<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 13, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------------
EASTGROUP PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 13-2711135
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
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.
JAECKLE FLEISCHMANN & MUGEL, LLP
800 FLEET BANK BUILDING
TWELVE FOUNTAIN PLAZA
BUFFALO, NEW YORK 14202
(716) 856-0600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
IF THE ONLY SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED
PURSUANT TO A DIVIDEND OR INTEREST REINVESTMENT PLAN, PLEASE CHECK THE FOLLOWING
BOX. [ ]
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON
A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), OTHER THAN THE SECURITIES OFFERED ONLY IN
CONNECTION WITH DIVIDEND OR INTEREST REINVESTMENT PLANS, CHECK THE FOLLOWING
BOX. [X]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(b) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING BOX
AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER
EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(c)
UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 2
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=============================================================================================================================
PROPOSED
MAXIMUM
AGGREGATE
OFFERING AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED PRICE(1)(2) REGISTRATION FEE
-------------------------------------------------- ----------- ----------------
<S> <C> <C>
SHARES OF COMMON STOCK (3)...................................
PREFERRED STOCK(4)........................................... $150,000,000
DEPOSITARY SHARES REPRESENTING PREFERRED STOCK(5)............
DEBT SECURITIES(6)...........................................
TOTAL................................................... $150,000,000 $45,455(7)
=============================================================================================================================
<FN>
(1) In no event will the aggregate maximum offering price of all securities
registered under this Registration Statement exceed $150,000,000. Any
securities registered hereunder may be sold separately or as units with
other securities registered hereunder.
(2) The proposed maximum offering price (a) has been omitted pursuant to
Instruction II.D. of Form S-3 and (b) will be determined, from time to
time, by the Registrant in connection with the issuance by the
Registrant of the securities registered hereunder.
(3) Subject to footnote (1), there is being registered hereunder an
indeterminate number of shares of Common Stock as may be sold, from
time to time, by EastGroup Properties, Inc. ("EastGroup"). There is
also being registered hereunder an indeterminate number of shares of
Common Stock that may be issued upon conversion of Preferred Stock or
Depositary Shares registered hereunder.
(4) Subject to footnote (1), there is being registered hereunder an
indeterminate number of shares of Preferred Stock as may be sold, from
time to time, by EastGroup.
(5) To be represented by Depositary Receipts representing an interest in
all or a specified portion of Preferred Stock.
(6) Subject to footnote (1), there is being registered hereunder an
indeterminate number of Debt Securities as may be sold from time to
time by EastGroup.
(7) Calculated pursuant to Rule 457(o) of the rules and regulations under
the Securities Act of 1933, as amended.
</TABLE>
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EXPLANATORY NOTE
This Registration Statement relates to securities which may be
offered from time to time by EastGroup Properties, Inc. ("EastGroup"). This
Registration Statement contains a form of basic prospectus (the "Basic
Prospectus") relating to EastGroup which will be used in connection with an
offering of securities by EastGroup. The specific terms of the securities to be
offered will be set forth in a prospectus supplement relating to such securities
(the "Prospectus Supplement").
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE
SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 13, 1997
PROSPECTUS
EASTGROUP PROPERTIES, INC.
$150,000,000
SHARES OF COMMON STOCK,
PREFERRED STOCK,
DEPOSITARY SHARES AND
DEBT SECURITIES
--------------------------------
EastGroup Properties, Inc. ("EastGroup"), may from time to
time offer in one or more series or classes (i) shares of its common stock, par
value $0.0001 per share (the "Common Stock"); (ii) its preferred stock (the
"Preferred Stock"); (iii) Preferred Stock represented by Depositary Shares (the
"Depositary Shares"); and (iv) unsecured debt securities ("Debt Securities"),
with an aggregate public offering price of up to $150,000,000 in amounts, at
prices and on terms to be determined at the time of offering. The Common Stock,
Preferred Stock, Depositary Shares and Debt Securities (collectively, the
"Securities") may be offered, separately or together, in one or more supplements
to this Prospectus (each, a "Prospectus Supplement").
The specific terms of the Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable (i) in the case of Common Stock,
any public offering price; (ii) in the case of Preferred Stock, the specific
title and stated value, any dividend, liquidation, redemption, conversion,
voting and other rights, and any public offering price; (iii) in the case of
Depositary Shares, the fractional share of Preferred Stock represented by each
such Depositary Share; and
-i-
<PAGE> 5
(iv) in the case of Debt Securities, the specific title, aggregate principal
amount, currency, form (which may be registered or bearer, or certificated or
global), authorized denominations, maturity, rate (or manner of calculation
thereof) and time of payment of interest, terms for redemption at the option of
EastGroup or repayment at the option of the holder, terms for sinking fund
payments, covenants and any initial public offering price. In addition, such
specific terms may include limitations on direct or beneficial ownership and
restrictions on transfer of the Securities, in each case as may be appropriate
to preserve the status of EastGroup as a real estate investment trust ("REIT"),
for federal income tax purposes.
The applicable Prospectus Supplement will also contain
information, where applicable, about certain United States federal income tax
considerations relating to, and any listing on a securities exchange of, the
Securities covered by such Prospectus Statement.
The Securities may be offered directly, through agents
designated from time to time by EastGroup, or to or through underwriters or
dealers. If any agents or underwriters are involved in the sale of any of the
Securities, their names, and any applicable purchase price, fee, commission or
discount arrangement between or among them, will be set forth, or will be
calculable from the information set forth, in the applicable Prospectus
Supplement. See "Plan of Distribution." No Securities may be sold without
delivery of the applicable Prospectus Supplement describing the method and terms
of the offering of such series of Securities.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
The date of this Prospectus is ___________________, 1997.
ii
<PAGE> 6
AVAILABLE INFORMATION
EastGroup is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by EastGroup may be inspected at, and,
upon payment of the Commission's customary charges, copies obtained from, the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
DC 20549. Such reports, proxy statements and other information are also
available for inspection and copying at prescribed rates at the Commission's
regional offices in New York, New York (Seven World Trade Center, 13th Floor,
New York, New York 10048) and in Chicago, Illinois (Suite 1400, Citicorp Center,
500 West Madison Street, Chicago, Illinois 60661-2511). The Commission maintains
a Web site (http://www.sec.gov) that also contains reports, proxy statements and
other information concerning EastGroup. In addition, the Common Stock is traded
on the New York Stock Exchange, Inc. ("NYSE") under the symbol "EGP" and can be
inspected and copied at the offices of the NYSE, 20 Broad Street, New York, New
York 10005.
EastGroup has filed with the Commission a Registration
Statement on Form S-3 (the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), and the rules and regulations
promulgated thereunder, with respect to the Securities. This Prospectus
constitutes the Prospectus of EastGroup, filed as part of the Registration
Statement. As permitted by the rules and regulations of the Commission, this
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
Commission noted above, and copies of which can be obtained from the Commission
at prescribed rates as indicated above. Statements contained in this Prospectus
as to the contents of any contract or other documents are not necessarily
complete, and in each instance, reference is made to the copy of such contract
or documents filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
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<PAGE> 7
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Incorporated into this Prospectus by reference are the
documents listed below filed by EastGroup or its predecessor, EastGroup
Properties, under the Exchange Act. Copies of any such documents, other than
exhibits to such documents, are available without charge to each person to whom
a copy of this 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.
The following documents or portions thereof are hereby
incorporated into this Prospectus by reference:
1. EastGroup Properties' Annual Report on Form 10-K for the
year ended December 31, 1996 (Commission file No.
1-7094).
2. EastGroup Properties' Proxy Material for its Annual
Meeting of Stockholders held on June 5, 1997
(Commission File No. 1-7094).
3. EastGroup Properties' Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997 (Commission File No.
1-7094).
Each document filed by EastGroup subsequent to the date of
this Prospectus pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act and prior to the termination of the offering of all Securities to which this
Prospectus relates shall be deemed to be incorporated by reference in this
Prospectus and shall be part hereof from the date of filing of such document.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained in this
Prospectus (in the case of a previously filed document incorporated or deemed to
be incorporated by reference herein) in any accompanying Prospectus Supplement
relating to a specific offering of Securities or in any other subsequently filed
document that is also incorporated or 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 Prospectus or any accompanying Prospectus Supplement.
Subject to the foregoing, all information appearing in this Prospectus and each
accompanying Prospectus Supplement is qualified in its entirety by the
information appearing in the documents incorporated by reference.
iv
<PAGE> 8
Unless the context otherwise requires, all references in this
Prospectus to "EastGroup" shall mean EastGroup Properties, Inc. and its
subsidiaries on a consolidated basis or, where the context so requires,
EastGroup Properties, Inc. only, and, as the context may require, their
predecessors.
THE COMPANY
EastGroup is a self-administered real estate investment trust
("REIT") which focuses on the ownership, acquisition and selective development
of industrial properties primarily in major Sunbelt markets, with an emphasis on
the states of Florida, Texas, Arizona and California. At March 31, 1997
EastGroup's portfolio included 28 industrial properties comprising over
4,950,000 square feet of leasable space, as well as four office buildings
containing approximately 569,000 square feet of leasable space. As of March 31,
1997, the industrial portfolio was 97% leased and the office portfolio was 90%
leased.
EastGroup is the successor to EastGroup Properties, a Maryland
real estate investment trust ("Parent"). EastGroup was incorporated under the
laws of the State of Maryland on April 4, 1997. Formed as a wholly-owned
subsidiary of Parent, EastGroup merged with Parent on June 5, 1997 (the
"Merger"), pursuant to the Agreement and Plan of Merger dated April 23, 1997 by
and between EastGroup and Parent. As a result of the Merger, EastGroup succeeded
to the business and operations of Parent.
EastGroup's principal executive offices are located at 300 One
Jackson Place, 188 East Capitol Street, Jackson, Mississippi 39201-2195. Its
telephone number is (601) 354-3555.
RATIO OF EARNINGS TO FIXED CHARGES
EastGroup's ratio of earnings to fixed charges for the three
months ended March 31, 1997 was 2.3, for the year ended December 31, 1996 was
2.4, for the year ended December 31, 1995 was 2.2, for the year ended December
31, 1994 was 2.8, for the year ended December 31, 1993 was 2.9, for the year
ended December 31, 1992 was (0.3). There was no Preferred Stock outstanding for
any of the periods shown above. Accordingly, the ratio of earnings to combined
fixed charges and Preferred Stock dividends is identical to the ratio of
earnings to fixed charges.
For purposes of computing these ratios, earnings have been
calculated by adding fixed charges, excluding capitalized interest, to pre-tax
income from continuing operations (net income or loss). Fixed charges consist of
interest costs, whether expensed or capitalized, the interest component of
rental expense and amortization of debt issuance costs.
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<PAGE> 9
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus
Supplement, EastGroup intends to use the net proceeds from the offering for
general corporate purposes including, without limitation, the acquisition and
development of real estate properties, whether by acquisition of properties
directly or through potential business combination transactions, the repayment
of debt and to fund working capital requirements.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued in one or more series under
an Indenture (the "Indenture"), which may be supplemented by supplemental
indentures (each, an "Indenture Supplement"), between EastGroup and a trustee
(the "Trustee") to be chosen by EastGroup and qualified to act as Trustee under
the Trust Indenture Act of 1939, as amended (the "TIA"). A copy of the form of
the Indenture will be filed as an exhibit to the Registration Statement of which
this Prospectus is a part and will be available for inspection at the corporate
trust office of the Trustee or as described above under "Available Information."
The Indenture is subject to, and governed by, the TIA. The statements made
hereunder relating to the Indenture and the Debt Securities to be issued
thereunder are summaries of certain provisions thereof and do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all provisions of the Indenture and such Debt Securities. All capitalized
terms used but not defined herein shall have the respective meanings set forth
in the Indenture.
GENERAL
The Debt Securities will be direct, unsecured obligations of
EastGroup and will rank equally with all other unsecured and unsubordinated
indebtedness of EastGroup. At March 31, 1997 the total outstanding debt of
EastGroup was approximately $105,423,000, all of which was secured debt. Except
as may be set forth in an applicable Prospectus Supplement, the Debt Securities
may be issued without limit as to aggregate principal amount, in one or more
series, in each case as established from time to time in or pursuant to
authority granted by a resolution of the Board of Directors of EastGroup or as
established in one or more Indenture Supplements. All Debt Securities of one
series need not be issued at the same time and, unless otherwise provided, a
series may be reopened, without the consent of the holders of the Debt
Securities of such series, for issuance of additional Debt Securities of such
series.
The Indenture provides that there may be more than one Trustee
thereunder, each with respect to one or more series of Debt Securities. Any
Trustee under the Indenture may resign or be removed with respect to one or more
series of Debt Securities, and a successor Trustee may be appointed to act with
respect to such series. In the event that two or more
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<PAGE> 10
persons are acting as Trustee with respect to different series of Debt
Securities, each such Trustee shall be a trustee of a trust under the Indenture
separate and apart from the trust administered by any other Trustee, and, except
as otherwise indicated herein, any action described herein to be taken by a
Trustee may be taken by each such Trustee with respect to, and only with respect
to, the one or more series of Debt Securities for which it is Trustee under the
Indenture.
Reference is made to the Prospectus Supplement relating to the
series of Debt Securities offered thereby for the specific terms thereof,
including:
(i) the title of such Debt Securities;
(ii) the aggregate principal amount of such Debt
Securities and any limit on such aggregate principal amount;
(iii) the percentage of the principal amount at which
such Debt Securities will be issued and, if other than the principal amount
thereof, the portion of the principal amount thereof payable upon declaration of
acceleration of the maturity thereof;
(iv) the date or dates, or the method for determining
such date or dates, on which the principal of such Debt Securities will be
payable;
(v) the rate or rates (which may be fixed or
variable), or the method by which such rate or rates shall be determined, at
which such Debt Securities will bear interest, if any;
(vi) the date or dates, or the method for determining
such date or dates, from which any interest will accrue, the dates on which any
such interest will be payable, the record dates for such interest payment dates,
or the method by which any such date shall be determined, the person to whom
such interest shall be payable, and the basis upon which interest shall be
calculated if other than that of a 360-day year of twelve 30-day months;
(vii) the place or places where the principal of (and
premium, if any) and interest, if any, on such Debt Securities will be payable,
such Debt Securities may be surrendered for registration of transfer or exchange
and notices or demands to or upon EastGroup in respect of such Debt Securities
and the Indenture may be served;
(viii) the period or periods within which, the price
or prices at which and the terms and conditions upon which such Debt Securities
may be redeemed, in whole or in part, at the option of EastGroup, if EastGroup
is to have such an option;
(ix) the obligation, if any, of EastGroup to redeem,
repay or purchase such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a holder thereof, and the period or periods within
which, the price or prices at which and the
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terms and conditions upon which such Debt Securities will be redeemed, repaid or
purchased, in whole or in part, pursuant to such obligation;
(x) if other than U.S. dollars, the currency or
currencies in which such Debt Securities are denominated and payable, which may
be a foreign currency or units of two or more foreign currencies or a composite
currency or currencies, and the terms and conditions relating thereto;
(xi) whether the amount of payments of principal of
(and premium, if any) or interest, if any, on such Debt Securities may be
determined with reference to an index, formula or other method (which index,
formula or method may, but need not be, based on a currency, currencies,
currency unit or units of composite currency or currencies) and the manner in
which such amounts shall be determined;
(xii) the events of default or covenants of such Debt
Securities, to the extent different from or in addition to those described
herein;
(xiii) whether such Debt Securities will be issued in
certificated and/or book-entry form;
(xiv) whether such Debt Securities will be in
registered or bearer form and, if in registered form, the denominations thereof
if other than $1,000 and any integral multiple thereof and, if in bearer form,
the denominations thereof if other than $5,000 and terms and conditions relating
thereto;
(xv) the applicability, if any, of the defeasance and
covenant defeasance provisions described herein, or any modification thereof;
(xvi) if such Debt Securities are to be issued upon
the exercise of debt warrants, the time, manner and place of such Debt
Securities to be authenticated and delivered;
(xvii) whether and under what circumstances EastGroup
will pay additional amounts on such Debt Securities in respect of any tax,
assessment or governmental charge and, if so, whether EastGroup will have the
option to redeem such Debt Securities in lieu of making such payment;
(xviii) with respect to any Debt Securities that
provide for optional redemption or prepayment upon the occurrence of certain
events (such as a change of control of EastGroup), (a) the possible effects of
such provisions on the market price of EastGroup's securities or in deterring
certain mergers, tender offers or other takeover attempts, and the intention of
EastGroup to comply with the requirements of Rule 14e-1 under the Exchange Act
and any other applicable securities laws in connection with such provisions; (b)
whether the occurrence of the specified events may give rise to cross-defaults
on other indebtedness such that payment on such Debt Securities may be
effectively subordinated; and (c) the existence of any
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<PAGE> 12
limitations on EastGroup's financial or legal ability to repurchase such Debt
Securities upon the occurrence of such an event (including, if true, the lack of
assurance that such a repurchase can be effected) and the impact, if any, under
the Indenture of such a failure, including whether and under what circumstances
such a failure may constitute an Event of Default; and
(xix) any other terms of such Debt Securities not
inconsistent with the terms of the Indenture.
The Debt Securities may provide for less than the entire
principal amount thereof to be payable upon declaration of acceleration of the
maturity thereof ("Original Issue Discount Securities"). If material or
applicable, special U.S. federal income tax, accounting and other considerations
applicable to Original Issue Discount Securities will be described in the
applicable Prospectus Supplement.
Except as described under "--Merger, Consolidation or Sale"
below or as may be set forth in any Prospectus Supplement, the Indenture does
not contain any other provisions that would limit the ability of EastGroup to
incur indebtedness or that would afford holders of the Debt Securities
protection in the event of (i) a highly leveraged or similar transaction
involving EastGroup or any affiliate of EastGroup; (ii) a change of control; or
(iii) a reorganization, restructuring, merger or similar transaction involving
EastGroup that may adversely affect the holders of the Debt Securities. In
addition, subject to the limitations set forth under "--Merger, Consolidation or
Sale" below, EastGroup may, in the future, enter into certain transactions, such
as the sale of all or substantially all of its assets or the merger or
consolidation of EastGroup, that would increase the amount of EastGroup's
indebtedness or substantially reduce or eliminate EastGroup's assets, which may
have an adverse effect on EastGroup's ability to service its indebtedness,
including the Debt Securities. In addition, restrictions on ownership and
transfers of Common Stock and Preferred Stock are designed to preserve its
status as a REIT and, therefore, may act to prevent or hinder a change of
control. See "Description of Common Stock--Restrictions on Transfer" and
"Description of Preferred Stock--Restrictions on Ownership." Reference is made
to the applicable Prospectus Supplement for information with respect to any
deletions from, modifications of or additions to the events of default or
covenants that are described below, including any addition of a covenant or
other provision providing event risk or similar protection.
Reference is made to "--Certain Covenants" below and to the
description of any additional covenants with respect to a series of Debt
Securities in the applicable Prospectus Supplement. Except as otherwise
described in the applicable Prospectus Supplement, compliance with such
covenants generally may not be waived with respect to a series of Debt
Securities by the Board of Directors of EastGroup or by the Trustee unless the
Holders of at least a majority in principal amount of all outstanding Debt
Securities of such series consent to such waiver, except to the extent that the
defeasance and covenant defeasance provisions of the Indenture described under
"--Discharge, Defeasance and Covenant Defeasance" below apply to such series of
Debt Securities. See "--Modification of the Indenture."
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<PAGE> 13
Debt Securities may be denominated and payable in a foreign
currency or units of two or more foreign currencies or a composite currency or
currencies. As more fully described in the applicable Prospectus Supplement,
awards or judgments by a court in the United States in connection with a claim
with respect to any Debt Securities denominated other than in United States
dollars (or a judgment denominated other than in United States dollars in
respect of such claims) may be converted into United States dollars at a rate of
exchange prevailing on a date determined pursuant to applicable law.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus
Supplement, the Debt Securities of any series which are registered securities,
other than registered securities issued in global form (which may be of any
denomination), shall be issuable in denominations of $1,000 and any integral
multiple thereof and the Debt Securities which are bearer securities, other than
bearer securities issued in global form (which may be of any denomination),
shall be issuable in denominations of $5,000.
Unless otherwise described in the applicable Prospectus
Supplement, the principal of (and premium, if any) and interest on any series of
Debt Securities will be payable at the corporate trust office of the Trustee,
provided that, at the option of EastGroup, payment of interest may be made by
check mailed to the address of the Person entitled thereto as it appears in the
applicable Security Register or by wire transfer of funds to such Person at an
account maintained within the United States.
Unless otherwise described in the applicable Prospectus
Supplement, any interest not punctually paid or duly provided for on any
Interest Payment Date with respect to a Debt Security ("Defaulted Interest")
will forthwith cease to be payable to the Holder on the applicable Regular
Record Date and may either be paid to the Person in whose name such Debt
Security is registered at the close of business on a special record date (the
"Special Record Date") for the payment of such Defaulted Interest to be fixed by
the Trustee, notice whereof shall be given to the Holder of such Debt Security
not less than 10 days prior to such Special Record Date, or may be paid at any
time in any other lawful manner, all as more completely described in the
Indenture.
Subject to certain limitations imposed upon Debt Securities
issued in book entry form, the Debt Securities of any series will be
exchangeable for other Debt Securities of the same series and of a like
aggregate principal amount and tenor of different authorized denominations upon
surrender of such Debt Securities at the corporate trust office of the Trustee.
In addition, subject to certain limitations imposed upon Debt Securities issued
in book entry form, the Debt Securities of any series may be surrendered for
registration of transfer thereof at the corporate trust office of the Trustee.
Every Debt Security surrendered for registration of transfer or exchange shall
be duly endorsed or accompanied by a written instrument of transfer. No service
charge will be made for any registration of transfer or exchange of any Debt
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<PAGE> 14
Securities, but the Trustee or EastGroup may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
If the applicable Prospectus Supplement refers to any transfer agent (in
addition to the Trustee) initially designated by EastGroup with respect to any
series of Debt Securities, EastGroup may at any time rescind the designation of
any such transfer agent or approve a change in the location through which any
such transfer agent acts, except that EastGroup will be required to maintain a
transfer agent in each place of payment for such series. EastGroup may at any
time designate additional transfer agents with respect to any series of Debt
Securities.
Neither EastGroup nor the Trustee shall be required (i) to
issue, register the transfer of or exchange any Debt Security if such Debt
Security may be among those selected for redemption during a period beginning at
the opening of business 15 days before selection of the Debt Securities to be
redeemed and ending at the close of business on (a) if such Debt Securities are
issuable only as Registered Securities, the day of the mailing of the relevant
notice of redemption and (b) if such Debt Securities are issuable as Bearer
Securities, the day of the first publication of the relevant notice of
redemption or, if such Debt Securities are also issuable as Registered
Securities and there is no publication, the mailing of the relevant notice of
redemption; or (ii) to register the transfer of or exchange any Registered
Security so selected for redemption in whole or in part, except, in the case of
any Registered Security to be redeemed in part, the portion thereof not to be
redeemed; or (iii) to exchange any Bearer Security so selected for redemption
except that such a Bearer Security may be exchanged for a Registered Security of
that series and like tenor, provided that such Registered Security shall be
simultaneously surrendered for redemption; or (iv) to issue, register the
transfer of or exchange any Debt Security which has been surrendered for
repayment at the option of the Holder, except the portion, if any, of such Debt
Security not to be so repaid.
MERGER, CONSOLIDATION OR SALE
EastGroup may consolidate with, or sell, lease or convey all
or substantially all of its assets to, or merge with or into, any other entity,
provided that (i) EastGroup shall be the continuing entity, or the successor
entity (if other than EastGroup) formed by or resulting from any such
consolidation or merger or which shall have received the transfer of such assets
shall expressly assume payment of the principal of (and premium, if any) and
interest on all the Debt Securities and the due and punctual performance and
observance of all of the covenants and conditions contained in the Indenture;
(ii) immediately after giving effect to such transaction and treating any
indebtedness which becomes an obligation of EastGroup or any Subsidiary as a
result thereof as having been incurred by EastGroup or such Subsidiary at the
time of such transaction, no Event of Default under the Indenture, and no event
which, after notice of the lapse of time, or both, would become such an Event of
Default, shall have occurred and be continuing; and (iii) an officer's
certificate and legal opinion covering such conditions shall be delivered to the
Trustee.
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CERTAIN COVENANTS
Existence. Except as permitted under "--Merger, Consolidation
or Sale" above, EastGroup is required to do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, rights
and franchises; provided, however, that EastGroup shall not be required to
preserve any right or franchise if it determines that the preservation thereof
is no longer desirable in the conduct of its business and that the loss thereof
is not disadvantageous in any material respect to the Holders of the Debt
Securities.
Maintenance of Properties. EastGroup is required to cause all
of its material properties used or useful in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and to cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of EastGroup may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that EastGroup and its Subsidiaries
shall not be prevented from selling or otherwise disposing for value their
respective properties in the ordinary course of business.
Payment of Taxes and Other Claims. EastGroup is required to
pay or discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon it or any Subsidiary or upon its income, profits or property or
that of any Subsidiary; and (ii) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of
EastGroup or any Subsidiary; provided, however, that EastGroup shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings.
Provision of Financial Information. The Holders of Debt
Securities will be provided with copies of the annual reports and quarterly
reports of EastGroup. Whether or not EastGroup is subject to Sections 13 or
15(d) of the Exchange Act and for so long as any Debt Securities are
outstanding, EastGroup will, to the extent permitted under the Exchange Act, be
required to file with the Commission the annual reports, quarterly reports and
other documents which EastGroup would have been required to file with the
Commission pursuant to such Sections 13 or 15(d) (the "Financial Statements") if
EastGroup were so subject, such documents to be filed with the Commission on or
prior to the respective dates (the "Required Filing Dates") by which EastGroup
would have been required so to file such documents if EastGroup were so subject.
EastGroup will also in any event (i) within 15 days of each Required Filing Date
(a) transmit by mail to all Holders of Debt Securities, as their names and
addresses appear in the Security Register, without cost to such Holders, copies
of the annual reports and quarterly reports which EastGroup would have been
required to file with the Commission pursuant to Sections 13 or 15(d) of the
Exchange Act if EastGroup were subject to such Sections and (b) file with the
Trustee copies of the annual reports, quarterly reports and other documents
which EastGroup would have been required to file with the Commission pursuant to
Sections 13 or
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15(d) of the Exchange Act if EastGroup were subject to such sections and (ii) if
filing such documents by EastGroup with the Commission is not permitted under
the Exchange Act, promptly upon written request and payment of the reasonable
cost of duplication and delivery, supply copies of such documents to any
prospective Holder.
Additional Covenants. Any additional or different covenants of
EastGroup with respect to any series of Debt Securities will be set forth in the
Prospectus Supplement relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that the following events are "Events
of Default" with respect to any series of Debt Securities issued thereunder: (i)
default for 30 days in the payment of any installment of interest on any Debt
Security of such series; (ii) default in the payment of the principal of (or
premium, if any, on) any Debt Security of such series at its maturity; (iii)
default in making any sinking fund payment as required for any Debt Security of
such series; (iv) default in the performance of any other covenant of EastGroup
contained in the Indenture (other than a covenant added to the Indenture solely
for the benefit of a series of Debt Securities issued thereunder other than such
series), such default having continued for 60 days after written notice as
provided in the Indenture; (v) default in the payment of an aggregate principal
amount exceeding $5,000,000 of any evidence of recourse indebtedness of
EastGroup or any mortgage, indenture or other instrument under which such
indebtedness is issued or by which such indebtedness is secured, such default
having occurred after the expiration of any applicable grace period and having
resulted in the acceleration of the maturity of such indebtedness, but only if
such indebtedness is not discharged or such acceleration is not rescinded or
annulled; (vi) certain events of bankruptcy, insolvency or reorganization, or
court appointment of a receiver, liquidator or trustee of EastGroup or any
Significant Subsidiary, as defined below, or any of their respective property;
and (vii) any other Event of Default provided with respect to a particular
series of Debt Securities. The term "Significant Subsidiary" means each
significant subsidiary (as defined in Regulation S-X promulgated under the
Securities Act) of EastGroup.
If an Event of Default under the Indenture with respect to
Debt Securities of any series at the time outstanding occurs and is continuing,
then in every such case the Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Debt Securities of that series may declare
the principal amount (or, if the Debt Securities of that series are Original
Issue Discount Securities or Indexed Securities, such portion of the principal
amount as may be specified in the terms thereof) of all of the Debt Securities
of that series to be due and payable immediately by written notice thereof to
EastGroup (and to the Trustee if given by the Holders). However, at any time
after such a declaration of acceleration with respect to Debt Securities of such
series (or of all Debt Securities then outstanding under the Indenture, as the
case may be) has been made, but before a judgment or decree for payment of the
money due has been obtained by the Trustee, the Holders of not less than a
majority in principal amount of Outstanding Debt Securities of such series (or
of all Debt Securities then outstanding under the
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Indenture, as the case may be) may rescind and annul such declaration and its
consequences if (i) EastGroup shall have deposited with the applicable Trustee
all required payments of the principal of (and premium, if any) and interest on
the Debt Securities of such series (or of all Debt Securities then outstanding
under the Indenture, as the case may be), plus certain fees, expenses,
disbursements and advances of the Trustee and (ii) all Events of Default, other
than the nonpayment of accelerated principal of (or specified portion thereof),
or premium (if any) or interest on the Debt Securities of such series (or of all
Debt Securities then outstanding under the Indenture, as the case may be) have
been cured or waived as provided in the Indenture. The Indenture also provides
that the Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series (or of all Debt Securities then
outstanding under the Indenture, as the case may be) may waive any past default
with respect to such series and its consequences, except a default (a) in the
payment of the principal of (or premium, if any) or interest on any Debt
Security of such series or (b) in respect of a covenant or provision contained
in the Indenture that cannot be modified or amended without the consent of the
Holder of each Outstanding Debt Security affected thereby.
The Trustee will be required to give notice to the Holders of
Debt Securities within 90 days of a default under the Indenture unless such
default has been cured or waived; provided, however, that the Trustee may
withhold notice to the Holders of any series of Debt Securities of any default
with respect to such series (except a default in the payment of the principal of
(or premium, if any) or interest on any Debt Security of such series or in the
payment of any sinking fund installment in respect of any Debt Security of such
series) if specified Responsible Officers of the Trustee consider such
withholding to be in the interest of such Holders.
The Indenture provides that no Holders of Debt Securities of
any series may institute any proceedings, judicial or otherwise, with respect to
the Indenture or for any remedy thereunder, except in the case of failure of the
Trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an Event of Default from the Holders of not
less than 25% in principal amount of the Outstanding Debt Securities of such
series, as well as an offer of indemnity reasonably satisfactory to it. This
provision will not prevent, however, any holder of Debt Securities from
instituting suit for the enforcement of payment of the principal of (and
premium, if any) and interest on such Debt Securities at the respective due
dates thereof.
Subject to provisions in the Indenture relating to its duties
in case of default, the Trustee is under no obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any Holders
of any series of Debt Securities then outstanding under the Indenture, unless
such Holders shall have offered to the Trustee thereunder reasonable security or
indemnity. The Holders of not less than a majority in principal amount of the
Outstanding Debt securities of any series (or of all Debt Securities then
outstanding under the Indenture, as the case may be) shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or of exercising any trust or power conferred upon the
Trustee. However, the Trustee may refuse to follow any direction which is
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in conflict with any law or the Indenture, which may involve the Trustee in
personal liability or which may be unduly prejudicial to the holders of Debt
Securities of such series not joining therein.
Within 120 days after the close of each fiscal year, EastGroup
must deliver to the Trustee a certificate, signed by one of several specified
officers of EastGroup, stating whether or not such officer has knowledge of any
default under the Indenture and, if so, specifying each such default and the
nature and status thereof.
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture will be
permitted to be made only with the consent of the Holders of not less than a
majority in principal amount of all Outstanding Debt Securities or series of
Outstanding Debt Securities which are affected by such modification or
amendment; provided, however, that no such modification or amendment may,
without the consent of the Holders of each such Debt Security affected thereby,
(i) change the Stated Maturity of the principal of, or premium (if any) or any
installment of interest on, any such Debt Security; (ii) reduce the principal
amount of, or the rate or amount of interest on, or any premium payable on
redemption of, any such Debt Security, or reduce the amount of principal of an
Original Issue Discount Security that would be due and payable upon declaration
of acceleration of the maturity thereof or would be provable in bankruptcy, or
adversely affect any right of repayment of the holder of any such Debt Security;
(iii) change the place of payment, or the coin or currency, for payment of
principal of, premium, if any, or interest on any such Debt Security; (iv)
impair the right to institute suit for the enforcement of any payment on or with
respect to any such Debt Security; (v) reduce the above stated percentage of
outstanding Debt Securities of any series necessary to modify or amend the
Indenture, to waive compliance with certain provisions thereof or certain
defaults and consequences thereunder or to reduce the quorum or voting
requirements set forth in the Indenture; or (vi) modify any of the foregoing
provisions or any of the provisions relating to the waiver of certain past
defaults or certain covenants, except to increase the required percentage to
effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the Holders of such Debt Security.
The Indenture provides that the Holders of not less than a
majority in principal amount of a series of Outstanding Debt Securities have the
right to waive compliance by EastGroup with certain covenants relating to such
series of Debt Securities in the Indenture.
Modifications and amendments of the Indenture will be
permitted to be made by EastGroup and the Trustee without the consent of any
Holder of Debt Securities for any of the following purposes: (i) to evidence the
succession of another Person to EastGroup as obligor under the Indenture; (ii)
to add to the covenants of EastGroup for the benefit of the Holders of all or
any series of Debt Securities or to surrender any right or power conferred upon
EastGroup in the Indenture; (iii) to add Events of Default for the benefit of
the Holders of all or any series
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of Debt Securities; (iv) to add or change any provisions of the Indenture to
facilitate the issuance of, or to liberalize certain terms of, Debt Securities
in bearer form, or to permit or facilitate the issuance of Debt Securities in
uncertificated form, provided, that such action shall not adversely affect the
interests of the Holders of the Debt Securities of any series in any material
respect; (v) to change or eliminate any provisions of the Indenture, provided
that any such change or elimination shall become effective only when there are
no Debt Securities Outstanding of any series created prior thereto which are
entitled to the benefit of such provision; (vi) to secure the Debt Securities;
(vii) to establish the form or terms of Debt Securities of any series; (viii) to
provide for the acceptance of appointment by a successor Trustee or facilitate
the administration of the trusts under the Indenture by more than one Trustee;
(ix) to cure any ambiguity, defect or inconsistency in the Indenture, provided
that such action shall not adversely affect the interests of Holders of Debt
Securities of any series in any material respect; or (x) to supplement any of
the provisions of the Indenture to the extent necessary to permit or facilitate
defeasance and discharge of any series of such Debt Securities, provided that
such action shall not adversely affect the interests of the Holders of the Debt
Securities of any series in any material respect.
The Indenture provides that in determining whether the Holders
of the requisite principal amount of Outstanding Debt Securities of a series
have given any request, demand, authorization, direction, notice, consent or
waiver thereunder or whether a quorum is present at a meeting of Holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security that
shall be deemed to be outstanding shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof; (ii) the principal amount
of a Debt Security denominated in a foreign currency that shall be deemed
outstanding shall be the U.S. dollar equivalent, determined on the issue date
for such Debt Security, of the principal amount (or, in the case of an Original
Issue Discount Security, the U.S. dollar equivalent on the issue date of such
Debt Security of the amount determined as provided in (i) above); (iii) the
principal amount of an Indexed Security that shall be deemed outstanding shall
be the principal face amount of such Indexed Security at original issuance,
unless otherwise provided with respect to such Indexed Security pursuant to the
Indenture; and (iv) Debt Securities owned by EastGroup or any other obligor upon
the Debt Securities or any affiliate to EastGroup or of such other obligor shall
be disregarded.
The Indenture contains provisions for convening meetings of
the Holders of Debt Securities of a series. A meeting will be permitted to be
called at any time by the Trustee, and also, upon request, by EastGroup or the
holders of at least 25% in principal amount of the Outstanding Debt Securities
of such series, in any such case upon notice given as provided in the Indenture.
Except for any consent that must be given by the Holder of each Debt Security
affected by certain modifications and amendments of the Indenture, any
resolution presented at a meeting or adjourned meeting duly reconvened at which
a quorum is present will be permitted to be adopted by the affirmative vote of
the Holders of a majority in principal amount of the Outstanding Debt Securities
of that series; provided, however, that, except as referred to above, any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by the
Holders of a specified
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<PAGE> 20
percentage, which is less than a majority, in principal amount of the
Outstanding Debt Securities of a series may be adopted at a meeting or adjourned
meeting duly reconvened at which a quorum is present by the affirmative vote of
the Holders of such specified percentage in principal amount of the Outstanding
Debt Securities of that series. Any resolution passed or decision taken at any
meeting of Holders of Debt Securities of any series duly held in accordance with
the Indenture will be binding on all Holders of Debt Securities of that series.
The quorum at any meeting called to adopt a resolution, and at any reconvened
meeting, will be Persons holding or representing a majority in principal amount
of the Outstanding Debt Securities of a series; provided, however, that if any
action is to be taken at such meeting with respect to a consent or wavier which
may be given by the Holders of not less than a specified percentage in principal
amount of the Outstanding Debt Securities of a series, the Persons holding or
representing such specified percentage in principal amount of the Outstanding
Debt Securities of such series will constitute a quorum.
Notwithstanding the foregoing provisions, if any action is to
be taken at a meeting of Holders of Debt Securities of any series with respect
to any request, demand, authorization, direction, notice, consent, waiver or
other action that the Indenture expressly provides may be made, given or taken
by the Holders of a specified percentage in principal amount of all Outstanding
Debt Securities affected thereby, or of the Holders of such series and one or
more additional series: (i) there shall be no minimum quorum requirement for
such meeting and (ii) the principal amount of the Outstanding Debt Securities of
such series that vote in favor of such request, demand, authorization,
direction, notice, consent, waiver or other action shall be taken into account
in determining whether such request, demand, authorization, direction, notice,
consent, waiver or other action has been made, given or taken under the
Indenture.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
EastGroup may discharge certain obligations to Holders of any
series of Debt Securities that have not already been delivered to the Trustee
for cancellation and that either have become due and payable or will become due
and payable within one year (or scheduled for redemption within one year) by
irrevocably depositing with the Trustee, in trust, funds in such currency or
currencies, currency unit or units or composite currency or currencies in which
such Debt Securities are payable in an amount sufficient to pay the entire
indebtedness on such Debt Securities in respect of principal (and premium, if
any) and interest to the date of such deposit (if such Debt Securities have
become due and payable) or to the Stated Maturity or Redemption Date, as the
case may be.
The Indenture provides that, if the provisions of Article
Fourteen are made applicable to the Debt Securities of or within any series
pursuant to the Indenture, EastGroup may elect either (i) to defease and be
discharged from any and all obligations with respect to such Debt Securities
(except for the obligation to pay additional amounts, if any, upon the
occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Debt Securities and the obligations to register the
transfer or exchange of such Debt
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Securities, to replace temporary or mutilated, destroyed, lost or stolen Debt
Securities, to maintain an office or agency in respect of such Debt Securities
and to hold moneys for payment in trust) ("defeasance") or (ii) to be released
from its obligations with respect to such Debt Securities under the Indenture
(including the restrictions described under "--Certain Covenants" above) and its
obligations with respect to any other covenant, and any omission to comply with
such obligations shall not constitute a default or an Event of Default with
respect to such Debt Securities ("covenant defeasance"), in either case upon the
irrevocable deposit by EastGroup with the Trustee, in trust, of an amount, in
such currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable at Stated Maturity, or
Government Obligations (as defined below), or both, applicable to such Debt
Securities which through the scheduled payment of principal and interest in
accordance with their terms will provide money in an amount sufficient to pay
the principal of (and premium, if any) and interest on such Debt Securities, and
any mandatory sinking fund or analogous payments thereon, on the scheduled due
dates therefor.
Such a trust will only be permitted to be established if,
among other things, EastGroup has delivered to the Trustee an Opinion of Counsel
(as specified in the Indenture) to the effect that the Holders of such Debt
Securities will not recognize income, gain or loss for U.S. federal income tax
purposes as a result of such defeasance or covenant defeasance and will be
subject to U.S. federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance or covenant
defeasance had not occurred, and such Opinion of Counsel, in the case of
defeasance, must refer to and be based upon a ruling of the Internal Revenue
Service (the "Service"), or a change in applicable United States Federal income
tax law occurring after the date of the Indenture.
"Government Obligations" means securities which are (i) direct
obligations of the United States of America or the government which issued the
foreign currency in which the Debt Securities of a particular series are
payable, for the payment of which its full faith and credit is pledged or (ii)
obligations of a person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such government which issued
the foreign currency in which the Debt Securities of such series are payable,
the payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America or such other government, which, in
either case, are not callable or redeemable at the option of the issuer thereof,
and shall also include a depository receipt issued by a bank or trust company as
custodian with respect to any such Government Obligation or a specific payment
of interest on or principal of any such Government Obligations held by such
custodian for the account of the holder of a depository receipt, provided that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the Government Obligation or
the specific payment of interest on or principal of the Government Obligation
evidenced by such depository receipt.
Unless otherwise provided in the applicable Prospectus
Supplement, if after EastGroup has deposited funds and/or Government Obligations
to effect defeasance or covenant
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<PAGE> 22
defeasance with respect to Debt Securities of any series: (i) the Holder of a
Debt Security of such series is entitled to, and does, elect pursuant to the
Indenture or the terms of such Debt Security to receive payment in a currency,
currency unit or composite currency other than that in which such deposit has
been made in respect of such Debt Security; or (ii) a Conversion Event (as
defined below) occurs in respect of the currency, currency unit or composite
currency in which such deposit has been made, the indebtedness represented by
such Debt Security shall be deemed to have been, and will be, fully discharged
and satisfied through the payment of the principal of (and premium, if any) and
interest on such Debt Security as they become due out of the proceeds yielded by
converting the amount so deposited in respect of such Debt Security into the
currency, currency unit or composite currency in which such Debt Security
becomes payable as a result of such election or such Conversion Event based on
the applicable market exchange rate. "Conversion Event" means the cessation of
use of (i) a currency, currency unit or composite currency both by the
government of the country which issued such currency and for the settlement of
transactions by a central bank or other public institutions of or within the
international banking community; (ii) the European Currency Unit as defined and
revised from time to time by the Council of the European Community ("ECU"), both
within the European Monetary System and for the settlement of transactions by
public institutions of or within the European Community; or (iii) any currency
unit or composite currency other than the ECU for the purposes for which it was
established.
Unless otherwise provided in the applicable Prospectus
Supplement, all payments of principal of (and premium, if any) and interest on
any Debt Security that is payable in a foreign currency that ceases to be used
by its government of issuance shall be made in U.S.
dollars.
In the event EastGroup effects covenant defeasance with
respect to any Debt Securities and such Debt Securities are declared due and
payable because of the occurrence of any Event of Default other than the Event
of Default described in clause (iv) under "--Events of Default, Notice and
Waiver" or described in clause (vii) under "--Events of Default, Notice and
Waiver" with respect to any other covenant as to which there has been covenant
defeasance, the amount in such currency, currency unit or composite currency in
which such Debt Securities are payable, and Government Obligations on deposit
with the Trustee, will be sufficient to pay amounts due on such Debt Securities
at the time of their Stated Maturity but may not be sufficient to pay amounts
due on such Debt Securities at the time of the acceleration resulting from such
event of Default. However, EastGroup would remain liable to make payment of such
amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the
provisions, if any, permitting such defeasance or covenant defeasance, including
any modification to the provisions described above, with respect to the Debt
Securities of or within a particular series.
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CONVERSION RIGHTS
The terms and conditions, if any, upon which any of the Debt
Securities are convertible into capital stock of or equity interest in EastGroup
will be set forth in the applicable Prospectus Supplement relating thereto. Such
terms will include the amount of capital stock of or equity interest in
EastGroup into which the Debt Securities are convertible, the conversion price
(or manner of calculation thereof), the conversion period, provisions as to
whether conversions will be at the option of the holders of the Debt Securities
or EastGroup, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of such Debt
Securities and any restrictions on conversion, including restrictions directed
at maintaining EastGroup's REIT status.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in
part in the form of one or more global securities (the "Global Securities") that
will be deposited with, or on behalf of, a depositary (the "Depositary"),
identified in the applicable Prospectus Supplement relating to such series.
Global Securities may be issued in either registered or bearer form and in
either temporary or permanent form. The specific terms of the depositary
arrangement with respect to a series of Debt Securities will be described in the
applicable Prospectus Supplement relating to such series.
DESCRIPTION OF PREFERRED STOCK
GENERAL
The Board of Directors of EastGroup may classify or reclassify
any unissued shares of its capital stock from time to time by setting or
changing the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends or distributions, qualifications, or
terms or conditions of redemption of such shares. There was no Preferred Stock
outstanding at March 31, 1997.
The following description of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which any
Prospectus Supplement may relate. The statements below describing the Preferred
Stock are in all respects subject to and qualified in their entirety by
reference to the applicable provisions of the Articles of Incorporation, as
amended ("Articles of Incorporation"), and Bylaws and any applicable articles
supplementing the Articles of Incorporation designating terms of a series of
Preferred Stock (a "Designating Amendment").
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TERMS
Subject to the limitations prescribed by the Articles of
Incorporation, the Board of Directors is authorized to fix the number of shares
constituting each series of Preferred Stock and the preference, conversion or
other rights, voting powers, restrictions, limitation as to dividends,
qualifications, or terms or conditions of redemption of the Preferred Stock. The
Preferred Stock will, when issued, be fully paid and nonassessable by EastGroup
(except as described under "--Stockholder Liability" below) and will have no
preemptive rights.
Reference is made to the Prospectus Supplement relating to the
Preferred Stock offered thereby for specific terms thereof, including:
(i) The title and stated value of such Preferred Stock;
(ii) The number of shares of such Preferred Stock offered, the
liquidation preference per share and the offering price of such Preferred Stock;
(iii) The dividend rate(s), period(s) and/or payment date(s)
or method(s) of calculation thereof applicable to such Preferred Stock;
(iv) The date from which dividends on such Preferred Stock
shall accumulate, if applicable;
(v) The procedures for any auction or remarketing, if any, for
such Preferred Stock;
(vi) The provision for a sinking fund, if any, for such
Preferred Stock;
(vii) The provision for redemption, if applicable, of such
Preferred Stock;
(viii) Any listing of such Preferred Stock on any securities
exchange;
(ix) The terms and conditions, if applicable, upon which such
Preferred Stock will be convertible into shares of Common Stock, including the
conversion price (or manner of calculation thereof);
(x) Whether interests in such Preferred Stock will be
represented by Depositary Shares;
(xi) Any other specific terms, preferences, rights,
limitations or restrictions of such Preferred Stock;
(xii) A discussion of U.S. federal income tax considerations
applicable to such Preferred Stock;
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(xiii) The relative ranking of preferences of such Preferred
Stock as to dividend rights and rights upon liquidation, dissolution or winding
up of the affairs of EastGroup;
(xiv) Any limitations on issuance of any series of Preferred
Stock ranking senior to or on a parity with such series of Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up of the
affairs of EastGroup; and
(xv) Any limitations on direct or beneficial ownership and
restrictions on transfer, in each case as may be appropriate to preserve the
status of EastGroup as a REIT.
RANK
Unless otherwise specified in the Prospectus Supplement, the
Preferred Stock, will, with respect to dividend rights and rights upon
liquidation, dissolution or winding up of EastGroup, rank (i) senior to all
classes or series of shares of Common Stock of EastGroup, and to all equity
securities ranking junior to such Preferred Stock; (ii) on a parity with all
equity securities issued by EastGroup the terms of which specifically provide
that such equity securities rank on a parity with the Preferred Stock; and (iii)
junior to all equity securities issued by EastGroup the terms of which
specifically provide that such equity securities rank senior to the Preferred
Stock.
DIVIDENDS
Holders of the Preferred Stock of each series will be entitled
to receive, when, as and if declared by the Board of Directors of EastGroup, out
of assets of EastGroup legally available for payment, cash dividends at such
rates and on such dates as will be set forth in the applicable Prospectus
Supplement. Each such dividend shall be payable to holders of record as they
appear on the share transfer books of EastGroup on such record dates as shall be
fixed by the Board of Directors of EastGroup.
Dividends on any series of the Preferred Stock may be
cumulative or non-cumulative, as provided in the applicable Prospectus
Supplement. Dividends, if cumulative, will be cumulative from and after the date
set forth in the applicable Prospectus Supplement. If the Board of Directors of
EastGroup fails to declare a dividend payable on a dividend payment date on any
series of the Preferred Stock for which dividends are non-cumulative, then the
holders of such series of the Preferred Stock will have no right to receive a
dividend in respect of the dividend period ending on such dividend payment date,
and EastGroup will have no obligation to pay the dividend accrued for such
period, whether or not dividends on such series are declared payable on any
future dividend payment date.
If Preferred Stock of any series is outstanding, no dividends
will be declared or paid or set apart for payment on any capital stock of
EastGroup of any other series ranking, as
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to dividends, on a parity with or junior to the Preferred Stock of such series
for any period unless (i) if such series of Preferred Stock has a cumulative
dividend, full cumulative dividends have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof set apart for
such payment on the Preferred Stock of such series for all past dividend periods
and the then current dividend period or (ii) if such series of Preferred Stock
does not have a cumulative dividend, full dividends for the then current
dividend period have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for such payment on the
Preferred Stock of such series. When dividends are not paid in full (or a sum
sufficient for such full payment is not so set apart) upon Preferred Stock of
any series and the shares of any other series of Preferred Stock ranking on a
parity as to dividends with the Preferred Stock of such series, all dividends
declared upon Preferred Stock of such series and any other series of Preferred
Stock ranking on a parity as to dividends with such Preferred Stock shall be
declared pro rata so that the amount of dividends declared per share of
Preferred Stock of such series and such other series of Preferred Stock shall in
all cases bear to each other the same ratio that accrued dividends per share on
the Preferred Stock of such series (which shall not include any accumulation in
respect of unpaid dividends for prior dividend periods if such Preferred Stock
does not have a cumulative dividend) and such other series of Preferred Stock
bear to each other. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on Preferred Stock of
such series which may be in arrears.
Except as provided in the immediately preceding paragraph,
unless (i) if such series of Preferred Stock has a cumulative dividend, full
cumulative dividends on the Preferred Stock of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past dividend periods and the then
current dividend period; and (ii) if such series of Preferred Stock does not
have a cumulative dividend, full dividends on the Preferred Stock of such series
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for the then current
dividend period, no dividends (other than in Common Stock or other capital
shares ranking junior to the Preferred Stock of such series as to dividends and
upon liquidation) shall be declared or paid or set aside for payment or other
distribution shall be declared or made upon the Common Stock, or any other
capital shares of EastGroup ranking junior to or on a parity with the Preferred
Stock of such series as to dividends or upon liquidation, nor shall any Common
Stock, or any other capital shares of EastGroup ranking junior to or on a parity
with the Preferred Stock of such series as to dividends or upon liquidation be
redeemed, purchased or otherwise acquired for any consideration (or any moneys
be paid to or made available for a sinking fund for the redemption of any such
shares) by EastGroup (except by conversion into or exchange for other capital
shares of EastGroup ranking junior to the Preferred Stock of such series as to
dividends and upon liquidation).
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REDEMPTION
If so provided in the applicable Prospectus Supplement, the
Preferred Stock will be subject to mandatory redemption or redemption at the
option of EastGroup, as a whole or in part, in each case upon the terms, at the
times and at the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred
Stock that is subject to mandatory redemption will specify the number of such
shares of Preferred Stock that shall be redeemed by EastGroup in each year
commencing after a date to be specified, at a redemption price per share to be
specified, together with an amount equal to all accrued and unpaid dividends
thereon (which shall not, if such shares of Preferred Stock do not have a
cumulative dividend, include any accumulation in respect of unpaid dividends for
prior dividend periods) to the date of redemption. The redemption price may be
payable in cash or other property, as specified in the applicable Prospectus
Supplement. If the redemption price for Preferred Stock of any series is payable
only from the net proceeds of the issuance of capital shares of EastGroup, the
terms of such shares of Preferred Stock may provide that, if no such capital
shares shall have been issued or to the extent the net proceeds from any
issuance are insufficient to pay in full the aggregate redemption price then
due, such Preferred Stock shall automatically and mandatorily be converted into
the applicable capital shares of EastGroup pursuant to conversion provisions
specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if such series of
Preferred Stock has a cumulative dividend, full cumulative dividends on all
shares of any series of Preferred Stock have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment for all past dividend periods and the then current dividend
period; and (ii) if such series of Preferred Stock does not have a cumulative
dividend, full dividends of the Preferred Stock of any series have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for the then current dividend period, no
shares of any series of Preferred Stock shall be redeemed unless all outstanding
Preferred Stock of such series is simultaneously redeemed; provided, however,
that the foregoing shall not prevent the purchase or acquisition of Preferred
Stock of such series to preserve the REIT status of EastGroup or pursuant to a
purchase or exchange offer made on the same terms to holders of all outstanding
Preferred Stock of such series. In addition, unless (i) if such series of
Preferred Stock has a cumulative dividend, full cumulative dividends on all
outstanding shares of any series of Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past dividend periods and the then
current dividend period; and (ii) if such series of Preferred Stock does not
have a cumulative dividend, full dividends on the Preferred Stock of any series
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for the then current
dividend period, EastGroup shall not purchase or otherwise acquire directly or
indirectly any shares of Preferred Stock of such series (except by conversion
into or exchange for capital shares of EastGroup ranking junior to the Preferred
Stock of such series as to dividends and upon liquidation); provided, however,
that
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the foregoing shall not prevent the purchase or acquisition of Preferred Stock
of such series to preserve the REIT status of EastGroup or pursuant to a
purchase or exchange offer made on the same terms to holders of all outstanding
Preferred Stock of such series.
If fewer than all of the outstanding shares of Preferred Stock
of any series are to be redeemed, the number of shares to be redeemed will be
determined by EastGroup and such shares may be redeemed pro rata from the
holders of record of such shares in proportion to the number of such shares held
or for which redemption is requested by such holder (with adjustments to avoid
redemption of fractional shares) or by lot in a manner determined by EastGroup.
Notice of redemption will be mailed at least 30 days but not
more than 60 days before the redemption date to each holder of record of
Preferred Stock of any series to be redeemed at the address shown on the share
transfer books of EastGroup. Each notice shall state: (i) the redemption date;
(ii) the number of shares and series of the Preferred Stock to be redeemed;
(iii) the redemption price; (iv) the place or places where certificates for such
shares of Preferred Stock are to be surrendered for payment of the redemption
price; (v) that dividends on the shares to be redeemed will cease to accrue on
such redemption date; and (vi) the date upon which the holder's conversion
rights, if any, as to such shares shall terminate. If fewer than all the shares
of Preferred Stock of any series are to be redeemed, the notice mailed to each
such holder thereof shall also specify the number of shares of Preferred Stock
to be redeemed from each such holder. If notice of redemption of any Preferred
Stock has been given and if the funds necessary for such redemption have been
set aside by EastGroup in trust for the benefit of the holders of any Preferred
Stock so called for redemption, then from and after the redemption date
dividends will cease to accrue on such Preferred Stock, and all rights of the
holders of such shares will terminate, except the right to receive the
redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of EastGroup, then, before any distribution or payment
shall be made to the holders of any shares of Common Stock or any other class or
series of capital shares of EastGroup ranking junior to the Preferred Stock in
the distribution of assets upon any liquidation, dissolution or winding up of
EastGroup, the holders of each series of Preferred Stock shall be entitled to
receive out of assets of EastGroup legally available for distribution to
stockholders liquidating distributions in the amount of the liquidation
preference per share (set forth in the applicable Prospectus Supplement), plus
an amount equal to all dividends accrued and unpaid thereon (which shall not
include any accumulation in respect of unpaid dividends for prior dividend
periods if such Preferred Stock does not have a cumulative dividend). After
payment of the full amount of the liquidating distributions to which they are
entitled, the holders of Preferred Stock will have no right or claim to any of
the remaining assets of EastGroup. In the event that, upon any such voluntary or
involuntary liquidation, dissolution or winding up, the available assets of
EastGroup are insufficient to pay the amount of the liquidating distributions on
all outstanding
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Preferred Stock and the corresponding amounts payable on all shares of other
classes or series of capital shares of EastGroup ranking on a parity with the
Preferred Stock in the distribution of assets, then the holders of the Preferred
Stock and all other such classes or series of capital shares shall share ratably
in any such distribution of assets in proportion to the full liquidating
distributions to which they would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to
all holders of Preferred Stock, the remaining assets of EastGroup shall be
distributed among the holders of any other classes or series of capital shares
ranking junior to the Preferred Stock upon liquidation, dissolution or winding
up, according to their respective rights and preferences and in each case
according to their respective number of shares. For such purposes, the
consolidation or merger of EastGroup with or into any other corporation, trust
or entity, or the sale, lease or conveyance of all or substantially all of the
property or business of EastGroup, shall not be deemed to constitute a
liquidation, dissolution or winding up of EastGroup.
VOTING RIGHTS
Holders of Preferred Stock will not have any voting rights,
except as set forth below or as otherwise from time to time required by law or
as indicated in the applicable Prospectus Supplement.
Whenever dividends on any shares of Preferred Stock shall be
in arrears for six or more consecutive quarterly periods, the holders of such
shares of Preferred Stock (voting separately as a class with all other series of
Preferred Stock upon which like voting rights have been conferred and are
exercisable) will be entitled to vote for the election of two additional
directors of EastGroup at a special meeting called by the holders of record of
at least ten percent (10%) of any series of Preferred Stock so in arrears
(unless such request is received less than 90 days before the date fixed for the
next annual or special meeting of the stockholders) or at the next annual
meeting of stockholders, and at each subsequent annual meeting until (i) if such
series of Preferred Stock has a cumulative dividend, all dividends accumulated
on such shares of Preferred Stock for the past dividend periods and the then
current dividend period shall have been fully paid or declared and a sum
sufficient for the payment thereof set aside for payment or (ii) if such series
of Preferred Stock does not have a cumulative dividend, four consecutive
quarterly dividends shall have been fully paid or declared and a sum sufficient
for the payment thereof set aside for payment. In such case, the entire Board of
Directors of EastGroup will be increased by two directors.
Unless provided otherwise for any series of Preferred Stock,
so long as any shares of Preferred Stock remain outstanding, EastGroup will not,
without the affirmative vote or consent of the holders of at least two-thirds of
the shares of each series of Preferred Stock outstanding at the time, given in
person or by proxy, either in writing or at a meeting (such series voting
separately as a class), (i) authorize or create, or increase the authorized or
issued amount of, any class or series of capital stock ranking prior to such
series of Preferred Stock
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with respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up or reclassify any authorized capital
stock of EastGroup into such shares, or create, authorize or issue any
obligation or security convertible into or evidencing the right to purchase any
such shares; or (ii) amend, alter or repeal the provisions of the Articles of
Incorporation or the Designating Amendment for such series of Preferred Stock,
whether by merger, consolidation or otherwise (an "Event"), so as to materially
and adversely affect any right, preference, privilege or voting power of such
series of Preferred Stock or the holder thereof; provided, however, to the
occurrence of any of the Events set forth in (ii) above, so long as the
Preferred Stock remains outstanding with the terms thereof materially unchanged,
taking into account that upon the occurrence of an Event, EastGroup may not be
the surviving entity, the occurrence of any such Event shall not be deemed to
materially and adversely affect such rights, preferences, privileges or voting
power of holders of Preferred Stock and provided further that (a) any increase
in the amount of the authorized Preferred Stock or the creation or issuance of
any other series of Preferred Stock, or (b) any increase in the amount of
authorized shares of such series or any other series of Preferred Stock, in each
case ranking on a parity with or junior to the Preferred Stock of such series
with respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up, shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior
to the time when the act with respect to which such vote would otherwise be
required shall be effected all outstanding shares of such series of Preferred
Stock have been redeemed or called for redemption and sufficient funds have been
deposited in trust to effect such redemption.
Under Maryland law, notwithstanding anything to the contrary
set forth above, holders of each series of Preferred Stock will be entitled to
vote upon any proposed amendment to the Articles of Incorporation if the
amendment would change the contract rights of such shares as expressly set forth
in the Articles of Incorporation.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of
Preferred Stock is convertible into Common Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include the
number of shares of Common Stock into which the Preferred Stock are convertible,
the conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversions will be at the option of the holders of the
Preferred Stock or EastGroup, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such series of Preferred Stock.
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STOCKHOLDER LIABILITY
As discussed below under "Description of Common
Stock--General," applicable Maryland law provides that no stockholder, including
holders of Preferred Stock, will be personally liable for the acts and
obligations of EastGroup and that the funds and property of EastGroup will be
the only recourse for such acts or obligations.
RESTRICTIONS ON OWNERSHIP
As discussed below under "Description of Common
Stock--Restrictions on Transfer," for EastGroup to qualify as a REIT under the
Code, not more than 50% in value of its outstanding capital shares may be owned,
directly or indirectly, by five or fewer individuals (as defined in the Code to
include certain entities) during the last half of a taxable year. To assist
EastGroup in meeting this requirement, EastGroup may take certain actions to
limit the beneficial ownership, directly or indirectly, by a single person of
EastGroup's outstanding equity securities, including any Preferred Stock of
EastGroup. Therefore, the Designating Amendment for each series of Preferred
Stock may contain provisions restricting the ownership and transfer of the
Preferred Stock. The applicable Prospectus Supplement will specify any
additional ownership limitation relating to a series of Preferred Stock.
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Preferred Stock will
be set forth in the applicable Prospectus Statement.
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
EastGroup may issue receipts ("Depositary Receipts") for
Depositary Shares, each of which will represent a fractional interest of a share
of a particular series of Preferred Stock, as specified in the applicable
Prospectus Supplement. Preferred Stock of each series represented by Depositary
Shares will be deposited under a separate deposit agreement (each, a "Deposit
Agreement") among EastGroup, the depositary named therein (a "Preferred Stock
Depositary") and the holders from time to time of the Depositary Receipts.
Subject to the terms of the applicable Deposit Agreement, each owner of a
Depositary Receipt will be entitled, in proportion to the fractional interest of
a share of a particular series of Preferred Stock represented by the Depositary
Shares evidenced by such Depositary Receipt, to all the rights and preferences
of the Preferred Stock represented by such Depositary Shares (including
dividend, voting, conversion, redemption and liquidation rights).
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The Depositary Shares will be evidenced by Depositary Receipts
issued pursuant to the applicable Deposit Agreement. Immediately following the
issuance and delivery of the Preferred Stock by EastGroup to a Preferred Stock
Depositary, EastGroup will cause such Preferred Stock Depositary to issue, on
behalf of EastGroup, the Depositary Receipts. Copies of the applicable form of
Deposit Agreement and Depositary Receipt may be obtained from EastGroup upon
request, and the statements made hereunder relating to Deposit Agreements and
the Depositary Receipts to be issued thereunder are summaries of certain
anticipated provisions thereof and do not purport to be complete and are subject
to, and qualified in their entirety by reference to, all of the provisions of
the applicable Deposit Agreement and related Depositary Receipts.
DIVIDENDS AND OTHER DISTRIBUTIONS
A Preferred Stock Depositary will be required to distribute
all cash dividends or other cash distributions received in respect of the
applicable Preferred Stock to the record holders of Depositary Receipts
evidencing the related Depositary Shares in proportion to the number of such
Depositary Receipts owned by such holders, subject to certain obligations of
holders to file proofs, certificates and other information and to pay certain
charges and expenses to such Preferred Stock Depositary.
In the event of a distribution other than in cash, a Preferred
Stock Depositary will be required to distribute property received by it to the
record holders of Depositary Receipts entitled thereto, subject to certain
obligations of holders to file proofs, certificates and other information and to
pay certain charges and expenses to such Preferred Stock Depositary, unless such
Preferred Stock Depositary determines that it is not feasible to make such
distribution, in which case such Preferred Stock Depositary may, with the
approval of EastGroup, sell such property and distribute the net proceeds from
such sale to such holders.
No distribution will be made in respect of any Depositary
Share to the extent that it represents any Preferred Stock which has been
converted or exchanged.
WITHDRAWAL OF STOCK
Upon surrender of the Depositary Receipts at the corporate
trust office of the applicable Preferred Stock Depositary (unless the related
Depositary Shares have previously been called for redemption or converted), the
holders thereof will be entitled to delivery at such office, to or upon each
such holder's order, of the number of whole or fractional shares of the
applicable Preferred Stock and any money or other property represented by the
Depositary Shares evidenced by such Depositary Receipts. Holders of Depositary
Receipts will be entitled to receive whole or fractional shares of the related
Preferred Stock on the basis of the proportion of Preferred Stock represented by
each Depositary Share as specified in the applicable Prospectus Supplement, but
holders of such Preferred Stock will not thereafter be entitled to
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<PAGE> 33
receive Depositary Shares therefor. If the Depositary Receipts delivered by the
holder evidence a number of Depositary Shares in excess of the number of
Depositary Shares representing the number of Preferred Stock to be withdrawn,
the applicable Preferred Stock Depositary will be required to deliver to such
holder at the same time a new Depositary Receipt evidencing such excess number
of Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES
Whenever EastGroup redeems Preferred Stock held by a Preferred
Stock Depositary, such Preferred Stock Depositary will be required to redeem as
of the same redemption date the number of Depositary Shares representing the
Preferred Stock so redeemed, provided EastGroup has paid in full to such
Preferred Stock Depositary the redemption price of the Preferred Stock to be
redeemed plus an amount equal to any accrued and unpaid dividends thereon to the
date fixed for redemption. The redemption price per Depositary Share will be
equal to the redemption price and any other amounts per share payable with
respect to the Preferred Stock. If fewer than all the Depositary Shares are to
be redeemed, the Depositary Shares to be redeemed will be selected pro rata (as
nearly as may be practicable without creating fractional Depositary Shares) or
by any other equitable method determined by EastGroup that preserves the REIT
status of EastGroup.
From and after the date fixed for redemption, all dividends in
respect of the Preferred Stock so called for redemption will cease to accrue,
the Depositary Shares so called for redemption will no longer be deemed to be
outstanding and all rights of the holders of the Depositary Receipts evidencing
the Depositary Shares so called for redemption will cease, except the right to
receive any moneys payable upon such redemption and any money or other property
to which the holders of such Depositary Receipts were entitled upon such
redemption upon surrender thereof to the applicable Preferred Stock Depositary.
VOTING OF THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of
the applicable Preferred Stock are entitled to vote, a Preferred Stock
Depositary will be required to mail the information contained in such notice of
meeting to the record holders of the Depositary Receipts evidencing the
Depositary Shares which represent such Preferred Stock. Each record holder of
Depositary Receipts evidencing Depositary Shares on the record date (which will
be the same date as the record date for the Preferred Stock) will be entitled to
instruct such Preferred Stock Depositary as to the exercise of the voting rights
pertaining to the amount of Preferred Stock represented by such holder's
Depositary Shares. Such Preferred Stock Depositary will be required to vote the
amount of Preferred Stock represented by such Depositary Shares in accordance
with such instructions, and EastGroup will agree to take all reasonable action
which may be deemed necessary by such Preferred Stock Depositary in order to
enable such Preferred Stock Depositary to do so. Such Preferred Stock Depositary
will be required to abstain from
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voting the amount of Preferred Stock represented by such Depositary Shares to
the extent it does not receive specific instructions from the holders of
Depositary Receipts evidencing such Depositary Shares. A Preferred Stock
Depositary will not be responsible for any failure to carry out any instruction
to vote, or for the manner or effect of any such vote made, as long as any such
action or non-action is in good faith and does not result from negligence or
willful misconduct of such Preferred Stock Depositary.
LIQUIDATION PREFERENCE
In the event of the liquidation, dissolution or winding up of
EastGroup, whether voluntary or involuntary, the holders of each Depositary
Receipt will be entitled to the fraction of the liquidation preference accorded
each share of Preferred Stock represented by the Depositary Share evidenced by
such Depositary Receipt, as set forth in the applicable Prospectus Supplement.
CONVERSION OF PREFERRED STOCK
The Depositary Shares, as such, will not be convertible into
shares of Common Stock or any other securities or property of EastGroup.
Nevertheless, if so specified in the applicable Prospectus Supplement relating
to an offering of Depositary Shares, the Depositary Receipts may be surrendered
by holders thereof to the applicable Preferred Stock Depositary with written
instructions to such Preferred Stock Depositary to instruct EastGroup to cause
conversion of the Preferred Stock represented by the Depositary Shares evidenced
by such Depositary Receipts into whole shares of Common Stock, other Preferred
Stock or other shares of stock, and EastGroup will agree that upon receipt of
such instructions and any amounts payable in respect thereof, it will cause the
conversion thereof utilizing the same procedures as those provided for delivery
of Preferred Stock to effect such conversion. If the Depositary Shares evidenced
by a Depositary Receipt are to be converted in part only, a new Depositary
Receipt or Receipts will be issued for any Depositary Shares not to be
converted. No fractional shares of Common Stock or Preferred Stock will be
issued upon conversion, and if such conversion will result in a fractional share
being issued, an amount will be paid in cash by EastGroup equal to the value of
the fractional interest based upon the closing price of the shares of Common
Stock or Preferred Stock, respectively, on the last business day prior to the
conversion.
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AMENDMENT AND TERMINATION OF A DEPOSIT AGREEMENT
Any form of Depositary Receipt evidencing Depositary Shares
which will represent Preferred Stock and any provision of a Deposit Agreement
will be permitted at any time to be amended by agreement between EastGroup and
the applicable Preferred Stock Depositary. However, any amendment that
materially and adversely alters the rights of the holders of Depositary Receipts
or that would be materially and adversely inconsistent with the rights granted
to the holders of the related Preferred Stock will not be effective unless such
amendment has been approved by the existing holders of at least two-thirds of
the applicable Depositary Shares evidenced by the applicable Depositary Receipts
then outstanding. No amendment shall impair the right, subject to certain
anticipated exceptions in the Deposit Agreements, of any holders of Depositary
Receipts to surrender any Depositary Receipt with instructions to deliver to the
holder the related Preferred Stock and all money and other property, if any,
represented thereby, except in order to comply with law. Every holder of an
outstanding Depositary Receipt at the time any such amendment becomes effective
shall be deemed, by continuing to hold such Depositary Receipt, to consent and
agree to such amendment and to be bound by the applicable Deposit Agreement as
amended thereby.
A Deposit Agreement will be permitted to be terminated by
EastGroup upon not less than 30 days' prior written notice to the applicable
Preferred Stock Depositary if (i) such termination is necessary to preserve
EastGroup's status as a REIT or (ii) a majority of each series of Preferred
Stock affected by such termination consents to such termination, whereupon such
Preferred Stock Depositary will be required to deliver or make available to each
holder of Depositary Receipts, upon surrender of the Depositary Receipts held by
such holder, such number of whole or fractional shares of Preferred Stock as are
represented by the Depositary Shares evidenced by such Depositary Receipts
together with any other property held by such Preferred Stock Depositary with
respect to such Depositary Receipts. EastGroup will agree that if a Deposit
Agreement is terminated to preserve EastGroup's status as a REIT, then EastGroup
will use its best efforts to list the Preferred Stock issued upon surrender of
the related Depositary Shares on a national securities exchange. In addition, a
Deposit Agreement will automatically terminate if (i) all outstanding Depositary
Shares thereunder shall have been redeemed; (ii) there shall have been a final
distribution in respect of the related Preferred Stock in connection with any
liquidation, dissolution or winding up of EastGroup and such distribution shall
have been distributed to the holders of Depositary Receipts evidencing the
Depositary Shares representing such Preferred Stock; or (iii) each share of the
related Preferred Stock shall have been converted into stock of EastGroup not so
represented by Depositary Shares.
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CHARGES OF A PREFERRED STOCK DEPOSITARY
EastGroup will pay all transfer and other taxes and
governmental charges arising solely from the existence of a Deposit Agreement.
In addition, EastGroup will pay the fees and expenses of a Preferred Stock
Depositary in connection with the performance of its duties under a Deposit
Agreement. However, holders of Depositary Receipts will pay the fees and
expenses of a Preferred Stock Depositary for any duties requested by such
holders to be performed which are outside of those expressly provided for in the
applicable Deposit Agreement.
RESIGNATION AND REMOVAL OF DEPOSITARY
A Preferred Stock Depositary will be permitted to resign at
any time by delivering to EastGroup notice of its election to do so, and
EastGroup will be permitted at any time to remove a Preferred Stock Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Preferred Stock Depositary. A successor Preferred Stock Depositary
will be required to be appointed within 60 days after delivery of the notice of
resignation or removal and will be required to be a bank or trust company having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000.
MISCELLANEOUS
A Preferred Stock Depositary will be required to forward to
holders of Depositary Receipts any reports and communications from EastGroup
which are received by such Preferred Stock Depositary with respect to the
related Preferred Stock.
Neither a Preferred Stock Depositary nor EastGroup will be
liable if it is prevented from or delayed in, by law or any circumstances beyond
its control, performing its obligations under a Deposit Agreement. The
obligations of EastGroup and a Preferred Stock Depositary under a Deposit
Agreement will be limited to performing their duties thereunder in good faith
and without negligence (in the case of any action or inaction in the voting of
Preferred Stock represented by the applicable Depositary Shares), gross
negligence or willful misconduct, and neither EastGroup nor any applicable
Preferred Stock Depositary will be obligated to prosecute or defend any legal
proceeding in respect of any Depositary Receipts, Depositary Shares or shares of
Preferred Stock represented thereby unless satisfactory indemnity is furnished.
EastGroup and any Preferred Stock Depositary will be permitted to rely on
written advice of counsel or accountants, or information provided by persons
presenting shares of Preferred Stock represented thereby for deposit, holders of
Depositary Receipts or other persons believed in good faith to be competent to
give such information, and on documents believed in good faith to be genuine and
signed by a proper party.
In the event a Preferred Stock Depositary receives conflicting
claims, requests or instructions from any holders of Depositary Receipts, on the
one hand, and EastGroup on the
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other hand, such Preferred Stock Depositary shall be entitled to act on such
claims, requests or instructions received from EastGroup.
DESCRIPTION OF COMMON STOCK
GENERAL
EastGroup is authorized to issue up to 70,000,000 shares of
Common Stock. As of June 9, 1997, EastGroup had 12,674,234 shares of Common
Stock outstanding and 669,355 shares of Common Stock reserved for issuance upon
the exercise of options granted under EastGroup's stock option plans. All of the
issued and outstanding shares of Common Stock are fully paid and non-assessable
and have equal voting, distribution and liquidation rights. Shares of Common
Stock are not subject to call or redemption; provided, however, if the EastGroup
Board of Directors determines that the direct or indirect ownership of shares of
Common Stock has or may become concentrated to an extent which threatens
EastGroup's status as a REIT, the Board of Directors may call for the redemption
of a number of shares of Common Stock.
The holders of shares of Common Stock are entitled to one vote
on matters put to a vote of the stockholders. The holders of Common Stock have
no cumulative voting rights. Additionally, subject to the rights of holders of
Preferred Stock, holders of Common Stock are entitled to receive such dividends
as may be declared from time to time by the directors out of funds legally
available therefor.
Shares of Common Stock currently outstanding are listed for
trading on the New York Stock Exchange, Inc. (the "NYSE") under the symbol
"EGP." EastGroup will apply to the NYSE to list the additional shares of Common
Stock to be sold pursuant to any Prospectus Supplement, and EastGroup
anticipates that such shares will be so listed.
Under Maryland law, stockholders are generally not liable for
EastGroup's debts or obligations. If EastGroup is liquidated, subject to the
right of any holders of Preferred Stock, if any, to receive preferential
distributions, each outstanding share of Common Stock will be entitled to
participate pro rata in the assets remaining after payment of, or adequate
provision for, all known debts and liabilities of EastGroup.
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PROVISIONS OF EASTGROUP'S ARTICLES OF INCORPORATION AND BYLAWS
EastGroup's Articles of Incorporation provide that the number
of directors will be ten, which number may be increased or decreased pursuant to
EastGroup's Bylaws. Currently, the number of directors is seven. All seven
positions on the Board of Directors are filled by the vote of the stockholders
at the annual meeting. Stockholders do not have cumulative voting rights in the
election of directors. Stockholders are entitled to one vote for each share of
Common Stock held by them.
OTHER MATTERS
The transfer agent and registrar for the shares of Common
Stock is Harris Trust and Savings Bank, Chicago, Illinois.
RESTRICTIONS ON TRANSFER
Ownership Limits. For EastGroup to qualify as a REIT under the
Code, no more than 50% in value of its outstanding shares of Common Stock may be
owned, actually and constructively under the applicable attribution provisions
of the Code, by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of a taxable year (other than the first
year) or during a proportionate part of a shorter taxable year. The shares of
Common Stock must also be beneficially owned by 100 or more persons during at
least 335 days of a taxable year (other than the first year) or during a
proportionate part of a shorter taxable year. Because EastGroup has elected to
be treated as a REIT, the Articles of Incorporation contain restrictions on the
acquisition of shares of Common Stock intended to ensure compliance with these
requirements.
Pursuant to the provisions of the Articles of Incorporation,
if a transfer of stock occurs whereby any person would own, beneficially or
constructively, in excess of 9.8 percent (in value or in number, whichever is
more restrictive) of the outstanding capital stock of EastGroup (excluding
Excess Stock, as defined below), then such amount in excess of the 9.8 percent
limit shall automatically be converted into shares of a separate class of stock,
the excess stock, par value $0.0001 per share, of EastGroup (the "Excess
Stock"), and any such transfer will be void ab initio. However, such
restrictions will not preclude the settlement of a transaction entered into
through the facilities of any interdealer quotation system or national
securities exchange upon which shares of capital stock of EastGroup are traded.
Notwithstanding the previous sentence, certain transactions may be settled by
providing Excess Stock. Although holders of Excess Stock have no dividend or
voting rights, such holders do have certain rights in the event of any
liquidation, dissolution or winding up of the corporation. The Articles of
Incorporation further provide that the Excess Stock will be held by EastGroup as
trustee for the person or persons in whose hands the shares would not be Excess
Stock and certain price-related restrictions are satisfied. These provisions are
designed to enable
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EastGroup to meet the share ownership requirements applicable to REITs under the
Code, but may also have an anti-takeover effect. EastGroup currently has
30,000,000 shares of Excess Stock authorized pursuant to the Articles of
Incorporation.
Each stockholder shall, upon request by the EastGroup, furnish
such information that EastGroup may reasonably request in order to determine
EastGroup's status as a REIT, to comply with the requirements of any taxing
authority or governmental agency or to determine any such compliance.
The foregoing ownership limitations may have the effect of
precluding acquisition of control of EastGroup without the consent of the Board
of Directors.
Special Voting Requirements for Certain Business Combinations.
Pursuant to Maryland law, EastGroup is governed by special procedures that apply
to certain business combinations between a corporation and interested
stockholders. The purpose of such provisions is to protect the corporation and
its stockholders against hostile takeovers by requiring that certain criteria
are satisfied. These criteria include prior approval by the board of directors,
prior approval by a majority or supermajority vote of disinterested stockholders
and requirements that a "fair price" be paid to the disinterested stockholders.
Maryland law provides that a Maryland corporation may not
engage in any "business combination" with any "interested stockholder." An
"interested stockholder" is defined, in essence, as any person owning
beneficially, directly or indirectly, ten percent or more of the outstanding
voting stock of a Maryland corporation. Unless an exemption applies, EastGroup
may not engage in any business combination with an interested stockholder for a
period of five years after the interested stockholder became an interested
stockholder, and thereafter may not engage in a business combination unless it
is recommended by the board of directors and approved by the affirmative vote of
at least (i) eighty percent of the votes entitled to be cast by the holders of
all outstanding voting stock of EastGroup, voting together as a single voting
group and (ii) two-thirds of the votes entitled to be cast by all holders of
outstanding shares of voting stock other than voting stock held by the
interested stockholder. The voting requirements do not apply at any time to
business combinations with an interested stockholder or its affiliates if
approved by the board of directors of the corporation prior to the time the
interested stockholder first became an interested stockholder. Additionally, if
the business combination involves the receipt of consideration by the
stockholders in exchange for the corporation's stock, the voting requirements do
not apply if certain "fair price" conditions are met.
Control Share Acquisitions. Maryland law provides for the
elimination of the voting rights of shares held by any person who makes a
"control share acquisition" except to the extent that such acquisition is exempt
or is approved by at least two-thirds of all votes entitled to be cast on the
matter, excluding shares of capital stock owned by the acquirer or by officers
or directors who are employees of the corporation whose shares were acquired. A
"control share acquisition" is the direct or indirect acquisition by any person
of ownership of, or the
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power to direct the exercise of voting power with respect to, shares of voting
stock ("control shares") that would, if aggregated with all other voting stock
owned by such person, entitle such person to exercise voting power in electing
directors within one of the following ranges of voting power: (i) one-fifth or
more but less than one-third; (ii) one-third or more but less than a majority;
or (iii) a majority or more of voting power.
A person who has made or proposes to make a control share
acquisition, upon the satisfaction of certain conditions (including an
undertaking to pay expenses), may compel the board of directors to call a
special meeting of stockholders to be held within 50 days of demand to consider
the voting rights of the shares. If no request for a meeting is made, the
corporation may itself present the question at any stockholders meeting. If
voting rights are not approved at the meeting or if the acquiring person does
not deliver an acquiring person statement as permitted by the statute, then,
subject to certain conditions and limitations, the corporation may redeem any or
all of the control shares (except those for which voting rights have previously
been approved) for fair value determined, without regard to voting rights, as of
the date of the last control share acquisition or as of the date of any meeting
of stockholders at which the voting rights of such shares are considered and not
approved.
If voting rights for control shares are approved at a
stockholders meeting and the acquirer becomes entitled to vote a majority of the
shares entitled to vote, all other stockholders may exercise appraisal rights.
The fair value of the stock as determined for purposes of such appraisal rights
may not be less than the highest price per share paid in the control share
acquisition, and certain limitations and restrictions otherwise applicable to
the exercise of dissenters' rights do not apply in the context of a control
share acquisition. The control share acquisition statute does not apply to stock
acquired in a merger, consolidation or stock exchange if the corporation is a
party to the transaction.
Supermajority Votes. The Articles of Incorporation provide
that (i) no term or provision of the Articles of Incorporation may be added,
amended or repealed in any respect which, in the determination of the Board of
Directors, cause EastGroup not to qualify as a REIT under the Code; (ii) the
sections of the Articles of Incorporation concerning the removal of directors,
amendment of the Bylaws, the indemnification of agents and limitation of
liability of directors and officers and the section concerning special
stockholder vote requirements shall not be amended or repealed; and (iii) no
provision imposing cumulative voting in the election of directors may be added
to the Articles of Incorporation, except, in addition to any vote required by
the terms of then outstanding Preferred Stock, upon the affirmative vote of the
holders of not less than eighty percent of all votes entitled to be cast on the
matter.
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FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTORY NOTES
The following discussion summarizes certain Federal income tax
considerations that may be relevant to a prospective holder of securities of
EastGroup. This discussion is based on current law. The discussion is not
exhaustive of all possible tax considerations and does not give a detailed
discussion of any state, local, or foreign tax considerations. It also does not
discuss all of the aspects of Federal income taxation that may be relevant to a
prospective stockholder in light of his particular circumstances or to certain
types of stockholders (including insurance companies, tax-exempt entities,
financial institutions or broker-dealers, foreign corporations and persons who
are not citizens or residents of the United States) who are subject to special
treatment under the Federal income tax laws.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT WITH HIS OWN
TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OF THE PURCHASE,
OWNERSHIP AND SALE OF SECURITIES IN AN ENTITY ELECTING TO BE TAXED AS A REAL
ESTATE INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER
TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE, AND ELECTION AND OF
POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
TAXATION OF THE COMPANY
General. EastGroup has elected to be taxed as a REIT under
Sections 856 through 860 of the Code effective since its inception. EastGroup's
qualification and taxation as a REIT depends upon its ability to meet on a
continuing basis, through actual annual operating results, distribution levels
and diversity of stock ownership, the various qualification tests and
organizational requirements imposed under the Code, as discussed below.
EastGroup believes that it is organized and has operated in such a manner as to
qualify under the Code for taxation as a REIT commencing since its inception,
and it intends to continue to operate in such a manner. No assurances, however,
can be given that EastGroup will operate in a manner so as to qualify or remain
qualified as a REIT. See "Failure to Qualify" below.
The following is a general summary of the Code provisions that
govern the Federal income tax treatment of a REIT and its stockholders. These
provisions of the Code are highly technical and complex. This summary is
qualified in its entirety by the applicable Code provisions, the regulations
promulgated thereunder ("Treasury Regulations"), and administrative and judicial
interpretations thereof.
If EastGroup qualifies for taxation as a REIT and distributes
to its stockholders at least 95% of its REIT taxable income, it generally will
not be subject to Federal corporate income taxes on net income that it
currently distributes to stockholders. This
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treatment substantially eliminates the "double taxation" (at the corporate and
stockholder levels) that generally results from investment in a corporation.
Notwithstanding its REIT election, however, EastGroup will be subject to Federal
income tax in the following circumstances. First, EastGroup will be taxed at
regular corporate rates on any undistributed taxable income, including
undistributed net capital gains. Second, under certain circumstances, the
company may be subject to the "alternative minimum tax" on its items of tax
preference. Third, if EastGroup has (i) net income from the sale or other
disposition of "foreclosure property" (which is, in general, property acquired
by foreclosure or otherwise on default of a loan secured by the property) that
is held primarily for sale to customers in the ordinary course of business or
(ii) other non-qualifying income from foreclosure property, it will be subject
to tax at the highest corporate rate on such income. Fourth, if EastGroup has
net income from prohibited transactions (which are, in general, certain sales or
other dispositions of property (other than foreclosure property) held primarily
for sale to customers in the ordinary course of business), such income will be
subject to a 100% tax. Fifth, if EastGroup should fail to satisfy the 75% gross
income test or the 95% gross income test (as discussed below), and has
nonetheless maintained its qualification as a REIT because certain other
requirements have been met, it will be subject to a 100% tax on the net income
attributable to the greater of the amount by which it fails the 75% or 95% test,
multiplied by a fraction intended to reflect its profitability. Sixth, if
EastGroup should fail to distribute during each calendar year at least the sum
of (i) 85% of its REIT ordinary income for such year; (ii) 95% of its REIT
capital gain net income for such year; and (iii) any undistributed taxable
income from prior years, EastGroup would be subject to a 4% excise tax on the
excess of such required distribution over the amounts actually distributed.
Seventh, if EastGroup acquires any asset from a C corporation (i.e., a
corporation generally subject to full corporate level tax) in a transaction in
which the basis of the asset in EastGroup's hands is determined by reference to
the basis of the asset (or any other property) in the hands of the C
corporation, and EastGroup recognizes gain on the disposition of such asset
during the 10-year period beginning on the date on which such asset was acquired
by it, then, to the extent of such property's built-in gain (the excess of the
fair market value of such property at the time of acquisition by EastGroup over
the adjusted basis of such property at such time), such gain will be subject to
tax at the highest regular corporate rate applicable (as provided in Service
regulations that have not yet been promulgated).
Requirements for Qualification. The Code defines a REIT as a
corporation, trust or association (i) which is managed by one or more trustees
or directors; (ii) the beneficial ownership of which is evidenced by
transferable shares or by transferable certificates of beneficial interest;
(iii) which would be taxable as a domestic corporation but for Sections 856
through 860 of the Code; (iv) which is neither a financial institution nor an
insurance company subject to certain provisions of the Code; (v) the beneficial
ownership of which is held by 100 or more persons; (vi) during the last half of
each taxable year not more than 50% in value of the outstanding stock of which
is owned, directly or indirectly, by five or fewer individuals (as defined in
the Code to include certain entities); and (vii) which meets certain other
tests, described below, regarding the nature of its income and assets. The Code
provides that conditions (i) through (iv), inclusive, must be met during the
entire taxable year and that condition (v) must be met during at least 335 days
of a taxable year of 12 months, or during a
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proportionate part of a taxable year of less than 12 months. Conditions (v) and
(vi) will not apply until after the first taxable year for which an election is
made to be taxed as a REIT. EastGroup has issued sufficient Common Stock with
sufficient diversity of ownership to allow it to satisfy requirements (v) and
(vi). In addition, EastGroup's Articles of Incorporation contains restrictions
regarding the transfer of its shares that are intended to assist it in
continuing to satisfy the share ownership requirements described in (v) and
(vi) above. See "Capital Stock of EastGroup -- Restrictions on Transfer."
In addition, a corporation may not elect to become a REIT
unless its taxable year is the calendar year. EastGroup's taxable year is the
calendar year.
Income Tests. In order for EastGroup to maintain qualification
as a REIT, three gross income requirements must be satisfied annually. First, at
least 75% of the REIT's gross income (excluding gross income from prohibited
transactions) for each taxable year must be derived directly or indirectly from
investments relating to real property or mortgages on real property (including
"rents from real property" and, in certain circumstances, interest) or from
certain types of temporary investments. Second, at least 95% of the REIT's gross
income (excluding gross income from prohibited transactions) for each taxable
year must be derived from such real property investments described above, and
from dividends, interest and gain from the sale or disposition of stock or
securities, or from any combination of the foregoing. Third, short-term gain
from the sale or other disposition of stock or securities, gain from prohibited
transactions and gain on the sale or other disposition of real property held for
less than four years (apart from involuntary conversions and sales of
foreclosure property) must represent less than 30% of the REIT's gross income
(including gross income from prohibited transactions) for each taxable year.
Rents received by EastGroup will qualify as "rents from real
property" in satisfying the above gross income tests only if several conditions
are met. First, the amount of rent must not be based in whole or in part on the
income or profits of any person. However, amounts received or accrued generally
will not be excluded from "rents from real property" solely by reason of being
based on a fixed percentage or percentages of receipts or sales. Second, rents
received from a tenant will not qualify as "rents from real property" if
EastGroup, or an owner of 10% or more of EastGroup, directly or constructively
owns 10% or more of such tenant (a "Related Party Tenant"). Third, if rent
attributable to personal property that is leased in connection with a lease of
real property is greater than 15% of the total rent received under the lease,
then the portion of rent attributable to such personal property will not qualify
as "rents from real property." Finally, for rents received to qualify as "rents
from real property," EastGroup generally must not operate or manage the
property, or furnish or render services to tenants, other than through an
"independent contractor" from whom EastGroup derives no revenue. The
"independent contractor" requirement, however, does not apply to the extent the
services provided by EastGroup are "usually or customarily rendered" in
connection with the rental of space for occupancy only and are not otherwise
considered "rendered to the occupant." EastGroup believes that all services that
are provided to its tenants will be considered "usually or customarily" rendered
in connection with the rental of comparable
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properties. Further, any noncustomary services will be provided only through
qualifying independent contractors.
If EastGroup fails to satisfy one or both of the 75% or 95%
gross income tests for any taxable year, it may nevertheless qualify as a REIT
for such year if it is entitled to relief under certain provisions of the Code.
These relief provisions generally will be available if its failure to meet such
tests was due to reasonable cause and not due to willful neglect, EastGroup
attaches a schedule of the sources of its income to its return, and any income
information on the schedules was not due to fraud with intent to evade tax. It
is not possible, however, to state whether in all circumstances EastGroup would
be entitled to the benefit of these relief provisions. As discussed above in
"General," even if these relief provisions were to apply, a tax would be imposed
with respect to the excess net income.
Asset Tests. At the close of each quarter of its taxable year,
EastGroup must also satisfy three tests relating to the nature of its assets.
First, at least 75% of the value of EastGroup's total assets must be represented
by real estate assets (including stock or debt instruments held for not more
than one year purchased with the proceeds of a stock or debt offering of the
company), cash, cash items and government securities. Second, not more than 25%
of EastGroup's total assets may be represented by securities other than those in
the 75% asset class. Third, of the investments included in the 25% asset class,
the value of any one issuer's securities owned by EastGroup may not exceed 5% of
the value of EastGroup's total assets, and EastGroup may not own more than 10%
of any one issuer's outstanding voting securities (excluding securities of a
qualified REIT subsidiary or another REIT). The 5% test must generally be met
for any quarter in which a REIT acquires securities of an issuer.
If EastGroup should fail to satisfy the asset tests at the
end of a calendar quarter, such a failure would not cause it to lose its REIT
status if (i) it satisfied the asset tests at the close of the preceding
calendar quarter, and (ii) the discrepancy between the value of EastGroup's
assets and the asset tests either did not exist immediately after the
acquisition of any particular asset or was not wholly or partly caused by such
an acquisition (e.g., the discrepancy arose from changes in the market values
of its assets). If the conditions described in clause (ii) of the preceding
sentence were not satisfied, EastGroup still could avoid disqualification by
eliminating any discrepancy within 30 days after the close of the calendar
quarter in which it arose.
Annual Distribution Requirements. EastGroup, in order to
qualify as a REIT, is required to distribute dividends (other than capital gain
dividends) to its stockholders in an amount at least equal to (i) the sum of (a)
95% of its "REIT taxable income" (computed without regard to the dividends paid
deduction and the REIT's net capital gain) and (b) 95% of the net income (after
tax), if any, from foreclosure property, minus (ii) the sum of certain items of
noncash income. Such distributions must be paid in the taxable year to which
they relate, or in the following taxable year if declared before EastGroup
timely files its tax return for such year and if paid on or before the first
regular dividend payment after such declaration. To the extent that EastGroup
does not distribute all of its net capital gain or distributes at least 95%, but
less than 100%, of its "REIT taxable income," as adjusted, it will be subject to
tax on the nondistributed amount at regular capital gains and ordinary corporate
tax rates. Furthermore, if EastGroup should fail to distribute during each
calendar year at least the sum of (i) 85% of its REIT ordinary income for such
year; (ii) 95% of its REIT capital gain income for such year; and (iii) any
undistributed taxable income from prior periods, it will be subject to a 4%
excise tax on the excess of such required distribution over the amounts actually
distributed.
EastGroup has made and intends to continue to make timely
distributions sufficient to satisfy the annual distribution requirements. It is
possible, however, that the company, from time to time, may not have sufficient
cash or liquid assets to meet the distribution requirements
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due to timing differences between the actual receipt of income and actual
payment of deductible expenses, and the inclusion of such income and deduction
of such expenses in arriving at EastGroup's taxable income, or if the amount of
nondeductible expenses such as principal amortization or capital expenditures
exceed the amount of noncash deductions. In the event that such timing
differences occur, in order to meet the distribution requirements, EastGroup may
arrange for short-term, or possible long-term, borrowing to permit the payment
of required dividends. If the amount of nondeductible expenses exceeds noncash
deductions, EastGroup may refinance its indebtedness to reduce principal
payments and borrow funds for capital expenditures.
Under certain circumstances, EastGroup may be able to rectify
a failure to meet the distribution requirement for a year by paying "deficiency
dividends" to stockholders in a later year that may be included in EastGroup's
deduction for dividends paid for the earlier year. Thus, EastGroup may be able
to avoid being taxed on amounts distributed as deficiency dividends; however,
the company will be required to pay interest to the Service based upon the
amount of any deduction taken for deficiency dividends.
Failure to Qualify. If EastGroup fails to qualify for taxation
as a REIT in any taxable year and no relief provisions apply, EastGroup will be
subject to tax (including any applicable alternative minimum tax) on its taxable
income at regular corporate rates. Distributions to stockholders in any year in
which EastGroup fails to qualify will not be deductible by it, nor will such
distributions be required to be made. In such event, to the extent of current
and accumulated earnings and profits, all distributions to stockholders will be
taxable as ordinary income, and, subject to certain limitations in the Code,
corporate distributees may be eligible for the dividends received deduction.
Unless entitled to relief under specific statutory provisions, EastGroup also
will be disqualified from taxation as a REIT for the four taxable years
following the year during which qualification was lost. It is not possible to
state whether in all circumstances EastGroup would be entitled to such statutory
relief.
TAXATION OF STOCKHOLDERS
Taxation of Taxable Domestic Stockholders. As long as
EastGroup qualifies as a REIT, distributions made to its taxable domestic
stockholders out of current or accumulated earnings and profits (and not
designated as capital gain dividends) will be taken into account by them as
ordinary income, and corporate stockholders will not be eligible for the
dividends received deduction as to such amounts. Distributions that are
designated as capital gain dividends will be taxed as long-term capital gains
(to the extent they do not exceed EastGroup's actual net capital gain for the
taxable year) without regard to the period for which the stockholder has held
his shares. However, corporate stockholders may be required to treat up to 20%
of certain capital gain dividends as ordinary income. Distributions in excess of
current and accumulated earnings and profits will not be taxable to a
stockholder to the extent that they do not exceed the adjusted basis of such
stockholder's Common Stock, but rather will reduce the adjusted basis of such
shares. To the extent that such distributions exceed the adjusted basis
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of a stockholder's Common Stock, they will be included in income as long-term
capital gain (or short-term capital gain if the shares have been held for one
year or less), assuming the shares are a capital asset in the hands of the
stockholder. In addition, any dividend declared by the company in October,
November or December of any year payable to a stockholder of record on a
specific date in any such month shall be treated as both paid by EastGroup and
received by the stockholder on December 31 of such year, provided that the
dividend is actually paid by the company during January of the following
calendar year. Stockholders may not include in their individual income tax
returns any net operating losses or capital losses of EastGroup.
In general, any gain or loss realized upon a taxable
disposition of shares by a stockholder who is not a dealer in securities will
be treated as a long term capital gain or loss if the shares have been held for
more than one year and otherwise a short term capital gain or loss. However,
any gain or loss realized upon a taxable disposition of shares by a stockholder
who is not a dealer in securities will be treated as a long term capital gain
or loss if the shares have been held for more than one year and otherwise a
short term capital gain or loss. However, any loss upon a sale or exchange of
Common Stock by a stockholder who has held such shares for six months or less
(after applying certain holding period rules) will be treated as long-term
capital loss to the extent of distributions from EastGroup required to be
treated by such stockholder as long-term capital gain.
Backup Withholding. EastGroup will report to its domestic
stockholders and the Service the amount of dividends paid during each calendar
year, and the amount of tax withheld, if any, with respect thereto. Under the
backup withholding rules, a stockholder may be subject to backup withholding at
the rate of 31% with respect to dividends paid unless such holder (i) is a
corporation or comes within certain other exempt categories and, when required,
demonstrates this fact, or (ii) provides a taxpayer identification number,
certifies as to no loss of exemption from backup withholding, and otherwise
complies with applicable requirements of the backup withholding rules. A
stockholder who does not provide EastGroup with its correct taxpayer
identification number may also be subject to penalties imposed by the Service.
Any amount paid as backup withholding will be creditable against the
stockholder's income tax liability. In addition, EastGroup may be required to
withhold a portion of capital gain distributions made to any stockholders who
fail to certify their non-foreign status to the company. See "Taxation of
Non-U.S. Stockholders" below.
Taxation of Tax-Exempt Stockholders. Most tax-exempt entities,
including employees' pension trusts, are not subject to Federal income tax
except to the extent of UBIT. The Service has ruled that amounts distributed by
a REIT to a tax-exempt employees' pension trust do not constitute "unrelated
business taxable income" ("UBTI"). Based upon this ruling and the analysis
therein, and subject to the discussion below regarding qualified pension trust
investors, distributions by EastGroup to a stockholder that is a tax-exempt
entity generally should not constitute UBTI, provided that the tax-exempt entity
has not financed the acquisition of its shares with "acquisition indebtedness"
within the meaning of the Code and the Common Stock are not otherwise used in an
unrelated trade or business of the tax-exempt entity. Revenue rulings, however,
are interpretative in nature and subject to revocation or modification by the
Service.
A "qualified trust" (defined to be any trust described in
section 401(a) of the Code and exempt from tax under section 501(a) of the Code)
that holds more than 10% of the value of the shares of a REIT may be required,
under certain circumstances, to treat a portion of distributions from the REIT
as UBTI. This requirement will apply for a taxable year only if (i)
39
<PAGE> 47
the REIT satisfies the requirement that not more than 50% of the value of its
shares be held by five or fewer individuals (the "five or fewer requirement")
only by relying on a special "look-through" rule under which shares held by
qualified trust stockholders are treated as held by the beneficiaries of such
trusts in proportion to their actuarial interests therein; and (ii) the REIT is
"predominantly held" by qualified trusts. A REIT is "predominantly held" by
qualified trusts if either (i) a single qualified trust holds more than 25% of
the value of the REIT shares, or (ii) one or more qualified trusts, each owning
more than 10% of the value of the REIT shares, hold in the aggregate more than
50% of the value of the REIT shares. If the foregoing requirements are met, the
percentage of any REIT dividend treated as UBTI to a qualified trust that owns
more than 10% of the value of the REIT shares is equal to the ratio of (i) the
UBTI earned by the REIT (computed as if the REIT were a qualified trust and
therefore subject to tax on its UBTI) to (ii) the total gross income (less
certain associated expenses) of the REIT for the year in which the dividends are
paid. A de minimis exception applies where the ratio set forth in the preceding
sentence is less than 5% for any year.
The provisions requiring qualified trusts to treat a portion
of REIT distributions as UBTI will not apply if the REIT is able to satisfy the
five or fewer requirement without relying on the "look-through" rule. The
restrictions on ownership of Common Stock in EastGroup's Articles of
Incorporation should prevent application of the foregoing provisions to
qualified trusts purchasing Common Stock of EastGroup pursuant to the Offering,
absent a waiver of the restrictions by the Board of Directors.
Taxation of Non-U.S. Stockholders. The rules governing U.S.
Federal income taxation of nonresident alien individuals, foreign corporations,
foreign partnerships and other foreign stockholders (collectively, "Non-U.S.
Stockholders") are complex, and no attempt will be made herein to provide more
than a limited summary of such rules. The discussion does not consider any
specific facts or circumstances that may apply to a particular Non-U.S.
Stockholder. Prospective Non-U.S. Stockholders should consult with their own tax
advisors to determine the impact of U.S. Federal, state and local income tax
laws with regard to an investment in Common Stock, including any reporting
requirements.
Distributions that are not attributable to gain from sales or
exchanges by EastGroup of U.S. real property interests and not designated by
EastGroup as capital gain dividends will be treated as dividends of ordinary
income to the extent that they are made out of current or accumulated earnings
and profits of EastGroup. Such distributions, ordinarily, will be subject to a
withholding tax equal to 30% of the gross amount of the distribution unless an
applicable tax treaty reduces such rate. However, if income from the investment
in Common Stock is treated as effectively connected with the Non-U.S.
Stockholder's conduct of a U.S. trade or business, the Non-U.S. Stockholder
generally will be subject to a tax at graduated rates, in the same manner as
U.S. stockholders are taxed with respect to such dividends (and may also be
subject to a branch profits tax of up to 30% if the stockholder is a foreign
corporation). EastGroup expects to withhold U.S. income tax at the rate of 30%
on the gross amount of any dividends paid to a Non-U.S. Stockholder that are not
designated as capital gain dividends, unless (i) a lower treaty rate applies and
the required form evidencing eligibility for that reduced
40
<PAGE> 48
rate is filed with EastGroup or (ii) the Non-U.S. Stockholder files IRS
Form 4224 with EastGroup claiming that the distribution is income treated as
effectively connected to a U.S. trade or business.
Distributions in excess of current and accumulated earnings
and profits of EastGroup will not be taxable to a stockholder to the extent that
they do not exceed the adjusted basis of the stockholder's Common Stock, but
rather will reduce the adjusted basis of such shares. To the extent that such
distributions exceed the adjusted basis of a Non-U.S. Stockholder's shares, they
will give rise to tax liability if the Non-U.S. Stockholder would otherwise be
subject to tax on any gain from the sale or disposition of his or her Common
Stock as described below. If at any time EastGroup is not a "domestically
controlled REIT," as defined below, EastGroup must withhold U.S. income tax at
the rate of 10% on distributions to Non-U.S. Stockholders that are not paid
out of current or accumulated earnings and profits unless the Non-U.S.
Stockholders provide EastGroup with withholding certificates evidencing their
exemption from withholding tax. If it cannot be determined at the time that
such a distribution is made whether or not such distribution will be in excess
of current and accumulated earnings and profits, the distribution will be
subject to withholding at the rate applicable to dividends. However, the
Non-U.S. Stockholder may seek a refund of such amounts from the Service if it
is subsequently determined that such distribution was, in fact, in excess of
current and accumulated earnings and profits of EastGroup.
For any year in which EastGroup qualifies as a REIT,
distributions that are attributable to gain from sales or exchanges by EastGroup
of U.S. real property interests will be taxed to a Non-U.S. Stockholder under
the provisions of the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, these distributions are taxed to a Non-U.S.
Stockholder as if such gain were effectively connected with a U.S. business.
Thus, Non-U.S. Stockholders will be taxed on such distributions at the normal
capital gain rates applicable to U.S. stockholders (subject to applicable
alternative minimum tax and a special alternative minimum tax in the case of
nonresident alien individuals). Also, distributions subject to FIRPTA may be
subject to a 30% branch profits tax in the hands of a corporate Non-U.S.
Stockholder not entitled to treaty relief or exemption. EastGroup is required by
applicable Treasury Regulations to withhold 35% of any distribution that could
be designated by EastGroup as a capital gain dividend. This amount is creditable
against the Non-U.S. Stockholder's FIRPTA tax liability.
Gain recognized by a Non-U.S. Stockholder upon a sale of
Common Stock generally will not be taxed under FIRPTA if EastGroup is a
"domestically controlled REIT," defined generally as a REIT in which at all
times during a specified testing period less than 50% in value of its shares was
held directly or indirectly by Non-U.S. Stockholders. EastGroup believes that it
currently qualifies as a "domestically controlled REIT," and that the sale of
Common Stock will not therefore be subject to tax under FIRPTA. Because
EastGroup is publicly traded, however, no assurance can be given that the
company will continue to be a domestically controlled REIT. Even if EastGroup
is not a "domestically controlled REIT," a Non-U.S. Stockholder's sale of
Common Stock generally will not be subject to tax under FIRPTA as a sale of
U.S. real property interests, provided that
41
<PAGE> 49
(i) EastGroup's Common Stock is "regularly traded" on an established securities
market, and (ii) the selling Non-U.S. Stockholder held 5% or less of EastGroup's
Common Stock at all times during the specified testing period. In addition, gain
not subject to FIRPTA will be taxable to a Non-U.S. Stockholder if (i) the
investment in Common Stocks is treated as effectively connected with the
Non-U.S. Stockholder's trade or business, in which case the Non-U.S. Stockholder
will be subject to the same treatment as the U.S. stockholders with respect to
such gain; or (ii) the Non-U.S. Stockholder is a nonresident alien individual
who was present in the United States for 183 days or more during the taxable
year and has a "tax home" in the United States, in which case the nonresident
alien individual will be subject to a 30% withholding tax on the individual's
capital gains. If the gain on the sale of Common Stock were to be subject to tax
under FIRPTA, the Non-U.S. Stockholder would be subject to the same treatment as
U.S. stockholders with respect to such gain (subject to applicable alternative
minimum tax and a special alterative minimum tax in the case of nonresident
alien individuals).
State and Local Taxes. EastGroup and its stockholders may be
subject to state or local taxation in various state or local jurisdictions,
including those in which it or they transact business or reside (although
stockholders who are individuals generally should not be required to file state
income tax returns outside of their state of residence with respect to
EastGroup's operations and distributions). The state and local tax treatment of
EastGroup and its stockholders may not conform to the Federal income tax
consequences discussed above. Consequently, prospective stockholders should
consult their own tax advisors regarding the effect of state and local tax laws
on an investment in the Securities.
PLAN OF DISTRIBUTION
EastGroup may sell Securities to or through underwriters, and
also may sell Securities directly to other purchasers or through agents.
The distribution of the Securities may be effected from time
to time in one or more transactions at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices.
In connection with the sale of Securities, underwriters may
receive compensation from EastGroup or for purchasers of Securities, for whom
they may act as agents, in the form of discounts, concessions or commissions.
Underwriters may sell Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers, and agents that participate in the distribution
of Securities may be deemed to be underwriters, and any discounts or commissions
they receive from EastGroup and any profit on the resale of Securities they
realize may be deemed to be underwriting discounts and commissions, under the
Securities Act. Any such underwriter or
42
<PAGE> 50
agent will be identified, and any such compensation received from EastGroup will
be described, in the Prospectus Supplement.
Unless otherwise specified in the related Prospectus
Supplement, each series of Securities will be a new issue with no established
trading market, other than the Common Stock which are listed on the NYSE. Any
Common Stock sold pursuant to a Prospectus Supplement will be listed on such
exchange, subject to official notice of issuance. EastGroup may elect to list
any series of Debt Securities, Preferred Stock or Depositary Shares on an
exchange, but is not obligated to do so. It is possible that one or more
underwriters may make a market in a series of Securities, but will not be
obligated to do so and may discontinue any market making at any time without
notice. Therefore, no assurance can be given as to the liquidity of the trading
market for the Securities.
Under agreements EastGroup may enter into, underwriters,
dealers and agents who participate in the distribution of Securities may be
entitled to indemnification by EastGroup against certain liabilities, including
liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions
with, or perform services for, or be customers of, EastGroup in the ordinary
course of business.
If so indicated in the applicable Prospectus Supplement,
EastGroup will authorize underwriters or other persons acting as EastGroup's
agents to solicit offers by certain institutions to purchase Securities from
EastGroup pursuant to contracts providing for payment and delivery on a future
date. Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by EastGroup. The obligations of any purchaser
under any such contract will be subject to the condition that the purchase of
the Securities shall not at the time of delivery be prohibited under the laws of
the jurisdiction to which such purchaser is subject. The underwriters and such
other agents will not have any responsibility in respect of the validity or
performance of such contracts.
EXPERTS
The consolidated financial statements of EastGroup as of
December 31, 1996 and 1995, and for each of the years in the three year period
ended December 31, 1996, have been incorporated by reference in the Prospectus
and Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein in,
and upon the authority of said firm as experts in accounting and auditing.
43
<PAGE> 51
LEGAL MATTERS
The legality of the Securities will be passed upon for
EastGroup by Jaeckle Fleischmann & Mugel, LLP, Buffalo, New York.
44
<PAGE> 52
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in
connection with the issuance and distribution of the Securities, other than
underwriting discounts and commissions. All of the amounts shown are estimated
except the Securities and Exchange Commission ("Commission") registration fee.
<TABLE>
<CAPTION>
<S> <C>
Commission Registration Fee..........................$ 45,455
New York Stock Exchange, Inc. Listing Fee............ 26,250
Blue Sky fees and expenses........................... 1,000
Printing and engraving expenses...................... 75,000
Legal fees and expenses.............................. 80,000
Accounting fees and expenses......................... 70,000
Miscellaneous........................................ 2,295
Total.......................................$300,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
EastGroup's Articles of Incorporation, as amended, contain a
provision authorizing EastGroup to indemnify and hold harmless, to the fullest
extent permitted by Maryland law, directors 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 corporation, subject to certain limitations, to indemnify
its officers and directors 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 director 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 director received an improper personal benefit or,
with respect to a criminal action or proceeding, the director had no reasonable
cause to believe the director's conduct was unlawful.
II-1
<PAGE> 53
EastGroup has entered into an indemnification agreement (the
"Indemnification Agreement") with each of its directors and officers, and the
Board of Directors has authorized EastGroup to enter into an Indemnification
Agreement with each of the future directors and officers of EastGroup. The
Indemnification Statute permits a corporation to indemnify its directors and
officers. However, the protection that is specifically afforded by the
Indemnification Statute authorizes other arrangements for indemnification of
directors and officers, including insurance. The Board of Directors has approved
and the stockholders 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 director 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 director 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.
ITEM 16. EXHIBITS.
The following exhibits are filed herewith (or incorporated by
reference):
(4) Form of Indenture, to be filed by amendment.
(5) Opinion of Jaeckle Fleischmann & Mugel, LLP regarding legality
of shares being registered, filed herewith.
(12) Statement regarding computation of ratios, filed herewith.
(23)(a) Consent of KPMG Peat Marwick LLP, filed herewith.
(b) Consent of Jaeckle Fleischmann & Mugel, LLP (incorporated by
reference to Exhibit 5).
(24) Powers of Attorney, filed herewith at pages II-5 and II-6.
(25) Statement of eligibility of trustee, to be filed by amendment.
II-2
<PAGE> 54
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933, as amended (the "Securities
Act");
(ii) 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. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20 percent
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement; and
(iii) To include any material information
with respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Sections 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any
liability under the Securities Act, each such 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.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration
II-3
<PAGE> 55
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.
(c) Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the 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 director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(d) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under
the Securities Act, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and contained in
a form or prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability
under the Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(e) The undersigned Registrant hereby undertakes to file an
application for the purpose of determining the eligibility of the trustee to act
under subsection (a) of Section 310 of the Trust Indenture Act in accordance
with the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Trust Indenture Act.
II-4
<PAGE> 56
SIGNATURES
----------
Pursuant to the requirements of the Securities of the
Securities Act of 1933, the Registrant certifies that it has reasonable grounds
to believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Jackson, State of Mississippi as of
the 13th day of June 1997.
EASTGROUP PROPERTIES, INC.
By: /s/David H. Hoster II
---------------------------------
David H. Hoster II
President and Director
POWERS OF ATTORNEY
Each person whose signature appears below hereby constitutes
and appoints each of David H. Hoster II or N. Keith McKey his or her true and
lawful attorney-in-fact and agent, each with full power of substitution and
revocation, for him or her and in his or her name, place and stead, in any and
all capacities, to sign any and all amendments (including post-effective
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 each attorney-in-fact and
agent, full power and authority to do and perform each such and every act and
thing requisite and necessary to be done, as fully to all intents and purposes
as such person might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent or his or her substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
II-5
<PAGE> 57
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement and the foregoing Powers of Attorney have been
signed by the following persons in the capacities indicated on the 13th day of
June 1997.
NAME AND TITLE DATE
- -------------- ----
/s/Leland R. Speed June 13, 1997
- ----------------------------------------------
Leland R. Speed, Chief Executive Officer
(Principal Executive Officer)
/s/David H. Hoster II June 13, 1997
- ----------------------------------------------
David H. Hoster II, President and Director
/s/N. Keith McKey June 13, 1997
- ----------------------------------------------
N. Keith McKey, Executive Vice President,
Chief Financial Officer, Treasurer and
Secretary
/s/Diane W. Hayman June 13, 1997
- ----------------------------------------------
Diane W. Hayman, Controller (Principal
Accounting Officer)
/s/Alexander G. Anagnos June 13, 1997
- ----------------------------------------------
Alexander G. Anagnos, Director
/s/H.C. Bailey, Jr. June 13, 1997
- ----------------------------------------------
H.C. Bailey, Jr., Director
/s/Harold B. Judell June 13, 1997
- ----------------------------------------------
Harold B. Judell, Director
/s/David M. Osnos June 13, 1997
- ----------------------------------------------
David M. Osnos, Director
/s/John N. Palmer June 13, 1997
- ----------------------------------------------
John N. Palmer, Director
II-6
<PAGE> 1
Exhibit 5
JAECKLE FLEISCHMANN & MUGEL, LLP
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
June 13, 1997
EastGroup Properties, Inc.
300 One Jackson Place
188 East Capitol Street
Jackson, Mississippi 39201
Ladies and Gentlemen:
Re: Registration Statement on Form S-3 under the Securities
Act of 1933, as amended, covering the registration of
shares of common stock, $0.0001 par value per share
(the "Common Stock"), preferred stock ("Preferred
Stock"), Preferred Stock represented by Depositary
Shares, and unsecured debt securities (collectively,
the "Securities"), of EastGroup Properties, Inc.
("EastGroup")
-------------------------------------------------------
As your counsel we have examined the above Registration
Statement and we are familiar with the documents referred to therein, as well as
EastGroup's Articles of Incorporation, as amended, and Bylaws, such records of
proceedings of EastGroup as we deemed material, and such other proceedings of
EastGroup as we deemed necessary for the purpose of this opinion.
We have examined the proceedings heretofore taken and we are
informed as to the procedures proposed to be followed by EastGroup in connection
with the authorization, issuance and sale of the above described Securities. In
our opinion the Securities to be issued by EastGroup will be, when issued and
paid for pursuant to the Registration Statement and the exhibits thereto, duly
authorized for issuance by all necessary corporate action and, upon the issuance
thereof in accordance with their terms, the Securities will be legally issued,
fully paid and non-assessable.
We consent to the filing of this opinion letter as an exhibit
to the Registration Statement.
Very truly yours,
JAECKLE FLEISCHMANN & MUGEL, LLP
<PAGE> 1
Exhibit 12
EASTGROUP PROPERTIES, INC.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
3 MONTHS YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAR. 31, 1997 DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1993 DEC. 31, 1992
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Pretax income from continuing operations
(net income (loss)) 3,087,392.47 12,509,189.35 7,710,814.49 7,167,825.65 6,414,661.94 (3,672,543.23)
Add: fixed charges 2,436,248.10 8,929,889.00 6,286,788.07 3,905,060.22 3,415,318.22 2,832,702.95
------------ ------------- ------------- ------------- ------------ ------------
5,523,640.57 21,439.07 13,997,602.56 11,072,885.87 9,829,980.16 (839,840.28)
2,436,248.10 8,929,889.00 6,286,788.07 3,905,060.22 3,415,318.22 2,832,702.95
------------ ------------- ------------- ------------- ------------ ------------
Ratio of earnings to fixed charges 2.267273 2.4008 2.226511 2.835522 2.878203 (0.296480)
============ ============= ============= ============= ============ ============
Fixed charges:
Interest expense per original financials 5,975,348.70 3,746,867.98 3,112,526.97 2,749,349.04
Add: amortization of loan costs 311,439.37 158,192.24 302,791.25 83,353.91
------------- ------------ ------------ -------------
Interest per adjusted 10-K 6,286,788.07 3,905,060.22 3,415,318.22 2,832,702.95
============= ============= ============ =============
</TABLE>
Fixed charges consist of interest costs and
amortization of debt issuance costs.
<PAGE> 1
Exhibit 23(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the use of our report incorporated herein by reference
and to the reference to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Jackson, Mississippi
June 12, 1997
