
calendar quarters specified:
<TABLE>
<CAPTION>
Distribution
Quarter Ended High Low Paid Per Share
- ----------------------------------------------------- ------ ------- --------------
<S> <C> <C> <C>
March 31, 1993 . . . . . . . . . . . . . . . . . . . $10-3/4 $8 $2.14
June 30, 1993 . . . . . . . . . . . . . . . . . . . . 8-3/4 7-7/8 0.14
September 30, 1993 . . . . . . . . . . . . . . . . . 9-5/8 7-3/4 0.14
December 31, 1993 . . . . . . . . . . . . . . . . . . 9-1/4 8-1/8 0.14
March 31, 1994 . . . . . . . . . . . . . . . . . . . 8-7/8 7-7/8 0.14
June 30, 1994 . . . . . . . . . . . . . . . . . . . . 8-7/8 7-3/4 0.14
September 30, 1994 . . . . . . . . . . . . . . . . . 9-1/4 6-1/2 1.59
December 31, 1994 . . . . . . . . . . . . . . . . . . 7 6-1/8 0.09
March 31, 1995 . . . . . . . . . . . . . . . . . . . 6-3/4 5-3/4 0.75
June 30, 1995 . . . . . . . . . . . . . . . . . . . . 6-3/4 6 0.09
September 30, 1995 . . . . . . . . . . . . . . . . . 7-1/2 6-1/8 0.09
December 31, 1995 . . . . . . . . . . . . . . . . . 7-3/4 7-1/8 0.15
(through December 21, 1995)
</TABLE>
On September 5, 1995, the most recent trading day on which LNH Shares
were traded prior to the public announcement that EastGroup and LNH had reached
an agreement in principle with respect to the Merger (which occurred on
September 6, 1995), the closing price for LNH Shares was $6.50. On December 5,
1995, the most recent trading day on which LNH Shares traded prior to the
public announcement as to the revised agreement in principle between LNH and
EastGroup regarding the Merger (which occurred on December 6, 1995), the
closing price for LNH Shares on NYSE was $7.125. On December 21, 1995,
the most recent trading day as to which it is practicable to provide market
price information, the closing price for LNH Shares was $7.50.
40
<PAGE> 53
DIFFERENCES IN SHAREHOLDERS' RIGHTS
The rights of holders of LNH Shares are governed by the provisions of
the LNH Articles originally filed December 23, 1980, and by the Bylaws of LNH,
as amended (the "Bylaws"), as well as by the Maryland General Corporation Law
and other Maryland law. If the Merger is consummated, shareholders of LNH
(other than those holding fewer than three shares on the Record Date) will
become shareholders of EastGroup, and their rights as such will be governed by
the EastGroup Declaration, and Trustees' Regulations, as amended (the
"EastGroup Regulations"), as well as by the Maryland General Corporation Law,
the Maryland Real Estate Investment Trusts Law and other Maryland law.
The rights of LNH shareholders differ in certain respects from the
rights they will have if they become shareholders of EastGroup pursuant to the
Merger. A summary of some of these differences is set forth below. This
summary is not intended in any way to be a complete description of all such
differences.
Capital Stock. The LNH Articles authorize LNH to issue 15,000,000 LNH Shares.
As of December 19, 1995, 2,200,000 LNH Shares were issued and outstanding.
EastGroup is presently authorized to issue up to 10,000,000 EastGroup Shares,
of which 4,231,656 were issued and outstanding as of December 19, 1995.
Voting. Under the LNH Bylaws, the presence, in person or by proxy, of the
holders of a majority of the outstanding LNH Shares constitutes a quorum at any
shareholders' meeting. The LNH Articles and LNH Bylaws do not restrict the
matters on which shareholders of LNH may vote. The LNH Articles further
provide that, notwithstanding any other provision of the Maryland General
Corporation Law, an action shall be valid and effective if authorized by the
affirmative vote of the holders of a majority of the LNH Shares outstanding and
entitled to vote.
In all elections for directors of LNH, shareholders of LNH are entitled
to cumulate their votes. Each LNH Share may be voted for as many individuals
as there are directors to be elected and for whose election the LNH Share is
entitled to vote.
Under the EastGroup Declaration, a majority of the outstanding
EastGroup Shares represented in person or by proxy shall constitute a quorum at
any meeting. The EastGroup Declaration authorizes shareholders to vote on the
election and removal of trustees, amendment of the EastGroup Declaration and
termination of EastGroup, but no other matters. The affirmative vote of the
holders of not less than two-thirds of the EastGroup Shares then outstanding
shall be necessary to remove a trustee, amend the EastGroup Declaration and
terminate EastGroup.
41
<PAGE> 54
In the case of the election of trustees, shareholders of EastGroup are
also entitled to cumulate their votes. Each shareholder of EastGroup is
entitled to as many votes as shall equal the number of EastGroup Shares owned
by him or her multiplied by the number of trustees to be elected, and each such
shareholder may cast all of such votes for a single candidate for trustee or
may distribute them among any two or more of the candidates as such shareholder
may determine in his or her discretion. The candidates receiving the highest
number of votes, up to the number of trusteeships to be filled in the election,
shall be elected.
Special Meetings of Shareholders. Pursuant to the LNH Bylaws, special meetings
of the LNH shareholders may be called at any time in the interval between
annual meetings by the Chairman of the Board of Directors or the President or
by a majority of the Board of Directors by vote at a meeting thereof or in
writing. The written request must be addressed to the Secretary of LNH. The
EastGroup Declaration provides that special meetings of shareholders may be
called by any trustee or officer upon the written request of shareholders
holding not less than 25 percent of the outstanding EastGroup Shares.
Additionally, the Maryland General Corporation Law provides that a special
meeting may be called by the President, the Board of Directors or Trustees or
on the written request of stockholders entitled to cast at least 25 percent of
all the votes entitled to be cast at the special meeting.
Term of Office. Directors of LNH and trustees of EastGroup are each elected
for one year terms and must stand for reelection annually. As of the date of
this Proxy Statement/Prospectus, LNH had four directors and EastGroup had seven
trustees.
DESCRIPTION OF CAPITAL STOCK OF EASTGROUP
EastGroup is authorized to issue up to 10,000,000 EastGroup Shares.
Holders of the EastGroup Shares will be entitled to receive such dividends as
may be declared from time to time by the trustees out of funds legally available
therefor. All of the issued and outstanding EastGroup Shares are fully paid
and non-assessable and have equal voting, distribution and liquidation rights.
EastGroup Shares shall not be subject to call or redemption; provided, however,
if the EastGroup trustees determine that the direct or indirect ownership of
EastGroup Shares has or may become concentrated to an extent which threatens
EastGroup's status as a REIT, the trustees may call for the redemption of a
number of EastGroup Shares.
Each EastGroup Share is entitled to one vote on matters put to a vote
of the shareholders, except that in the election of trustees, shareholders
shall have cumulative voting rights. This means an EastGroup shareholder is
entitled to as many votes as equal the number of EastGroup Shares owned by him
or her multiplied by the number of trustees to be elected. Shareholders may
cast all their votes for one trustee candidate or distribute the votes as they
so determine.
42
<PAGE> 55
INDEMNIFICATION PROVISIONS
Under the EastGroup Declaration, EastGroup is required to indemnify its
trustees and officers to the fullest extent permitted by Maryland law as
currently existing or later amended (but in the case of such amendment, only to
the extent that it permits broader indemnification rights than permitted prior
to such amendment). Each trustee and officer of EastGroup has a written
agreement with EastGroup which requires, among other things, that EastGroup
shall indemnify the trustee or officer to the fullest extent permitted under
Maryland law. The EastGroup Declaration provides that its trustees shall not
be personally liable to EastGroup or its shareholders except for acts,
omissions or errors constituting bad faith, willful misfeasance, gross
negligence or reckless disregard of a trustee's duties. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to trustees, officers and controlling persons of EastGroup pursuant
to the foregoing provisions or otherwise, EastGroup has been advised that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
EXPERTS
The consolidated financial statements of EastGroup as of December 31,
1994 and 1993, and for each of the years in the three year period ended
December 31, 1994, have been incorporated by reference in the Proxy
Statement/Prospectus and the Registration Statement in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein.
The consolidated financial statements of LNH REIT, Inc. appearing in
LNH REIT, Inc.'s Annual Report (Form 10-KSB) for the years ended December 31,
1994 and 1993, have been audited by Ernst & Young LLP, independent auditors, as
set forth in their report thereon included therein and incorporated herein by
reference.
The financial statements referred to above are incorporated herein by
reference in reliance upon such reports given upon the authority of such firms
as experts in accounting and auditing.
LEGAL OPINIONS
The validity of the EastGroup Shares being offered hereby has been
passed upon for EastGroup by Jaeckle, Fleischmann & Mugel. Jaeckle,
Fleischmann & Mugel has also passed upon the significant federal income tax
consequences of the Merger to the holders of LNH Shares.
43
<PAGE> 56
REPORTS TO SHAREHOLDERS
EastGroup will provide shareholders with annual reports containing
financial statements reported upon by independent auditors, and also unaudited
quarterly statements of operations.
OTHER MATTERS
The management of the LNH does not know of any other matters to come
before the Meeting. However, if any other matters come before the Meeting, it
is the intention of the persons designated as proxies to vote in accordance
with their judgment on such matters.
A portion of the expense of preparing, printing and mailing the form of
proxy and the material used in the solicitation thereof initially will be borne
by LNH, but ultimately will be borne, directly or indirectly, by EastGroup if
the Merger is consummated. If the Merger is not consummated, LNH would bear
all expenses it incurred relating to this Proxy Statement/Prospectus.
In addition to solicitation by mail, members of the Board of Directors,
officers and regular employees of LNH may solicit the return of proxies by
telephone, telegram and personal interview.
LNH may require brokers, custodians, nominees and other record holders
to forward copies of this Proxy Statement/Prospectus to persons for whom they
hold LNH Shares and to seek authority for the execution of proxies; in such
cases, LNH will reimburse such holders for their charges and expenses. LNH has
retained Beacon Hill Partners, Inc. ("Beacon Hill") to assist with the
solicitation of proxies and will pay Beacon Hill a fee of $3,000 (subject to
increase for additional services such as telephone solicitation) plus
reimbursement for out of pocket expenses for its services.
44
<PAGE> 57
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Pro Forma Consolidated Balance Sheet
as of September 30, 1995 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Notes to Pro Forma Consolidated Balance Sheet
as of September 30, 1995 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Pro Forma Consolidated Statement of Operations for the year
ended December 31, 1994 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Pro Forma Consolidated Statement of Operations
for the nine months ended September 30, 1995 (unaudited) . . . . . . . . . . . . . . . . . . . . . . F-5
Notes to Pro Forma Consolidated Statements of Operations (unaudited) . . . . . . . . . . . . . . . . . . . . F-6
</TABLE>
F-1
<PAGE> 58
EASTGROUP PROPERTIES
PRO FORMA CONSOLIDATED BALANCE SHEET (Unaudited)
As of September 30, 1995
The following unaudited pro forma consolidated balance sheet sets forth
the effect of the EastGroup Properties merger with LNH REIT, Inc. as if the
merger had been consummated on September 30, 1995. The pro forma consolidated
balance sheet has been prepared by management of EastGroup based upon the
historical financial statements of EastGroup and LNH REIT. This pro forma
consolidated balance sheet may not be indicative of the results that actually
would have occurred if the merger had been in effect on the dates indicated or
which may be obtained in the future. The pro forma consolidated balance sheet
should be read in conjunction with the other financial statements and the notes
to the financial statements of EastGroup and LNH REIT incorporated by reference
herein.
<TABLE>
<CAPTION>
EastGroup September LNH
30, 1995 September 30, 1995 Pro Forma Pro Forma
(Historical) (Historical) Adjustments Consolidated
---------------- ---------------- ----------- ------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
ASSETS
Real estate properties (net of accumulated
depreciation) $139,271 $11,123 $ (2,924)(1) $147,470
Mortgage loans (net of allowance for losses) 5,984 12,856 (3,298)(1) 15,542
Land and land purchase leasebacks 1,327 1,327
Investment securities 6,150 675 6,825
Equity method investments 4,009 (4,009)(1) 0
Cash and cash equivalents 159 1,322 1,481
Other assets 3,493 445 (24)(2) 3,914
-------- ------ -------- --------
$160,393 $26,421 $(10,255) $176,559
======== ====== ======== ========
LIABILITIES
Mortgage notes payable $ 62,202 $ 62,202
Notes payable to banks 13,835 13,835
Accounts payable and accrued expenses 2,189 $1,064 $(24)(2) 3,229
Minority interest 922 1,480 2,402
-------- ------ -------- --------
79,148 2,544 (24) 81,668
-------- ------ -------- --------
SHAREHOLDERS' EQUITY
Shares of beneficial interest 4,227 1,100 (1,100)(1) 4,877
650 (1)
Additional paid-in-capital 68,269 25,169 (25,169)(1) 81,265
12,996 (1)
Unrealized gain (loss) on securities (2) 506 (506)(1) (2)
Undistributed earnings (deficit) 8,751 (2,898) 2,898 8,751
-------- ------ -------- --------
81,245 23,877 (10,231) 94,891
-------- ------ -------- --------
$160,393 $26,421 $(10,255) $176,559
======== ====== ======== ========
Book value per share $ 19.22 $10.85 $ 19.46
Shares outstanding (In thousands) 4,227 2,200 4,877
</TABLE>
F-2
<PAGE> 59
EASTGROUP PROPERTIES
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET (Unaudited)
As of September 30, 1995
(1) EastGroup issues 649,827 shares of stock to all LNH REIT shareholders
(except for EastGroup) in exchange for all LNH REIT shares outstanding.
The 515,200 LNH REIT shares owned by EastGroup (representing 23.42% of the
total shares outstanding) are retired. The merger with LNH REIT is
accounted for under the purchase method of accounting.
<TABLE>
<S> <C>
LNH REIT shares outstanding 2,200,000
Less LNH REIT shares owned by EastGroup (515,200)
------------
1,684,800
Exchange ratio (8.10/21.00) .3857
------------
New EastGroup shares issued 649,827
Market value per EastGroup share at date of merger $ 21.00
------------
$ 13,646,000
EastGroup's investment in LNH at
September 30, 1995 4,009,000
------------
EastGroup's cost of LNH REIT's net assets $ 17,655,000
============
</TABLE>
The difference between LNH's book value and EastGroup's cost is allocated
to LNH's real estate and mortgage loans based upon relative fair values.
<TABLE>
<S> <C>
Cost $ 17,655,000
Book value 23,877,000
------------
Difference $ (6,222,000)
============
Difference is allocated as follows:
Real estate $ (2,924,000)
Mortgage loans (3,298,000)
------------
$ (6,222,000)
============
</TABLE>
(2) Eliminate LNH's management fee payable to EastGroup against EastGroup's
management fee receivable.
F-3
<PAGE> 60
EASTGROUP PROPERTIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
For the year ended December 31, 1994
The following unaudited pro forma consolidated statements of operations
for the year ended December 31, 1994 and the nine months ended September 30,
1995 set forth the affect of EastGroup's proposed merger with LNH REIT as if
these transactions had been consummated on January 1, 1994. These pro forma
consolidated statements of operations have been prepared by management of
EastGroup based upon historical statements of operations of EastGroup and LNH
REIT. These pro forma statements of operations may not be indicative of the
results that actually would have occurred if the transactions had been in
effect on the dates indicated or which may be obtained in the future. These
pro forma statements of operations should be read in conjunction with their
notes and the other financial statements and notes to the financial statements
of EastGroup and LNH REIT incorporated by reference herein.
<TABLE>
<CAPTION>
EastGroup LNH
December 31, December 31,
1994 1994 Pro Forma Pro Forma
(Historical) (Historical) Adjustments Consolidated
--------------- ----------------- ----------- ------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
REVENUES
Income from real estate operations $23,194 $1,249 $ 24,443
Land rents 398 398
Equity in earnings of real estate investment
trust 123 $(123) (1) 0
Interest:
Mortgage loans 1,041 574 1,615
Other 13 101 114
Other 126 226 (107) (2) 245
------- ------ ----- --------
24,895 2,150 (230) 26,815
------- ------ ----- --------
EXPENSES
Management fees 338 (338) (3) 0
Operating expenses from real estate
operations 9,741 605 10,346
Interest expense 3,747 224 (4) 3,971
Depreciation and amortization 4,481 277 4,758
Minority interests in joint ventures 163 54 217
General and administrative expenses 2,046 227 125 (5) 2,398
Stock appreciation rights and incentive
compensation recovery (129) (129)
Provision for possible losses 525 525
------- ------ ----- --------
20,049 2,026 11 22,086
------- ------ ----- --------
Income from operations 4,846 124 (241) 4,729
------- ------ ----- --------
GAIN ON INVESTMENT
Real estate and mortgage loans 2,322 135 2,457
------- ------ ----- --------
2,322 135 0 2,457
------- ------ ----- --------
NET INCOME $ 7,168 $ 259 $(241) $ 7,186
======= ====== ===== ========
Income from operations $ 1.18 $ 0.06 $0.99
Gain on investments 0.56 0.06 0.52
------- ------ --------
Net income per share
$ 1.74 $ 0.12 $1.51
======= ====== ========
WEIGHTED AVERAGE SHARES
OUTSTANDING 4,114 2,200 (6) 4,763
======= ====== ========
</TABLE>
F-4
<PAGE> 61
EASTGROUP PROPERTIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
For the nine months ended September 30, 1995
<TABLE>
<CAPTION>
EastGroup LNH
September 30, September 30,
1995 1995 Pro Forma Pro Forma
(Historical) (Historical) Adjustments Consolidated
-------------- -------------- ----------- ------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
REVENUES
Income from real estate operations $21,427 $1,083 $22,510
Land rents 177 177
Equity in earnings of real estate investment
trust 167 $(167) (1) 0
Interest:
Mortgage loans 800 510 1,310
Other 41 41
Other 224 43 (91) (2) 176
------- ------ ----- -------
22,795 1,677 (258) 24,214
------- ------ ----- -------
EXPENSES
Management fees 221 (221) (3) 0
Operating expenses from real estate
operations 8,762 400 9,162
Interest expense 4,508 67 (4) 4,575
Depreciation and amortization 4,371 273 4,644
Minority interest in joint ventures 185 73 258
Recovery of possible losses (250) (250)
General and administrative expenses 1,604 353 95 (5) 2,052
------- ------ ----- -------
19,430 1,070 (59) 20,441
------- ------ ----- -------
Income from operations 3,365 607 (199) 3,773
------- ------ ----- -------
GAIN ON INVESTMENTS
Real estate and mortgage loans 1,451 535 1,986
------- ------ ----- -------
1,451 535 0 1,986
------- ------ ----- -------
NET INCOME $ 4,816 $1,142 $(199) $ 5,759
======= ====== ===== =======
Income from operations $ 0.80 $ 0.28 $ 0.77
Gain on investments 0.34 0.24 0.41
------- ------ -------
Net income per share
$ 1.14 $ 0.52 $ 1.18
======= ====== =======
WEIGHTED AVERAGE SHARES
OUTSTANDING 4,224 2,200 4,874
======= ====== =======
</TABLE>
F-5
<PAGE> 62
EASTGROUP PROPERTIES
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Eliminate equity in earnings of LNH REIT, Inc.
(2) Eliminate equity in earnings of EastGroup Managers, Inc.
(3) Eliminate LNH management fee expense payable to LNH REIT Managers.
(4) Increase interest expense for borrowings to purchase LNH Shares from the
Walker Interests.
(5) Eliminate management fee income received from LNH REIT Managers.
(6) Weighted average EastGroup Shares outstanding were computed as follows:
<TABLE>
<CAPTION>
Twelve Months Nine Months
Ended Ended
December 31, 1994 September 30, 1995
----------------- ------------------
<S> <C> <C>
Historical weighted average 4,113,627 4,224,403
EastGroup Shares outstanding
EastGroup Shares issued in 649,827 649,827
merger with LNH REIT
--------- ---------
Pro forma weighted average
EastGroup Shares outstanding 4,763,454 4,874,230
========= =========
</TABLE>
F-6
<PAGE> 63
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF TRUSTEES AND OFFICERS
EastGroup's Restated Declaration of Trust, as amended,
contains a provision authorizing EastGroup to indemnify and hold harmless, to
the fullest extent permitted by Maryland law, trustees and officers involved in
an action, suit or proceeding.
Section 2-418 of the Maryland General Corporation Law (the
"Indemnification Statute"), the law of the state in which EastGroup is
organized, empowers a Trust, subject to certain limitations, to indemnify its
officers and trustees against expenses, including attorneys' fees, judgments,
penalties, fines, settlements and expenses, actually and reasonably incurred by
them in any suit or proceeding to which they are parties unless the act or
omission of the trustee was material to the matter giving rise to the
proceeding and was committed in bad faith, or was the result of active and
deliberate dishonesty, or the trustee received an improper personal benefit or,
with respect to a criminal action or proceeding, the trustee had no reasonable
cause to believe their conduct was unlawful.
EastGroup has entered into an indemnification agreement (the
"Indemnification Agreement") with each of its trustees and officers, and the
Board of Trustees has authorized EastGroup to enter into an Indemnification
Agreement with each of the future trustees and officers of EastGroup. The
Indemnification Statute permits a corporation to indemnify its trustees and
officers. However, the protection that is specifically afforded by the
Indemnification Statute authorizes other arrangements for indemnification of
trustees and officers, including insurance. The Board of Trustees has approved
and the shareholders have ratified the Indemnification Agreement, which is
intended to provide indemnification to the maximum extent allowable by, or not
in violation of, or offensive to, any law of the State of Maryland.
The Indemnification Agreement provides that EastGroup shall
indemnify a trustee or officer who is a party to the agreement (the
"Indemnitee") if he or she was or is a party to or otherwise involved in any
proceeding by reason of the fact that he or she was or is a trustee or officer
of EastGroup, or was or is serving at its request in a certain capacity of
another entity, against losses incurred in connection with the defense or
settlement of such proceeding. This indemnification shall be provided to the
fullest extent permitted by Maryland law. This is similar to the
indemnification provided by the Indemnification Statute except that
indemnification is not available to the Indemnitee who is adjudged liable on
the basis that a personal benefit was improperly received or who pays any
amount in settlement of a proceeding without EastGroup's written consent.
II-1
<PAGE> 64
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits are filed herewith (or incorporated by reference):
(2) (a) Agreement and Plan of Merger among EastGroup, Sub and LNH dated as of
December 22, 1995, attached to the Proxy Statement/Prospectus
as Appendix A. EastGroup agrees to furnish supplementally to the SEC
upon request a copy of any omitted schedule or exhibit to the Merger
Agreement.
(b) EastGroup's Annual Report on Form 10-K for the year ended December
31, 1994 (incorporated by reference).
(c) Amendment No. 2 to EastGroup's Registration Statement on Form S-2
(No. 33-70574) filed January 20, 1994 (incorporated by reference).
(3) (a) EastGroup's Declaration of Trust, as amended (incorporated by
reference).
(b) EastGroup's Trustees' Regulations, as amended (incorporated by
reference).
(5) Opinion of Jaeckle, Fleischmann & Mugel regarding legality of shares
being registered, filed herewith.
(8) Opinion of Jaeckle, Fleischmann & Mugel, as to federal income tax
consequences of the Merger, attached to the Proxy
Statement/Prospectus as Appendix C.
(10)(a) Amendment and Restatement of the Expense-Sharing Agreement among
Congress Street Properties, Inc., Eastover Corporation, EastGroup
Properties and The Parkway Company dated as of September 1, 1990
(incorporated by reference).
(b) First Amendment to Amendment and Restatement of Expense-Sharing
Agreement among Congress Street Properties, Inc., Eastover
Corporation, EastGroup Properties and The Parkway Company dated as of
October 1, 1993 (incorporated by reference to Exhibit 10B of
EastGroup's Registration Statement on Form S-2 (No. 33-70574) filed
October 19, 1993).
(c) EastGroup Properties 1989 Incentive Plan (incorporated by reference
to Exhibit A of EastGroup's proxy statement dated April 26, 1991).
(d) EastGroup Properties 1991 Trustees Stock Option Plan (incorporated by
reference to Exhibit B of EastGroup's proxy statement dated April 26,
1991).
(11) Statement regarding computation of earnings per share (incorporated
by reference to Exhibit (11) of EastGroup's 1993 Annual Report on
Form 10-K).
II-2
<PAGE> 65
(13)(a) EastGroup's Annual Report to Shareholders for the year ended December
31, 1994 (incorporated by reference).
(b) LNH's Annual Report to Shareholders for the year ended December 31,
1994 (incorporated by reference).
(22) Subsidiaries of EastGroup (incorporated by reference).
(24)(a) Consent of Ernst & Young LLP, filed herewith.
(b) Consent of KPMG Peat Marwick LLP, filed herewith.
(c) Consent of Rauscher Pierce Refsnes, Inc., filed herewith.
(d) Consent of Jaeckle, Fleischmann & Mugel, contained in Exhibit 5(a)
hereto.
(25) Powers of Attorney, filed herewith.
(28)(a) Agreement of EastGroup to furnish the SEC with copies of instruments
defining the rights of holders of long-term debt (incorporated by
reference to Exhibit 28(e) of EastGroup's 1986 Annual Report on Form
10-K).
(b) Opinion of Rauscher Pierce Refsnes, Inc. as to the fairness of the
transaction to LNH shareholders, attached as Appendix B to the Proxy
Statement/Prospectus.
(c) Form of proxy, filed herewith.
ITEM 22. UNDERTAKINGS
EastGroup, the undersigned registrant, hereby undertakes:
(1) To file, during any period during which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement;
(c) To include any additional or changed material information with
respect to the plan of distribution.
II-3
<PAGE> 66
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, 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 Securities Act, and, is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a trustee, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such trustee, 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 of
whether such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of this issue.
(5) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request.
(6) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it
became effective.
II-4
<PAGE> 67
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
has duly caused the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Jackson, State of
Mississippi, on December 22, 1995.
EASTGROUP PROPERTIES
By: /s/ David H. Hoster II
-----------------------------
David H. Hoster II, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
LELAND R. SPEED and N. KEITH McKEY or either of them, his or her true and
lawful attorneys-in-fact for him or her and in his or her name to sign any and
all amendments to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact full
powers of substitution and hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, shall lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Managing Trustee and Chief Executive December 22, 1995
/s/ Leland R. Speed Officer (Principal Executive Officer)
- --------------------------------
Leland R. Speed
Executive Vice President, Chief Financial December 22, 1995
/s/ N. Keith McKey Officer and Secretary (Principal
- --------------------------------
N. Keith McKey Financial Officer)
/s/ Diane W. Hayman Controller (Principal Accounting Officer) December 22, 1995
- --------------------------------
Diane W. Hayman
</TABLE>
II-5
<PAGE> 68
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Trustee December 22, 1995
/s/ Alexander G. Anagnos
- -------------------------------
Alexander G. Anagnos
Trustee December , 1995
- -------------------------------
H. C. Bailey, Jr.
President and Trustee December 22, 1995
/s/ David H. Hoster II
- -------------------------------
David H. Hoster II
Trustee December 22, 1995
/s/ Harold B. Judell
- -------------------------------
Harold B. Judell
Trustee December 22, 1995
/s/ David M. Osnos
- -------------------------------
David M. Osnos
Trustee December 22, 1995
/s/ John N. Palmer
- -------------------------------
John N. Palmer
</TABLE>
II-6
<PAGE> 1
APPENDIX A
AGREEMENT AND PLAN OF MERGER
AMONG
EASTGROUP PROPERTIES,
EASTGROUP-LNH CORPORATION
AND
LNH REIT, INC.
DATED: DECEMBER 22, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I.
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
----------
Section 1.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
--------------
Section 1.3 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
---------------------
Section 1.4 Articles of Incorporation and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
------------------------------------
Section 1.5 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
---------
Section 1.6 Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
--------------------
Section 1.7 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-------
ARTICLE II.
DISSENTING SHARES; EXCHANGE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.1 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-----------------
Section 2.2 Exchange of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
------------------
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF LNH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 3.1 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
------------------------------
Section 3.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
--------------
Section 3.3 Authority Relative to this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
------------------------------------
Section 3.4 SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-----------
Section 3.5 Proxy Statement/Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
--------------------------
Section 3.6 Consents and Approvals; No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
------------------------------------
Section 3.7 Litigation, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
----------------
Section 3.8 Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-------
Section 3.9 Property and Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
----------------------------------
Section 3.10 ERISA Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-------------
Section 3.11 REIT Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-----------
Section 3.12 Taxes, Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
------------------
Section 3.13 Tax Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
----------
Section 3.14 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
-----------------------
Section 3.15 No Default; Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
----------------------
Section 3.16 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
-------------------------
Section 3.17 Compliance with Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
-----------------------
Section 3.18 Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
-----------------
Section 3.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
---------
Section 3.20 Control Share Provisions Inapplicable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
-------------------------------------
Section 3.21 Representations and Warranties Continuing . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
-----------------------------------------
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF EASTGROUP AND SUB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.1 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
------------------------------
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 4.2 Capitalization; Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
----------------------------
Section 4.3 Authority Relative to this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
------------------------------------
Section 4.4 SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
-----------
Section 4.5 Proxy Statements/Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
---------------------------
Section 4.6 Consents and Approvals; No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
------------------------------------
Section 4.7 Litigation, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
----------------
Section 4.8 Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-------
Section 4.9 Property and Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
----------------------------------
Section 4.10 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
---------------------
Section 4.11 REIT Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
-----------
Section 4.12 Taxes, Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
------------------
Section 4.13 Tax Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
----------
Section 4.14 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
-----------------------
Section 4.15 No Default; Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
----------------------
Section 4.16 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
-------------------------
Section 4.17 Compliance with Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
-----------------------
Section 4.18 Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
-----------------
Section 4.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
---------
Section 4.20 Shares of Beneficial Interest of EastGroup . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
------------------------------------------
Section 4.21 Representations and Warranties Continuing . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
-----------------------------------------
ARTICLE V.
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.1 Conduct of Business of LNH and EastGroup . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
----------------------------------------
Section 5.2 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
---------------------
Section 5.3 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
------------
Section 5.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
--------
Section 5.5 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
--------------------
Section 5.6 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
---------------
Section 5.7 Meetings of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
------------------------
Section 5.8 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
--------
ARTICLE VI.
CONDITIONS TO CONSUMMATION OF THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.1 Certificates, Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
--------------------------------
Section 6.2 Other Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
----------------
ARTICLE VII.
TERMINATION; AMENDMENTS; WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
-----------
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
---------------------
Section 7.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
---------
Section 7.4 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
-----------------
Section 7.5 Reimbursement of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
-------------------------
ARTICLE VIII.
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
------------------------------------------
Section 8.2 Brokerage Fees; Commissions and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
----------------------------------------
Section 8.3 Entire Agreement; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
----------------------------
Section 8.4 Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
--------
Section 8.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
-------
Section 8.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
-------------
Section 8.7 Jurisdiction and Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
----------------------
Section 8.8 Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
--------------------
Section 8.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
------------
Section 8.10 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
--------
Section 8.11 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
-------------------
Section 8.12 Performance by Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
------------------
Section 8.13 Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
-------------------
Section 8.14 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-------------------
</TABLE>
iii
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of
December 22, 1995, by and among LNH REIT, INC., a Maryland corporation engaged
in the real estate business ("LNH"), EASTGROUP-LNH CORPORATION, a Maryland
corporation and a wholly-owned subsidiary of EastGroup Properties ("Sub"), and
EASTGROUP PROPERTIES, a Maryland real estate investment trust ("EastGroup").
WHEREAS, the respective Boards of Trustees and Directors of
EastGroup, Sub and LNH have duly approved the acquisition of LNH by EastGroup by
means of a merger of LNH with and into Sub pursuant to the terms of this
Agreement, it is therefore agreed as follows:
ARTICLE I.
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the
conditions hereof, and in accordance with the relevant provisions of the
Maryland General Corporation Law (the "Maryland Law"), including, without
limitation, any required vote of shareholders of LNH as described in Section 5.7
of this Agreement, LNH shall be merged with and into Sub (the "Merger") as soon
as practicable following the satisfaction or waiver, if permissible, of the
conditions set forth in Article VI hereof. Following the Merger, Sub shall
continue as the surviving corporation (the "Surviving Corporation") under the
laws of the State of Maryland and the separate corporate existence of LNH shall
cease.
Section 1.2 Effective Time. The Merger shall be consummated by
filing with the Maryland Secretary of State the Articles of Merger in the form
attached hereto as Exhibit A (the "Articles of Merger") (the time of such filing
being the "Effective Time").
Section 1.3 Effects of the Merger. The Merger shall have the
effects set forth in Section 3-114 of the Maryland Law. As of the Effective
Time, LNH shall merge with and into Sub.
Section 1.4 Articles of Incorporation and Bylaws. The Articles
of Incorporation and Bylaws of Sub, both as in effect at the Effective Time,
shall be the Articles of Incorporation and Bylaws of the Surviving Corporation.
Section 1.5 Directors. As of the Effective Time, directors of
Sub in office on the date of execution hereof shall be directors of the
Surviving Corporation until their respective successors are duly elected and
qualified.
Section 1.6 Conversion of Shares.
(a) Each share of common stock, $.50 par value
per share ("Shares"), of LNH issued and outstanding immediately prior to the
Effective Time (other than Shares held by LNH as treasury stock or held by
EastGroup, which shall be cancelled) shall, by virtue of the Merger and without
any action on the part of any holder thereof, be
<PAGE> 6
converted into the right to receive a certain amount of newly issued, fully paid
and non-assessable shares of beneficial interest of EastGroup based on an
exchange ratio (the "Exchange Ratio") as determined and set forth below. Such
shares shall be issuable upon surrender of the certificates formerly
representing Shares of LNH. The Exchange Ratio will be determined by dividing
the value $8.10 by the average closing price for shares of beneficial interest
of EastGroup for the 10 trading days preceding the Closing (as defined in
Section 1.7) (the "Closing Price"). No fractional shares of beneficial interest
of EastGroup shall be issued. Instead shareholders of LNH will be entitled to
receive cash in lieu of fractional shares in an amount based upon the Closing
Price, multiplied by the fraction of a share of beneficial interest of EastGroup
to which the shareholder would have otherwise been entitled. The shares of
beneficial interest of EastGroup issuable in exchange for the Shares of LNH and
the cash payment in lieu of fractional shares are referred to herein as the
"Merger Consideration." All shares issued to the shareholders of LNH
representing the Merger Consideration shall be registered under the Securities
Act of 1933, as amended (the "Securities Act"), on a Form S-4 Registration
Statement being filed by EastGroup with the Securities and Exchange Commission
(the "SEC"). Any shares representing the Merger Consideration held by persons
who are affiliates (as that term is defined in SEC Rule 405) of LNH shall bear a
legend restricting the transferability of shares pursuant to SEC Rule 145.
EastGroup shall have no obligation to keep the Form S-4 Registration Statement
effective and it shall expire by its terms on the earlier of (i) ninety (90)
days after the Effective Time or (ii) the date that any event occurs which would
cause EastGroup to be required to file a post-effective amendment under the
Securities Act in order to update the Proxy Statement/Prospectus (as defined in
Section 8.10) pursuant to Section 10 of the Securities Act.
(b) Each Share held in the treasury of LNH and
each Share held by EastGroup immediately prior to the Effective Time shall, at
the Effective Time, by virtue of the Merger and without any action on the part
of the holder thereof, be cancelled and retired and cease to exist and no
payment shall be made with respect thereto.
Section 1.7 Closing. Upon the terms and subject to the
conditions hereof, as soon as practicable after the satisfaction of all
conditions described in Article VI, LNH and Sub shall execute in the manner
required by the Maryland Law and deliver to the Maryland Secretary of State the
duly executed Articles of Merger, and the parties shall take such other and
further actions as may be required by law to make the Merger effective.
Contemporaneous with the filing referred to in this Section, a closing (the
"Closing") will be held at the offices of EastGroup in Jackson, Mississippi (or
such other place as the parties may agree), for the purpose of implementing all
transactions described in this Agreement.
ARTICLE II.
DISSENTING SHARES; EXCHANGE OF SHARES
Section 2.1 Dissenting Shares. Shareholders of LNH
who do not vote for the Merger will not have appraisal rights.
2
<PAGE> 7
Section 2.2 Exchange of Shares.
(a) Promptly after the Effective Time, Sub
shall cause EastGroup's transfer agent (the "Agent") to mail to each record
holder, as of the Effective Time, of an outstanding certificate or certificates
which immediately prior to the Effective Time represented Shares of LNH (the
"Certificate(s)") a form letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss of and title to the Certificate
shall pass to Sub upon physical delivery to the Agent) and instructions for use
in effecting the surrender of the Certificate and for receiving any payment for
fractional shares. Upon surrender to the Agent of a Certificate, together with
such letter of transmittal duly executed, the holder of such Certificate shall
be entitled to receive in exchange therefor a certificate or certificates and
cash representing the Merger Consideration and such surrendered Certificate
shall then be cancelled. If issuance is to be made to a person other than the
person in whose name the Certificate surrendered is registered, it shall be a
condition of issuance that the Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the person requesting
such issuance shall pay transfer or other taxes required by reason of the
payment to a person other than the registered holder of the Certificate or
Certificates surrendered or established to the satisfaction of EastGroup that
such tax has been paid or is not applicable. Until surrendered in accordance
with the provisions of this Section 2.2, each Certificate shall represent for
all purposes the right to receive the Merger Consideration.
(b) At and after the Effective Time there
shall be no transfers of Shares which were outstanding immediately prior to the
Effective Time on the stock transfer books of LNH. If, after the Effective Time,
Certificates are presented to Sub, they shall be cancelled and exchanged for the
Merger Consideration provided in this Article II. At the close of business on
the day prior to the Effective Time the stock ledger of LNH shall be closed.
(c) From and after the Effective Time, holders
of Certificates formerly evidencing Shares shall cease to have any rights as
shareholders of LNH, except as provided herein or by law.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF LNH
LNH represents and warrants to EastGroup as follows:
Section 3.1 Organization and Qualification. LNH is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Maryland. All Subsidiaries of LNH are legal entities that are
duly organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation. Each of LNH and its Subsidiaries has
all requisite power and authority to own or operate its properties and conduct
its business as it is now being conducted. LNH and each of its Subsidiaries is
duly qualified and in good standing as a foreign corporation or entity
authorized to do business in each of the jurisdictions in which the character of
the properties owned or held under lease by it or the nature of the business
transacted by it makes such qualification necessary, except
3
<PAGE> 8
where the failure to be so qualified and in good standing would not have a
Material Adverse Effect (as defined in Section 8.10) on LNH or such Subsidiary.
Section 3.2 Capitalization.
(a) The authorized capital stock of LNH
consists of 15,000,000 Shares. As of the date hereof, 2,200,000 Shares were
issued and outstanding and no Shares were held in treasury. Neither LNH nor any
Subsidiary has any shares of its capital stock reserved for issuance. All issued
and outstanding Shares are validly issued, fully paid, non-assessable and free
of preemptive rights.
(b) The Disclosure Schedule sets forth the
name, the number of shares of authorized capital stock and the number of issued
and outstanding shares of capital stock or other indicia of ownership of each
direct or indirect Subsidiary of LNH. Except as set forth in such schedule, all
of the outstanding shares of capital stock of each of such Subsidiaries are
owned, directly or indirectly, by LNH, beneficially and of record. All of such
shares of capital stock of the Subsidiaries are owned free and clear of all
liens, charges, encumbrances, rights of others, mortgages, pledges or security
interests, and are not subject to any agreements or understandings among any
persons with respect to the voting or transfer of such shares. There are no
outstanding subscriptions, options, convertible securities, warrants or claims
of any kind issued or granted by or binding on LNH to purchase or otherwise
acquire any security of or equity interest in any of such Subsidiaries. All of
the outstanding shares of capital stock of each such Subsidiary have been duly
authorized and validly issued and are fully paid and non-assessable, and none
has been issued in violation of the preemptive rights of any stockholder.
Section 3.3 Authority Relative to this Agreement. LNH has all
requisite power and authority to execute and deliver this Agreement and (other
than approval of the Merger and this Agreement by the holders of two-thirds of
all the votes entitled to be cast) to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been authorized by the Board of Directors
of LNH, and no other corporate proceedings on the part of LNH are necessary to
authorize this Agreement or to consummate the transactions so contemplated
(other than approval of the Merger and this Agreement by the holders of
two-thirds of the Shares entitled to vote). This Agreement has been duly and
validly executed and delivered by LNH and constitutes a valid and binding
agreement of LNH, enforceable against LNH in accordance with its terms.
Section 3.4 SEC Reports. To the best of its knowledge, LNH has
filed all required forms, reports and documents with the SEC ("LNH SEC Reports")
required to be filed by it pursuant to the federal securities laws and the SEC
rules and regulations thereunder, all of which have complied in all material
respects with all applicable requirements of the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and interpretive releases promulgated thereunder. None of such LNH SEC Reports,
including without limitation any financial statements, notes, or schedules
included therein, at the time filed, contained nor contains, or if to be filed
in the future, will contain, any untrue statement of a material fact, or
omitted, omits or will omit to
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state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
Each of the financial statements in or incorporated by
reference into the LNH SEC Reports is fairly stated as of its date (subject, in
the case of unaudited interim statements, to normal year-end audit adjustments)
and is presented in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as may be noted
therein; and independent certified public accountants for LNH have rendered or
will render an unqualified opinion with respect to each audited financial
statement included in the LNH SEC Reports or, if qualified, such qualification
is or will be reasonably satisfactory to EastGroup. The financial statements
included or to be included in the LNH SEC Reports are hereinafter sometimes
collectively referred to as the "LNH Financial Statements."
Section 3.5 Proxy Statement/Prospectus. The Proxy
Statement/Prospectus required for the consummation of the Merger will comply in
all material respects with the Securities Act and the Exchange Act, except that
no representation will be made by LNH with respect to information supplied in
writing by EastGroup or any affiliate of EastGroup specifically for inclusion in
the Proxy Statement/Prospectus. None of the information relating to LNH and its
Subsidiaries supplied in writing by LNH specifically for inclusion in the Proxy
Statement/Prospectus shall, at the time the Proxy Statement/Prospectus is mailed
or at the time of the Special Meeting (as defined in Section 8.10), contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Section 3.6 Consents and Approvals; No Violation. Except as
described in the Disclosure Schedule delivered herewith, neither the execution
and delivery of this Agreement by LNH nor the consummation of the transactions
contemplated hereby nor compliance by LNH with any of the provisions hereof will
(a) conflict with or result in any breach of any provision of the Articles of
Incorporation, as amended, Bylaws, as amended, or other organization documents
of LNH or the Articles of Incorporation and Bylaws of any Subsidiary, (b)
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority (as defined in Section 8.10), except
(i) pursuant to the Securities Act and the Exchange Act, (ii) the filing of the
Articles of Merger pursuant to the Maryland Law, (iii) such filings and
approvals as may be required under the "blue sky," takeover or securities laws
of various states, or (iv) where the failure to obtain such consent, approval,
authorization or permit, or to make such filing or notification, would not in
the aggregate have a Material Adverse Effect, (c) result in a default (with or
without due notice or lapse of time or both) (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, Contract (as defined in
Section 3.16), license, agreement or other instrument or obligation to which LNH
or any of its Subsidiaries is a party or by which LNH, any of its Subsidiaries
or any of their respective assets may be bound, except for such defaults (or
rights of termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained or which, in the aggregate, would not
have a Material Adverse Effect, (d) result in the creation or imposition of any
lien, charge or other encumbrance on the assets
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of LNH or any of its Subsidiaries which would have a Material Adverse Effect on
LNH or any of its Subsidiaries, or (e) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to LNH, any of its Subsidiaries
or any of their respective assets, except for violations which would not in the
aggregate have a Material Adverse Effect.
Section 3.7 Litigation, etc. Except as described in the
Disclosure Schedule, (a) there is no action, claim, or proceeding pending or, to
the knowledge of LNH, threatened, to which LNH or any of its Subsidiaries is or
would be a party before any court or Governmental Authority acting in an
adjudicative capacity or any arbitrator or arbitration tribunal with respect to
which there is a reasonable likelihood of a determination having, or which,
insofar as reasonably can be foreseen, in the future would have a Material
Adverse Effect on LNH, (b) neither LNH nor any of its Subsidiaries is subject to
any outstanding order, writ, injunction or decree having, or which, insofar as
reasonably can be foreseen, in the future would have a Material Adverse Effect
on LNH and (c) there are no claims asserted or actions or proceedings pending
against any officer or director of LNH arising out of or pertaining to any
action or omission within the scope of his or her employment or position with
LNH, which claim, action or proceeding would involve a Material Adverse Effect
on LNH. All litigation and other administrative, judicial or quasi-judicial
proceedings to which LNH is a party or to which it has been threatened, to LNH's
knowledge, to be made a party, are described in the Disclosure Schedule.
Section 3.8 Changes. Except as expressly contemplated by this
Agreement or as reflected in the Disclosure Schedule or in LNH SEC Reports,
since December 31, 1994, LNH and its Subsidiaries has conducted its business
only in the ordinary and usual course, and, except as set forth in the
Disclosure Schedule or in LNH SEC Reports, none of the following has occurred:
(a) any material adverse change in the
condition (financial or other), results of operations, business, assets and
employee relations of LNH and its Subsidiaries, taken as a whole;
(b) any change in accounting methods,
principles or practices by LNH materially affecting its assets, liabilities or
business, except insofar as may have been required by a change in generally
accepted accounting principles;
(c) any damage, destruction or loss, whether
or not covered by insurance, materially adversely affecting the condition
(financial or other), business or operations of LNH and its Subsidiaries, taken
as a whole;
(d) any declaration, setting aside or payment
of dividends or distributions in respect of the Shares (other than those
dividends publicly announced, declared and paid by LNH), or any redemption,
purchase or other acquisition of any of LNH's securities;
(e) any issuance by LNH of, or commitment of
LNH to issue, any shares of capital stock or securities convertible into or
exchangeable or exercisable for shares of capital stock;
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(f) any entry by LNH or any of LNH's
Subsidiaries into any commitment or transaction material to the condition
(financial or other), business or operations of LNH and its Subsidiaries, taken
as a whole, which is not in the ordinary course of business and consistent with
past practice;
(g) any revaluation by LNH or any of LNH's
Subsidiaries of any of its assets, including, without limitation, writing down
the value of assets or writing off notes or accounts receivables other than in
the ordinary course of business and consistent with past practice;
(h) any action taken by LNH or any of LNH's
Subsidiaries of the type referred to in Section 5.1;
(i) any agreement by LNH to do any of the
things described in the preceding clauses (a) through (h) other than as
expressly contemplated or provided for herein; and
(j) any waiver by LNH or any of its
Subsidiaries of any rights that, singularly or in the aggregate, are material to
the business, assets, financial condition or results of operation of LNH and its
Subsidiaries, taken as a whole.
Section 3.9 Property and Environmental Matters.
(a) Except as disclosed in the Disclosure
Schedule, to the best knowledge of LNH, the location, construction, occupancy,
operation, condition and use of the real property now or previously owned,
leased by or in the possession of LNH or its Subsidiaries (the "Real Property"),
the facilities or improvements located thereon and the operations and practices
of LNH and its Subsidiaries are or at the time of ownership, lease or possession
were in substantial compliance with all Environmental Laws (as defined in
Section 8.10) and any restrictive covenant or deed restriction (recorded or
otherwise) affecting the Real Property, including, without limitation, all
applicable zoning ordinances and building codes in effect at the time of
improvement of such Real Property, flood disaster and occupational health and
safety laws.
(b) Neither LNH nor any of its Subsidiaries is
subject to any material liability or obligation, including investigatory or
remedial obligations under any Environmental Law or the common law with respect
to Hazardous Materials (as defined in Section 8.10), relating to (i) the
environmental conditions on, under or about the Real Property, including,
without limitation, the air, soil, surface water and groundwater conditions at
the Real Property, or (ii) the use, management, handling, transport, treatment,
generation, storage, disposal, release or discharge of any Hazardous Materials.
(c) With the exception of those Hazardous
Materials and activities described in the Disclosure Schedule, to the best
knowledge of LNH, no portion of the Real Property is being used, nor has been
used by LNH or its Subsidiaries at any previous time, for the generation,
storage, treatment, processing, disposal or other handling of any Hazardous
Materials.
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(d) Neither LNH nor any of its Subsidiaries
has received any notice and is not aware of any existing condition (including
the condition of the Real Property, whether or not caused by LNH or any
Subsidiary) or the practice of the business conducted by LNH or its Subsidiaries
which forms or could form the basis of any claim, action, suit, proceeding,
administrative consent or agreement, litigation or settlement, hearing or
investigation, arising out of the manufacture, processing, distribution, use,
treatment, storage, spill, disposal, transport or handling of, or the emission,
discharge, release or threatened release into the environment of, any Hazardous
Materials which, if decided against LNH or any of its Subsidiaries, would have a
Material Adverse Effect on LNH and its Subsidiaries.
(e) LNH and its Subsidiaries have listed and
described on the Disclosure Schedule or made available to EastGroup, as
appropriate (i) all treatment, storage and disposal facilities, as defined in
the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901, et
seq., as amended, or under similar Environmental Laws, and all underground
storage tanks, whether empty, filled, or partially filled with any substance,
that are located on the Real Property; (ii) the current and past Hazardous
Material disposal practices of LNH and its Subsidiaries; and (iii) any
environmental assessment or environmental audit reports delivered to LNH or its
Subsidiaries.
(f) To the best of its knowledge, LNH and its
Subsidiaries are not required to obtain or apply for any permit, license,
registration, notification or similar authorization under any Environmental Law
for the conduct of LNH's or its Subsidiaries' business or relating to the Real
Property, the facilities, improvements or equipment located thereon.
(g) No portion of the Real Property has been
designated as a covered facility under CERCLA (as defined in Section 8.10(a)) or
included on any similar "superfund" list or registry or has been made subject to
any environmental lien pursuant to any Environmental Law or by any Governmental
Authority.
Section 3.10 ERISA Matters. LNH and each of its Subsidiaries
have no "Employee Benefit Plans" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), that cover any of
its employees. LNH has never contributed to a "multiemployer plan" as defined in
Section 3(37) of ERISA.
Section 3.11 REIT Status. For all years in which it has been in
existence, LNH has continuously been organized and operated in conformity with
the requirements for qualification as a real estate investment trust under the
Internal Revenue Code of 1986, as amended (the "Code"). LNH has no intention of
changing its operations or engaging in activities which adversely affect its
ability to qualify, or make economically undesirable its continued qualification
as, a real estate investment trust.
Section 3.12 Taxes, Tax Returns.
(a) LNH has delivered to EastGroup copies of
the federal income tax returns of LNH for each of the last three fiscal years
and all schedules and exhibits
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thereto. Except as set forth on the Disclosure Schedule, each of LNH and its
Subsidiaries has duly and timely filed in correct form all federal, state and
local information returns and tax returns ("Returns") required to be filed by it
and its Subsidiaries on or prior to the date hereof (all such Returns, to the
best knowledge of LNH, being accurate and complete in all material respects)
and, to the best knowledge of LNH, has duly paid or made provision for the
payment of all taxes and other governmental charges which have been incurred or
are due or claimed to be due from them by any governmental authority (including,
without limitation, those due in respect of LNH's properties, income, business,
capital stock, franchises, licenses, sales and payrolls) other than taxes or
other charges (i) which are not yet delinquent or are being contested in good
faith, and set forth in the Disclosure Schedule and (ii) have not been finally
determined. The liabilities and reserves for taxes in the LNH Financial
Statements are sufficient in the aggregate for the payment of all unpaid
federal, state and local taxes (including any interest or penalties thereon),
whether or not disputed or accrued, for the period ended December 31, 1994 or
for any year or period prior thereto, and for which LNH or any of its
Subsidiaries may be liable in its own right or as transferee of the assets of,
or successor to, any corporation, person, association, partnership, joint
venture or other entity.
(b) To the best knowledge of LNH, (i) proper
and accurate amounts have been withheld by LNH and its Subsidiaries from its
employees and others for all prior periods in compliance in all material
respects with the tax withholding provisions of applicable federal, state and
local laws and regulations, and proper due diligence steps have been taken in
connection with back-up withholding, (ii) Returns which are accurate and
complete in all material respects have been filed by LNH and its Subsidiaries
for all periods for which Returns were due with respect to income tax
withholding, Social Security and unemployment taxes, and (iii) the amounts shown
on such Returns to be due and payable have been paid in full or adequate
provision therefor has been included by LNH in the most recent LNH Financial
Statements.
Section 3.13 Tax Audits. Except as disclosed in LNH SEC Reports
or in the Disclosure Schedule, (a) no audit of any material Return of LNH or any
Subsidiary is currently in progress nor has LNH or any Subsidiary been notified
that such an audit is contemplated by any taxing authority, (b) neither LNH nor
any Subsidiary has extended any statute of limitations with respect to the
period for assessment of any federal, state or local tax, (c) neither LNH nor
any Subsidiary contemplates the filing of an amendment to any Return, which
amendment would have a Material Adverse Effect on LNH and its Subsidiaries, and
(d) neither LNH nor any Subsidiary has any actual or potential material
liability for any tax obligation of any taxpayer (including, without limitation,
any affiliated group of corporations or other entities which included LNH or any
Subsidiary during a prior period) other than LNH or its Subsidiaries. Except as
disclosed in the LNH SEC Reports or the Disclosure Schedule, there are no
material tax claims pending against LNH or any Subsidiary, there are no material
tax claims threatened to be asserted against LNH or any Subsidiary, and there
are no material issues which have been raised in prior periods or audits which
by application of similar principles are expected to result in a material tax
claim for any other period. For purposes of this Section 3.12, "tax" and "taxes"
shall include all income, gross receipt, franchise, excise, real and personal
property, sales, ad valorem,
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employment, withholding and other taxes imposed by any foreign, federal, state,
municipal, local or other Governmental Authority, including assessments in the
nature of taxes.
Section 3.14 Undisclosed Liabilities. LNH and its Subsidiaries
are not liable for or subject to any material Liabilities (as hereinafter
defined), except (a) Liabilities adequately disclosed or reserved for in the
most recent LNH Financial Statements and not heretofore paid or discharged, (b)
Liabilities under any contract, commitment or agreement specifically disclosed
on the Disclosure Schedule, none of which Liabilities under any such contract,
commitment or agreement was required under generally accepted accounting
principles consistently applied to have been adequately and specifically
disclosed or reserved for in the most recent LNH Financial Statements, or (c)
Liabilities incurred, consistent with past practice, in or as a result of the
ordinary course of business of LNH, and in accordance with this Agreement, since
the date of the most recent LNH Financial Statements. As used in this Agreement,
the term "Liability" shall include any direct or indirect liability,
indebtedness, obligation, guarantee or endorsement (other than endorsements of
notes, bills and checks presented to banks for collection or deposit in the
ordinary course of business), whether known or unknown, accrued, absolute,
contingent or otherwise.
Section 3.15 No Default; Compliance.
(a) Except as set forth in the Disclosure
Schedule, neither LNH nor any of its Subsidiaries is in default under, and no
condition exists that with notice or lapse of time or both would constitute a
default under, (i) any mortgage, loan agreement, indenture, evidence of
indebtedness or other instrument evidencing borrowed money to which LNH or any
of its Subsidiaries is a party or by which either LNH or any of its Subsidiaries
or any of its properties is bound, (ii) any judgment, order or injunction of any
court, arbitrator or governmental agency or (iii) any other agreement, contract,
lease, license or other instrument, which default or potential default might
reasonably be expected to have a Material Adverse Effect.
(b) Except as set forth in the Disclosure
Schedule, LNH and each of its Subsidiaries has complied with all laws,
regulations, orders, judgments or decrees of any federal or state court or
governmental authority applicable to its business and operations, the
non-compliance with which might reasonably be expected to have a Material
Adverse Effect.
Section 3.16 Contracts and Commitments. Except as listed and
described in the Disclosure Schedule, to the best of its knowledge, neither LNH
nor any of its Subsidiaries is a party to, nor is it or any of its assets bound
by, any written or oral:
(a) contract with any present or
former shareholder, director, officer, employee or
consultants;
(b) contract with any labor
union or other representative of employees;
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(c) contract for the future
purchase of, or payment for, supplies or products, or for the
performance of services by a third party, involving payment or
potential payment by LNH of $25,000 or more under any one
contract or series of related contracts;
(d) any contract, including,
without limitation, any outstanding quotations, bids or
proposals, to sell goods or to perform services in an aggregate
amount in excess of $25,000;
(e) distributorship,
representative or sales agency agreement, contract or
commitment;
(f) conditional sale agreement
or lease under which LNH is either the seller or purchaser,
lessor or lessee, involving annualized payments or potential
payments by or to LNH that are in excess of $25,000;
(g) contract (including, without
limitation, any note, debenture, bond, conditional sale or
equipment trust agreement, letter of credit agreement or loan
agreement) for the borrowing or lending of money (including,
without limitation, those to or from officers, directors or
shareholders of LNH, or any affiliates or members of their
immediate families, for a line of credit, or for a guarantee,
security, indemnitee, pledge or undertaking of the indebtedness
or obligations of any other person);
(h) contract for any charitable
or political contribution;
(i) contract for any capital
expenditure involving future payments, which, together with
future payments under all other existing contracts for the same
capital project, are in excess of $25,000;
(j) contract limiting or
restraining LNH from engaging or competing in any lines of
business with any person, nor is any officer or employee of LNH
subject to any such agreement, contract or commitment;
(k) license, franchise,
distributorship or other contract relating in whole or in part
to any ideas, technical assistance or other know-how of or
used by LNH;
(l) contract which is expected
to continue for more than six months from the date hereof;
(m) contract not made in the
ordinary course of business; or
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(n) any guaranty, direct or
indirect, of any contract, lease or agreement entered into by
LNH, any of its Subsidiaries, their officers or directors.
(Each of the foregoing is referred to herein as a "Contract".) Except as may be
disclosed on the Disclosure Schedule, each of the Contracts listed on the
Disclosure Schedule is valid and enforceable in accordance with its terms; LNH
and, to the best of LNH's knowledge, the other parties thereto are in
substantial compliance with the provisions thereof; except as may be disclosed
on the Disclosure Schedule, neither LNH nor any other party is (or, by reason of
the consummation of the transactions contemplated by this Agreement, will be) in
default in the performance, observance or fulfillment of any obligation,
covenant or condition contained therein and no event has occurred or is
anticipated to occur (including the consummation of the transactions
contemplated by this Agreement) which with or without the giving of notice or
lapse of time, or both, would constitute a default or give the right of
termination thereunder; furthermore, except as may be disclosed on the
Disclosure Schedule, no such Contract contains any contractual requirement with
which there is a reasonable likelihood that either (i) LNH or any other party
thereto will be unable to comply or (ii) compliance therewith by LNH will have a
Material Adverse Effect on LNH and its Subsidiaries, taken as a whole. Except as
set forth in the Disclosure Schedule, neither LNH nor any of its officers has
made any oral commitments or has any oral understandings which may be material
to LNH.
Section 3.17 Compliance with Permits. To the best of LNH's
knowledge, all necessary governmental certificates, consents, permits, licenses
or other authorizations with regard to the ownership or operation by LNH or its
Subsidiaries of its properties and assets have been obtained and no violation
exists in respect of such licenses, permits or authorizations, except where the
failure to obtain and hold such permits, or any violation thereof by LNH or its
Subsidiaries, would not reasonably be expected to have a Material Adverse
Effect. None of the documents and materials filed with or furnished to any
Governmental Authority with respect to the properties, assets or business of LNH
or its Subsidiaries contains any untrue statement of a material fact or fails to
state a material fact necessary to make the statements therein not misleading.
Section 3.18 Title to Property. Except as disclosed on the
Disclosure Schedule, LNH and each of its Subsidiaries has good and marketable
title, free and clear (except as indicated in the most recent LNH Financial
Statements and liens for current taxes not yet due and payable), of all security
interests, liens, encumbrances and encroachments of a material nature, to its
property and assets that are material to LNH's business.
Section 3.19 Insurance. The Disclosure Schedule sets forth a
complete and accurate list and description of all insurance policies in force
naming LNH, any of its Subsidiaries or any employees of any of them as an
insured or beneficiary or as a loss payable payee or for which LNH or any of its
Subsidiaries has paid or is obligated to pay all or part of the premiums.
Neither LNH nor any of its Subsidiaries has received notice of any pending or
threatened termination or retroactive premium increase with respect thereto, and
LNH and its Subsidiaries are in compliance with all conditions contained
therein, the noncompliance with which could result in the termination of
insurance coverage or increased
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premiums for prior or future periods. There are no pending material claims
against such insurance by LNH or any of its Subsidiaries as to which insurers
have denied liability, no defenses provided by insurers under reservations of
rights, and no material claim under such insurance that has not been properly
filed by LNH or any of its Subsidiaries.
Section 3.20 Control Share Provisions Inapplicable.
The Merger will not be subject to Sections 3-601 et. seq. of the Maryland Law
concerning special voting requirements for transactions with interested
stockholders and Sections 3-701 et. seq. of the Maryland Law concerning the
voting rights of certain control shares.
Section 3.21 Representations and Warranties Continuing. The
representations and warranties set forth herein shall be true and correct on the
date hereof and at all times prior to the Effective Time as if made from time to
time, including, without limitation, at the Effective Time.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF EASTGROUP AND SUB
EastGroup and Sub, jointly and severally, represent and warrant
to LNH as follows:
Section 4.1 Organization and Qualification. EastGroup is a real
estate investment trust duly organized, validly existing and in good standing
under the laws of the State of Maryland and Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland.
All Subsidiaries of EastGroup are legal entities that are duly organized,
validly existing and in good standing under the laws of their respective
jurisdictions of incorporation. Each of EastGroup and its Subsidiaries has all
requisite power and authority to own or operate its properties and conduct its
business as it is now being conducted. EastGroup and each of its Subsidiaries is
duly qualified and in good standing as a foreign corporation or entity
authorized to do business in each of the jurisdictions in which the character of
the properties owned or held under lease by it or the nature of the business
transacted by it makes such qualification necessary, except where the failure to
be so qualified and in good standing would not have a Material Adverse Effect on
EastGroup or such Subsidiary.
Section 4.2 Capitalization; Subsidiaries.
(a) The authorized capital stock of EastGroup
consists of 10,000,000 shares of beneficial interest, par value $1.00 per share.
As of December 19, 1995, 4,231,656 shares of beneficial interest were issued
are outstanding and no shares held in treasury. Neither EastGroup nor
any Subsidiary has any shares of its capital stock reserved for issuance, except
for 300,000 shares of beneficial interest of EastGroup issuable pursuant
to employee and director stock options. No other options, warrants or other
securities convertible into capital stock of EastGroup are outstanding. All
issued and outstanding shares of beneficial interest of EastGroup are validly
issued, fully paid, non-assessable and free of preemptive rights.
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(b) The Disclosure Schedule sets forth the
name, the number of shares of authorized capital stock and the number of issued
and outstanding shares of capital stock or other indicia of ownership of each
direct or indirect Subsidiary of EastGroup. Except as set forth in such
schedule, all of the outstanding shares of capital stock of each of such
Subsidiaries are owned, directly or indirectly, by EastGroup, beneficially and
of record. All of such shares of capital stock of the Subsidiaries are owned
free and clear of all liens, charges, encumbrances, rights of others, mortgages,
pledges or security interests, and are not subject to any agreements or
understandings among any persons with respect to the voting or transfer of such
shares. There are no outstanding subscriptions, options, convertible securities,
warrants or claims of any kind issued or granted by or binding on EastGroup and
Sub to purchase or otherwise acquire any security of or equity interest in any
of such Subsidiaries. All of the outstanding shares of capital stock of each
such Subsidiary have been duly authorized and validly issued and are fully paid
and non-assessable, and none has been issued in violation of the preemptive
rights of any stockholder.
Section 4.3 Authority Relative to this Agreement. EastGroup and
Sub have all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Trustees of EastGroup and the Board of Directors of Sub and by EastGroup as sole
shareholder of Sub, and no other corporate proceedings on the part of EastGroup
and Sub are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by EastGroup and Sub and constitutes a valid and binding agreement
of EastGroup and Sub, enforceable against EastGroup and Sub in accordance with
its terms.
Section 4.4 SEC Reports. To the best of its knowledge,
EastGroup has filed all required forms, reports and documents with the SEC
("EastGroup SEC Reports") required to be filed by it pursuant to the federal
securities laws and the SEC rules and regulations thereunder, all of which have
complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act, and the rules and interpretive releases
promulgated thereunder. None of such EastGroup SEC Reports, including without
limitation any financial statements, notes, or schedules included therein, at
the time filed, contained or contains, or, if to be filed in the future will
contain, any untrue statement of a material fact, or omitted, omits or will omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
Each of the consolidated financial statements in or
incorporated by reference into the EastGroup SEC Reports is fairly stated as of
its date (subject, in the case of unaudited interim statements, to normal
year-end audit adjustments), and is presented in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as may be noted therein; and independent certified public
accountants for EastGroup have rendered or will render an unqualified opinion
with respect to each audited financial statement included in the EastGroup SEC
Reports or, if qualified, such qualification is reasonably satisfactory to LNH.
The consolidated financial statements
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<PAGE> 19
included or to be included in the EastGroup SEC Reports are hereinafter
sometimes collectively referred to as the "EastGroup Financial Statements."
Section 4.5 Proxy Statements/Prospectus. The Proxy
Statement/Prospectus required for the consummation of the Merger will comply in
all material respects with the Securities Act and the Exchange Act, except that
no representation will be made by EastGroup with respect to information supplied
in writing by LNH or any affiliate of LNH specifically for inclusion in the
Proxy Statement/Prospectus. None of the information relating to EastGroup and
its Subsidiaries supplied in writing by EastGroup specifically for inclusion in
the Proxy Statement/Prospectus shall, at the time the Proxy Statement/Prospectus
is mailed or at the time of the Special Meeting, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Section 4.6 Consents and Approvals; No Violation. Except as
described in the Disclosure Schedule, neither the execution and delivery of this
Agreement by EastGroup and Sub nor the consummation of the transactions
contemplated hereby nor compliance by EastGroup and Sub with any of the
provisions hereof will (a) conflict with or result in any breach of any
provision of the Declaration of Trust, as amended or Trustees Regulations of
EastGroup or the Articles of Incorporation and Bylaws of any Subsidiary, (b)
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, except (i) pursuant to the
Securities Act and the Exchange Act, (ii) the filing of the Articles of Merger
pursuant to the Maryland Law, (iii) such filings and approvals as may be
required under the "blue sky," takeover or securities laws of various states, or
(iv) where the failure to obtain such consent, approval, authorization or
permit, or to make such filing or notification, would not in the aggregate have
a Material Adverse Effect, (c) result in a default (with or without due notice
or lapse of time or both) (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, EastGroup Contract (as defined in
Section 4.16), license, agreement or other instrument or obligation to which
EastGroup or any of its Subsidiaries is a party or by which EastGroup, any of
its Subsidiaries or any of their respective assets may be bound, except for such
defaults (or rights of termination, cancellation or acceleration) as to which
requisite waivers or consents have been obtained or which, in the aggregate,
would not have a Material Adverse Effect, (d) result in the creation or
imposition of any lien, charge or other encumbrance on the assets of EastGroup
or any of its Subsidiaries, which would have a material Adverse Effect on
EastGroup or any of its Subsidiaries or (e) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to EastGroup, any of its
Subsidiaries or any of their respective assets, except for violations which
would not in the aggregate have a Material Adverse Effect.
Section 4.7 Litigation, etc. Except as described in the
Disclosure Schedule, (a) there is no action, claim, or proceeding pending or, to
the knowledge of EastGroup and Sub, threatened, to which EastGroup or any of its
Subsidiaries is or would be a party before any court or Governmental Authority
acting in an adjudicative capacity or any arbitrator or arbitration tribunal
with respect to which there is a reasonable likelihood of a
15
<PAGE> 20
determination having, or which, insofar as reasonably can be foreseen, in the
future would have a Material Adverse Effect on EastGroup and Sub, (b) neither
EastGroup nor any of its Subsidiaries is subject to any outstanding order, writ,
injunction or decree having, or which, insofar as reasonably can be foreseen, in
the future would have a Material Adverse Effect on EastGroup and Sub, and (c)
there have been no claims made or actions or proceedings brought against any
officer, trustee or director of EastGroup and Sub arising out of or pertaining
to any action or omission within the scope of his or her employment or position
with EastGroup and Sub, which claim, action or proceeding would involve a
Material Adverse Effect on EastGroup and Sub taken as a whole. All litigation
and other administrative, judicial or quasi-judicial proceedings to which
EastGroup or Sub is a party or to which it has been threatened to EastGroup's
knowledge to be made a party, are described in the Disclosure Schedule.
Section 4.8 Changes. Except as expressly contemplated by this
Agreement or as reflected in the Disclosure Schedule or in the EastGroup SEC
Reports, since December 31, 1994, EastGroup and the Subsidiaries have conducted
their business only in the ordinary and usual course, and, except as set forth
in the Disclosure Schedule or in the EastGroup SEC Reports, none of the
following has occurred:
(a) any material adverse change in the
condition (financial or other), results of operations, business, assets and
employee relations of EastGroup and its Subsidiaries, taken as a whole;
(b) any change in accounting methods,
principles or practices by EastGroup materially affecting its assets,
liabilities or business, except insofar as may have been required by a change in
generally accepted accounting principles;
(c) any damage, destruction or loss, whether
or not covered by insurance, materially adversely affecting the condition
(financial or other), business or operations of EastGroup and its Subsidiaries,
taken as a whole;
(d) any declaration, setting aside or payment
of dividends or distributions in respect of the shares of beneficial interest of
EastGroup (other than those dividends publicly announced, declared and paid by
EastGroup), or any redemption, purchase or other acquisition of any of its
securities;
(e) any issuance by EastGroup and Sub of, or
commitment of EastGroup and Sub to issue, any shares of capital stock or
securities convertible into or exchangeable or exercisable for shares of capital
stock;
(f) any entry by EastGroup and Sub or any of
EastGroup's Subsidiaries into any commitment or transaction material to the
condition (financial or other), business or operations of EastGroup and its
Subsidiaries, taken as a whole, which is not in the ordinary course of business
and consistent with past practice;
(g) any revaluation by EastGroup or any of its
Subsidiaries of any of their respective assets, including without limitation,
writing down the value of assets
16
<PAGE> 21
or writing off notes or accounts receivables other than in the ordinary course
of business and consistent with past practice;
(h) any action taken by EastGroup or any of
its Subsidiaries of the type referred to in Section 5.1;
(i) any agreement by EastGroup and Sub to do
any of the things described in the preceding clauses (a) through (h) other than
as expressly contemplated or provided for herein; and
(j) any waiver by EastGroup or any of its
Subsidiaries of any rights that, singularly or in the aggregate, are material
to the business, assets, financial condition or results of operation of
EastGroup and its Subsidiaries, taken as a whole.
Section 4.9 Property and Environmental Matters.
(a) Except as disclosed in the Disclosure
Schedule, to the best knowledge of EastGroup and Sub, the location,
construction, occupancy, operation, condition and use of the real property now
or previously owned, leased by or in the possession of EastGroup or its
Subsidiaries (the "EastGroup Real Property"), the facilities or improvements
located thereon and the operations and practices of EastGroup and its
Subsidiaries are or at the time of ownership, lease or possession were in
substantial compliance with all Environmental Laws and any restrictive covenant
or deed restriction (recorded or otherwise) affecting EastGroup Real Property,
including, without limitation, all applicable zoning ordinances and building
codes in effect at the time of improvements to such EastGroup Real Property,
flood disaster and occupational health and safety laws.
(b) Neither EastGroup nor any of its
Subsidiaries is subject to any material liability or obligation, including
investigatory or remedial obligations under any Environmental Law or the common
law with respect to Hazardous Materials relating to (i) the environmental
conditions on, under or about EastGroup Real Property, including, without
limitation, the air, soil, surface water and groundwater conditions at the
EastGroup Real Property, or (ii) the use, management, handling, transport,
treatment, generation, storage, disposal, release or discharge of any Hazardous
Materials.
(c) With the exception of those Hazardous
Materials and activities described in the Disclosure Schedule, to the best
knowledge of EastGroup and Sub, no portion of the EastGroup Real Property is
being used, nor has been used by EastGroup or its Subsidiaries at any previous
time, for the generation, storage, treatment, processing, disposal or other
handling of any Hazardous Materials.
(d) Neither EastGroup nor any of its
Subsidiaries has received any notice or is aware of any existing condition
(including the condition of the EastGroup Real Property, whether or not caused
by EastGroup or any Subsidiary) or the practice of the businesses conducted by
EastGroup or its Subsidiaries which forms or could form the basis of any claim,
action, suit, proceeding, administrative consent or agreement, litigation or
settlement, hearing or investigation, arising out of the manufacture,
processing, distribution,
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<PAGE> 22
use, treatment, storage, spill, disposal, transport, or handling of, or the
emission, discharge, release or threatened release into the environment of, any
Hazardous Material which, if decided against EastGroup or any of its
Subsidiaries, would have a Material Adverse Effect on EastGroup and its
Subsidiaries.
(e) EastGroup and its Subsidiaries have listed
and described on the Disclosure Schedule (i) all treatment, storage and
disposal facilities, as defined in the Resource Conservation and Recovery Act
of 1976, 42 U.S.C. #6901, et seq., as amended, or under similar Environmental
Laws, and all underground storage tanks, whether empty, filled, or partially
filled with any substance, that are located on the EastGroup Real Property;
(ii) the current and past Hazardous Material disposal practices of EastGroup
and its Subsidiaries; and (iii) any environmental assessment or environmental
audit reports delivered to EastGroup or its Subsidiaries.
(f) To the best of their knowledge, EastGroup
and its Subsidiaries have obtained or applied for all permits, licenses,
registrations, notifications and similar authorizations required under
Environmental Laws for the conduct of EastGroup's or its Subsidiaries' business
or relating to EastGroup's Real Property, the facilities, improvements or
equipment located thereon. The Disclosure Schedule includes a list of the
Environmental Permits.
(g) Except as identified in the Disclosure
Schedule, EastGroup and its Subsidiaries are in substantial compliance with all
terms and conditions of the Environmental Permits and no proceeding is pending
for the revocation of any Environmental Permit.
(h) No portion of the EastGroup Real Property
has been designated as a covered facility under CERCLA or included on any
similar "superfund" list or registry or has been made subject to any
environmental lien pursuant to any Environmental Law or by any Governmental
Authority.
Section 4.10 Compliance with ERISA. EastGroup, each of
its Subsidiaries and all EastGroup Employee Benefit Plans, that cover any of
its or their employees (which EastGroup Employee Benefit Plans are listed on
the Disclosure Schedule), comply with all laws, requirements and orders under
ERISA and the Code, the breach or violation of which would have a Material
Adverse Effect on EastGroup and its Subsidiaries, taken as a whole; the present
value of all of the assets of each of its EastGroup Employee Benefit Plans that
is subject to Title VI of ERISA equals or exceeds the present value of all of
the benefits accrued under each such EastGroup Employee Benefit Plan as of the
end of the most recent plan year with respect to such plan ending prior to the
date hereof, calculated on the basis of the actuarial assumptions used in the
last actuarial evaluation for each such plan; none of the employees of
EastGroup or any of its Subsidiaries is covered by a collective bargaining
agreement; neither EastGroup nor any of its Subsidiaries has ever contributed
to a "multiemployer plan" as defined in Section 3(37) of ERISA; neither the
EastGroup Employee Benefit Plans nor any fiduciary or administrator thereof has
engaged in a "prohibited transaction" as defined in Section 406 of ERISA or,
where applicable, Section 4975 of the Code for which no exemption is
applicable, that may have any Material Adverse Effect on
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<PAGE> 23
EastGroup and its Subsidiaries, taken as a whole, nor have there been any
"reportable events" as defined in Section 4043 of ERISA for which the
thirty-day notice has not been waived.
Section 4.11 REIT Status. For all years in which it
has been in existence, EastGroup has continuously been organized and operated
in conformity with the requirements for qualification as a real estate
investment trust under the Code. EastGroup has no intention of changing its
operations or engaging in activities which adversely affect its continued
qualification as, a real estate investment trust.
Section 4.12 Taxes, Tax Returns.
(a) EastGroup will deliver to LNH copies of
the federal income tax returns of EastGroup for each of the last three fiscal
years and all schedules and exhibits thereto. Except as set forth on the
Disclosure Schedule, each of EastGroup and its Subsidiaries has duly and timely
filed in correct form all Returns required to be filed by it and its
Subsidiaries on or prior to the date hereof (all such Returns to the best
knowledge of EastGroup being accurate and complete in all material respects)
and, to the best knowledge of EastGroup, has duly paid or made provision for
the payment of all taxes and other governmental charges which have been
incurred or are due or claimed to be due from them by any governmental
authority (including, without limitation, those due in respect of their
properties, income, business, capital stock, franchises, licenses, sales and
payrolls) other than taxes or other charges (i) which are not yet delinquent or
are being contested in good faith and set forth in the Disclosure Schedule and
(ii) have not been finally determined. The liabilities and reserves for taxes
in the EastGroup Financial Statements are sufficient in the aggregate for the
payment of all unpaid federal, state and local taxes (including any interest or
penalties thereon), whether or not disputed or accrued, for the period ended
December 31, 1995 or for any year or period prior thereto, and for which
EastGroup or any of its Subsidiaries may be liable in its own right or as
transferee of the assets of, or successor to, any corporation, person,
association, partnership, joint venture or other entity.
(b) To the best knowledge of EastGroup, (i)
proper and accurate amounts have been withheld by EastGroup and its
Subsidiaries from their employees and others for all prior periods in
compliance in all material respects with the tax withholding provisions of
applicable federal, state or local laws and regulations, and proper due
diligence steps have been taken in connection with back-up withholding, (ii)
Returns which are accurate and complete in all material respects have been
filed by EastGroup and each of its Subsidiaries for all periods for which
returns were due with respect to income tax withholding, Social Security and
unemployment taxes, and (iii) the amounts shown on such returns to be due and
payable have been paid in full, or adequate provision therefore has been
included by EastGroup in the EastGroup Financial Statements.
Section 4.13 Tax Audits. Except as disclosed in the
EastGroup SEC Reports or in the Disclosure Schedule, (a) no audit of any
material Return of EastGroup or any Subsidiary is currently in progress, nor
has EastGroup or any Subsidiary been notified that such an audit is
contemplated by any taxing authority, (b) neither EastGroup nor any Subsidiary
has extended any statute of limitations with respect to the period for
assessment of
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<PAGE> 24
any federal, state or local tax, (c) neither EastGroup nor any Subsidiary
contemplates the filing of an amendment to any Return, which amendment would
have a Material Adverse Effect on EastGroup and its Subsidiaries, taken as a
whole, and (d) neither EastGroup nor any Subsidiary has any actual or potential
material liability for any tax obligation of any taxpayer (including, without
limitation, any affiliated group of corporations or other entities which
included EastGroup or any Subsidiary during a prior period) other than
EastGroup or its Subsidiaries. Except as disclosed in the EastGroup SEC
Reports or the Disclosure Schedule, there are no material tax claims pending
against EastGroup or any Subsidiary, there are no material tax claims
threatened to be asserted against EastGroup or any Subsidiary, and there are no
material issues which have been raised in prior periods or audits which by
application of similar principles are expected to result in a material tax
claim for any other period. For purposes of this Section 4.12, "tax" and
"taxes" shall include all income, gross receipt, franchise, excise, real and
personal property, sales, ad valorem, employment, withholding and other taxes
imposed by any foreign, federal, state, municipal, local or other Governmental
Authority, including assessments in the nature of taxes.
Section 4.14 Undisclosed Liabilities. EastGroup and
its Subsidiaries are not liable for or subject to any material Liabilities
except (a) Liabilities adequately disclosed or reserved for in the most recent
EastGroup Financial Statements and not heretofore paid or discharged, (b)
Liabilities under any contract, commitment or agreement specifically disclosed
on the Disclosure Schedule, none of which Liabilities under any such contract,
commitment or agreement were required under generally accepted accounting
principles consistently applied to have been adequately and specifically
disclosed or reserved for in the most recent EastGroup Financial Statements, or
(c) Liabilities incurred, consistent with past practice, in or as a result of
the ordinary course of business of EastGroup, and in accordance with this
Agreement, since the date of the most recent EastGroup Financial Statements.
Section 4.15 No Default; Compliance.
(a) Except as set forth in the Disclosure
Schedule, neither EastGroup nor any of its Subsidiaries is in default under,
and no condition exists that with notice or lapse of time or both would
constitute a default under, (i) any mortgage, loan agreement, indenture,
evidence of indebtedness or other instrument evidencing borrowed money to which
either EastGroup or any of its Subsidiaries is a party or by which either
EastGroup or any of its Subsidiaries or its properties is bound, (ii) any
judgment, order or injunction of any court, arbitrator or governmental agency
or (iii) any other agreement, contract, lease, license or other instrument,
which default or potential default might reasonably be expected to have a
Material Adverse Effect.
(b) Except as set forth in the Disclosure
Schedule, EastGroup and each of its Subsidiaries have complied with all laws,
regulations, orders, judgments or decrees of any federal or state court or
governmental authority applicable to their respective businesses and
operations, the non-compliance with which might reasonably be expected to have
a Material Adverse Effect.
20
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Section 4.16 Contracts and Commitments. Except as
listed and described in the Disclosure Schedule, to the best of EastGroup's
knowledge, neither EastGroup nor any of its Subsidiaries is a party to, nor are
they or their assets bound by any written or oral:
(a) contract with any present or
former stockholder, trustee, director, officer, employee or
consultants;
(b) contract with any labor
union or other representative of employees;
(c) contract for the future
purchase of, or payment for, supplies or products, or for the
performance of services by a third party, involving payment or
potential payment by EastGroup of $25,000 or more under any
one contract or series of related contracts;
(d) any contract, including,
without limitation, any outstanding quotations, bids or
proposals, to sell goods or to perform services in an
aggregate amount in excess of $25,000;
(e) distributorship,
representative or sales agency agreement, contract or
commitment;
(f) conditional sale agreement
or lease under which EastGroup is either the seller or
purchaser, lessor or lessee, involving annualized payments or
potential payments by or to EastGroup that are in excess of
$25,000;
(g) contract (including, without
limitation, any note, debenture, bond, conditional sale or
equipment trust agreement, letter of credit agreement or loan
agreement) for the borrowing or lending of money (including,
without limitation, those to or from officers, trustees or
shareholders of EastGroup, or any affiliates or members of
their immediate families, for a line of credit, or for a
guarantee, security, indemnitee, pledge or undertaking of the
indebtedness or obligations of any other person);
(h) contract for any charitable
or political contribution;
(i) contract for any capital
expenditure involving future payments, which, together with
future payments under all other existing contracts for the
same capital project, are in excess of $25,000;
(j) contract limiting or
restraining EastGroup from engaging or competing in any lines
of business with any person, nor is any officer or employee of
EastGroup subject to any such agreement, contract or
commitment;
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(k) license, franchise,
distributorship or other contract relating in whole or in part
to any ideas, technical assistance or other know-how of or
used by EastGroup;
(l) contract which is expected
to continue for more than six months from the date hereof;
(m) contract not made in the
ordinary course of business; or
(n) any guaranty, direct or
indirect, of any person of any contract, lease or agreement
entered into by EastGroup, any of its Subsidiaries or any of
their officers, trustees or directors.
(Each of the foregoing is referred to herein as a "EastGroup Contract.")
Except as may be disclosed on the Disclosure Schedule, each of the EastGroup
Contracts listed on the Disclosure Schedule is valid and enforceable in
accordance with its terms; EastGroup and, to the best of EastGroup's knowledge,
the other parties thereto are in substantial compliance with the provisions
thereof; except as may be disclosed on the Disclosure Schedule, neither
EastGroup nor any other party is (or by reason of the consummation of the
transactions contemplated by this Agreement, will be) in default in the
performance, observance or fulfillment of any obligation, covenant or condition
contained therein and no event has occurred or is anticipated to occur
(including the consummation of the transactions contemplated by this Agreement)
which with or without the giving of notice or lapse of time, or both, would
constitute a default or give the right of termination thereunder; furthermore,
except as may be disclosed on the Disclosure Schedule, no such contract
contains any contractual requirement with which there is a reasonable
likelihood that either (i) EastGroup or any other party thereto will be unable
to comply or (ii) compliance therewith by EastGroup will have a Material
Adverse Effect on EastGroup and its Subsidiaries taken as a whole. Except as
set forth in the Disclosure Schedule, neither EastGroup nor any of its officers
has made any oral commitments or has any oral understandings which may be
material to EastGroup.
Section 4.17 Compliance with Permits. To the best of
EastGroup's knowledge, all necessary governmental certificates, consents,
permits, licenses or other authorizations with regard to the ownership or
operation by EastGroup or its Subsidiaries of their respective properties and
assets have been obtained and no violation exists in respect of such licenses,
permits or authorizations, except where the failure to obtain and hold such
permits, or any violation thereby by EastGroup or its Subsidiaries, would not
reasonably be expected to have a Material Adverse Effect. None of the
documents and materials filed with or furnished to any Governmental Authority
with respect to the properties, assets or businesses of EastGroup or its
Subsidiaries contains any untrue statement of a material fact or fails to state
a material fact necessary to make the statements therein not misleading.
Section 4.18 Title to Property. Except as disclosed on
the Disclosure Schedule, EastGroup and each of its Subsidiaries has good and
marketable title, free and clear (except as indicated in the most recent
EastGroup Financial Statements and liens for
22
<PAGE> 27
current taxes not yet due and payable), of all security interests, liens,
encumbrances and encroachments of a material nature, to its property and assets
that are material to EastGroup's businesses on a consolidated basis.
Section 4.19 Insurance. The Disclosure Schedule sets
forth a complete and accurate list and description of all insurance policies in
force naming EastGroup, any of its Subsidiaries or any employees of any of them
as an insured or beneficiary or as a loss payable payee or for which EastGroup
or any of its Subsidiaries has been paid or is obligated to pay all or part of
the premiums. Neither EastGroup nor its Subsidiaries has received notice of
any pending or threatened termination or retroactive premium increase with
respect thereto, and EastGroup and its Subsidiaries are in compliance with all
conditions contained therein, the noncompliance with which could result in the
termination of insurance coverage or increased premiums for prior or future
periods. There are no pending material claims against such insurance by
EastGroup or any of its Subsidiaries as to which insurers have denied
liability, no defenses provided by insurers under reservations of rights, and
no material claim under such insurance that has not been properly filed by
EastGroup or any of its Subsidiaries.
Section 4.20 Shares of Beneficial Interest of
EastGroup. The shares of beneficial interest of EastGroup to be issued in the
Merger will have been duly authorized and, when issued in accordance with the
terms of the Articles of Merger and this Agreement, will be validly issued and
fully paid and nonassessable, and no shareholder of EastGroup will have any
preemptive rights with respect thereto.
Section 4.21 Representations and Warranties Continuing.
The representations and warranties set forth herein shall be true and correct
on the date hereof and at all times prior to the Effective Time as if made from
time to time, including, without limitation, at the Effective Time.
ARTICLE V.
COVENANTS
Section 5.1 Conduct of Business of LNH and EastGroup.
Except as contemplated by this Agreement or disclosed in the Disclosure
Schedule, during the period from the date of this Agreement to the Effective
Time, LNH, LNH's Subsidiaries, EastGroup and EastGroup's Subsidiaries will each
conduct their operations according to their ordinary and usual course of
business and consistent with past practice. Without limiting the generality of
the foregoing, and except as otherwise expressly provided in this Agreement or
disclosed in the Disclosure Schedule, neither LNH or any of LNH's Subsidiaries
nor EastGroup or any of EastGroup's Subsidiaries will, prior to the Effective
Time, without the prior written consent of EastGroup and LNH (a) issue, sell or
pledge, or authorize or propose the issuance, sale or pledge of (i) additional
shares of capital stock of any class, or securities convertible into any such
shares, or any rights, warrants or options to acquire any such shares or other
convertible securities, other than pursuant to commitments outstanding at the
date hereof and referred to in Section 3.2 or 4.2, or (ii) any other securities
in respect of, in lieu of or in substitution for, capital stock outstanding on
the date hereof, (b) purchase or otherwise acquire, or propose to purchase or
otherwise acquire, any of its outstanding
23
<PAGE> 28
securities, (c) declare or pay any dividend or distribution on any shares of
its capital stock (except, in the case of EastGroup and LNH, EastGroup's and
LNH's regular quarterly dividend with respect to their shares ), (d) authorize,
recommend, propose or announce an intention to authorize, recommend or propose,
or enter into an agreement in principle or an agreement with respect to, any
merger, consolidation or business combination (other than the Merger), any
acquisition of a material amount of assets or securities, any disposition of a
material amount of assets or securities or any material change in its
capitalization, or any entry into a material contract or any release or
relinquishment of any material contract rights, not in the ordinary course of
business, (e) propose or adopt any amendments to its charter or bylaws, (f)
enter into, assign or terminate, or amend in any material respect, any Contract
or EastGroup Contract, (g) acquire, dispose of, encumber or relinquish any
material asset (other than the sale of real properties with the consent of the
other parties, which consent shall not be unreasonably withheld), (h) waive,
compromise or settle any right or claim that would adversely affect the
ownership, operation or value of any asset, (i) make any material capital
expenditures other than pursuant to existing capital expenditure programs that
are disclosed in the Disclosure Schedule, (j) allow or permit the expiration,
termination or cancellation at any time prior to the Effective Time of any of
the insurance policies or coverages or surety bonds currently maintained by or
on behalf of EastGroup or LNH unless replaced with a policy, coverage or bond
having substantially the same coverage and similar terms and conditions, (k)
waive, settle or compromise any material litigation or other claim on a basis
materially adverse to LNH, LNH's Subsidiaries, EastGroup or EastGroup's
Subsidiaries, (l) agree in writing or otherwise to take any of the foregoing
actions or any action which would make any representation or warranty in this
Agreement untrue or incorrect, or (m) incur any indebtedness for borrowed money
(other than indebtedness in place at the date of this Agreement).
Section 5.2 Access to Information.
(a) Between the date of this Agreement and the
Effective Time, the parties will afford to each other and their authorized
representatives reasonable access (subject to tenants' rights) to the real
estate, offices, warehouses or other facilities and to the books and records of
such party and LNH's Subsidiaries and EastGroup's Subsidiaries, will permit the
parties and their representatives to make such reasonable inspections as they
may require and will cause their officers and those of LNH's Subsidiaries and
EastGroup's Subsidiaries to furnish the parties and their representatives with
such financial and operating data, environmental assessments and other
information with respect to the business and real property of the parties,
LNH's Subsidiaries and EastGroup's Subsidiaries as they and their
representatives may from time to time reasonably request. No inspection or
examination by either party will constitute a waiver of any claim against the
other party for misrepresentation or breach of this Agreement.
(b) The parties will hold and will cause their
representatives to hold in strict confidence, unless compelled to disclose by
judicial or administrative process, or, in the opinion of counsel, by other
requirements of law, all documents and information concerning the parties
furnished to them and their representatives in connection with the transactions
contemplated by this Agreement (except to the extent that such information can
be shown to have been (i) in the public domain through no fault of the parties
or their
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<PAGE> 29
representatives, or (ii) later lawfully acquired by the parties or their
representatives from other sources unless they or their representatives know
that such other sources are not entitled to disclose such information) and will
not release or disclose such information to any other person, except their
auditors, attorneys, financial advisors and other consultants and advisors in
connection with this Agreement, provided that such person shall have first been
advised of the confidentiality provision of this Section 5.2. If the
transactions contemplated by this Agreement are not consummated, such
confidence shall be maintained except to the extent such information can be
shown to have been (iii) in the public domain through no fault of EastGroup,
Sub or LNH, as the case may be, or their respective representatives, or (ii)
later lawfully acquired by the parties or representatives from other sources,
and, if requested, either party will, and will cause its agents, auditors,
consultants, representatives and advisors to return to the other, or destroy,
all copies of written information furnished.
(c) Each of EastGroup and LNH agrees to
furnish the other at the time of filing with copies of all reports and filings
(including exhibits and schedules) filed by either party with the SEC between
the date hereof and the Closing.
Section 5.3 Best Efforts. Subject to the terms and
conditions herein provided, and to the fiduciary duties of the Boards of
Trustees and Directors of the parties under applicable law, each of the parties
hereto agrees to use its best efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and trustees and
directors of each party to this Agreement shall take all such necessary action.
Section 5.4 Consents. EastGroup and LNH each will use
its best efforts to obtain such consents of third parties to agreements which
would otherwise be violated by any provisions hereof, to take all actions
necessary to effect the transactions contemplated hereby, and to make such
filings with Governmental Authorities necessary to consummate the transactions
contemplated by this Agreement including, without limitation, (a) the vigorous
defense of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transaction contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or Governmental Authority
vacated or reviewed, and (b) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by this
Agreement.
Section 5.5 Public Announcements. Except as required
by law, neither party shall make any news releases or other public announcement
pertaining to the existence of this Agreement or the Merger without the prior
consent of the other party hereto. To the extent such a release or
announcement is required by law, the party making the same shall give the other
party advance notice of, and an opportunity to comment on, the proposed release
or announcement.
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<PAGE> 30
Section 5.6 Indemnification. If the Merger occurs,
then from and after its Effective Time EastGroup shall indemnify each person
who becomes an employee, agent, officer or trustee of EastGroup to the full
extent permitted by the Declaration of Trust, as amended, and Trustees
Regulations of EastGroup and permitted by law in respect of any claim arising
after the Effective Time in connection with such person's service as such. In
addition, LNH shall indemnify to the full extent of its assets and to the
fullest extent permitted by its Articles of Incorporation, as amended, and
Bylaws, as amended, and permitted by law, each person who held positions with
LNH prior to the Effective Time as an employee, agent, officer or director in
respect of any claim arising in connection with such person's service as such.
Any obligation of LNH hereunder shall be assumed by EastGroup to the extent of
(a) any distribution of assets from LNH to EastGroup or any affiliate of
EastGroup following the Merger and (b) any liability or obligation of such
person arising under this Agreement or in connection with the Merger. All
persons indemnified herewith are referred to as "Indemnified Parties." All
such indemnification provided for herein shall be to the fullest extent
authorized by law as now in effect or as hereafter amended (but, in the case of
any amendment, only to the extent that such amendment permits greater
indemnification rights than prior to such amendment) against any losses,
claims, damages, liabilities, costs, expenses (including legal fees and
disbursements of counsel), penalties, judgments and amounts paid in settlement
("Damages"), including but not limited to those based in contract, tort,
negligence, strict liability, or any theory of recovery, arising out of or
relating to any act, omission, transaction, cause of action, liability, debt or
obligation pertaining to (a) the fact that the Indemnified Party was an
officer, trustee, director, employee or agent of LNH or a Subsidiary of LNH or
EastGroup or a Subsidiary of EastGroup or (b) this Agreement or any of the
transactions contemplated hereby; provided, however, that (a) EastGroup and LNH
as appropriate will be entitled to participate in and, to the extent that they
may wish, to assume the defense of any action, with counsel reasonably
satisfactory to the Indemnified Party but if any Indemnified Party (or group
thereof) believes that, by reason of an actual or potential conflict of
interest, it is advisable for such Indemnified Party (or group thereof) to be
represented by separate counsel, such Indemnified Party (or group thereof) may
retain counsel reasonably satisfactory to EastGroup who will represent such
Indemnified Party (or group thereof) and EastGroup and Sub as appropriate shall
pay all reasonable fees and disbursements of such counsel promptly as
statements therefor are received, (b) the Indemnified Party, EastGroup and Sub
will cooperate with each other, and use their respective best efforts to
assist, in the vigorous defense of any such matter, and (c) EastGroup and Sub
shall not be liable for any settlement effected without its written consent,
which consent, however, shall not be unreasonably withheld.
Section 5.7 Meetings of Shareholders. LNH shall
promptly take all action necessary in accordance with applicable law and its
Articles of Incorporation, as amended, and Bylaws, as amended, to convene the
Special Meeting to consider and vote on the Merger and this Agreement. LNH and
EastGroup shall prepare the Form S-4 Registration Statement, file it with the
SEC under the Securities Act as promptly as practicable after execution hereof,
and use all reasonable efforts to have the Form S-4 Registration Statement
declared effective by the SEC. As promptly as practicable after the Proxy
Statement/Prospectus has been cleared by the SEC, LNH shall mail the Proxy
Statement/Prospectus forming a part of the Form S-4 Registration Statement to
the shareholders of LNH as of the record date for the Special Meeting.
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<PAGE> 31
Section 5.8 Blue Sky. EastGroup shall use its best
efforts to obtain, prior to the SEC effective date of the Form S-4 Registration
Statement, all necessary state law or "blue sky" permits and approvals required
to carry out the transactions contemplated by this Agreement, provided that
EastGroup shall not be required by virtue thereof to submit to general
jurisdiction in any state.
ARTICLE VI.
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.1 Certificates, Opinion of Counsel.
Immediately prior to the Effective Time, LNH and EastGroup shall cause to be
delivered to each other or to have received the following:
(a) A certificate, dated the date of the
Effective Time, as the case may be, of the chief executive and chief financial
officer certifying that all representations and warranties made herein are true
and correct as of the date made and as of the Effective Time and that all
agreements or other actions required to be performed prior to the Effective
Time as a condition to consummating the Merger have been performed or taken and
such conditions satisfied in accordance with the terms of this Agreement.
(b) An opinion of counsel to LNH dated the
date of the Effective Time in form and substance satisfactory to each as to the
matters set forth in Sections 3.1 and 3.3 (except as to the Subsidiaries of
LNH, for which no opinion need be given), and such other matters as EastGroup
shall request, which opinion may contain customary exceptions and
qualifications.
(c) An opinion of counsel to EastGroup and Sub
dated the date of the Effective Time as to each of the matters set forth in
Sections 4.1 and 4.3 (except as to the Subsidiaries of EastGroup, for which no
opinion need be given), and such other matters as LNH may request, which
opinion may contain customary exceptions and qualifications.
(d) Jaeckle, Fleischmann & Mugel shall have
rendered an opinion, dated the Effective Time, in form and substance
satisfactory to LNH, to the effect that, on the basis of facts, representations
and assumptions set forth in such opinion, the Merger will for federal income
tax purposes constitute a reorganization within the meaning of Section 368, or
any successor thereto, of the Code and that (except with respect to cash in
lieu of fractional share interests), (i) no gain or loss will be recognized by
a holder of Shares upon conversation in the Merger into shares of beneficial
interest of EastGroup, (ii) the basis of shares of beneficial interest of
EastGroup to be received in the Merger by a holder of Shares of LNH will be the
same as such holder's basis in the Shares of LNH exchanged therefore, and (iii)
the holding period of the Shares of beneficial interest of EastGroup to be
received in the Merger by a holder of such LNH Shares will include the period
during which such holder of such Shares held the Shares exchanged therefore,
provided that such Shares were held as a capital asset immediately prior to the
consummation of the Merger; in rendering such opinion, such tax advisor may
rely upon certificates of officers of EastGroup and LNH as to factual matters.
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<PAGE> 32
(e) LNH shall have received an opinion of
Rauscher Pierce Refsnes, Inc. updated to the Effective Time to the effect that
the Merger and the transactions provided for herein are fair to the
shareholders of LNH from a financial point of view.
Section 6.2 Other Conditions. The respective
obligations of each party to effect the Merger are subject to the satisfaction
or waiver, where permissible, prior to the Effective Time of the following
conditions:
(a) This Agreement and the transactions
contemplated hereby shall have been approved by the affirmative vote of the
shareholders of LNH by the requisite vote.
(b) No statute, rule, regulation, executive
order, decree, or injunction shall have been enacted, entered, promulgated or
enforced by any court of competent jurisdiction in the United States or
domestic governmental authority which prohibits or restricts the consummation
of the Merger.
(c) LNH shall have obtained all material
consents listed on the Disclosure Schedule.
(d) There shall have been no Material Adverse
Change in the business, properties or financial condition of EastGroup or LNH.
(e) All parties shall have delivered all
documents and taken all other actions required by this Agreement.
(f) The Form S-4 Registration Statement shall
have become effective and no stop order suspending the effectiveness of the
Form S-4 Registration Statement shall have been issued and no proceedings for
that purpose shall have been initiated or threatened by the SEC or any state.
(g) EastGroup shall have received all state
securities laws and "blue sky" permits and other authorizations necessary to
consummate the transactions contemplated hereby and no stop order suspending
the effectiveness thereof shall have been issued and no proceeding for that
purpose shall have been initiated or threatened by any state.
(h) All representations and warranties of any
party shall be true and effective as of the Closing.
(i) Sub shall have incurred no material
indebtedness between its date of formation and the Closing except as
specifically contemplated by this Agreement.
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<PAGE> 33
ARTICLE VII.
TERMINATION; AMENDMENTS; WAIVER
Section 7.1 Termination. This Agreement may be
terminated and the Merger contemplated hereby may be abandoned at any time,
notwithstanding approval thereof by the shareholders of LNH, prior to the
Effective Time:
(a) by mutual written consent duly authorized
by the Boards of Trustees and Directors of LNH, EastGroup and Sub;
(b) by EastGroup or LNH if the Effective Time
shall not have occurred on or before April 15, 1996;
(c) by EastGroup or LNH if any court of
competent jurisdiction or other Governmental Authority shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger or if litigation or proceedings shall be
pending that are reasonably likely to result in any of the foregoing;
(d) by LNH, if EastGroup or Sub shall not have
performed all obligations required to be performed by them under this
Agreement, except where any failures to perform would, in the aggregate, not
materially impair or delay the ability of LNH to effect the Merger;
(e) by EastGroup or Sub, if LNH shall not have
performed all obligations required to be performed by it under this Agreement,
except where any failures to perform would, in the aggregate, not materially
impair or delay the ability of EastGroup and Sub to effect the Merger;
(f) by LNH, if there shall have been a breach
by EastGroup or Sub of any of the covenants contained herein or if any
representation or warranty made by EastGroup or Sub is untrue in any material
respect; and
(g) by EastGroup or Sub, if there shall have
been a breach by LNH of any of the covenants contained herein or if any
representation or warranty made by LNH is untrue in any material respect.
Section 7.2 Effect of Termination. In the event of
the termination and abandonment of this Agreement pursuant to Section 7.1
subsections (a), (b) or (c) this Agreement shall forthwith become void and have
no effect, without any liability on the part of any party or its trustees,
directors, officers or shareholders, other than the provisions of Section
5.2(b), 7.5 and 8.9.
Section 7.3 Amendment. This Agreement may be amended
by action taken by or on behalf of the Boards of Trustees and Directors of LNH,
EastGroup and Sub at any time before or after any adoption of this Agreement by
the shareholders of LNH but, after any such approval, no amendment shall be
made which decreases the Merger
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<PAGE> 34
Consideration per Share or which adversely affects the rights of LNH's
shareholders hereunder without the approval of such shareholders. This
Agreement may not be amended except by an instrument in writing signed on
behalf of EastGroup, LNH and Sub.
Section 7.4 Extension; Waiver. At any time prior to
the Effective Time, the parties hereto, by action taken by or on behalf of the
respective Boards of Trustees and Directors of LNH, EastGroup and Sub, may (a)
extend the time for the performance of any of the obligations or other acts of
any other applicable party hereto, (b) waive any inaccuracies in the
representations and warranties contained herein by any other applicable party
or in any document, certificate or writing delivered pursuant hereto by any
other applicable party, or (c) subject to the proviso contained in Section 7.3,
waive compliance with any of the agreements of any other applicable party or
with any conditions to its own obligations. Any agreement on the part of any
other applicable party to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
Section 7.5 Reimbursement of Expenses. In the event
that either EastGroup or LNH terminates this Agreement and the Merger pursuant
to the provision of Section 7.1(d) or (e) hereof, (the party receiving notice
that it has failed to perform under Section 7.1(d) or (e) being referred to in
this section as the "Terminating Party"), the Terminating Party shall pay the
other party (for purposes of this Section 7.5, the "Non-Terminating Party") the
Non-Terminating Party's out-of-pocket expenses incurred in connection with this
transaction, including without limitation professional fees and travel
expenses, which shall be paid by wire transfer not later than three (3)
business days after the Non-Terminating Party notifies the Terminating Party of
the amount of such expenses. Payment of such expenses shall not preclude the
Non-Terminating Party from asserting any other claim it may have in law or in
equity against the Terminating Party. If the Terminating Party fails to pay
such expenses on the date provided herein, the Terminating Party shall pay
interest thereon from the due date thereof until the date paid at the rate of
ten percent per annum and shall reimburse the Non-Terminating Party all
reasonable attorneys' fees and other costs and expenses incurred in collecting
such expenses from the Terminating Party.
ARTICLE VIII.
MISCELLANEOUS
Section 8.1 Survival of Representations and
Warranties. The representations and warranties made in this Agreement shall
not survive beyond the Effective Time. This Section 8.1, however, shall not
limit any covenant or agreement of the parties hereto, which by its terms
contemplates performance after the Effective Time.
Section 8.2 Brokerage Fees; Commissions and Expenses.
LNH hereby represents and warrants to EastGroup with respect to LNH, and
EastGroup hereby represents and warrants to LNH with respect to EastGroup, that
no person or entity is entitled to receive from LNH or EastGroup, respectively,
any investment banking, brokerage or finder's fee or fees for financial
consulting or advisory services (except the fee for the fairness opinions) in
connection with this Agreement or the transactions contemplated hereby. Other
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<PAGE> 35
costs, expenses and liabilities which may be incurred in connection with the
consummation of this Agreement or the Merger, such as, for example and without
limitation, the cost of professional fees shall be paid by the party incurring
the cost, except as contemplated by Section 7.5.
Section 8.3 Entire Agreement; Assignment. This
Agreement (a) constitutes the entire agreement among the parties with respect
to the subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof and (b) shall not be assigned by operation
of law or otherwise.
Section 8.4 Validity. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provisions of this Agreement, each of
which shall remain in full force and effect.
Section 8.5 Notices. All notices, requests, claims,
demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given when (i) delivered in person or (ii) on the
fifth business day following the day duly sent by facsimile telegram, telex or
by registered or certified mail (postage prepaid, return receipt requested) to
the respective parties as follows:
If to LNH:
LNH REIT, Inc.
300 One Jackson Place
188 East Capitol Street
Jackson, MS 39201-2195
Attention: Leland R. Speed, Chief Executive Officer
with a copy (which shall not affect the validity of notice
hereunder) to:
Butler, Snow, O'Mara, Stevens & Cannada
17th Floor, Deposit Guaranty Plaza
210 East Capitol Street, P.O. Box 22567
Jackson, MS 39225-2567
Attention: Daniel G. Hise, Esq.
If to EastGroup or Sub:
EastGroup Properties
300 One Jackson Place
188 East Capitol Street
Jackson, MS 39201-2195
Attention: David H. Hoster II, President
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<PAGE> 36
with a copy (which shall not affect the validity of notice
hereunder) to:
Jaeckle, Fleischmann & Mugel
800 Fleet Bank Building
Twelve Fountain Plaza
Buffalo, New York 14202
Attention: Joseph P. Kubarek, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
Section 8.6 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of Maryland,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
Section 8.7 Jurisdiction and Venue. The parties agree
that the courts of the State of Mississippi shall have personal jurisdiction
over all parties to this Agreement and any action involving a dispute under
this Agreement shall have as its venue a court located in the State of
Mississippi.
Section 8.8 Descriptive Headings. The descriptive
headings herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement.
Section 8.9 Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
Section 8.10 Expenses. Except as otherwise provided
herein, each of the parties shall bear and pay all costs and expenses incurred
by it or on its behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial or other
consultants, investment bankers, accountants and counsel.
Section 8.11 Certain Definitions.
(a) "Environmental Laws" shall mean any and
all laws, subsequent enactments, modifications and amendments, including,
without limitation, any foreign, federal, state and local laws, statutes,
ordinances, rules, regulations, permits, licenses, approvals, administrative
consent orders or agreements, interpretations, orders and decrees of courts or
Governmental Authorities relating to the protection of human health or the
environment, including, but not limited to, requirements pertaining to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transportation, handling, reporting, licensing, permitting, investigation or
remediation of Hazardous Materials. Environmental Laws include, for example
and without limitation, the Resource Conservation and Recovery Act of 1976; the
Comprehensive Environmental Response, Cleanup and Liability Act of 1980
("CERCLA"); the Hazardous Materials Transportation Act; the Clean Water Act
(the Federal
32
<PAGE> 37
Water Pollution Control Act); the Toxic Substances Control Act; the Safe
Drinking Water Act; the Emergency Planning and Community Right-to-Know Act; the
United States Environmental Protection Agency's Underground Storage Tank
Regulations; all as amended and modified; and occupational health and safety,
flood control and sanitation laws.
(b) "Governmental Authority" shall mean the
United States, any foreign country, state, county, city or other political
subdivision, agency or instrumentality exercising executive, legislative,
judicial, regulatory or administration jurisdiction, over EastGroup, Sub, LNH,
LNH's Subsidiaries and EastGroup's Subsidiaries.
(c) "Hazardous Material" shall mean any
substance or material (i) which is or becomes defined as a hazardous waste,
hazardous substance, pollutant, contaminant or toxic substance or water under
any Environmental Law; (ii) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, mutagenic or otherwise hazardous and is or becomes
regulated by any Governmental Authority; (iii) the presence of which requires
investigation or remediation under any Environmental Law or common law; or
(iv)the presence of which is deemed to constitute a nuisance, trespass or pose
a health or safety hazard to persons or neighboring properties.
(d) "Material Adverse Effect" shall mean any
adverse change in the financial condition, assets, business or operations of
any party which is material to such party taken as a whole.
(e) "Proxy Statement/Prospectus" shall mean
the document forming Part I of the Registration Statement on Form S-4 filed
with the SEC pursuant to the requirements of the Securities Act and the
Exchange Act.
(f) "Special Meeting" shall mean the special
meeting of the shareholders of LNH called pursuant to the Proxy
Statement/Prospectus to consider approval of the Merger.
(g) "Subsidiary" shall mean, when used with
reference to an entity, any corporation, a majority of the outstanding voting
securities of which are owned directly or indirectly by such entity. Such term
shall also refer to any other partnership, limited partnership, joint venture,
trust, or other business entity in which a party hereto owns a majority
interest.
Section 8.12 Performance by Sub. EastGroup agrees to
cause Sub to comply with its obligations hereunder and to cause Sub to
consummate the Merger as contemplated herein.
Section 8.13 Disclosure Schedule. If the Disclosure
Schedule becomes misleading in any respect, LNH and EastGroup shall notify the
other, in writing, of any facts making the Disclosure Schedule misleading;
provided, however, that no such notice shall be deemed to amend or modify the
representations and warranties herein.
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<PAGE> 38
Section 8.14 Parties in Interest. This Agreement shall
be binding upon and inure solely to the benefit of each party hereto, and
nothing in this Agreement, express or implied, is intended to or shall confer
upon any other person or persons any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the day and year set forth above.
LNH REIT, INC.
By: /s/ Leland R. Speed
-----------------------------
Leland R. Speed
Chief Executive Officer
ATTEST:
/s/ N. Keith McKey
- --------------------------------
N. Keith McKey, Secretary
EASTGROUP-LNH CORPORATION
By: /s/ David H. Hoster II
-----------------------------
David H. Hoster II
President
ATTEST:
/s/ N. Keith McKey
- --------------------------------
N. Keith McKey, Secretary
EASTGROUP PROPERTIES
By: /s/ David H. Hoster II
-----------------------------
David H. Hoster II
President
ATTEST:
/s/ N. Keith McKey
- --------------------------------
N. Keith McKey, Secretary
34
<PAGE> 1
APPENDIX B
[RAUSCHER PIERCE REFSNES, INC. LETTERHEAD]
G. CLYDE BUCK
Managing Director
December 21, 1995
LNH REIT, Inc.
300 One Jackson Place
188 East Capitol Street
Jackson, Mississippi 39201
Attention: Mr. N. Keith McKey
Senior Vice President, Chief Financial Officer and
Secretary
Dear Mr. McKey:
You have asked us for our opinion as to the fairness from a financial
point of view to the shareholders of LNH REIT, Inc. ("LNH") of the
consideration to be received pursuant to the terms of a merger agreement
between LNH and EastGroup Properties ("EastGroup") whereby the shareholders of
LNH would receive a value of $8.10 for each share of LNH stock in the form of
EastGroup common stock (the "Exchange") based on the average of EastGroup's
closing market price for the 10 trading days prior to the Effective Date (as
defined in the Merger Agreement).
Rauscher Pierce Refsnes, Inc., as part of its investment banking
business, is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements, and valuations for estate, corporate and other purposes.
1001 Fannin, Suite 700 - Houston, Texas 77002 - (713) 651-3354
Member New York Stock Exchange, Inc.
<PAGE> 2
LNH REIT, Inc.
December 21, 1995
Page 2
In arriving at our opinion, we have, among other things:
1. Reviewed a draft dated December 13, 1995 of an "Agreement and Plan
of Merger" between LNH and EastGroup;
2. Reviewed a draft dated December 13, 1995 of a Form S-4
registration statement for the merger of LNH into EastGroup;
3. Reviewed an analysis dated August 23, 1995 prepared by LNH, of the
values of assets and liabilities indicating a ratio of 0.375 for
the Exchange;
4. Reviewed EastGroup's annual report and Form 10-K for the years
ended December 31, 1994 plus quarterly earnings reports on Form
10-Q for the quarters ended March 31, 1994; June 30 1994;
September 30, 1994; March 31, 1995; June 30, 1995 and
September 30, 1995;
5. Reviewed quarterly earnings reports on Form 10-Q for LNH for the
quarters ended March 31, 1994; June 30, 1994; September 30, 1994;
March 31, 1995; June 30, 1995 and September 30, 1995 plus LNH's
annual report and Form 10-K for the year ended December 31, 1994;
6. Reviewed LNH's Notice of Annual Meeting and Proxy Statement dated
April 27, 1995;
7. Reviewed EastGroup's Notice of Annual Meeting and Proxy Statement
dated April 27, 1995;
8. Reviewed LNH Board of Directors' Meeting file dated September 6,
1995, May 31, 1995 and March 21, 1995;
9. Reviewed EastGroup Properties Board of Trustees meeting file dated
September 6, 1995, June 1, 1995 and March 16, 1995;
10. Reviewed proforma financial statements for Form S-4;
<PAGE> 3
LNH REIT, Inc.
December 21, 1995
Page 3
11. Reviewed a liquidation value estimate for LNH in a memo prepared
by LNH management on November 8, 1995;
12. Discussed with management of LNH and EastGroup the outlook for
future operating results, the assets and liabilities of both
companies, material in the foregoing documents, and other matters
we considered relevant to our inquiry.
In our review and in arriving at our opinion, we have, with your
permission, (i) not independently verified any of the foregoing information and
have relied upon its being complete and accurate in all material respects, and
(ii) not made an independent evaluation or appraisal of specific real estate
holdings or other assets of LNH and EastGroup. Our opinion is provided solely
for your benefit in connection with the proposed transaction, according to the
terms of our engagement letter dated October 19, 1995.
Based upon and subject to the foregoing, it is our opinion that, as of
the date hereof, the consideration to be received by the shareholders of LNH
pursuant to the proposed Exchange is fair to the shareholders of LNH from a
financial point of view.
RAUSCHER PIERCE REFSNES, INC.
By: /s/ G. Clyde Buck
-------------------------
G. Clyde Buck
Managing Director
<PAGE> 1
APPENDIX C
JAECKLE, FLEISCHMANN & MUGEL
A T T O R N E Y S A T L A W
FLEET BANK BUILDING TWELVE FOUNTAIN PLAZA BUFFALO, NEW YORK 14202-2292
TEL (716) 856-0600 FAX (716) 856-0432
FORM OF TAX OPINION OF JAECKLE, FLEISCHMANN & MUGEL
__________________, 1995
LNH REIT, Inc.
300 One Jackson Place
188 East Capitol Street
Jackson, Mississippi 39201-2195
Ladies and Gentlemen:
We have acted as counsel to EastGroup Properties, a Maryland
real estate investment trust ("EastGroup"), in connection with the transactions
contemplated by the Agreement and Plan of Merger dated December 22, 1995 among
EastGroup, LNH REIT, Inc., a Maryland corporation ("LNH"), and EastGroup-LNH
Corporation, a Maryland corporation and wholly-owned subsidiary of EastGroup
("Sub"), (the "Agreement").
We have examined executed counterparts of the Agreement and
have examined such other documents and records as we have deemed necessary and
relevant for purposes hereof. We have relied on certificates of officers of
EastGroup and Sub and on certificates of officers of LNH as well as upon
information set forth in the Registration Statement on Form S-4 relating to the
transactions contemplated by the Agreement and on representations of the
parties set forth in the Agreement. We have assumed the genuineness of all
signatures, the authenticity of all documents and records submitted to us as
originals, the conformity to authentic original documents and records of all
documents and records submitted to us as copies, and the truthfulness of all
statements of fact contained therein.
In rendering our opinion, we have considered the applicable
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury Regulations, pertinent judicial authorities, interpretive rulings of
the Internal Revenue Service and such other authorities as we have considered
necessary and relevant. Based on the foregoing and subject to the limitations
and assumptions set forth herein, and having due regard for such legal
considerations as we deem relevant, we are of the opinion that:
1. The merger of LNH with and into Sub (the "Merger"),
will constitute a reorganization within the meaning
of section 368(a) of the Code, and
<PAGE> 2
LNH REIT, Inc.
_______________, 1995
Page 2
EastGroup, LNH and Sub will each be a party to the
reorganization within the meaning of section 368(b)
of the Code.
2. No gain or loss will be recognized by EastGroup, LNH
or Sub in the Merger.
3. No gain or loss will be recognized by the holders of
shares of common stock, $0.50 par value per share, of
LNH ("LNH Shares"), upon their receipt of shares of
beneficial interest, $1.00 par value per share, of
EastGroup ("EastGroup Shares"), in exchange for their
LNH Shares, except that holders of LNH Shares who
receive cash proceeds from the sale of fractional
interests in EastGroup Shares will recognize gain or
loss equal to the difference between such proceeds
and the tax basis allocated to their fractional share
interests and such gain or loss will constitute
capital gain or loss if their LNH Shares are held as
a capital asset at the effective time of the Merger.
4. The aggregate tax basis of the EastGroup Shares
(including fractional share interests treated as
received) received by the holders of LNH Shares will
be the same as the aggregate tax basis of their LNH
Shares.
5. The holding period of the EastGroup Shares in the
hands of the holders of LNH Shares will include the
holding period of their LNH Shares, provided such LNH
Shares are held as a capital asset at the effective
time of the Merger.
Except as set forth above, we express no opinion as to the tax
consequences, whether federal, state, local, or foreign, to any party of the
Merger or of any transactions related to the Merger or contemplated by the
Agreement. This opinion is being furnished to you in connection with the
Merger and may not be used or relied upon for any other purpose. We hereby
consent to the filing of this opinion as an exhibit to the Registration
Statement and to its attachment as an exhibit to the Proxy Statement/Prospectus
contained therein, as well as to the reference to this opinion therein.
Very truly yours,
JAECKLE, FLEISCHMANN & MUGEL
<PAGE> 1
EXHIBIT 5
JAECKLE, FLEISCHMANN & MUGEL
ATTORNEYS AT LAW
FLEET BANK BUILDING TWELVE FOUNTAIN PLAZA BUFFALO, NEW YORK 14202-2292
TEL (716) 856-0600 FAX (716) 856-0432
December 22, 1995
EastGroup Properties
300 One Jackson Place
188 East Capitol Street
Jackson, Mississippi 39201-2195
Ladies and Gentlemen:
We are furnishing this opinion in connection with a Registration
Statement on Form S-4 (the "Registration Statement") filed by EastGroup
Properties ("EastGroup"), covering shares of beneficial interest, $1.00 par
value per share (the "Shares"), to be issued by EastGroup in connection with
the merger of EastGroup-LNH Corporation ("Sub") and LNH REIT, Inc. ("LNH")
under the terms of an Agreement and Plan of Merger dated as of December 22,
1995 among EastGroup, Sub and LNH (the "Merger Agreement").
We have examined EastGroup's Restated Declaration of Trust, as amended,
and Trustees Regulations, as amended, such records of proceedings of EastGroup
as we deemed material, the Registration Statement and such other documents as
we deemed necessary for the purposes of this opinion.
Based on the foregoing, we are of the opinion that the Shares have been
duly authorized for issuance by all necessary corporate action and, upon the
issuance thereof in accordance with the terms of the Merger Agreement, the
Shares will be legally issued, fully paid and non-assessable.
Very truly yours,
JAECKLE, FLEISCHMANN & MUGEL
<PAGE> 1
Exhibit 24(a)
Consent of Ernst & Young LLP
We consent to the Reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related prospectus of EastGroup
Properties for the registration of 649,827 shares of EastGroup's common stock
and to the incorporation by reference therein of our report dated March 24,
1995, with respect to the consolidated financial statements of LNH Reit, Inc.
included in its Annual Report (Form 10-KSB) for the year ended December 31,
1994, filed with the Securities and Exchange Commission and in its Annual
Report to Shareholders, included as Exhibit 13(b) to this Registration
Statement.
Earnst & Young LLP
Jackson, Mississippi
December 20, 1995
<PAGE> 1
Exhibit 24(b)
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Trustees
EastGroup Properties:
We consent to the use of our reports incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Jackson, Mississippi
December 21, 1995
<PAGE> 1
Exhibit 24(c)
CONSENT OF RAUSCHER PIERCE REFSNES, INC.
On behalf of Rauscher Pierce Refsnes, Inc. ("RPR"), the undersigned hereby
consents to the inclusion of the opinion of RPR, dated as of December 21, 1995,
as to the fairness, from a financial point of view, of the consideration to be
received by the shareholders of LNH REIT, Inc. ("LNH") in the merger of LNH
with and into a subsidiary of EastGroup Properties.
Date: December 21, 1995
Sincerely,
/s/ G. Clyde Buck
----------------------------
G. Clyde Buck
Managing Director
GCB/cmf
<PAGE> 1
EXHIBIT 28(C)
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF LNH REIT, INC.
SPECIAL MEETING OF SHAREHOLDERS
________________, 1996
The undersigned hereby appoints Leland R. Speed and N. Keith McKey, or either
of them, as Proxies, each with full power of substitution and resubstitution,
and hereby authorizes them to represent and to vote as designated below, on
behalf of the undersigned, all of the shares of common stock, $0.50 par value
per share, of LNH REIT, Inc. ("LNH"), held of record by the undersigned at the
close of business on ________________________, 1996 at the special meeting of
shareholders to be held at ________ a.m. on ________________________, 1996, at
300 One Jackson Place, 188 East Capitol Street, Jackson, Mississippi, and at
any adjournment or postponement thereof.
1. APPROVAL OF THE AGREEMENT AND PLAN OF MERGER dated as of
December 22, 1995 among LNH REIT, Inc., EastGroup
Properties and EastGroup-LNH Corporation.
/ / FOR / / AGAINST / / ABSTAIN
2. In their discretion, Proxies are authorized to vote upon such other
business as may properly come before the special meeting and any
adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE MATTER INDICATED IN 1 ABOVE AND WILL BE VOTED IN THE DISCRETION
OF THE PROXIES NAMED HEREIN WITH RESPECT TO ANY MATTER REFERRED TO IN 2 ABOVE.
Dated: _________________________, 1996
PLEASE SIGN EXACTLY AS NAME(S) APPEAR
ON STOCK CERTIFICATES(S). A
corporation is requested to sign its
name by its President or other
authorized officer, with the office
held so designated. A partnership
should sign in the partnership name by
an authorized person. Executors,
trustees, administrators, etc. are
requested to indicate the capacity in
which they are signing. JOINT TENANTS
SHOULD BOTH SIGN.
________________________________________
________________________________________
(Signature(s) of Shareholder(s))
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD
IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE.
