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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): SEPTEMBER 25, 1998
EASGTROUP PROPERTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND
(STATE OR OTHER JURISDICTION OF INCORPORATION)
1-7094 13-2711135
(Commission File Number) (IRS Employer Identification No.)
300 ONE JACKSON PLACE
188 EAST CAPITOL STREET
P.O. BOX 22728
JACKSON, MISSISSIPPI 39225-2728
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (601) 354-3555
(Former name or former address, if changed since last report)
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FORM 8-K
EASTGROUP PROPERTIES
ITEM 5. OTHER EVENTS
On September 25, 1998, EastGroup entered into an agreement with Five Arrows
Realty Securities II L.L.C.("Five Arrows"), an investment fund managed by
Rothschild Realty Inc., a member of the Rothschild Group, providing for the
sale of up to 2,800,000 shares at a net price of $24.50 per share of Series B
Cumulative Convertible Preferred Stock. Under the terms of this agreement,
EastGroup Properties may sell the Series B Preferred Stock to Five Arrows at up
to five closings, at EastGroup's option, during the next twelve months for an
aggregate purchase price of up to $70 million. Under the terms of the
agreement, EastGroup is required to fund at least $40 million over the next
twelve months, but may at its sole discretion increase the funding up to $70
million under identical terms. In connection with such sale, EastGroup has
entered into certain related agreements with Five Arrows, providing, among
other things, for certain registration rights with respect to the Series B
Preferred Stock and the right to designate a member of the Board of Directors
under certain circumstances.
The Series B Preferred Stock is entitled to quarterly dividends in
arrears equal to the greater of $0.547 per share or the dividend on the number
of shares of common stock into which a share of Series B Preferred Stock is
convertible. Each share of Series B Preferred Stock is convertible into 1.1364
shares of common stock. The Series B Preferred Stock may be redeemed by
EastGroup after January 1, 2004 at a 4% premium over the liquidation preference
of $25.00 with such premium declining to zero after January 1, 2008. Over the
twelve-month period of funding, EastGroup will use the proceeds to fund the
acquisition and selective development of additional industrial properties in
EastGroup's current and targeted Sunbelt markets.
(C) EXHIBITS.
The following exhibits are included herein:
99(a) Investment Agreement dated as of September 25, 1998 between the
Registrant and Five Arrows Realty Securities II L.L.C. (filed
herewith).
99(b) Articles Supplementary of the Registrant dated September 28, 1998
creating the Registrant's Series B Cumulative Convertible Preferred
Stock (filed herewith).
99(c) Operating Agreement dated as of September 25, 1998 between the Company
and Five Arrows Realty Securities II L.L.C. (filed herewith).
99(d) Agreement and Waiver between the Registrant and Five Arrows Realty
Securities II L.L.C. (filed herewith).
99(e) Opinion of Jaeckle Fleischmann & Mugel, LLP regarding legality (filed
herewith).
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FORM 8-K
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EastGroup Properties, Inc.
(Registrant)
Dated: September 25, 1998 By: /s/ Keith McKey N.
Keith McKey, CPA
Executive Vice-President,
Chief Financial Officer,
and Secretary
/s/ Diane W. Hayman
Diane W. Hayman, CPA
Vice-President and Controller
(Principal Accounting Officer)
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Exhibit 99(a)
INVESTMENT AGREEMENT
BETWEEN
EASTGROUP PROPERTIES, INC.
AND
FIVE ARROWS REALTY SECURITIES II L.L.C.
----------------------
DATED AS OF SEPTEMBER 25, 1998
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INVESTMENT AGREEMENT
INVESTMENT AGREEMENT dated as of September 25, 1998 between
EastGroup Properties, Inc., a corporation organized under the laws of the State
of Maryland (the "Company") and Five Arrows Realty Securities II L.L.C., a
limited liability company organized under the laws of the State of Delaware (the
"Investor").
WHEREAS, the Company wishes to issue the Preferred Shares (as
defined herein) to the Investor, and the Investor wishes to purchase, acquire
and accept the Preferred Shares from the Company (the "Investment").
NOW THEREFORE, in consideration of the promises and the mutual
covenants herein contained and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE 1 DEFINED TERMS.
Section 1.1 DEFINED TERMS. The following terms shall, unless
the context otherwise requires, have the meanings set forth in this Section 1.1.
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
disbursements.
"Affiliate" means, with respect to any Person, (a) any member
of the Immediate Family of such Person or a trust established for the benefit of
such member, (b) any beneficiary of a trust described in (a), (c) any Entity
which, directly or indirectly though one or more intermediaries, is deemed to be
the beneficial owner of 10% or more of the voting equity of the Person for the
purposes of Section 13(d) of the Exchange Act, (d) any officer of the Person or
any member of the Board of Directors of the Person, or (e) any Entity which,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person, including such
Person or Persons referred to in the preceding clauses (a) or (d); PROVIDED,
HOWEVER, that none of the Investor, Rothschild or their respective Affiliates
nor any of their respective officers, directors, partners, members or Affiliates
nor any Preferred Director (as such term is defined in the Articles
Supplementary) shall be considered an Affiliate of the Company or its
Subsidiaries for purposes of this Agreement.
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"Agreement" means this Investment Agreement, as originally
executed and as hereafter from time to time supplemented, amended and restated.
"Agreement and Waiver" means the Agreement and Waiver, dated
as of the date of the initial Closing, between the Company and the Investor in
the form of Exhibit A attached hereto.
"Articles Supplementary" means the Articles Supplementary
classifying 2,800,000 shares of preferred stock as Series B Cumulative
Convertible Preferred Stock of the Company in the form of Exhibit B attached
hereto.
"Benefit Plan" means a defined benefit plan as defined in
Section 3(35) of ERISA that is subject to Title IV of ERISA (other than a
Multiemployer Plan) and in respect of which the Company or any ERISA Affiliate
is or within the immediately preceding six (6) years was an "employer" as
defined in Section 3(5) of ERISA.
"Business Day" means any Monday, Tuesday, Wednesday, Thursday
or Friday which is not a day in which banking institutions in New York City are
authorized or obligated by law or executive order to close.
"Charter" means the Articles of Incorporation of the Company
as currently in effect and as amended in the future in a manner that is not
inconsistent with the terms of the Operative Instruments.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time or any successor statute thereto.
"Common Stock" means the shares of the common stock, par value
$.0001 per share, of the Company.
"Confidential Information" means the identity of the Company
in the context of the Investment, the existence and contents of discussions
regarding the Investment and information concerning the assets, operations,
business, records, projections and prospects of the Company; PROVIDED, HOWEVER,
that the term "Confidential Information" does not include information that (i)
is or becomes available to the public other than as a result of disclosure by
any of the Investor or Rothschild or any of their respective representatives,
(ii) was available to the Investor or Rothschild or was within the Investor's or
Rothschild's knowledge prior to its disclosure by the Company to the Investor or
Rothschild, or (iii) becomes available to the Investor or Rothschild from a
source other than the Company, provided that such source is not known by the
Investor or Rothschild to be bound by a confidentiality agreement with the
Company or its representative.
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"Entity" means any general partnership, limited partnership,
corporation, joint venture, trust, business trust, real estate investment trust,
limited liability company, cooperative or association.
"Environmental Claim" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter or other communication from any
governmental agency, department, bureau, office or other authority, or any third
party alleging violations of Environmental Laws or Releases of Hazardous
Materials.
"Environmental Laws" means the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. 9601 et seq., as
amended; the Resource Conservation and Recovery Act ("RCRA), 42 U.S.C. 6901 et
seq., as amended; the Clean Air Act ("CAA"), 42 U.S.C. 7401 et seq., as amended;
the Clean Water Act ("CWA"), 33 U.S.C. 1251 et seq., as amended; the
Occupational Safety and Health Act ("OSHA"), 29 U.S.C. 655 et seq. and any other
federal, state, local or municipal laws, statutes, regulations, rules or
ordinances imposing liability or establishing standards of conduct for
protection of the environment.
"Environmental Liabilities" means any monetary obligations,
losses, liabilities (including strict liability), damages, punitive damages,
treble damages, costs and expenses (including all reasonable out-of-pocket fees,
disbursements and expenses of counsel, reasonable out-of-pocket expert and
consulting fees and reasonable out-of-pocket costs for environmental site
assessments, remedial investigation and feasibility studies), fines, penalties,
sanctions and interest incurred as a result of any Environmental Claim filed by
any governmental authority or any third party against the Company or its
Subsidiaries or any predecessors in interest which relate to any violations of
Environmental Laws, Response Actions, Releases or threatened Releases of
Hazardous Materials from or onto (i) any assets, properties or businesses
presently or formerly owned by the Company, its Subsidiaries or a predecessor in
interest, or (ii) any facility which received Hazardous Materials generated by
the Company, its Subsidiaries or a predecessor in interest.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time. References to sections
of ERISA shall be construed also to refer to any successor sections.
"ERISA Affiliate" means any (i) corporation which is a member
of the same controlled group of corporations (within the meaning of Section
414(b) of the Code) as the Company, (ii) partnership or other trade or business
(whether or not incorporated) under common control (within the meaning of
Section 414(c) of the Code) with the Company, or (iii) member of the same
affiliated service group (within the meaning of Section 414(m) of the Code) as
the
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Company, any corporation described in clause (i) above or any partnership or
trade or business described in clause (ii) above.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means United States Generally Accepted Accounting
Principles, as in effect from time to time.
"Hazardous Materials" include (a) any element, compound, or
chemical that is defined, listed or otherwise classified as a contaminant,
pollutant, toxic pollutant, toxic or hazardous substances, extremely hazardous
substance or chemical, hazardous waste, medical waste, biohazardous or
infectious waste, special waste, or solid waste under Environmental Laws; (b)
petroleum, petroleum-based or petroleum-derived products; (c) electrical
equipment containing polychlorinated biphenyls at a level greater than 50 ppm;
(d) any substance exhibiting a hazardous waste characteristic (as identified in
Regulations adopted pursuant to Environmental Laws, i.e. corrosivity,
ignitibility, toxicity or reactivity) as well as any radioactive or explosive
materials; and (e) asbestos-containing materials.
"Immediate Family" means, with respect to any Person, such
Person's spouse, parents, parents-in-law, descendants, nephews, nieces,
brothers, sisters, brothers-in-law, sisters-in-law, stepchildren, sons-in-law
and daughters-in-law.
"Lien" means and includes any lien, security interest, pledge,
charge, option, right of first refusal, claim, mortgage, lease, easement or any
other encumbrance whatsoever.
"Material Adverse Effect," when used with reference to events,
acts, failures or omissions to act, or conduct of a specified Person, means that
such events, acts, failures or omissions to act, or conduct would have a
material adverse effect on (i) the condition (financial or otherwise), earnings,
business affairs or business prospects of such Person and its consolidated
subsidiaries, considered as one enterprise, or (ii) the ability of such Person
to perform its obligations under the Operative Instruments.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA and subject to Title IV of ERISA which is, or
within the immediately preceding six (6) years was, contributed to by the
Company or any ERISA Affiliate.
"Operating Agreement" means the Operating Agreement, dated as
of the initial Closing Date, between the Company and the Investor, in the form
of Exhibit C attached hereto.
"Operative Instruments" means this Agreement, the Articles
Supplementary, and the Operating Agreement.
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"Permit" means a permit, license, consent, order or approval
by any federal, state or local governmental agency.
"Person" means any individual or Entity.
"Plan" means an employee benefit plan defined in Section 3(3)
of ERISA in respect of which the Company or any ERISA Affiliate is, or within
the immediately preceding six (6) years was, an "employer" as defined in Section
3(5) of ERISA.
"Preferred Shares" means the shares of the Company designated
in the Articles Supplementary as Series B Cumulative Convertible Preferred
Stock.
"Registration Statement" means the registration statement of
the Company on Form S-3 (Registration No. 333-58309) filed with the SEC pursuant
to the Securities Act.
"REIT" means a real estate investment trust described in Code
Section 856.
"Release" means any spilling, leaking, pumping, emitting,
emptying, discharging, injecting, escaping, leaching, migrating, dumping, or
disposing of Hazardous Materials (including the abandonment or discarding of
barrels, containers or other closed receptacles containing Hazardous Materials)
into the environment.
"Response Action" means all actions taken to (i) clean up,
remove, remediate, contain, treat, monitor, assess, evaluate or in any other way
address Hazardous Materials in the environment as required by Environmental
Laws; (ii) prevent or minimize a Release or threatened Release of Hazardous
Materials so they do not migrate or endanger or threaten to endanger to cause
substantial danger to public health or welfare or the environment as required by
42 U.S.C. 9601; (iii) perform pre-remedial studies and investigations and
post-remedial operation and maintenance activities as required by 42 U.S.C.
9601; or (iv) any other actions authorized by 42 U.S.C. 9601.
"Reportable Event" means any of the events described in
Section 4043(b) of ERISA (other than events for which the notice requirements
have been waived).
"Representatives" means, with respect to any Person, the
directors, officers, employees, Affiliates, representatives (including, but not
limited to, financial advisors, attorneys and accountants), agents or potential
sources of financing of such person.
"Rothschild" means Rothschild Realty Inc.
"SDAT" means the State Department of Assessment and Taxation
of Maryland.
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"SEC" means the Securities and Exchange Commission or any
successor regulatory authority.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" of any Person or Entity means an Entity in which
such Person or Entity has the ability, whether by the direct or indirect
ownership of shares or other equity interests, by contract or otherwise, to
elect a majority of the directors of a corporation or the trustees of a real
estate investment trust, to select the managing partner of a partnership, or
otherwise to select, or have the power to remove and then select, a majority of
those persons exercising governing authority over such Entity. A limited
partnership shall be deemed to be a Subsidiary of a Person or Entity if such
Person or Entity or a Subsidiary of such Person or Entity serves as a general
partner thereof. A trust shall be deemed to be a Subsidiary of a Person or
Entity if such Person or Entity or a Subsidiary of such Person or Entity serves
as any trustee thereof or any Person having the right to select any such
trustee.
"Termination Event" means (i) a Reportable Event with respect
to any Benefit Plan (with respect to which the 30 day notice requirement has not
been waived); (ii) the withdrawal of the Company or any ERISA Affiliate from a
Benefit Plan during a plan year in which the Company or any ERISA Affiliate was
a "substantial employer" as defined in Section 4001(a)(2) of ERISA; (iii)
providing a written notice of intent to terminate a Benefit Plan to affected
parties of a distress termination described in Section 4041(c) of ERISA; or (iv)
the institution by the PBGC of proceedings to terminate a Benefit Plan.
Section 1.2 TERMS DEFINED HEREIN. In addition to the terms
defined in Section 1.1 above, the following terms shall, unless the context
otherwise requires, have the meanings set forth in this Agreement in the section
set forth next to such term
DEFINED TERM SECTION
- ------------ -------
Accredited Investor....................................................5.2
Breach.................................................................4.19
Closing................................................................2.1
Excess Stock...........................................................4.9
Indemnified Party......................................................10.4.3
Indemnifying Party.....................................................10.4.3
Liabilities............................................................4.17
1998 10-Qs.............................................................4.8
1997 10-K..............................................................4.2
1998 Proxy Statement...................................................4.8
Preferred Stock........................................................4.9
Purchase Price.........................................................2.1
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Third Party Claim......................................................10.4.3
ARTICLE 2 SALE AND PURCHASE OF PREFERRED SHARES.
Section 2.1 SALE OF PREFERRED SHARES. At the closings provided
for in Article 3 hereof (each a "Closing"): (i) the Company shall issue and sell
an aggregate of not less than 1,600,000 Preferred Shares and not more than
2,800,000 Preferred Shares to the Investor, and shall deliver to the Investor a
stock certificate or certificates representing all of the Preferred Shares,
registered in the Investor's or its nominee's name; and (ii) the Investor shall
purchase, acquire and accept such Preferred Shares as the Company issues and
sells to it, but not in excess of 2,800,000 Preferred Shares for $25.00 per
share, less the Discount, as defined below (the "Purchase Price"). The term
"Discount" shall mean a discount per share of 2.0% of $25.00, or a discount per
share of $.50.
Section 2.2 PAYMENT FOR THE PREFERRED SHARES.
At the Closings and in accordance with the provisions set
forth in Article 3, the Purchase Price shall be paid by the Investor to the
Company in United States dollars by wire transfer of funds immediately available
to such account(s) as the Company shall designate in a written notice delivered
to the Investor not less than five (5) Business Days prior to the applicable
Closing Date.
Section 2.3 TRANSFER TAXES. The Company shall pay all stock
transfer taxes, recording fees and other sales, transfer, use, purchase or
similar taxes resulting from the Investment.
ARTICLE 3 CLOSINGS.
Section 3.1 CLOSINGS. The Company shall be entitled to
designate up to five Closings, each of which shall provide for the issuance and
sale of at least 200,000 Preferred Shares, and in no event shall the Closings,
in the aggregate, provide for the sale and issuance of less than 1,600,000
Preferred Shares. Each Closing of the sale and purchase of the Preferred Shares
shall take place at the offices of Schulte Roth & Zabel LLP, 900 Third Avenue,
New York, New York 10022 at 10:00 a.m. New York City time.
Section 3.2 CLOSING DATES. Each Closing shall occur on such
date as the Company notifies the Investor on not less than ten (10) Business
Days notice or at such other time as the Company and the Investor mutually agree
in writing (each, a "Closing Date"); provided, however, that if the sale of all
of the Preferred Shares as provided for herein shall not
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have occurred before the one year anniversary date of this Agreement, the
Closing for such Preferred Shares as shall not have previously been so sold
shall occur on such anniversary date.
Section 3.3 CANCELLATION OF SUBSEQUENT CLOSINGS. In the event
that a Change of Control or a Put Event (each as defined in the Articles
Supplementary) occurs prior to the sale by the Company to the Investor of
1,600,000 Preferred Shares to be sold pursuant to this Agreement, and the
Investor notifies the Company that it elects to cancel the remaining Closings,
such remaining Closings shall be canceled and the Company shall immediately pay
to the Investor by wire transfer in immediately available funds an amount equal
to the product of (x) $.50 multiplied by (y) the difference between (A)
1,600,000 and (B) the number of Preferred Shares which the Company has sold to
the Investor pursuant to this Agreement.
Section 3.4 TERMINATION OF EXCESS FUNDING; ADDITIONAL
DISCOUNT. The Company may prior to March 31, 1999, in its sole discretion and
upon written notice, elect to terminate the Investor's commitment to purchase in
excess of 1,600,000 (or such other number up to 2,800,000) Preferred Shares (the
"Excess Funding Termination"). If the Investor receives written notice from the
Company of an Excess Funding Termination subsequent to December 31, 1998 and on
or prior to March 31, 1999, then the Investor shall be entitled to receive an
additional discount in the form of a refund or prepayment (the "Additional
Discount") on the purchase of the Preferred Shares that have been or are
purchased by the Investor after giving effect to such Excess Funding Termination
in an amount equal to the product of $0.625 multiplied by that number of
Preferred Shares the purchase of which has been canceled pursuant to the Excess
Funding Termination (the "Canceled Shares"). Any payment request to be made
hereunder shall be made by wire transfer in immediately available funds
simultaneously with the delivery by the Company of the foregoing notice of
Excess Funding Termination. Any notice of Excess Funding Termination shall be
effective as of the date such notice is deemed to be received under Section
10.2.
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Investor as
follows:
Section 4.1 DUE INCORPORATION AND STATUS OF THE COMPANY.
Section 4.1.1 DUE INCORPORATION. The Company and each
of its Subsidiaries has been duly organized and is validly existing and in good
standing under the laws of the state of their respective organization and are
qualified or licensed, and in good standing, as a foreign corporation authorized
to do business in each other jurisdiction in which its ownership of properties
or its conduct of business requires such qualification or licensing, except
where the failure to be so qualified or licensed, or in good standing, as a
foreign corporation would not have a Material Adverse Effect on the Company.
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Section 4.1.2 REIT STATUS. As of the date hereof, the
Company qualifies as a REIT under the Code and has taken no action or omitted to
take any action, the effect of which reasonably could be expected to disqualify
the Company as a REIT under the Code.
Section 4.2 AUTHORITY. The Company has the power and authority
to own, lease and operate its properties, directly or indirectly, and to conduct
its business as presently conducted and as contemplated by the Annual Report on
Form 10-K, as amended, as filed by the Company under the Exchange Act for the
year ended December 31, 1997(the "1997 10-K").
Section 4.3 VALID AGREEMENT OF THE COMPANY. The execution,
delivery and performance of this Agreement, the Operating Agreement and the
Agreement and Waiver have each been duly authorized by the Company. This
Agreement has been, and the Operating Agreement and Agreement and Waiver, upon
the Closing, will be executed and delivered by the Company. This Agreement
represents and the Operating Agreement and Agreement and Waiver, upon the
Closing will represent, the valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
enforcement is sought by proceedings in equity or at law).
Section 4.4 NO DEFAULT. The execution and delivery of the
Operative Instruments by the Company and the performance by the Company of its
obligations do not (or if not yet executed, upon the execution and delivery
thereof will not) (a) violate the Charter or By-Laws of the Company; (b) violate
or constitute a breach of or default under any mortgage, indenture, loan
agreement, promissory note or other agreement to which the Company or any of its
Subsidiaries is a party, or by which any of them is bound, or to which any
property of the Company or any of its Subsidiaries is subject; or (c) conflict
with or violate any law or any regulation, rule, order or decree of any
governmental body, court or administrative agency having jurisdiction over the
Company or any of its Subsidiaries or the properties of any of them; except, in
the case of clauses (b) and (c) above, for such breaches, defaults, conflicts or
violations which would not, individually or in the aggregate, have a Material
Adverse Effect on the Company or on the ability of the Company to consummate the
transactions contemplated hereby.
Section 4.5 NO REQUIRED CONSENTS. The execution and delivery
of the Operative Instruments by the Company and the performance by the Company
of its obligations to be performed at or prior to the related Closing do not
require any filing or registration with, or the receipt of any consent by, any
governmental or regulatory authority by the Company or its Subsidiaries other
than (a) any which have already been obtained or waived and (b) such consents as
may be required under the Securities Act, the regulations promulgated thereunder
or applicable state securities laws.
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Section 4.6 RESERVATION OF SHARES . The Company has duly
reserved solely for purposes of issuance upon conversion of the Preferred Shares
the shares of Common Stock into which the Preferred Shares may be converted from
time to time.
Section 4.7 VALIDITY OF PREFERRED SHARES. The Company has duly
authorized the issuance and delivery of 2,800,000 shares of Preferred Stock
pursuant to this Agreement and, upon delivery thereof and receipt by the Company
of the Purchase Price therefor, such shares of Preferred Stock will be duly
authorized, validly issued, fully paid and nonassessable. The Preferred Shares
have the dividend, conversion, voting and other terms set forth in the Articles
Supplementary and, to the extent not inconsistent therewith, as set forth in the
Charter and By-Laws of the Company and the Maryland General Corporation Law.
Section 4.8 DISCLOSURE. The Company has heretofore delivered
to the Investor the Proxy Statement relating to its 1998 Annual Meeting of
Shareholders (the "1998 Proxy Statement"), the 1997 10-K, and the Quarterly
Reports on Form 10-Q as filed by the Company under the Exchange Act for the
quarters ended March 31, 1998 and June 30, 1998 (the "1998 10-Qs").
Section 4.8.1 NO MISSTATEMENT OR OMISSION. At the
time of filing, the Registration Statement, the 1998 Proxy Statement, the 1997
10-K and the 1998 10-Qs complied in all material respects with the requirements
of the Exchange Act and the rules and regulations promulgated by the SEC
thereunder. The Registration Statement (including, without limitation, the
documents incorporated by reference therein), the 1998 Proxy Statement, the 1997
10-K and the 1998 10-Qs do not, as of their respective dates, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made not misleading,
in the case of each of the foregoing other than the Registration Statement, in
light of the circumstances under which they were made.
Section 4.8.2 FINANCIAL STATEMENTS. The financial
statements, including the notes thereto, and supporting schedules included in
the 1997 10-K and the 1998 10-Qs have been prepared in conformity with GAAP
applied on a consistent basis (except as otherwise noted therein) and present
fairly the financial position of the Company and its Subsidiaries as of the
dates indicated and the results of their operations for the periods shown.
Section 4.8.3 SUBSEQUENT EVENTS. Since the respective
dates as of which information is given in the 1997 10-K and the 1998 10-Qs,
except as otherwise stated therein, in any Current Report on Form 8-K filed by
the Company or in the press releases listed on Schedule 4.8.3 hereto and other
than changes in general economic conditions or industry conditions, there has
not been any change in the condition (financial or otherwise) or in the
earnings, business affairs or business prospects of the Company and its
Subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business which would have a Material Adverse Effect on the
Company.
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Section 4.9 CAPITALIZATION. The authorized capital stock of
the Company consists of: (i) 68,275,000 shares of Common Stock; (ii) 1,725,000
of 9% Series A Cumulative Redeemable Preferred Stock, par value $.0001 per share
(the "Preferred Stock"); and (iii) 30,000,000 shares of excess stock, par value
$.0001 per share (the "Excess Stock"). Schedule 4.9 sets forth the issued and
outstanding capital stock of the Company as of September 24, 1998. Except as set
forth on Schedule 4.9 hereto, there are no other shares of capital stock of the
Company outstanding and no other outstanding options, warrants, convertible or
exchangeable securities, subscriptions, rights (including preemptive rights),
stock appreciation rights, calls or commitments of any character whatsoever to
which the Company is a party or may be bound requiring the issuance or sale of
shares of any capital stock of the Company, and there are no contracts or other
agreements by which the Company is or may become bound to issue additional
shares of its capital stock or any options, warrants, convertible or
exchangeable securities, subscriptions, rights (including preemptive rights),
stock appreciation rights, calls or commitments of any character whatsoever
relating to such shares.
Section 4.10 LITIGATION. Except as set forth on Schedule 4.10
or in the 1997 10-K or the 1998 10-Qs, the Company has not received any notice
of any outstanding judgments, rulings, orders, writs, injunctions, awards or
decrees of any court or any foreign, federal, state, county or local government
or any other governmental, regulatory or administrative agency or authority or
arbitral tribunal against or involving the Company or any of its Subsidiaries
which is currently in effect. Neither the Company nor any of its Subsidiaries is
a party to, or to the knowledge of the Company, threatened with, any litigation
or judicial, governmental, regulatory, administrative or arbitration proceeding
which, if decided adversely to their respective interests could have an adverse
effect upon the transactions contemplated hereby or that could reasonably be
expected to have a Material Adverse Effect on the Company.
Section 4.11 ERISA. (a) Each Plan is in substantial compliance
with the applicable provisions of ERISA and the Code, (b) no Termination Event
has occurred nor is reasonably expected to occur with respect to any Benefit
Plan, (c) the most recent annual report (Form 5500 Series) with respect to each
Plan, including Schedule B (Actuarial Information) thereto, copies of which have
been filed with the Internal Revenue Service, is complete and correct in all
material respects and fairly presents the funding status of such Benefit Plan,
and since the date of such report there has been no material adverse change in
such funding status, (d) no Benefit Plan had an accumulated (whether or not
waived) funding deficiency or permitted decreases which would create a
deficiency in its funding standard account within the meaning of Section 412 of
the Code at any time during the previous 60 months, and (e) no Lien imposed
under the Code or ERISA exists or is likely to arise on account of any Benefit
Plan within the meaning of Section 412 of the Code. Neither the Company nor any
of its ERISA Affiliates has incurred any withdrawal liability under ERISA with
respect to any Multiemployer Plan, and the Company is not aware of any facts
indicating that the Company or any of its ERISA Affiliates may in the future
incur any such withdrawal liability. Except as required by Section 4980B of the
Code, the Company does not maintain a welfare plan (as defined in Section 3(1)
of ERISA) which provides benefits or coverage
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after a participant's termination of employment. Neither the Company nor any of
its ERISA Affiliates have incurred any liability under the Worker Adjustment and
Retraining Notification Act. All Plans in existence on the Closing Date are set
forth on Schedule 4.11 hereto.
Section 4.12 ENVIRONMENTAL MATTERS. Except as set forth in
Schedule 4.12 hereto, to the best knowledge of the Company and its Subsidiaries:
(a) The operations and properties of the Company and its
Subsidiaries are in full compliance with Environmental Laws except to the extent
that any failure to comply is not reasonably expected to have a material adverse
effect on the condition or operation of the individual property subject to the
Environmental Laws;
(b) There has been no Release (i) at any assets, properties or
businesses currently owned or operated by the Company, any of its Subsidiaries
or any predecessor in interest; (ii) from adjoining properties or businesses; or
(iii) from or onto any facilities which received Hazardous Materials generated
by the Company, any of its Subsidiaries or any predecessor in interest that
would result in any Environmental Liabilities except to the extent that any such
Release is not reasonably expected to have a material adverse effect on the
individual property subject to the Environmental Liabilities;
(c) No Environmental Claims have been asserted against the
Company, any of its Subsidiaries or any predecessor in interest nor does the
Company or any of its Subsidiaries have knowledge or notice of any threatened or
pending Environmental Claims;
(d) No Environmental Claims have been asserted against any
facilities that may have received Hazardous Materials generated by the Company,
any of its Subsidiaries or any predecessor in interest;
(e) The Company has conducted Phase I Environmental Site
Assessments on all of the material assets, properties and businesses owned or
operated by the Company and its Subsidiaries and has delivered to the Investor
true and complete copies of all material environmental reports, studies,
investigations or material correspondence with any governmental agency in their
possession regarding any Environmental Liabilities at the assets, properties or
businesses of the Company or any of its Subsidiaries; and
(f) To the extent that any of the assets, properties or
businesses owned or operated by the Company or any of its Subsidiaries are
located in "wetlands" regulated under Environmental Laws, the Company and its
Subsidiaries are in material compliance with Environmental Laws regulating those
"wetlands."
Section 4.13 INVESTMENT COMPANY. The Company is not, and upon
the issuance and sale of the Preferred Shares as herein contemplated will not
be, an "investment company" or
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an Entity "controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended.
Section 4.14 TAXES. The Company has filed all federal, state,
local or foreign tax returns that are required to be filed or has duly requested
extensions thereof and has paid all taxes required to be paid by it and any
related assessments, fines or penalties, except for any such tax, assessment,
fine or penalty that is being contested in good faith and by appropriate
proceedings or where the failure to make any such filing or payment would not be
reasonably expected to have a Material Adverse Effect on the Company; and
adequate charges, accruals and reserves have been provided for in the financial
statements of the Company in respect of all material federal, state, local and
foreign taxes for all periods as to which the tax liability of the Company has
not been finally determined or remains open to examination by applicable taxing
authorities. The Company is not currently under review by any federal or state
taxing authority.
Section 4.15 INSURANCE. The Company carries or is entitled to
the benefits of insurance in such amounts and covering such risks as is
reasonably sufficient under the circumstances and is consistent with comparable
businesses and all such insurance is in full force and effect.
Section 4.16 AFFILIATED TRANSACTIONS. Except as set forth on
Schedule 4.16 or as disclosed in the 1997 10-K, the 1998 10-Qs or the 1998 Proxy
Statement describe all transactions with, or payments to, any Affiliate in
excess of $60,000 in the aggregate (other than reimbursement of expenses and
compensation payable to employees or officers or directors' fees payable to the
Company's directors). Except as set forth on Schedule 4.16, neither the Company,
nor any officer or director of the Company, nor any of its Subsidiaries, or any
Affiliate of any of the foregoing, or any member of the Immediate Family of any
of the foregoing: (i) owns, directly or indirectly, any interest in (excepting
not more than five (5) percent stock holdings held solely for investment
purposes in securities of any Person which are listed on any national securities
exchange or regularly traded in the over-the-counter market) or is an owner,
sole proprietor, shareholder, partner, director, officer, employee, consultant
or agent of any person which is a competitor, lessor, lessee, customer or
supplier of the Company or any of its Subsidiaries; (ii) owns, directly or
indirectly, in whole or in part, any property, patent, trademark, service mark,
trade name, copyright, franchise, invention, permit, license or secret or
confidential information which the Company or any of its Subsidiaries is using
or the use of which is necessary for the business of the Company or any of its
Subsidiaries; or (iii) has any cause of action or other suit, action or claim
whatsoever against, or owes any amount to, the Company or any of its
Subsidiaries, in each case (i) through (iii) except for those in the ordinary
course of business.
Section 4.17 LIABILITIES. Except as set forth on Schedule 4.17
or as reflected in the consolidated balance sheet of the Company at June 30,
1998 as included in the 1998 10-Qs, the Company and its Subsidiaries do not have
any material direct or indirect indebtedness, liability, claim, loss, damage,
deficiency, obligation or responsibility, fixed or unfixed, choate or
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inchoate, liquidated or unliquidated, secured or unsecured, subordinated or
unsubordinated, matured or unmatured, accrued, absolute, contingent or
otherwise, including, without limitation, liabilities on account of taxes, other
governmental, regulatory or administrative charges or lawsuits brought, whether
or not of a kind required by GAAP to be set forth on a financial statement
(collectively, "Liabilities"), that were not fully and adequately reflected or
reserved against on the Balance Sheet of the Company or incurred in the ordinary
course of business since June 30, 1998 (less Liabilities that have been
discharged in the ordinary course of business since the date of the Balance
Sheet of the Company).
Section 4.18 AGREEMENT AND WAIVER. The Board of Directors of
the Company has approved the provisions of the Agreement and Waiver.
Section 4.19 NO EVENT OF DEFAULT. No event has occurred and is
continuing and no condition exists which constitutes a breach, an event of
default, or otherwise gives any other party the rights to accelerate or require
payment of any obligation, or with the passage of time would constitute such an
event (a "Breach"), under any agreement or instrument to which the Company or
any of its Subsidiaries is a party that could reasonably be expected to have a
Material Adverse Effect on the Company. Neither the Company nor any of its
Subsidiaries has received any notice that an event has occurred and is
continuing or that a condition exists which constitutes a Breach under any
agreement or instrument to which the Company or any of its Subsidiaries is a
party that could reasonably be expected to have a Material Adverse Effect on the
Company.
Section 4.20 NO BROKERS. In connection with the Investment,
the Company has not retained or become obligated to any broker or finder other
than Rothschild and PaineWebber Incorporated.
Section 4.21 FULL DISCLOSURE. All documents and other papers
delivered to the Investor by or on behalf of the Company in connection with this
Agreement and the transactions contemplated hereby are true, complete, accurate
and authentic and, when taken together with the Company's representations and
warranties set forth in this Agreement, do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading.
Section 4.22 REGISTRATION STATEMENT. The Preferred Shares and
the Common Stock issuable upon conversion of the Preferred Shares will be issued
and sold to the Investor pursuant to the Registration Statement. The
Registration Statement is currently effective and the Company will use its best
efforts to maintain such effectiveness as long as any Preferred Shares are
outstanding and, if necessary, to have declared effective one or more
registration statements under the Securities Act so as to give effect to the
Company's obligations hereunder. The Registration Statement has not been the
subject of an issued stop order or other
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proceeding relating to the effectiveness of the Registration Statement and, to
the Company's best knowledge, the Commission has given no notice that it is
contemplating such action. No registration, filing or qualification is required
under any state "blue sky" or other securities laws to sell the Preferred Shares
hereunder or to issue shares of Common Stock upon conversion of the Preferred
Shares.
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
In order to induce the Company to enter into this Agreement
and to consummate the transactions contemplated hereby, the Investor hereby
represents and warrants to, and covenants with, the Company as follows:
Section 5.1 ORGANIZATION. The Investor has been duly organized
and is validly existing and in good standing under the laws of the State of
Delaware, and has all requisite power and authority under such laws to carry on
its business as now conducted.
Section 5.2 ACCREDITED INVESTOR. The Investor is an
"Accredited Investor," as such term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act.
Section 5.3 VALID AGREEMENTS OF THE INVESTOR. The Investor has
all right, power and authority to enter into this Agreement and the Operating
Agreement and to consummate the transactions contemplated hereby and thereby.
All action on the part of the Investor, its officers, managers and members
necessary for the authorization, execution and delivery of the Operative
Agreements and the performance of all obligations of the Investor hereunder have
been taken or will be taken prior to the Closing. Each of the Operative
Instruments to which the Investor is a party has each been duly authorized,
executed and delivered by the Investor, and constitutes a legal, valid and
binding obligation of the Investor, enforceable against the Investor in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
(whether enforcement is sought by proceedings in equity or at law).
Section 5.4 NO DEFAULT. The execution and delivery of this
Agreement and the Operating Agreement by the Investor and the performance by the
Investor of its obligations thereunder do not (or if not yet executed, upon the
execution and delivery thereof will not) (a) violate the organizational
documents of the Investor; (b) violate or constitute a breach of or default
under any mortgage, indenture, loan agreement, promissory note or other
agreement to which the Investor is a party, or by which the Investor is bound,
or to which any property of the Investor is subject; or (c) conflict with or
violate any law or any regulation, rule, order or decree of any governmental
body, court or administrative agency having jurisdiction over the Investor or
its properties except with respect to clauses (b) and (c) where such conflict,
breach, default or violation would not reasonably be expected to have a Material
Adverse Effect on the Investor.
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Section 5.5 NO BROKERS. In connection with the Investment, the
Investor has not retained or become obligated to any broker or finder.
Section 5.6 INVESTMENT COMPANY. The Investor is not, and upon
the purchase of the Preferred Shares as herein contemplated, will not be, an
"investment company" or an Entity "controlled" by and "investment company" as
such terms are defined in the Investment Company Act of 1940, as amended.
Section 5.7 POSITION IN COMPANY SECURITIES. None of the
Investor or Rothschild or any of their respective officers, partners,
stockholders, members or subsidiaries has a long position or any short position
in any securities of the Company, in each case having a current market value
exceeding $10,000.
ARTICLE 6 COVENANTS AND UNDERTAKINGS.
Section 6.1 CLOSINGS. The Company shall use its best efforts
to comply with all conditions precedent to the Closings, including, without
limiting the foregoing, the Company shall cause the Articles Supplementary to
have been adopted, filed with the SDAT and become effective.
Section 6.2 EXPENSES OF ROTHSCHILD REALTY, INC. Except as set
forth in Section 6.3, the Company agrees to reimburse Rothschild at each Closing
for its reasonable out-of-pocket expenses documented to the reasonable
satisfaction of the Company. All such amounts paid pursuant to this Section 6.2
shall be paid by wire transfer of funds immediately available in New York City
to such account(s) as Rothschild shall designate in a written notice delivered
to the Company not less than two Business Days prior to the initial Closing
Date; PROVIDED, HOWEVER, that the Investor, on behalf of the Company, may
directly pay out of the Purchase Price payable hereunder such fees and expenses
to Rothschild; PROVIDED, FURTHER, that the aggregate of all such out-of-pocket
expenses including, without limitation, the fees and expenses of counsel to the
Investor provided for in Section 6.3 hereof, shall not exceed $100,000. In the
event that no Closing occurs, the Company agrees to pay Rothschild a fee of
$50,000.
Section 6.3 FEES AND EXPENSES OF COUNSEL TO THE INVESTOR.
Subject to the limitation set forth in Section 6.2, the Company agrees to pay to
counsel to the Investor, at each Closing reasonable fees and expenses in
connection with services rendered and expenses incurred in connection with the
issuance and sale of Preferred Shares to the Investor. All such amounts paid
pursuant to this Section 6.3 shall be paid by wire transfer of funds immediately
available in New York City to such account(s) as counsel to the Investor shall
designate in a written notice delivered to the Company not less than two
Business Days prior to each Closing Date; PROVIDED, HOWEVER, that the Investor,
on behalf of the Company, may directly pay out of the Purchase Price hereunder
such fees and expenses to counsel to the Investor.
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ARTICLE 7 CONDITIONS PRECEDENT TO THE OBLIGATION
OF THE INVESTOR TO CLOSE
The obligation of the Investor to complete each Closing is subject, at
its option, to the fulfillment on or prior to the related Closing Date (unless
otherwise provided) the following conditions, any one (1) or more of which may
be waived by it in its sole discretion:
Section 7.1 REPRESENTATIONS AND COVENANTS. The representations
and warranties of the Company contained in this Agreement shall be true,
complete and accurate in all material respects on and as of the related Closing
Date with the same force and effect as though made on and as of the related
Closing Date, except for changes contemplated or permitted by this Agreement and
except to the extent that any representation or warranty is made as of a
specified date, in which case, such representation and warranty shall be true
and correct in all material respects as of such date. The Company shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by the
Company on or prior to the related Closing Date. The Company shall have
delivered to the Investor a certificate, dated the related Closing Date and
signed by the President and Chief Financial Officer of the Company, to the
foregoing effect and stating that all conditions to the Investor's obligations
hereunder have been satisfied.
Section 7.2 GOOD STANDING CERTIFICATES. The Company shall have
delivered to the Investor: (i) copies of its Charter, including all amendments
thereto, certified by the SDAT; (ii) a certificate from the SDAT to the effect
that the Company is in good standing and subsisting in such jurisdiction and
listing all charter documents of the Company on file in such state; (iii) a
certificate from the Secretary of State or other appropriate official in each
State in which the Company is qualified to do business to the effect that the
Company is in good standing in such State; and (iv) a certificate as to the Tax
status of the Company from the appropriate official in its Maryland and each
State in which the Company is qualified to do business, in each case, dated as
of a date within reasonable proximity to the related Closing Date.
Section 7.3 GOVERNMENTAL PERMITS AND APPROVALS. Any and all
Permits necessary for the consummation of the transactions contemplated hereby
shall have been obtained and a copy thereof shall have been delivered to the
Investor; except for (a) notice requirements which may be fulfilled subsequent
to the Closing Date and (b) consents, permits, approvals, authorizations,
filings and declarations the failure to obtain or to undertake which will not
adversely affect the ability of the Company to perform its obligations under the
Operative Agreements or any agreement executed in accordance therewith or would
not have a Material Adverse Effect on the Company or its Subsidiaries.
Section 7.4 LEGISLATION. No legislation shall have been
proposed, and approved by a legislative committee, or enacted, and no statute,
law, ordinance, code, rule or regulation shall have been adopted, revised or
interpreted, by any foreign, federal, state, county
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or local government or any other governmental, regulatory or administrative
agency or authority, which would require, upon or as a condition to the
acquisition of the Preferred Shares by the Investor, the divestiture or
cessation of the conduct of any business presently conducted by the Company, on
the one hand, or by the Investor, on the other hand, or which, in the good faith
judgment of the Investor, may, individually or in the aggregate, have a Material
Adverse Effect on it or on the Company in the event that the transactions
contemplated hereby are consummated.
Section 7.5 LEGAL PROCEEDINGS. No suit, action, claim,
proceeding or investigation shall have been instituted or threatened by or
before any court or any foreign, federal, state, county or local government or
any other governmental, regulatory or administrative agency or authority seeking
to restrain, prohibit or invalidate the issuance or sale of the Preferred Shares
to the Investor hereunder or the consummation of the transactions contemplated
hereby or to seek damages in connection with such transactions.
Section 7.6 THIRD PARTY CONSENTS. All consents, waivers,
licenses, variances, exemptions, franchises, permits, approvals and
authorizations from parties to any contracts and other agreements (including any
amendments and modifications thereto) with the Company which may be required in
connection with the performance by the Company of its obligations under this
Agreement or to assure such contracts and other agreements continue in full
force and effect after the consummation of the transactions contemplated hereby
(without any Breach by the Company or any of its Subsidiaries) shall have been
obtained.
Section 7.7 STOCK CERTIFICATES. The Company shall have
tendered to the Investor the stock certificate or certificates representing the
Preferred Shares to be purchased on such Closing Date in accordance with Section
3.1 hereof, registered in the Investor's name.
Section 7.8 APPROVAL OF COUNSEL TO THE INVESTOR. The Company
shall furnish to counsel for the Investor such certificates and documents as may
reasonably be requested by counsel to the Investor to enable such counsel to
pass on or evaluate the satisfaction of the conditions set forth in this Article
7. All actions and proceedings hereunder and all documents and other papers
required to be delivered by the Company hereunder or in connection with the
consummation of the transactions contemplated hereby, and all other related
matters, shall have been reasonably approved by counsel to the Investor, as to
their form and substance.
Section 7.9 ARTICLES SUPPLEMENTARY. The Articles Supplementary
shall be effective.
Section 7.10 OPERATING AGREEMENT. The Company shall have
executed and delivered to the Investor the Operating Agreement.
Section 7.11 OPINIONS OF COUNSEL. The Investor shall have
received favorable opinion letters, dated as of the related Closing Date, from
Jaeckle Fleischmann & Mugel, LLP and Piper & Marbury L.L.P. to the effect of the
matters as the Investor may reasonably request.
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Section 7.12 NO STOP ORDER. On the related Closing Date, no
stop order suspending the effectiveness of the Company's Registration Statement
shall have been issued under the Securities Act or proceedings therefor
initiated or threatened by the SEC.
Section 7.13 LISTING OF COMMON STOCK. The Common Stock
issuable upon conversion of the Preferred Shares shall have been approved for
listing on the New York Stock Exchange.
Section 7.14 EXPENSES OF ROTHSCHILD REALTY, INC. Rothschild
shall have been reimbursed for the expenses to be paid by the Company as
described under Section 6.2.
Section 7.15 FEES AND EXPENSES OF COUNSEL TO THE INVESTOR.
Provided that counsel to the Investor shall have provided to the Company a copy
of their invoice and at least three (3) days prior to the related Closing,
Counsel to the Investor shall have received the fees and disbursements to be
paid by the Company as described under Section 6.3.
Section 7.16 AGREEMENT AND WAIVER. The Company shall have
executed and delivered to the Investor the Agreement and Waiver.
Section 7.17 DIVIDENDS ON PREFERRED SHARES. All accrued and
unpaid dividends on any outstanding Preferred Shares, whether or not declared
with respect to any dividend payment date as provided in the Articles
Supplementary, have been paid to, or made available for payment to, the holders
of such outstanding Preferred Shares.
Section 7.18 DIRECTOR AND OFFICER INSURANCE. The Company shall
have in place director and officer insurance as provided under Section 2.5 of
the Operating Agreement.
ARTICLE 8 CONDITIONS PRECEDENT TO THE OBLIGATION OF
THE COMPANY TO CLOSE
The obligation of the Company to complete each Closing is subject, at
its option, to the fulfillment on or prior to the related Closing Date of the
following conditions, any one (1) or more of which may be waived it in its sole
discretion:
Section 8.1 REPRESENTATIONS AND COVENANTS. The representations
and warranties of the Investor contained in this Agreement shall be true,
complete and accurate in all material respects on and as of the related Closing
Date with the same force and effect as though made on and as of the related
Closing Date, except for changes contemplated or permitted by this Agreement and
except to the extent that any representation or warranty is made as of a
specified date, in which case, such representation and warranty shall be true,
complete and accurate in all material respects as of such date. The Investor
shall have performed and complied in all material respects with all covenants
and agreements required by this Agreement to be performed or
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complied with by it on or prior to the related Closing Date. The Investor shall
have delivered to the Company a certificate, dated the related Closing Date and
signed by an officer of the Investor to the foregoing effect and stating that
all conditions to the Company's obligations hereunder have been satisfied.
Section 8.2 GOVERNMENTAL PERMITS AND APPROVALS. Any and all
Permits necessary for the consummation of the transactions contemplated hereby
shall have been obtained.
Section 8.3 LEGAL PROCEEDINGS. No suit, action, claim,
proceeding or investigation shall have been instituted or threatened before any
court or any foreign, federal, state, county or local government or any other
governmental, regulatory or administrative agency or authority seeking to
restrain, prohibit or invalidate the sale of the Preferred Shares to the
Investor hereunder or the consummation of the transactions contemplated hereby
or to seek damages in connection with such transactions.
Section 8.4 THIRD PARTY CONSENTS. All consents, waivers,
licenses, variances, exemptions, franchises, permits, approvals and
authorizations from parties to any contracts and other agreements (including any
amendments and modifications thereto) with the Investor which may be required in
connection with the performance by the Investor of its obligations under this
Agreement shall have been obtained.
Section 8.5 PURCHASE PRICE. The Investor shall have tendered
payment for the Preferred Shares in the amount and in the manner specified in
Section 3.1 hereof.
Section 8.6 APPROVAL OF COUNSEL TO THE COMPANY. The Investor
shall furnish to counsel for the Company such certificates and documents as may
reasonably be requested by counsel to the Company to enable such counsel to pass
on or evaluate the satisfaction of the conditions set forth in this Article 8.
All actions and proceedings hereunder and all documents or other papers required
to be delivered by the Investor hereunder or in connection with the consummation
of the transactions contemplated hereby, and all other related matters, shall be
subject to the reasonable approval of Jaeckle Fleischmann & Mugel, LLP, counsel
to the Company, as to their form and substance.
Section 8.7 NO STOP ORDER. On the Closing Date, no stop order
suspending the effectiveness of the Company's Registration Statement shall have
been issued under the Securities Act or proceedings therefor initiated or
threatened by the SEC.
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ARTICLE 9 ASSIGNMENT.
Section 9.1 ASSIGNABILITY BY INVESTOR. Subject to the terms of
the Agreement and Waiver, the Investor may, without the consent or approval of
the Company, assign its rights and obligations under this Agreement to a Person
to whom the Investor assigns its interest in the Preferred Shares, pro rata
based upon the percentage of Preferred Shares transferred, provided that such
assignee agrees in writing to be bound by the terms of this Agreement.
Section 9.2 ASSIGNABILITY BY THE COMPANY. Without the prior
written consent of the Investor, in the sole and absolute discretion of the
Investor, the Company may not assign or delegate its rights or obligations
hereunder.
Section 9.3 BINDING AGREEMENT. Subject to the provisions of
Sections 9.1 and 9.2, this Agreement shall be binding upon the heirs, successors
and assigns of the parties.
ARTICLE 10 MISCELLANEOUS.
Section 10.1 APPLICABLE LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York as applied
to be performed wholly within such State.
Section 10.2 NOTICES. All notices hereunder shall be in
writing and shall be given: (a) if to the Company, at 300 One Jackson Place, 188
East Capitol Street, Jackson, Mississippi 39201, Attention: President, or such
other address or addresses of which the Investor shall have been given notice,
with copies to Jaeckle Fleischmann & Mugel, LLP, Twelve Fountain Plaza, Buffalo,
New York 14202, Attention: Joseph P. Kubarek, Esq., or such other address of
which the Investor shall have been given notice; and (b) if to the Investor, at
Rothschild Realty, Inc., 1251 Avenue of the Americas, New York, New York 10020,
Attn: Matthew Kaplan, or such other address of which the Company shall have been
given notice, with copies to Schulte Roth & Zabel LLP, 900 Third Avenue, New
York, New York 10022, Attention: Andre Weiss, Esq., or such other address of
which the Company shall have been given notice. Any notice shall be deemed to
have been given if personally delivered or sent by United States mail or by
commercial courier or delivery service or by telegram or telex and shall be
deemed received, unless earlier received, (i) if sent by certified or registered
mail, return receipt requested, three business days after deposit in the mail,
postage prepaid, (ii) if sent by United States Express Mail or by commercial
courier or delivery service, one Business Day after delivery to a United States
Post Office or delivery service, postage prepaid, (iii) if sent by telegram,
telex or facsimile transmission, when receipt is acknowledged by answerback, and
(iv) if delivered by hand, on the date of receipt.
Section 10.3 ENTIRE AGREEMENT; AMENDMENTS. This Agreement and
other agreements referred to herein set forth the entire understanding of the
parties hereto, and this
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Agreement shall not be amended except by an instrument in writing executed by
the Company and the Investor.
Section 10.4 REMEDIES FOR BREACHES OF THIS AGREEMENT.
Section 10.4.1 SURVIVAL OF CERTAIN PROVISIONS. All of
the representations and warranties of the Company contained in Article 4 above
and all of the covenants and undertakings of the Company contained in Article 6
above, shall survive the Closings hereunder and continue in full force and
effect provided that such representations and warranties shall survive only
until the first anniversary of the last Closing (subject to any applicable
statutes of limitations), and that the representations and warranties contained
in Section 4.14 shall survive the Closings hereunder and continue in full force
and effect until the expiration of the applicable statutes of limitation (giving
effect to any extensions thereof), and provided, further, the representations
and warranties contained in Section 4.12 shall survive the Closings hereunder
and continue in full force and effect until the sixth anniversary of the last
Closing (subject to any applicable statutes of limitation).
Section 10.4.2 INDEMNIFICATION PROVISIONS. In the
event that either the Company or the Investor breaches any of its
representations, warranties, and covenants contained herein, provided that the
non-breaching party makes a written claim for indemnification against the
breaching party pursuant to Section 10.2, then the breaching party agrees to
indemnify the non-breaching party from and against the entirety of any Adverse
Consequences the non-breaching party may suffer through and after the date of
the claim for indemnification (including any Adverse Consequences the
non-breaching party, its members or shareholders may suffer after the end of any
applicable survival period) resulting from, arising out of, relating to, in the
nature of, or caused by such breach. In addition to the indemnification rights
provided for herein, the non-breaching party shall also have the right to all
such remedies to which it is entitled as a matter of law or equity. No failure
or delay by the non-breaching party in exercising any right, power or privilege
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise of any right, power or privilege.
22
<PAGE> 24
Section 10.4.3 MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any party
entitled to be indemnified hereunder (the "INDEMNIFIED PARTY") with
respect to any matter (a "THIRD PARTY CLAIM") which may give rise to a
claim for indemnification against the Company or the Investor (the
"INDEMNIFYING PARTY") under this Section 10.4, then the Indemnified
Party shall promptly notify each Indemnifying Party thereof in writing;
PROVIDED, HOWEVER, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying
Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to
assume the defense of the Third Party Claim with counsel of his or its
choice reasonably satisfactory to the Indemnified Party at any time
within 15 days after the Indemnified Party has given notice of the
Third Party Claim; PROVIDED, HOWEVER, that the Indemnifying Party must
conduct the defense of the Third Party Claim actively and diligently
thereafter in order to preserve its rights in this regard; and PROVIDED
FURTHER that the Indemnified Party may retain separate co-counsel at
its sole cost and expense and participate in the defense of the Third
Party Claim.
(iii) So long as the Indemnifying Party has assumed
and is conducting the defense of the Third Party Claim in accordance
with Section 10.4.3(ii) above, the Indemnifying Party will not consent
to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably) unless the judgment
or proposed settlement involves only the payment of money damages by
one or more of the Indemnifying Parties and does not impose an
injunction or other equitable relief upon the Indemnified Party.
(iv) So long as the Indemnifying Party has assumed
and is conducting the defense of the Third Party Claim in accordance
with Section 10.4.3(ii) above, the Indemnified Party will not consent
to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably).
(v) In the event none of the Indemnifying Parties
assumes and conducts the defense of the Third Party Claim in accordance
with Section 10.4.3(ii) above, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner he or
it reasonably may deem appropriate (and the Indemnified Party need not
consult with, or obtain any consent from, any Indemnifying Party in
connection therewith) and (B) the Indemnifying Parties will remain
responsible for any Adverse
23
<PAGE> 25
Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party
Claim to the fullest extent provided in this Section 10.4.
Section 10.5 CONFIDENTIALITY. The Investor agrees not to use
any Confidential Information for any purpose other than evaluating the
Investment and the Investor will not divulge, furnish or make available to any
other person or entity other than the Investor's legal counsel, accountants and
designated advisors, and a limited number of the Investor's officers and
employees and the officers and employees of any member of the Investor, solely
to the extent necessary in connection with the evaluation and consummation of
the Investment; such persons and entities shall be informed by the Investor of
the confidential nature of the Confidential Information and shall be directed to
treat such Confidential Information confidentially. Except as required by law,
without the prior written consent of the other party or until such time as a
mutually agreeable public announcement is made, no party hereto will disclose to
any Person other than its Affiliates, attorneys, accountants and other advisors
either the fact that discussion or negotiations are taking place concerning the
Investment or any of the terms, conditions or other facts with respect to the
Investment, including status or that the Confidential Information has been made
available to the Investor and its Representatives.
In the event that the Investor is requested or required (by
oral questions, interrogatories, requests for information or documents,
subpoena, civil investigative demand or similar process) to disclose any of the
Confidential Information, the Investor will provide the Company with prompt
notice of such request or requirements, and the Investor shall cooperate with
the Company in seeking to legally avoid such disclosure. If, in the absence of a
protective order, the Investor is legally compelled, in the opinion of its
counsel, to disclose any of the information, the Company shall either seek and
obtain appropriate protective orders against such disclosure or shall hereby be
deemed to waive the Investor's compliance with the provisions of this Agreement
to the extent necessary to satisfy such request or requirement.
Section 10.6 STANDSTILL. Subject to the provisions of the
sentence next following, the Investor agrees that for such period of time it and
its Affiliates holds Preferred Shares or shares of Common Stock into which the
Preferred Shares have been converted, none of the Investor, Rothschild, any of
their officers, members, partners, stockholders or subsidiaries and its
Affiliates shall (a) acquire, offer to acquire, or agree to acquire, directly or
indirectly, by purchase or otherwise, or sell short, any securities, direct or
indirect rights or options to acquire any securities, direct or indirect rights
or options to acquire any securities, or securities or instruments convertible
into voting securities, of the Company; PROVIDED, HOWEVER, that the foregoing
shall not prohibit the acquisition of securities of the Company in an amount
that does not exceed the Ownership Limit, as defined in the Charter, (b) make,
or in any way participate, directly or indirectly, in any "solicitation" of
"proxies" to vote (as such terms are used in the proxy rules of the SEC)
securities of the Company, or seek to advise or influence any person or entity
with respect to any voting of any securities of the Company, (c) form, join or
in any way
24
<PAGE> 26
participate in a "group" within the meaning of Section 13(d)(3) of the Exchange
Act, with respect to any voting securities of the Company, (d) make any public
announcement with respect to or make or submit a proposal or offer (with or
without conditions) for the securities or assets of the Company or any
extraordinary transaction involving the Company or any of its Subsidiaries, (e)
submit or effect any filing or application, or seek to obtain any permit,
consent or agreement, approval or other action, required by or from any
regulatory agency with respect to an acquisition of the Company or any of its
securities or assets, (f) otherwise act alone or in concert with others to seek
to control the management, board of directors or policies of the Company; or (g)
propose any of the foregoing unless and until such proposal is specifically
invited by the Company. Based on the representations of Rothschild to the
Company that Affiliates of Rothschild (which representation Rothschild hereby
reaffirms) not under control of Rothschild have no access to any of the internal
information or files of Rothschild and receive no information, recommendations
or advice from Rothschild, the Company agrees that the prohibitions of the
preceding sentence shall not apply to any Affiliates of Rothschild that are not
under the control of Rothschild and are engaged in the regular business of
trading in publicly-traded securities, so long as such affiliates have not
received, or been given access to, any of the Confidential Information and have
not received any instructions, recommendations or advice pertaining to an
investment in or control of the Company from any party having access to any of
the Confidential Information.
Section 10.7 LOCK-UP. The Investor agrees that for a period of
two years, commencing on the date of this Agreement, it shall not sell transfer,
convey, assign, pledge or hypothecate any of the Preferred Shares or any shares
of Common Stock obtained upon conversion of any Preferred Shares.
Section 10.8 TERMINATION. This Agreement may be terminated at
any time prior to the date which all of the Preferred Shares have been sold
hereunder:
(a) by the mutual written consent of the Investor and the
Company;
(b) by the Company or the Investor if the entire amount of
Preferred Shares to be sold by the Company to the Investor hereto have not been
sold on or prior to the date which is the one year anniversary of the date
hereof; providing that the party attempting to terminate this Agreement is not
in material breach of any of its representations, warranties, covenants or
agreements contained in this Agreement. In the event of termination by the
Company or the Investor pursuant to this Section 10.8, written notice thereof
shall forthwith be delivered to the other party;
(c) by the Investor, if there is a material breach of any
material representation or warranty set forth in Article 4 hereof or any
covenant or agreement to be complied with or performed by the Investor pursuant
to the terms of this Agreement, PROVIDED that the Investor
25
<PAGE> 27
may not terminate this Agreement prior to the Closing unless the Company has not
cured such failure after 10 days notice thereof; or
(d) by the Company, if there is a material breach of any
material representation or warranty set forth in Article 5 hereof or any
covenant or agreement to be complied with or performed by the Investor pursuant
to the terms of this Agreement, PROVIDED that the Company may not terminate this
Agreement prior to the Closing unless the Investor has cured such failure after
10 days notice thereof.
Section 10.9 REMEDIES FOR VIOLATION OF SECTIONS 10.5, 10.6 AND
10.7. The provisions of Sections 10.5, 10.6 and 10.7 shall survive the Closings.
The parties agree that, without limiting any other remedies available to the
Company, that the Company shall be entitled to injunctive or other equitable
relief in the event of a failure to comply with the provisions of Sections 10.5,
10.6 and 10.7, No failure or delay by the Company in exercising any right, power
or privilege shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise of any right, power or
privilege.
26
<PAGE> 28
Section 10.10 COUNTERPARTS. This Agreement may be executed in
more than one counterpart, each of which may be executed by fewer than all the
parties, with the same effect as if the parties executed one counterpart as of
the day and year first above written.
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands and seals as of the day and year first above written.
EASTGROUP PROPERTIES, INC.
By: /s/ N. Keith McKey
--------------------------------------------
Name: N. Keith McKey
Title: Chief Financial Officer and Executive Vice
President
FIVE ARROWS REALTY SECURITIES II L.L.C.
By: /s/ Matthew W. Kaplan
--------------------------------------------
Name: Matthew W. Kaplan
Title: Manager
The undersigned hereby acknowledges the terms hereof and
hereby agrees to be bound by the following sections hereof: Sections 10.5, 10.6,
10.7 and 10.9.
ROTHSCHILD REALTY INC.
By: /s/ Matthew W. Kaplan
--------------------------------------------
Name: Matthew W. Kaplan
Title: Senior Vice President
27
<PAGE> 1
Exhibit 99(b)
ARTICLES SUPPLEMENTARY
----------------------
CLASSIFYING 2,800,000 SHARES OF COMMON STOCK AS
SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
EASTGROUP PROPERTIES, INC.
Pursuant to Section 2-105 of the Maryland General Corporation Law
(the "M.G.C.L."), EastGroup Properties, Inc., a corporation organized and
existing under the M.G.C.L. (the "Corporation"), and having its principal office
in Baltimore City, Maryland located at c/o CT Corporation System, 32 South
Street, Baltimore, Maryland 21202,
DOES HEREBY CERTIFY TO THE STATE DEPARTMENT OF ASSESSMENT AND
TAXATION OF MARYLAND THAT:
FIRST: Pursuant to authority granted to and vested in the Board of
Directors of the Corporation (the "Board") by the Charter of the Corporation
(the "Charter"), and pursuant to the provisions of Section 2-105 of the
M.G.C.L., the Board, at a meeting duly convened and held on September 21, 1998,
regarding the possible sale and issuance by the Corporation of convertible
preferred stock, adopted resolutions duly classifying 2,800,000 shares of Common
Stock of the Corporation into a single series of Preferred Stock to be
designated as "Series B Cumulative Convertible Preferred Stock, par value $.0001
per share," and has provided for the issuance of such shares;
SECOND: The terms of the "Series B Cumulative Convertible Preferred
Stock," as set forth by the Board, including the preferences, conversion or
other rights, voting powers, limitations as to dividends, qualifications and
terms and conditions of redemption of each such series, are as follows
(capitalized terms not otherwise defined shall have the meanings ascribed to
them in the Charter):
Section 1. PREFERRED SHARES -- DESIGNATION AND AMOUNT. The shares
of such class of Preferred Stock shall be designated as "Series B Cumulative
Convertible Preferred Stock" and the number of shares constituting the series so
designated shall be 2,800,000 (the "Preferred Shares").
Section 2. PREFERRED SHARES -- DIVIDEND RIGHTS.
(a) GENERAL. Subject to Section 9, and in addition to any other
dividends provided for herein, the Corporation shall pay in cash, when, as and
if declared by the Board, out of funds legally available therefor as provided by
the M.G.C.L. (the "Legally Available Funds"),
<PAGE> 2
dividends at the quarterly rate equal to the Applicable Dividend Rate (as
defined below) per issued and outstanding Preferred Share, per quarter. Such
dividends shall be cumulative and payable (if declared) quarterly on each
January 15, April 15, July 15 and October 15, with respect to the prior quarter,
commencing October 15, 1998 (except that if such date is not a Business Day (as
defined below), then such dividend will be payable on the next succeeding
Business Day) to the holders of record at the close of business on the date
specified by the Board at the time such dividend is declared no more than thirty
(30) days prior to the date fixed for payment thereof; provided, however, that
the Corporation shall have the right to declare and pay dividends at any time.
Dividends shall begin to accrue and be cumulative from the date of issuance of
such Preferred Share to and including the first to occur of (i) the date on
which the Liquidation Value (as defined herein) of such Preferred Share or Put
Payment (plus all accrued and unpaid dividends thereon whether or not declared)
is paid to the holder thereof in connection with the liquidation of the
Corporation or the redemption of such Preferred Share by the Corporation, (ii)
the last day of the quarter preceding the quarter in which such Preferred Shares
are converted into shares of Common Stock hereunder if such date is after the
record date for the Regular Quarterly Dividend (as defined herein) on the Common
Stock for the quarter in which such conversion takes place, (iii) the last day
of the quarter second preceding the quarter in which such Preferred Shares are
converted into shares of Common Stock hereunder if such date is prior to the
record date for the Regular Quarterly Dividend on the Common Stock for the
quarter in which such conversion takes place, or (iv) the date on which such
share is otherwise acquired and paid for by the Corporation.
(b) CUMULATIVE DIVIDENDS. Each of such dividends shall be fully
cumulative, to the extent not previously paid. Dividends not paid in full on the
dates set forth above shall accrue dividends at the Applicable Dividend Rate
stated as a percentage equivalent to the Applicable Dividend Rate divided by
$25. Any dividend payment with respect to the Preferred Shares shall first be
credited against any prior accrued and unpaid dividend. No dividends shall be
set apart for or paid upon the Common Stock or any other shares of stock ranking
junior to the Preferred Shares unless all such cumulative dividends on the
Preferred Shares have been paid. Dividend payments with respect to the Preferred
Shares shall be made pari passu with the dividend payments on the 9% Series A
Cumulative Redeemable Preferred Stock (the "Series A Preferred Shares").
(c) APPLICABLE DIVIDEND RATE. With respect to any Preferred Share
then issued and outstanding the "Applicable Dividend Rate" per fiscal quarter
shall be the greater of (i) the quarterly dividend payable for the applicable
quarter per share of Common Stock into which the Preferred Shares are
convertible and (ii) $.547. The Applicable Dividend Rate shall be pro rated for
the actual number of days in any partial quarter.
(d) PRO RATA DISTRIBUTION. All dividends paid with respect to
Preferred Shares pursuant to this Section 2 shall be paid pro rata in respect of
each Preferred Share entitled thereto. In the event that the Legally Available
Funds available for the payment of dividends shall be insufficient for the
payment of the entire amount of dividends payable with respect to Preferred
Shares on any date on which the Board has declared the payment of a dividend or
otherwise, the amount of any available surplus shall be allocated for the
payment of dividends
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<PAGE> 3
with respect to the Preferred Shares and any other shares of capital stock that
are pari passu as to dividends pro rata based upon the amount of accrued and
unpaid dividends of such shares of capital stock.
(e) BUSINESS DAY. For purposes hereof, the term "Business Day"
shall mean any Monday, Tuesday, Wednesday, Thursday or Friday which is not a day
on which banking institutions in New York City are authorized or obligated by
law or executive order to close.
Section 3. PREFERRED SHARES -- CERTAIN RESTRICTIONS. Unless the
dividends (including accrued and unpaid dividends in arrears whether or not
declared) described above in Section 2, which pursuant to their terms should
have been paid, have been paid in full or declared and set apart for payment,
the Corporation shall be prohibited from paying dividends on, making any other
distributions on, or redeeming or purchasing or otherwise acquiring for
consideration any capital stock of the Corporation (without regard to its rank,
either as to dividends or upon liquidation, dissolution or winding up), other
than (i) the Series A Preferred Shares of the Corporation or any other preferred
stock of the Corporation which ranks pari passu with the Preferred Shares, all
of which payments shall be made pari passu with the Preferred Shares and (ii)
shares of preferred stock of the Corporation that rank senior to the Preferred
Shares if the issuance of such Preferred Shares has been approved by the holders
of a majority of the Preferred Shares. The Corporation shall not permit any
subsidiary or subpartnership of the Corporation to purchase or otherwise acquire
for consideration or make any payment with respect to any shares of capital
stock of the Corporation if the Corporation is prohibited from purchasing or
otherwise acquiring for consideration or making any payment with respect to such
shares at such time and in such manner pursuant to the prior sentence, provided,
however, that the Corporation shall not be prohibited from making a capital
contribution of capital stock of the Corporation to any of its subsidiaries or
subpartnerships.
Section 4. PREFERRED SHARES -- VOTING RIGHTS.
(a) GENERAL. Except as limited by law the holders of the Preferred
Shares shall be entitled to vote or consent on all matters submitted to the
holders of Common Stock together with the holders of the Common Stock as a
single class.
(b) CALCULATION OF VOTES. For the purposes of calculating the votes
cast for a particular matter when voting or consenting pursuant to Section 4(a),
each Preferred Share will entitle the holder thereof to one vote for each share
of Common Stock into which such Preferred Share is convertible as provided in
Section 7(c) herein as of the record date for such vote or consent or, if no
record date is specified, as of the date of such vote or consent.
(c) SECTION 4(C) DIRECTORS. In addition to the other voting rights
described herein, the number of directors constituting the Board shall be
automatically increased by one (1) member upon the first and the second of the
following to occur: (i) the Corporation's failure to pay the Regular Quarterly
Dividend on the Common Stock for any quarter in an amount of at least $.30 per
share (adjusted to reverse the effect of any event set forth in Section 7 that
would require an adjustment to the Conversion Price (the "Dividend Reduction
Default"); (ii) the Corporation's failure to pay in full the quarterly dividend
payable hereunder (whether or not
-3-
<PAGE> 4
declared) at any time in respect of the Preferred Shares (the "Dividend Payment
Default"); and (iii) the issuance by the Corporation of such number of Preferred
Shares such that the total number of outstanding Preferred Shares shall exceed
1,600,000 (the "Minimum Issuance Condition"), for an aggregate maximum increase
in any event of two directors. The position on the Board established pursuant to
clause (i) of this Section 4(c) shall remain available until the first to occur
of such time as (x) Five Arrows Realty Securities II L.L.C., Rothschild Realty
Inc. or the ninety-nine percent (99%) member of Five Arrows Realty Securities II
L.L.C., ceases to own either (A) all of the outstanding Preferred Shares or (B)
an amount of voting securities of the Corporation which, if converted into
shares of Common Stock, would exceed 10% of the outstanding Common Stock on a
fully diluted basis (determined on the basis of then convertible, exercisable or
exchangeable securities, warrants or options issued by the Corporation (such
amount as set forth in clauses (A) and (B) above, the "Minimum Threshold") and
(y) the Dividend Reduction Cure (as defined in Section 4(g)). The position on
the Board established pursuant to clause (ii) of this Section 4(c) shall remain
available until the first to occur of such time as (x) the Minimum Threshold
fails to be satisfied and (y) the Dividend Payment Cure (as defined herein). In
no event shall the positions created under this Section 4(c) be reduced below
one as long as the Minimum Issuance Condition has been satisfied. Any director
elected pursuant to this section shall be deemed to have resigned upon the
position created hereby not being available.
The term "Regular Quarterly Dividend" means any cash dividend or
dividends paid in any calendar quarter that do not in the aggregate exceed the
Corporation's reported Funds From Operations (as defined by the National
Association of Real Estate Investment Trusts prior to 1996) for the quarter
relating to such dividend.
(d) SECTION 4(d) DIRECTORS. In addition to the other voting rights
described herein, at any time after the Minimum Threshold ceases to be satisfied
and a Dividend Payment Default occurs for three consecutive fiscal quarters, the
number of directors constituting the Board shall be automatically increased by a
maximum of two (2) members. The position on the Board created pursuant to this
Section 4(d) shall continue to be available until the earlier to occur of such
time as (i) there are no Preferred Shares of the Corporation outstanding and
(ii) the Dividend Payment Cure (as defined herein). Any director elected
pursuant to this section shall be deemed to have resigned upon the position
created hereby not being available.
(e) ELECTION OF PREFERRED DIRECTORS. The holders of the Preferred
Shares shall have the special right, voting separately as a single class, to
elect as soon as practical, a director to fill each vacancy created pursuant to
Section 4(c) or 4(d) and to elect their respective successors at each succeeding
annual meeting of the Corporation thereafter at which such successor is to be
elected. The director so elected from time to time in respect of clause (i) of
Section 4(c) shall be referred to herein as the "Section 4(c)(i) Director." The
director so elected from time to time in respect of clause (ii) of Section 4(c)
shall be referred to herein as the "Section 4(c)(ii) Director." The director so
elected from time to time in respect of clause (iii) of Section 4(c) shall be
referred to herein as the "Section 4(c)(iii) Director." The directors so elected
from time to time in respect of Section 4(d) shall be referred to herein as the
"Section 4(d) Directors." As used herein, the term "Preferred Director" shall
refer to each of the Section
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<PAGE> 5
4(c)(i) Director, the Section 4(c)(ii) Director, the Section 4(c)(iii) Director
or a Section 4(d) Director, as appropriate, and the term "Preferred Directors"
shall refer to all such directors. At no time shall there be more than two
Preferred Directors on the Board.
(f) CLASSIFICATION OF BOARD. Each vacancy created upon the Board
from time to time pursuant to clause (i), (ii) or (iii) of Section 4(c) or
Section 4(d), as the case may be, shall be apportioned among the classes of
directors, if any, so that the number of directors in each of the classes of
directors is as nearly equal in number as possible. The Preferred Directors
shall be classified accordingly.
(g) CURES.
(i) Upon the occurrence of a Dividend Reduction Default, the
same shall be deemed to continue to exist until such time as (the "Dividend
Reduction Cure") (x) the Regular Quarterly Dividend paid in the immediately
preceding quarter on the Common Stock shall be greater than $.30 per share
(adjusted to reverse the effect of any event set forth in Section 7 that would
require an adjustment to the Conversion Price) and (y) all dividends, and all
other accrued and unpaid dividends whether or not declared, on the Preferred
Shares have been paid or made available for payment.
(ii) Upon the occurrence of the Dividend Payment Default, the
same shall be deemed to continue and exist until (the "Dividend Payment Cure")
such time as the earlier to occur of (x) none of the Preferred Shares shall
remain outstanding or (y) all dividends, including accrued and unpaid dividends
on the Preferred Shares whether or not declared, have been paid or made
available for payment.
(h) BOARD COMMITTEES. Such of the 4(c)(i), 4(c)(ii) or 4(c)(iii)
Director as is first elected shall be designated as a member of every committee
of the Board, other than two committees, such two committees to be specified by
such Director. The other Director elected under Section 4(c) shall be designated
as a member of each committee of the Board on which such other Director is not a
member.
(i) VOTING PROCEDURES. At each meeting of the stockholders of the
Corporation at which the holders of the Preferred Shares shall have the right to
vote as a single class, as provided in this Section 4, the presence in person or
by proxy of the holders of record of a majority of the total number of Preferred
Shares then outstanding shall be necessary and sufficient to constitute a quorum
of such class for such election by such stockholders as a class. At any such
meeting or adjournment thereof the absence of a quorum of holders of Preferred
Shares shall not prevent the election of directors other than the Preferred
Directors, and the absence of a quorum of the holders of any other class or
series of stock for the election of such other directors shall not prevent the
election of any Preferred Directors by the holders of the Preferred Shares.
(j) VACANCY. In case any vacancy shall occur among the directors
elected by the holders of the Preferred Shares such vacancy shall be filled by
the vote of holders of the
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<PAGE> 6
Preferred Shares, voting as a single class, at a special meeting of such
stockholders called for that purpose.
(k) WRITTEN CONSENT. Notwithstanding the foregoing, any action
required or permitted to be taken by holders of Preferred Shares at any meeting
of stockholders may be taken without a meeting, without prior notice and without
a vote, if a unanimous consent, in writing, setting forth the action so taken,
shall be signed by each of the holders of Preferred Shares and shall be executed
and delivered to the Secretary of the Corporation for placement among the
minutes of proceedings of the stockholders of the Corporation.
(l) APPROVAL BY THE CORPORATION. The Corporation acting through a
majority of its Directors shall have the right to approve the nomination of any
Section 4(c)(i) Director, Section 4(c)(ii) Director or Section 4(c)(iii)
Director, such approval not to be unreasonably withheld.
(m) RESTRICTIONS. So long as Preferred Shares of the Corporation
are outstanding, without the consent of the holders of at least the majority of
the Preferred Shares at the time outstanding, given in person or by proxy, at a
meeting called for that purpose at which the holders of the Preferred Shares
shall vote separately as a class, or by the unanimous consent in writing of all
of the holders of the Preferred Shares (in addition to any other vote or consent
of stockholders required by law or by the Charter), the Corporation may not (i)
effect or validate the amendment, alteration or repeal of any provision of these
Articles Supplementary, (ii) effect or validate the amendment, alteration or
repeal of any provision of the Charter of the Corporation which would adversely
effect the rights of the holders of the Preferred Shares as such, (iii) effect
or validate the amendment, alteration or repeal of any provision of the Charter
of the Corporation which would increase in any respect the restrictions or
limitations on ownership applicable to the Preferred Shares pursuant thereto,
(iv) effect or validate the amendment, alteration or repeal of any provision of
the Charter of the Corporation or By-Laws of the Corporation so as to limit the
right to indemnification provided to any present or future member or members of
the Board elected by the holders of the Preferred Shares, (v) other than the
2,800,000 Preferred Shares authorized herein, issue Preferred Shares (or a
series of preferred stock that would vote as a class with the Preferred Shares
with respect to the election of any Preferred Director) or shares of stock
ranking senior to the Preferred Shares (as to dividends or upon liquidation,
dissolution or winding up), or (vi) effect or validate the amendment, alteration
or repeal of any provision of the Charter of the Corporation or By-Laws of the
Corporation so as to increase the number of members of the Board beyond eleven
(11) members (not including any Preferred Directors). Nothing in this Section
4(m) shall prevent the Corporation from issuing any shares of stock of the
Corporation which rank junior (as to dividends and upon liquidation, dissolution
or winding up) to the Preferred Shares upon such terms as the Board shall
authorize from time to time.
(n) REPORTS. The Corporation shall mail to each holder of record of
Preferred Shares, at such holder's address in the records of the Corporation,
within 45 days after the end of the first three fiscal quarters of each fiscal
year and within 90 days after the end of each fiscal year, its financial reports
for such fiscal period in such form and containing such independent accountants
report as set forth under the rules of the Securities and Exchange Commission
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<PAGE> 7
(together with the report of the Corporation's independent accountants with
respect to such fiscal period) irrespective of whether the Corporation is then
required to file reports under such rules.
Section 5. PREFERRED SHARE --REDEMPTION RIGHTS.
(a) GENERAL. The Corporation may, at its option, to the extent it
shall have Legally Available Funds therefor, redeem all or any portion (on a pro
rata basis) of the outstanding Preferred Shares, at any time on or after the
date which is the fifth anniversary of the original date of issuance of
Preferred Shares; PROVIDED, HOWEVER, that the Corporation may redeem all of the
Preferred Shares prior to such fifth anniversary in the event of a Change of
Control, as defined below, in which case, the redemption price for the Preferred
Shares shall be equal to $25.00 per share plus accrued and unpaid dividends
(whether or not declared and accrued through the date of payment for redemption
or the date payment is made available for payment to the holder thereof) plus a
premium equal to 6.0% of $25.00; and PROVIDED, FURTHER, the initial redemption
of the Preferred Shares shall not be for less than 50% of the outstanding
Preferred Shares.
(b) NOTICE. The option of the Corporation to redeem the Preferred
Shares pursuant to this Section 5 shall be exercised by mailing of a written
notice of election (a "Redemption Notice") by the Corporation to the holders of
the Preferred Shares at such holder's address appearing on the records of the
Corporation, which notice shall be mailed at least 30 days prior to the date
specified therein for the redemption of the Preferred Shares. In the event of a
Change of Control, as defined below, the Corporation shall mail a notice to such
holders no later than 15 days after the date of occurrence of such Change of
Control as to whether or not it elects to exercise such election under Section
5(a). Any such notice under this Section 5(b) shall state, at a minimum, the
amount of Preferred Shares to be redeemed, the date on which such redemption
shall occur and the last date on which such holder can exercise the conversion
rights provided for in Section 7 herein (the "Final Conversion Date"). Any such
notice under this Section 5(b)which was mailed in the manner herein provided
shall be conclusively presumed to have been given on the date mailed whether or
not the holder receives such notice.
(c) CONVERSION. During the period beginning on the date on which
the Corporation mailed to each holder of the Preferred Shares a written notice
of election pursuant to subsection (b) above and ending on the thirtieth day
following the date of such mailing, each holder of the Preferred Shares may
exercise its rights pursuant to Section 7 herein.
(d) REDEMPTION PRICE. Upon the thirtieth day following the mailing
to the holder of the Preferred Shares of a written notice of election pursuant
to subsection (b) above, the Corporation shall be required, unless such holder
of Preferred Shares has exercised its rights pursuant to subsection (c) above,
to purchase from such holder of Preferred Shares (upon surrender by such holder
at the Corporation's principal office of the certificate representing such
Share), such Preferred Shares specified in the Redemption Notice, at a price
equal to the product of (i) $25.00 per share plus accrued and unpaid dividends
(whether or not declared and accrued through the date of payment for redemption
or the date payment is made available for payment to the holder thereof) plus a
premium equal to the following percentage of $25.00:
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<PAGE> 8
<TABLE>
<CAPTION>
Redemption Occurs
On or After But Prior to % Premium
- ----------- ------------ ---------
<S> <C> <C>
January 1, 2004 December 31, 2004 4.0
January 1, 2005 December 31, 2005 3.0
January 1, 2006 December 31, 2006 2.0
January 1, 2007 December 31, 2007 1.0
January 1, 2008 0.0
</TABLE>
and (ii) the number of Preferred Shares to be redeemed as provided in the
Redemption Notice (the "Redemption Price").
(e) DIVIDENDS. No Preferred Share is entitled to any dividends
accruing thereon after the date on which the payments provided by and in
accordance with Section 5(d) are paid or made available for payment to the
holder thereof. On such date all rights of the holder of such Preferred Share
shall cease, and such Preferred Share shall not be deemed to be outstanding.
Section 6. PREFERRED SHARES -- LIQUIDATION RIGHTS.
(a) LIQUIDATION PAYMENT. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
then out of the assets of the Corporation before any distribution or payment to
the holders of shares of capital stock of the Corporation ranking junior to the
Preferred Shares (as to dividends or upon liquidation, dissolution or winding
up), the holders of the Preferred Shares shall be entitled to be paid $25.00 per
share (the "Liquidation Value") plus accrued and unpaid dividends whether or not
declared, if any, (or a pro rata portion thereof with respect to fractional
shares), to the date of final distribution or the distribution is made
available; PROVIDED, HOWEVER, that if such liquidation, dissolution or winding
up of the Corporation occurs in connection with or subsequent to a Change of
Control (as defined in Section 8(e)), then the holders of the Preferred Shares
shall be entitled to be paid the Put Payment (as defined herein). Except as
provided in this Section 6, the holders of the Preferred Shares shall be
entitled to no other or further distribution in connection with such
liquidation, dissolution or winding up.
(b) PRO RATA DISTRIBUTION. If, upon any liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation available for
distribution to the holders of Preferred Shares and the Series A Preferred
Shares shall be insufficient to permit payment in full to such holders the sums
which such holders are entitled to receive in such case, then all of the assets
available for distribution to the holders of the Preferred Shares and the Series
A Preferred Shares shall be distributed among and paid to the holders of
Preferred Shares and the Series A Preferred Shares, ratably in proportion to the
respective amounts that would be payable to such holders if such assets were
sufficient to permit payment in full.
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<PAGE> 9
Section 7. PREFERRED SHARES--CONVERSION.
(a) CONVERSION RIGHTS. Subject to and upon compliance with the
provisions of this Section 7, a holder of Preferred Shares shall have the right,
at such holder's option, at any time to convert all or a portion of such shares
into the number of fully paid and non-assessable shares of Common Stock obtained
by multiplying the number of Preferred Shares being converted by the Conversion
Ratio (as defined below and as in effect at the time and on the date provided
for in this Section 7(b)(iv)) by surrendering such Preferred Shares to be
converted. Such surrender shall be made in the manner provided in Section 7,
paragraph (b); PROVIDED, HOWEVER, that the right to convert any Preferred Shares
called for redemption pursuant to Section 5 shall terminate at the close of
business on the Final Conversion Date, unless the Corporation shall default in
making payment of any cash payable upon such redemption under Section 5 hereof.
The "Conversion Ratio" with respect to any Preferred Shares will initially be
equal to 1.1364, subject to adjustment as described below.
(b) MANNER OF CONVERSION.
(i) In order to exercise the conversion right, the holder of
each Preferred Share to be converted shall surrender to the Corporation the
certificate representing such share, duly endorsed or assigned to the
Corporation or in blank, accompanied by written notice to the Corporation that
the holder thereof elects to convert such Preferred Shares. Unless the shares of
Common Stock issuable on conversion are to be issued in the same name as the
name in which such Preferred Shares are registered, each Preferred Share
surrendered for conversion shall be accompanied by instruments of transfer, in
form satisfactory to the Corporation, duly executed by the holder or such
holder's duly authorized attorney and an amount sufficient to pay any transfer
or similar tax (or evidence reasonably satisfactory to the Corporation
demonstrating that such taxes have been paid).
(ii) As promptly as practicable after the surrender of
certificates of Preferred Shares as aforesaid, the Corporation shall issue and
shall deliver at such office to such holder, or on such holder's written order,
a certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of such Preferred Shares in accordance with the
provisions of this Section 7, and any fractional interest in respect of a share
of Common Stock arising upon such conversion shall be settled as provided in
paragraph (c) of this Section 7.
(iii) Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which certificates for
Preferred Shares have been surrendered and such notice received by the
Corporation as aforesaid, and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become the holder or holders of record
of the shares represented thereby at such time on such date and such conversion
shall be at the Conversion Ratio in effect at such time on such date unless the
stock transfer books of the Corporation shall be closed on that date, in which
event such conversion shall have been deemed to have been effected and such
person or persons shall be deemed to have become the holder or holders of record
at the close of business on the next succeeding day on which such stock transfer
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<PAGE> 10
books are open, but such conversion shall be at the Conversion Ratio in effect
on the date on which such shares shall have been surrendered and such notice
received by the Corporation.
(c) FRACTIONAL SHARES. No fractional shares or scrip representing
fractions of shares of Common Stock shall be issued upon conversion of the
Preferred Shares. Instead of any fractional interest in a share of Common Stock
that would otherwise be deliverable upon the conversion of Preferred Shares, the
Corporation shall pay to the holder of such share an amount in cash based upon
the Current Market Price of Common Stock on the Trading Day immediately
preceding the date of conversion. If more than one Preferred Share shall be
surrendered for conversion at one time by the share holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be computed on the
basis of the aggregate number of Preferred Shares so surrendered.
(d) ADJUSTMENT OF CONVERSION RATIO. The Conversion Ratio shall be
adjusted from time to time as follows:
(i) PAYMENT OF DIVIDENDS; SUBDIVISIONS, COMBINATIONS,
RECLASSIFICATIONS. If the Corporation shall, while any Preferred Shares are
outstanding, (A) pay a dividend or make a distribution with respect to its
capital stock in shares of its Common Stock, (B) subdivide its outstanding
Common Stock into a greater number of shares, (C) combine its outstanding Common
Stock into a smaller number of shares or (D) issue any shares of capital stock
by reclassification of its Common Stock, the Conversion Ratio in effect at the
opening of business on the day next following the date fixed for the
determination of stockholders entitled to receive such dividend or distribution
or at the opening of business on the day following the day on which such
subdivision, combination or reclassification becomes effective, as the case may
be, shall be adjusted so that the holder of any Preferred Shares thereafter
surrendered for conversion shall be entitled to receive the number of shares of
Common Stock that such holder would have owned or have been entitled to receive
after the happening of any of the events described above had such Preferred
Shares been converted immediately prior to the record date in the case of a
dividend or distribution or the effective date in the case of a subdivision,
combination or reclassification. An adjustment made pursuant to this
subparagraph (i) shall become effective immediately after the opening of
business on the day next following the record date (except as provided in
paragraph (h) below) in the case of a dividend or distribution and shall become
effective immediately after the opening of business on the day next following
the effective date in the case of a subdivision, combination or
reclassification.
(ii) RIGHTS, OPTIONS AND WARRANTS. If the Corporation shall,
while any Preferred Shares are outstanding, issue rights, options or warrants to
all holders of Common Stock entitling them (for a period expiring within 45 days
after the record date mentioned below) to subscribe for or purchase Common Stock
at a price per share less than the Current Market Price per share of Common
Stock on the record date for the determination of stockholders entitled to
receive such rights or warrants, then the Conversion Ratio in effect at the
opening of business on the day next following such record date shall be adjusted
to equal the ratio determined by dividing (I) the Conversion Ratio in effect
immediately prior to the opening of business on the day next following the date
fixed for such determination by (II) a fraction, the
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<PAGE> 11
numerator of which shall be the sum of (A) the number of shares of Common Stock
outstanding on the close of business on the date fixed for such determination
and (B) the number of shares that the aggregate proceeds to the Corporation from
the exercise of such rights or warrants for Common Stock would purchase at such
Current Market Price, and the denominator of which shall be the sum of (A) the
number of Shares of Common Stock outstanding on the close of business on the
date fixed for such determination and (B) the number of additional shares of
Common Stock offered for subscription or purchase pursuant to such rights or
warrants. Such adjustment shall become effective immediately after the opening
of business on the day next following such record date (except as provided in
paragraph (h) below). In determining whether any rights or warrants entitle the
holders of Common Stock to subscribe for or purchase shares of Common Stock at
less than such Current Market Price, there shall be taken into account any
consideration received by the Corporation upon issuance and upon exercise of
such rights or warrants, the value of such consideration, if other than cash, to
be determined by the Board of Directors.
(iii) ISSUANCE OF SECURITIES. If the Corporation shall
distribute to all holders of its Common Stock any shares of capital stock of the
Corporation (other than Common Stock) or evidence of its indebtedness or assets
(excluding Regular Quarterly Dividends) or rights or warrants to subscribe for
or purchase any of its securities (excluding those rights and warrants issued to
all holders of Common Stock entitling them for a period expiring within 45 days
after the record date referred to in subparagraph (ii) above to subscribe for or
purchase Common Stock, which rights and warrants are referred to in and treated
under subparagraph (ii) above) (any of the foregoing being hereinafter in this
subparagraph (iii) called the "Securities"), then in each such case each holder
of Preferred Shares shall receive concurrently with the receipt by holders of
the Common Stock the kind and amount of such Securities that it would have owned
or been entitled to receive had such Preferred Shares been converted immediately
prior to such distribution or related record date, as the case may be.
(iv) DISTRIBUTION OF CASH. In case the Corporation shall pay or
make a dividend or other distribution on its Common Stock exclusively in cash
(excluding Regular Quarterly Dividends), each holder of Preferred Shares shall
receive concurrently with the receipt by holders of the Common Stock the kind
and amount of any such distribution that it would have owned or been entitled to
receive had such Preferred Shares been converted immediately prior to such
distribution or related record date, as the case may be.
(v) MINIMUM ADJUSTMENT. No adjustment in the Conversion Ratio
shall be required unless such adjustment would require a cumulative increase or
decrease of at least 1%; PROVIDED, HOWEVER, that any adjustments that by reason
of this subparagraph (v) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment until made. Notwithstanding
any other provisions of this Section 7, the Corporation shall not be required to
make any adjustment of the Conversion Ratio for (x) the issuance of any shares
of Common Stock pursuant to any plan providing for the reinvestment of dividends
or interest payable on securities of the Corporation and the investment of
additional optional amounts in shares of Common Stock pursuant to any plan
providing for the reinvestment of dividends or interest payable on securities of
the Corporation and the investment of additional optional
-11-
<PAGE> 12
amounts in shares of Common Stock under such plan, (y) the issuance of
contingent rights issued pursuant to a stockholders' rights plan adopted by the
Corporation pursuant to which the acquisition by any third party of a specified
percentage of Common Stock triggers the exercisability of such rights to
purchase Common Stock, for so long as no event has occurred triggering such
rights to exercise, and (z) the issuance of Common Stock or options to purchase
Common Stock pursuant to an employee benefit plan. All calculations under this
Section 7 shall be made to the nearest cent (with $.005 being rounded upward) or
to the nearest one-tenth of a share (with .05 of a share being rounded upward),
as the case may be. Anything in this paragraph (d) to the contrary
notwithstanding, the Corporation shall be entitled, to the extent permitted by
law, to make such reductions in the Conversion Ratio, in addition to those
required by this paragraph (d), as it in its discretion shall determine to be
advisable in order that any stock dividends, subdivision of shares,
reclassification or combination of shares, distribution of rights or warrants to
purchase stock or securities, or a distribution of other assets (other than cash
dividends) hereafter made by the Corporation to its stockholders shall not be
taxable, or if that is not possible, to diminish any income taxes that are
otherwise payable because of such event.
(e) ADJUSTMENT OF CONVERSION RATIO UPON CERTAIN TRANSACTIONS. If
the Corporation shall be a party to any transaction (including, without
limitation, a merger, consolidation, statutory share exchange, self tender offer
for all or substantially all shares of Common Stock, sale of all or
substantially all of the Corporation's assets or recapitalization of the Common
Stock and excluding any transaction as to which subparagraph (d)(i) of this
Section 7 applies) (each of the foregoing being referred to herein as a
"Transaction"), in each case as a result of which shares of Common Stock shall
be converted into the right to receive stock, securities or other property
(including cash or any combination thereof), each Preferred Share that is not
converted into the right to receive stock, securities or other property in
connection with such Transaction shall thereafter be convertible into the kind
and amount of shares of stock, securities and other property (including cash or
any combination thereof) receivable upon the consummation of such Transaction by
a holder of that number of shares of Common Stock into which one Preferred Share
was convertible immediately prior to such Transaction, assuming such holder of
Common Stock (i) is not a person with which the Corporation consolidated or into
which the Corporation merged or which merged into the Corporation or to which
such sale or transfer was made, as the case may be (a "Constituent Person"), or
an affiliate of a Constituent Person or (ii) failed to exercise his or her
rights of election, if any, as to the kind or amount of stock, securities and
other property (including cash) receivable upon such Transaction (provided that
if the kind or amount of stock, securities and other property (including cash)
receivable upon such Transaction is not the same for each share of Common Stock
of the Corporation held immediately prior to such Transaction by other than a
Constituent Person or an affiliate thereof and in respect of which such rights
of election shall not have been exercised ("Non-electing Share"), then for the
purpose of this paragraph (e) the kind and amount of stock, securities and other
property (including cash) receivable upon such Transaction by each Non-electing
Share shall be deemed to be the kind and amount so receivable per share by a
plurality of the Non-electing Shares). The Corporation shall not be a party to
any Transaction unless the terms of such Transaction are consistent with the
provisions of this paragraph (e), and it shall not consent or agree to the
occurrence of any Transaction until the Corporation has entered into an
agreement with the successor or purchasing entity, as the case may be, for the
benefit of the holders of the
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<PAGE> 13
Preferred Shares that will contain provisions enabling the holders of the
Preferred Shares that remain outstanding after such Transaction to convert into
the consideration received by holders of Common Stock at the Conversion Ratio in
effect immediately prior to such Transaction. The provisions of this paragraph
(e) shall similarly apply to successive Transactions.
(f) NOTICE OF CERTAIN EVENTS. If:
(i) the Corporation shall declare a dividend (or any other
distribution) on the Common Stock (other than the Regular Quarterly Dividend);
or
(ii) the Corporation shall authorize the granting to all
holders of the Common Stock of rights or warrants to subscribe for or purchase
any shares of any class or any other rights or warrants; or
(iii) there shall be any reclassification of the Common Stock
(other than any event to which subparagraph (d)(i) of this Section 7 applies) or
any consolidation or merger to which the Corporation is a party and for which
approval of any stockholders of the Corporation is required, or a statutory
share exchange, or self tender offer by the Corporation for all or substantially
all of its outstanding shares of Common Stock or the sale or transfer of all or
substantially all of the assets of the Corporation as an entity; or
(iv) there shall occur the involuntary or voluntary
liquidation, dissolution or winding up of the Corporation,
then the Corporation shall cause to be mailed to the holders of Preferred
Shares, at the address as shown on the stock records of the Corporation, as
promptly as possible, but at least 15 Business Days prior to the applicable date
hereinafter specified, a notice stating (A) the date on which a record is to be
taken for the purpose of such dividend, distribution or rights or warrants, or,
if a record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distribution or rights or warrants
are to be determined or (B) the date on which such reclassification,
consolidation, merger, statutory share exchange, sale, transfer, liquidation,
dissolution or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock shall be entitled to exchange
their shares of Common Stock for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, statutory share
exchange, sale, transfer, liquidation, dissolution or winding up. Failure to
give or receive such notice or any defect therein shall not affect the legality
or validity of the proceedings described in this Section 7.
(g) NOTICE OF ADJUSTMENT OF CONVERSION RATIO. Whenever the
Conversion Ratio is adjusted as herein provided, the Corporation shall prepare a
notice of such adjustment of the Conversion Ratio setting forth the adjusted
Conversion Ratio and the effective date of such adjustment and shall mail such
notice of such adjustment of the Conversion Ratio to the holders of the
Preferred Shares at such holders' last address as shown on the stock records of
the Corporation.
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<PAGE> 14
(h) TIMING OF ADJUSTMENT. In any case in which paragraph (d) of
this Section 7 provides that an adjustment shall become effective on the day
next following the record date for an event, the Corporation may defer until the
occurrence of such event (A) issuing to the holder of Preferred Shares converted
after such record date and before the occurrence of such event the additional
shares of Common Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable upon such
conversion before (giving effect to such adjustment and (B) paying to Such
holder any amount of cash in lieu of any fraction pursuant to paragraph (c) of
this Section 7.
(i) NO DUPLICATION OF ADJUSTMENTS. There shall be no adjustment of
the Conversion Ratio in case of the issuance of any stock of the Corporation in
a reorganization, acquisition or other similar transaction except as
specifically set forth in this Section 7. If any action or transaction would
require adjustment of the Conversion Ratio pursuant to more than one paragraph
of this Section 7, only one adjustment shall be made and such adjustment shall
be the amount of adjustment that has the highest absolute value.
(j) OTHER ADJUSTMENTS TO CONVERSION RATIO. If the Corporation shall
take any action affecting the Common Stock, other than action described in this
Section 7, that would materially adversely affect the conversion rights of the
holders of the Preferred Shares or the value of such conversion rights, the
Conversion Ratio for the Preferred Shares may be adjusted, to the extent
permitted by law, in such manner, if any, and at such time, as the Board of
Directors, in its sole discretion, may determine to be equitable in the
circumstances.
(k) RESERVATION, VALIDITY, LISTING AND SECURITIES LAW COMPLIANCE
WITH RESPECT TO SHARES OF COMMON STOCK.
(i) The Corporation covenants that it will at all times reserve
and keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued shares of Common Stock for the purpose of effecting
conversion of the Preferred Shares, the full number of shares of Common Stock
deliverable upon the conversion of all outstanding Preferred Shares not
therefore converted. Before taking any action which would cause an adjustment in
the Conversion Ratio such that Common Stock issuable upon the conversion of
Preferred Shares would be issued below par value of the Common Stock, the
Corporation will take any corporate action which may, in the opinion of its
counsel, be reasonably necessary in order that the Corporation may validly and
legally issue fully-paid and nonassessable shares of Common Stock at such
adjusted Conversion Ratio.
(ii) The Corporation covenants that any shares of Common Stock
issued upon the conversion of the Preferred Shares shall be validly issued,
fully paid and non-assessable.
(iii) The Corporation shall endeavor to list the shares of
Common Stock required to be delivered upon conversion of the Preferred Shares,
prior to such delivery, upon each national securities exchange, if any, upon
which the outstanding Common Stock is listed at the time of such delivery.
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<PAGE> 15
(iv) Prior to the delivery of any securities that the
Corporation shall be obligated to deliver upon conversion of the Preferred
Shares, the Corporation shall endeavor to comply with all federal and state laws
and regulations thereunder requiring the registration of such securities with,
or any approval of or consent to the delivery thereof, by any governmental
authority.
(l) TRANSFER TAXES. The Corporation will pay any and all
documentary stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of shares of Common Stock or other securities or property on
conversion of the Preferred Shares pursuant hereto; PROVIDED, HOWEVER, that the
Corporation shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issue or delivery of shares of Common Stock or
other securities or property in a name other than that of the holder of the
Preferred Shares to be converted, and no such issue or delivery shall be made
unless and until the person requesting such issue or delivery has paid to the
Corporation the amount of any such tax or established, to the reasonable
satisfaction of the Corporation, that such tax has been paid.
(m) CERTAIN DEFINED TERMS. The following definitions shall apply to
terms used in this Section 7:
(i) CURRENT MARKET PRICE. For the purpose of any computation under
this Section 7, the Current Market Price per share of Common Stock
on any date in question shall be deemed to be the average of the
daily closing prices for the five consecutive Trading Days
preceding such date in question; PROVIDED, HOWEVER, that if another
event occurs that would require an adjustment pursuant to
subsection (f) through (j), inclusive, the Board may make such
adjustments to the closing prices during such five Trading Day
period as it deems appropriate to effectuate the intent of the
adjustments in this Section 7, in which case any such determination
by the Board shall be set forth in a resolution of the Board and
shall be conclusive.
(ii) "Trading Day" shall mean a day on which the Common Stock is
traded on the New York Stock Exchange, or other national exchange
or quotation system used to determine the Closing Price.
Section 8. PREFERRED SHARES -- CHANGE OF CONTROL AND PUT OPTION.
(a) Subject to the last sentence of this Section 8(a), if a Change
of Control or Put Event occurs, in either case as a result of the voluntary (and
not legally compelled) act, omission or participation of the Corporation, which
act, omission or participation the Corporation had the discretion under existing
laws and regulations to refrain from, then each holder of Preferred Shares will
have the right to require that the Corporation, to the extent it shall have
Legally Available Funds therefor, to redeem such holder's Preferred Shares at a
redemption price payable in cash in an amount equal to 102% of the Liquidation
Value thereof, plus accrued and unpaid dividends whether or not declared, if any
(the "Put Payment"), to the date of purchase or the date payment is made
available (the "Put Date") pursuant to the offer described in subsection (b)
below (the "Put Offer"). Notwithstanding the foregoing, if the Securities and
Exchange Commission or its staff (collectively, the "SEC"), by written
communication to the
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<PAGE> 16
Corporation, indicates that the provisions of the first sentence of this Section
8(a) would preclude the Corporation from treating the Preferred Shares as equity
on its financial statements, then those events constituting either a Change of
Control Event or Put Event for which the SEC objects to the holder of Preferred
Shares having a cash redemption right shall, instead, be covered by the
Conversion Ratio revision alternative set forth in the second sentence of this
Section 8(a).
(b) Within 15 days following the Corporation becoming aware that an
event has occurred that has resulted in any Change of Control or Put Event, the
Corporation shall mail a notice to each holder of Preferred Shares, at such
holder's address appearing in the records of the Corporation, stating (i) that a
Change of Control or Put Event, as applicable, has occurred and that such holder
has the right to require the Corporation to redeem such holder's Preferred
Shares in cash, (ii) the date of redemption (which shall be a Business Day, no
earlier than 30 days and no later than 60 days from the date such notice is
mailed, or such later date as may be necessary to comply with the requirements
of applicable law including the Exchange Act, and in no event shall such date be
earlier than 20 business days after the notice was mailed pursuant to the second
sentence of Section 5(b) herein,), (iii) the redemption price for the
redemption, and (iv) the instructions determined by the Corporation, consistent
with this subsection, that a holder must follow in order to have its Preferred
Shares redeemed.
(c) On the Put Date, the Corporation will, to the extent lawful,
accept for payment Preferred Shares or portions thereof tendered pursuant to the
Put Offer and pay an amount equal to the Put Payment in respect of all Preferred
Shares or portions thereof so tendered. The Corporation shall promptly mail to
each holder of Preferred Shares to be redeemed the Put Payment for such
Preferred Shares.
(d) Notwithstanding anything else herein, to the extent they are
applicable to any Change of Control, the Corporation will comply with Section 14
of the Exchange Act and the provisions of Regulation 14D and 14E and any other
tender offer rules under the Exchange Act and any other federal and state
securities laws, rules and regulations and all time periods and requirements
shall be adjusted accordingly.
(e) "Change of Control" means each occurrence of any of the
following: (i) the acquisition, directly or indirectly, by any individual or
entity or group (as such term is used in Section 13(d)(3) of the Exchange Act of
beneficial ownership (as defined in Rule 13d-3 under the Exchange Act, except
that such individual or entity shall be deemed to have beneficial ownership of
all shares that any such individual or entity has the right to acquire, whether
such right is exercisable immediately or only after passage of time) of more
than 33 1/3% of the aggregate outstanding voting power of capital stock of the
Corporation; (ii) other than with respect to the election, resignation or
replacement of the Preferred Directors, during any period of two consecutive
years, individuals who at the beginning of such period constituted the Board of
Directors of the Corporation (together with any new directors whose election by
such Board of Directors or whose nomination for election by the stockholders of
the Corporation was approved by a vote of 66 2/3% of the directors of the
Corporation (excluding Preferred Directors) then still in office who were either
directors at the beginning of such period, or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority
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of the Board of Directors of the Corporation then in office; and (iii) (A) the
Corporation consolidates with or merges into another entity (the "Merger Entity)
or conveys, transfers or leases all or substantially all of its respective
assets (including, but not limited to, real property investments) to any
individual or entity (the "Acquiring Entity", and, together with the Merger
Entity, the "Successor Entity"), or (B) any corporation consolidates with or
merges into the Corporation, which in either event (A) or (B) is pursuant to a
transaction in which the outstanding voting capital stock of the Corporation is
reclassified or changed into or exchanged for cash, securities or other property
(unless the holders of the voting capital stock of the Corporation immediately
prior to such transaction hold immediately after such transaction more than 45%
of the outstanding voting capital stock of the Successor Entity).
(f) "Put Event" means each occurrence of any of (i) the Corporation
fails to qualify as a real estate investment trust as described in Section 856
of the Internal Revenue Code of 1986, as amended, other than as a result of any
action, or unreasonable failure to act, by any holder of Preferred Shares; (ii)
the Corporation becomes a "Pension-held REIT" as defined in Section 856(h)(3)(D)
of the Internal Revenue Code of 1986, as amended, other than as a result of any
action, or unreasonable failure to act, by the holders of Preferred Shares; or
(iii) the Corporation ceases to be engaged primarily in the business of owning
and managing office, multi-family properties and/or industrial properties
directly, or through subsidiaries, as carried on as of the date hereof and
described in the Corporation's Annual Report on Form 10-K, as amended, as filed
with the Securities and Exchange Commission for the year ended December 31,
1997.
Section 9. PREFERRED SHARES -- RESTRICTIONS ON OWNERSHIP TRANSFER
TO PRESERVE TAX BENEFIT.
(a) The Preferred Shares shall be governed by the restrictions on
ownership and transfer set forth in Section 2(b) of Article V of the Charter.
(b) So long as Preferred Shares are outstanding, without the
consent of the holders of at least a majority of the Preferred Shares at the
time outstanding, given in person or by proxy, at a meeting called for that
purpose at which the holders of the Preferred Shares shall vote separately as a
class, or by unanimous written consent in writing of all holders of the
Preferred Shares, the Corporation will not effect or validate any amendment,
alteration or repeal of any Section of the Charter, so as to increase in any
respect the restrictions or limitations on ownership applicable to the Preferred
Shares pursuant thereto.
Section 10. PREFERRED SHARES--CONVERSION AND EXCHANGE FOR EXCESS
STOCK. Preferred Shares exchanged for Excess Stock pursuant to Section 2(c) of
the Charter shall be governed by Article V of the Charter.
Section 11. MISCELLANEOUS.
(a) EXCHANGE OR MARKET TRANSACTIONS. Nothing in Section 9, Section
10 or this Section 11 shall preclude the settlement of any transaction entered
into through the facilities of the New York Stock Exchange or any other national
securities exchange or automated inter-dealer
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quotation system. However, as set forth in Section 9, Section 10 or this Section
11, certain transactions may be settled by providing shares of Excess Stock.
(b) SEVERABILITY. If any provision of Section 9, Section 10 or this
Section 11 or any application of any such provision is determined to be invalid
by any federal or state court having jurisdiction over the issues, the validity
of the remaining provisions shall not be affected and other applications of such
provisions shall be affected only to the extent necessary to comply with the
determination of such court.
(c) MAILINGS. All mailings shall be made by overnight United States
mail or by another overnight courier service.
(d) REACQUIRED SHARES. Any Preferred Shares purchased or otherwise
acquired by the Corporation in any matter whatsoever shall be retired and
canceled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock and
may be classified again and reissued as part of a new series or class of
Preferred Stock to be created by the Board pursuant to its power contained in
the Charter, subject to conditions and restrictions on issuance set forth
herein.
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IN WITNESS WHEREOF, EASTGROUP PROPERTIES, INC. has caused its
corporate seal to be hereunto affixed and these Articles Supplementary to be
signed by its Vice President, Stewart R. Speed, and attested by its Secretary,
N. Keith McKey, this 25th day of September, 1998.
EASTGROUP PROPERTIES, INC.
By: /s/ Stewart R. Speed
--------------------------------
Name: Stewart R. Speed
Title: Vice President
THE UNDERSIGNED, Secretary of EastGroup Properties, Inc. who
executed on behalf of said corporation the foregoing Articles Supplementary, of
which this certificate is made a part, hereby acknowledges, in the name and on
behalf of said corporation, the foregoing Articles Supplementary to be the
corporate act of said corporation and further certify that, to the best of his
knowledge, information and belief, the matters and facts set forth therein with
respect to the approval thereof or otherwise required to be verified under oath
are true in all material respects, under the penalties of perjury.
By: /s/ N. Keith McKey
----------------------
Name: N. Keith McKey
Title: Secretary
Corporate Seal
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<PAGE> 1
Exhibit 99(c)
OPERATING AGREEMENT
OPERATING AGREEMENT, dated as of September 25, 1998, between
EastGroup Properties, Inc., a Maryland corporation (the "Company"), and Five
Arrows Realty Securities II L.L.C., a limited liability company organized under
the laws of the State of Delaware (the "Investor"), for the benefit of the
Investor.
This Agreement is executed pursuant to the Investment
Agreement, dated as of September 25, 1998, between the Company and the Investor
(the "Investment Agreement"). In order to induce the Investor to enter into the
Investment Agreement, the Company has agreed to provide the registration rights
set forth in this Agreement.
The parties hereby agree as follows:
1. DEFINITIONS. The following terms shall have the meanings set forth
below:
"AFFILIATE" means, with respect to any Person, (a) any member
of the Immediate Family of such Person or a trust established for the
benefit of such member, (b) any beneficiary of a trust described in
(a), (c) any Entity which, directly or indirectly though one or more
intermediaries, is deemed to be the beneficial owner of 10% or more of
the voting equity of the Person for the purposes of Section 13(d) of
the Exchange Act, (d) any officer of the Person or any member of the
Board of Directors of the Company, or (e) any Entity which, directly or
indirectly through one or more intermediaries, controls, is controlled
by, or is under common control with, such Person, including such Person
or Persons referred to in the preceding clauses (a) or (d); provided,
however, that none of the Investor, Rothschild Realty Inc. or their
respective Affiliates, nor any of their respective officers, directors,
partners or members nor a Preferred Director (as such term is defined
in the Articles Supplementary) shall be considered an Affiliate of the
Company or any of its Subsidiaries for the purposes of this Agreement.
"BUSINESS DAY" means any Monday, Tuesday, Wednesday, Thursday
or Friday which is not a day on which banking institutions in New York
City are authorized or obligated by law or executive order to close.
"ARTICLES SUPPLEMENTARY" means the Articles Supplementary
classifying 2,800,000 shares of preferred stock as Series B Cumulative
Convertible Preferred Stock of the Company.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Common Stock, par value $.0001 per
share, of the Company.
<PAGE> 2
"DEMAND REQUESTING HOLDERS" means any Holder or Holders
holding an aggregate of not less than 30% of the Registrable Securities
then outstanding. For purposes of calculating such percentage, shares
of Common Stock constituting Registrable Securities shall be deemed to
equal the number of shares of converted Preferred Stock in respect of
which such shares of Common Stock were issued.
"ENTITY" means any general partnership, limited partnership,
corporation, joint venture, trust, business trust, real estate
investment trust, limited liability company, cooperative or
association.
"EQUITY SECURITY" includes common stock, preferred stock and
any other security that is treated as an equity security either under
the Exchange Act or under generally accepted accounting principles by
the issuer thereof or any other security convertible into, or
exchangeable for any equity security and any other instrument, such as
an equity swap, the value of which is based, at least in part, on the
value of such equity security.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"GOVERNMENTAL BODY" means any foreign, federal, state,
municipal or other government, or any department, commission,
investigative body, board, bureau, agency, public authority or
instrumentality thereof or any court, mediator, arbitrator or other
tribunal.
"HOLDER" means any person that owns or has the right to
acquire Registrable Securities or Piggyback Registrable Securities, as
applicable, constituting more than 3% of the outstanding shares of such
class of Registrable Securities or Piggyback Registrable Securities, as
applicable.
"IMMEDIATE FAMILY" means, with respect to any Person, such
Person's spouse, parents, parents-in-law, descendants, nephews, nieces,
brothers, sisters, brothers-in-law, sisters-in-law, stepchildren,
sons-in-law and daughters-in-law.
"MAJORITY HOLDERS" means (a) the Investor, so long as (i) the
Investor holds at least 25% of the outstanding Registrable Securities
and (ii) no underwritten Demand Registration or Piggyback Registration
has been consummated by the Company pursuant to Section 3 of this
Agreement, or (b) otherwise, the holder or holders at the relevant time
(excluding the Company or any of its Subsidiaries) of more than 50% of
the Preferred Shares or Registrable Securities then outstanding. For
purposes of calculating such percentage, shares of Common Stock
constituting Registrable Securities shall be deemed to equal the number
of shares of converted Preferred Stock in respect of which such shares
of Common Stock were issued.
"PERSON" means any individual or Entity.
"PIGGYBACK REGISTRABLE SECURITIES" means Registrable
Securities of the same class and series as the securities the Company
proposes to register under the Securities Act in a
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<PAGE> 3
transaction giving rise to Piggyback Registration rights under Section
4 hereof, except that in the case of a shelf registration statement,
all Registrable Securities shall be deemed to be Piggyback Registrable
Securities.
"PREFERRED SHARES" means the Series B Cumulative Convertible
Preferred Stock issued by the Company to the Investor, pursuant to the
Investment Agreement.
"PROSPECTUS" means the Prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference in such
Prospectus.
"REGISTRABLE SECURITIES" means (i) all Preferred Shares and
all shares of Common Stock that have been issued, or are issuable on
conversion, in respect of the Preferred Shares pursuant to the
provisions of Section 7 of the Articles Supplementary of the Company,
dated the date hereof, (ii) any other securities that are received by
the Holders pursuant to Section 7 of the Articles Supplementary, (iii)
any other capital stock of the Company, the holders of which shall have
the right, without limitation as to amount, either to all or to a share
of the balance of current dividends and liquidating dividends after the
payment of dividends and distributions on any shares entitled to
preference, and (iv) any other securities into which or for which any
of the securities described in clauses (i) through (iii) above may be
or have been converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise,
until such time as (a) they have been effectively registered under the
Securities Act for resale and sold thereunder, (b) they are distributed
to the public pursuant to Rule 144 (or any similar provisions then in
force) under the Securities Act, (c) they shall have been otherwise
transferred, new certificates therefor not bearing a legend restricting
further transfer shall have been issued by the Company and subsequent
disposition thereof shall not require registration under the Securities
Act, or (d) they shall have ceased to be outstanding.
"REGISTRATION STATEMENT" means any registration statement of
the Company which covers any of the Registrable Securities pursuant to
the provisions of this Agreement, including the Prospectus, amendments
and supplements to such Registration Statement, including
post-effective amendments, all exhibits and all material incorporated
by reference in such Registration Statement.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"SHAREHOLDER APPROVAL" means the affirmative vote of holders
of a majority of the shares of Voting Capital Stock of the Company
represented in person or by proxy at a duly held meeting of such
shareholders at which a quorum was present or the written consent of
holders of a majority of all outstanding shares of Voting Capital Stock
of the Company; provided, however, that if the outstanding shares of
Voting Capital Stock
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<PAGE> 4
having varying votes per share, the foregoing references in this
sentence to holders of a majority of shares shall be deemed to mean
holders of shares entitled to cast a majority of votes.
"SUBSIDIARY" of any Person or Entity means an Entity in which
such Person or Entity has the ability, whether by the direct or
indirect ownership of shares or other equity interests, by contract or
otherwise, to elect a majority of the directors of a corporation or the
trustees of a real estate investment trust, to select the managing
partner of a partnership, or otherwise to select, or have the power to
remove and then select, a majority of those persons exercising
governing authority over such Entity. A limited partnership shall be
deemed to be a Subsidiary of a Person or Entity if such Person or
Entity or a Subsidiary of such Person or Entity serves as a general
partner thereof. A trust shall be deemed to be a Subsidiary of a Person
or Entity if such Person or Entity or a Subsidiary of such Person or
Entity serves as any trustee thereof or any Person having the right to
select any such trustee.
"UNDERWRITERS MAXIMUM NUMBER" means for any underwritten
registration, that number of shares of securities to which such
registration should, in the written opinion of the managing underwriter
or underwriters of such registration in light of market factors, be
limited.
"UNDERWRITTEN REGISTRATION" or "UNDERWRITTEN OFFERING" means a
registration in which securities of the Company are sold to an
underwriter for reoffering to the public.
"VOTING CAPITAL STOCK" means equity securities of the Company
entitled to vote generally in the election of directors of the Company.
2. COVENANTS AND UNDERTAKINGS
2.1 RESERVATION OF SHARES. The Company will maintain as
reserved those shares of Common Stock reserved in accordance with Section 4.6 of
the Investment Agreement and shall take all such action as may be required from
time to time in order that it may validly and legally issue fully paid and
non-assessable shares of Common Stock in accordance herewith and therewith.
2.2 NO PARTIAL REDEMPTION. Notwithstanding its ability to
effect partial redemptions of the Preferred Shares pursuant to Section 5 of the
Articles Supplementary, if the Company shall elect to redeem any Preferred
Shares held by the Investor, Rothschild Realty Inc., an Affiliate of either of
them or one of their respective members or partners, the Company shall redeem
all of such Preferred Shares simultaneously and on the same terms.
2.3 AFFILIATE TRANSACTIONS. So long as the Investor or an
Affiliate of the Investor, or one of their respective members or partners, is
the holder of either (A) all of the outstanding Preferred Shares or (B) an
amount of the Company's Voting Capital Stock which if converted into shares of
Common Stock would exceed 10% of the outstanding Common Stock on a fully diluted
basis (determined on the basis of then convertible, exercisable or exchangeable
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<PAGE> 5
securities, warrants or options issued by the Company), the Company will not,
and will not permit any of their respective Subsidiaries to, directly or
indirectly, consummate any transaction or series of transactions (including,
without limitation, the sale, purchase, exchange or lease of any assets or
properties or the rendering of any services) with any Affiliate (other than
among the Company or its Subsidiaries) (an "Affiliate Transaction") unless (i)
such transaction or series of related transactions is on terms that are no less
favorable to the Company or its Subsidiaries, as the case may be, than would be
available in a comparable transaction in arm's-length dealings with an unrelated
third party and (ii) with respect to any one transaction or series of related
transactions involving aggregate payments in excess of $1,000,000, the Company
delivers a certificate, certified by an officer of the Company, to the Investor
certifying that such transaction or series of related transaction complies with
clause (i) above and such transaction or series of related transactions has
received the approval of a majority of the disinterested members of the Board of
Directors of the Company; provided, however, that this Section 2.3 shall not
apply to any transaction (i) arising out of any agreement existing on the date
hereof or any transaction in which all holders of any class or series of
outstanding capital stock of the Company have the right to participate on a pro
rata basis or (ii) that has received Shareholder Approval.
2.4 INSPECTION RIGHTS. So long as the Investor or an Affiliate
of the Investor, or one of their respective members or partners, is the holder
of either (A) all of the Preferred Shares outstanding or (B) an amount of the
Company's Voting Capital Stock which if converted into shares of Common Stock
would exceed 10% of the Common Stock on a fully diluted basis (determined on the
basis of then convertible, exercisable or exchangeable securities, warrants or
options issued by the Company), the Company shall permit, and cause its
Subsidiaries to permit, the Investor or any agents or representatives thereof to
examine and inspect the books and records of the Company and take copies and
extracts therefrom on reasonable prior notice and at reasonable times and during
normal business hours; provided, however, that the Investor continues to be
subject to Section 10.5 of the Investment Agreement.
2.5 INSURANCE FOR DIRECTORS. So long as the Investor or an
Affiliate of the Investor, or one of their respective members or partners, is
represented on the Board of Directors of the Company or is entitled to obtain
such representation or is the holder of either (A) all of the Preferred Shares
outstanding or (B) an amount of the Company's Voting Capital Stock which if
converted into shares of Common Stock would exceed 10% of the Common Stock on a
fully diluted basis (determined on the basis of then convertible, exercisable or
exchangeable securities, warrants or options issued by the Company), the Company
shall obtain and maintain directors' and officers' reimbursement and liability
insurance in form reasonably acceptable to the Investor and with such carrier as
shall be reasonably acceptable to the Investor in the name of each director,
including each Preferred Director (as such terms is defined in the Articles
Supplementary), in an amount not less than $10,000,000.
2.6 ACCRUED AND UNPAID DIVIDENDS. Notwithstanding anything in
the Articles Supplementary to the contrary, on the date of conversion of any
Preferred Shares pursuant to Section 7 of the Articles Supplementary by the
Investor, Rothschild Realty Inc., an Affiliate of either of them or one of their
respective members or partners, the Company shall pay such holder
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<PAGE> 6
of such Preferred Shares all accrued and unpaid dividends in respect of such
Preferred Shares as provided for in Section 2 of the Articles Supplementary.
2.7 FEES AND EXPENSES. In the event that the Company shall
request that the Investor consent to any action by the Company that is otherwise
prohibited by, or amend any of, the Operative Instruments, the Company shall pay
all reasonable legal fees and expenses reasonably incurred by the Investor in
connection with the Investor's review of such request.
3. DEMAND REGISTRATION
3.1 RIGHT TO DEMAND REGISTRATION. (a) Subject to Section 3.5, at any
time following the earlier of (i) the expiration of the ninety day period
commencing from the date of the last Closing and (ii) the one year anniversary
of the date hereof and as long as the Investor and its Affiliates continues to
hold beneficially at least one-half of the Registrable Securities that had been
issued pursuant to the Investment Agreement, Demand Requesting Holders may make
written requests to the Company for registration with the Commission (a "Demand
Registration") under and in accordance with the provisions of the Securities Act
of all or part of its Registrable Securities to the effect that the Shelf
Registration then in effect may not be used with respect to the offering
contemplated by the Demand Registration; provided, however, that the Company (i)
shall be required to effect no more than two such Demand Registrations pursuant
to this Section 3 (other than the "shelf" registration provided for under
Section 3.2), (ii) shall not be required to effect a Demand Registration if less
than $10 million in market value of Registrable Securities would be registered
and (iii) shall not be required to provide any such Demand Registration if the
Investor shall have received a favorable opinion letter from counsel to the
Company, in form and substance satisfactory in the reasonable judgment of
counsel to the Investor that (x) subject to the restrictions on transfer set
forth in the Articles Supplementary, the Preferred Shares were, when issued to
the Investor, fully registered under the Securities Act and shall be freely
transferable by the Investor without the requirement that such Preferred Shares
be registered or qualified pursuant to any federal securities law or the
Investor comply with the prospectus delivery requirements of the Securities Act
or Rule 144(e) under the Securities Act and (y) subject to the restrictions on
transfer set forth in the Charter, any Common Stock held or that would be held
by the Investor as a result of the conversion of any Preferred Shares pursuant
to the provisions of the Articles Supplementary were, when the Preferred Shares
were issued to the Investor, registered under the Securities Act and shall be
freely transferable by the Investor without the requirement that such Common
Stock be registered or qualified pursuant to any federal securities law or that
the Investor comply with the prospectus delivery requirements of the Securities
Act or Rule 144(e) under the Securities Act.
(b) The Demand Registration shall be in the form of a firmly
underwritten offering managed by an underwriter or underwriters selected by the
Company pursuant to Section 3.4.
(c) Within ten days after receipt of any request by the Demand
Requesting Holders under Section 3.1(a) or the Majority Holders under Section
3.2, the Company will give written notice (the "Other Holders Notice") of such
registration request to all other Holders, if
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any, and, subject to Section 3.4, shall include in such registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein from the Holders thereof within 15 days after
such notice by the Company.
3.2 SHELF REGISTRATION. The Company shall have used its best
efforts to have caused a "shelf" registration statement with respect to all of
the Registrable Shares, on an appropriate Form, pursuant to Rule 415 under the
Securities Act or any similar rule that may be adopted by the Commission (the
"Shelf Registration"), to be declared effective by the Commission prior to the
earlier of (i) the expiration of the ninety day period commencing from the date
of the last Closing and (ii) the one year anniversary of the date hereof. The
Company shall use best efforts to keep the Shelf Registration continuously
effective until the earlier of (i) the second anniversary (plus the term of any
Blackout Period, as defined in Section 3.5) of the date such Shelf Registration
is declared effective and (ii) the date on which all shares registered on such
"shelf" registration statement have been sold; provided, however, that the
Company shall not be required to provide any such Shelf Registration if the
Investor shall have received a favorable opinion letter from counsel to the
Company, in form and substance satisfactory in the reasonable judgment of
counsel to the Investor that (x) subject to the restrictions on transfer set
forth in the Articles Supplementary, the Preferred Shares were, when issued to
the Investor, fully registered under the Securities Act and shall be freely
transferable by the Investor without the requirement that such Preferred Shares
be registered or qualified pursuant to any federal securities law or the
Investor comply with the prospectus delivery requirements of the Securities Act
or Rule 144(e) under the Securities Act and (y) subject to the restrictions on
transfer set forth in the Charter, any Common Stock held by the Investor as a
result of the conversion of any Preferred Shares pursuant to the provisions of
the Articles Supplementary were, when the Preferred Shares were issued to the
Investor, registered under the Securities Act and shall be freely transferable
by the Investor without the requirement that such Common Stock be registered or
qualified pursuant to any federal securities law or that the Investor comply
with the prospectus delivery requirements of the Securities Act or Rule 144(e)
under the Securities Act.. Such "shelf" registration shall provide for
distributions under all lawful means and shall not qualify as the Demand
Registration to which the Holders are entitled. Any Holder shall be required to
comply with the rules of the New York Stock Exchange or any other stock exchange
on which the Common Stock is then listed.
3.3 EFFECTIVE REGISTRATION AND EXPENSES. A registration will qualify as
a Demand Registration or a Shelf Registration when it has become effective;
provided, however, that (i) if the Demand Requesting Holders with regard to a
Demand Registration, or the Majority Holders with regard to a Shelf
Registration, withdraw their Registrable Securities after the filing with the
Commission of the initial Registration Statement related thereto, such demand
will count as a Demand Registration or a Shelf Registration unless such Demand
Requesting Holders or Majority Holders, as the case may be, agree severally to
pay all of the Registration Expenses of the Company and all other out of pocket
expenses of the Company contemplated by Section 7 hereof, incurred through the
date that notice of such withdrawal is given and (ii) an effective Demand
Registration will not count as the sole Demand Registration if the Demand
Requesting Holders have not been permitted to register and sell all of the
Registrable Securities requested to be included in such registration by such
Demand Requesting Holders.
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3.4 PRIORITY ON UNDERWRITTEN DEMAND REGISTRATIONS. Subject to the
rights granted pursuant to the agreements set forth on Schedule 11.2, if the
managing underwriter or underwriters of any underwritten Demand Registration
advise the Company and the Holders in writing of an Underwriters Maximum Number,
the Company will be obligated and required to include in such registration (i)
first, the Registrable Securities requested to be included in such Demand
Registration by the Holders, pro rata in proportion to the number of Registrable
Securities requested to be included in such registration by each of them until
all such Registrable Securities have been so included, (ii) second, the
securities requested to be included in such Demand Registration by the Company
and other Persons having contractual rights thereto, in accordance with the
priorities that exist among them, and (iii) third, any other securities of the
Company to be registered on behalf of any other Person, including the Company.
Neither the Company nor any of its securityholders (other than Holders of
Registrable Securities) shall be entitled to include any securities in any
Demand Registration unless the Company or such securityholders (as the case may
be) shall have irrevocably agreed in writing to sell such securities on the same
terms and conditions as shall apply to the Registrable Securities to be included
in such Demand Registration.
3.5 SELECTION OF UNDERWRITERS. The managing underwriter and any
additional investment bankers and managers for use in connection with any
underwritten Demand Registration will be selected by the Company with the
consent of the Majority Holders, with such consent not to be unreasonably
withheld.
3.6 LIMITATIONS REGARDING REGISTRATION AT THE REQUEST OF HOLDERS. (a)
The Company shall not be required to effect a Demand Registration or a Shelf
Registration under Section 3 and the Holders of Registrable Securities will
discontinue the disposition of their securities covered by a Shelf Registration
during any Blackout Period (as defined below) (i) if the Board of Directors of
the Company determines in good faith that effecting such a registration or
continuing such disposition at such time would have a material adverse effect
upon a proposed sale of all (or substantially all) of the assets of the Company
or a merger, reorganization, recapitalization or similar current transaction
materially affecting the capital structure or equity ownership of the Company,
(ii) if the Company is in possession of material information which the Board of
Directors of the Company determines in good faith is not in the best interests
of the Company to disclose in a registration statement at such time, or (iii) if
the Company has delivered a notice pursuant to Section 4.1 that it is
undertaking an underwritten offering in which the Holders will be entitled to
exercise their Piggyback Registration rights; provided, however, that the
Company may (i) only delay a Demand Registration pursuant to this Section 3.6 by
delivery of a Blackout Notice (as defined below) within thirty (30) days of
delivery of the notice requesting a Demand Registration and only for a period
not exceeding three (3) months (or until such earlier time as such transaction
is consummated or no longer proposed or the material information has been made
public); and (ii) require, by delivery of a Blackout Notice, that the Holders of
Registrable Securities discontinue from time to time, the disposition of their
securities covered by a Shelf Registration for an aggregate period not to exceed
six (6) months (each period as described in (i) and (ii) above, a "Blackout
Period") .
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(b) The Company shall promptly notify the Holders in writing
(a "Blackout Notice") of any decision not to effect a Demand Registration or a
Shelf Registration or to discontinue sales of Registrable Securities pursuant to
this Section 3.6, which notice shall set forth the reason for such decision (but
not disclosing any nonpublic material information unless expressly requested by
Holders) and shall include an undertaking by the Company promptly to notify the
Holders as soon as a Demand Registration or a Shelf Registration may be effected
or sales may resume.
(c) The Company shall not be required to effect a Demand
Registration or Shelf Registration under Section 3 during any period the Company
is restricted from filing a registration statement or from making any public
sale or distribution of its equity securities pursuant to any agreement on
Schedule 11.2.
4. PIGGYBACK REGISTRATION
4.1 RIGHT TO INCLUDE REGISTRABLE SECURITIES. Subject to Section 4.3, if
the Company or any other issuer of Registrable Securities at any time or from
time to time proposes to register shares of its equity securities or Registrable
Securities under the Securities Act (other than in a registration on Form S-4 or
S-8 or any successor form to such forms or in connection with an exchange offer
or an offering of securities solely to the existing stockholders or employees of
the Company), whether or not for sale for its own account, the Company shall
deliver prompt written notice to all Holders of Registrable Securities of its
intention to undertake such registration and of such Holders' rights to
participate in such registration to the extent of their holdings of Piggyback
Registrable Securities under this Section 4 as hereinafter provided. The Company
shall use its reasonable best efforts to effect the registration under the
Securities Act of all Piggyback Registrable Securities with respect to which the
Company receives a request for registration from the Holders thereof by written
notice to the Company within 15 Business Days after the date of the Company's
notice to such Holders of its intended registration (which notice by Holders
shall specify the amount of such Piggyback Registrable Securities to be
registered, which amount for each Holder must equal or exceed the lesser of (i)
half of all Piggyback Registrable Securities that such Holder either owns or has
the right to acquire or (ii) 10,000 shares), to the extent necessary to permit
their disposition in accordance with the Company's intended methods thereof of
all such Piggyback Registrable Securities by including such Piggyback
Registrable Securities in the registration statement pursuant to which the
Company proposes to register the securities (a "Piggyback Registration");
provided, however, that if such registration involves an underwritten offering,
all Holders requesting inclusion in the registration shall be required to sell
such Piggyback Registrable Securities to the underwriters selected by the
Company at the same price and on the same terms of underwriting applicable to
the Company and any other Persons selling securities. Holders desiring to
participate in a Piggyback Registration shall be bound by the Company's intended
method of disposition of shares thereunder. The Holders requesting inclusion in
a registration pursuant to this Section 4 may, at any time prior to the
effective date of the registration statement relating to such registration,
revoke such request by delivering written notice to the Company revoking such
requested inclusion. All requests for Piggyback Registration under this Section
4 shall be without
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prejudice to the rights of the Holders to request, and shall not be counted as,
the sole Demand Registration or Shelf Registration under Section 3 above.
4.2 PRIORITY IN PIGGYBACK REGISTRATION. If any of the Piggyback
Registrable Securities registered pursuant to any Piggyback Registration are to
be sold in one or more firm commitment underwritten offerings, and the managing
underwriters advise in writing the Company and the Holders of such Piggyback
Registrable Securities of an Underwriters Maximum Number, or, in the case of a
Piggyback Registration not being underwritten, the Company shall reasonably
determine (and notify the Holders of Piggyback Registrable Securities of such
determination), after consultation with an investment banker of nationally
recognized standing, that the number of shares of securities proposed to be sold
in such offering exceeds the number of shares which can be sold in such offering
within a price range acceptable to the Company, the Company shall include in
such registration only such number of shares (including Piggyback Registrable
Securities) which in the opinion of such underwriter or underwriters or the
Company, as the case may be, can be sold within such price range, selected in
the following order of priority: (i) first, all of the shares that the Company
proposes to register (but solely to the extent that the proceeds thereof shall
not be used to purchase Common Stock or other securities of the Company), and
the shares requested by any other Person having demand registration rights and
having made demand for the subject registration, and (ii) second, the Piggyback
Registrable Securities requested to be included in such registration by Holders
that have requested their Piggyback Registrable Securities to be included
therein, PRO RATA in proportion to the number of Piggyback Registrable
Securities requested to be included in such registration by each of them.
4.3 LIMITATIONS REGARDING PIGGYBACK REGISTRATIONS. If the Company, at
any time after giving written notice under Section 4.1 of its intention to
register Common Stock and prior to the effectiveness of the registration
statement filed in connection with such registration, determines for any reason
either not to effect such registration or to delay such registration, the
Company may, at its election, by the delivery of written notice to each Holder,
(i) in the case of a determination not to effect registration, relieve itself of
its obligation to register the Piggyback Registrable Securities in connection
with such registration, or (ii) in the case of a determination to delay the
registration, delay the registration of such Piggyback Registrable Securities
for the same period as the delay in the registration of such other shares of
Common Stock.
4.4 AGREEMENT OF HOLDERS. As a condition precedent to permitting any
Holder to participate in a Piggyback Registration, the Company shall have the
right to require such Holder to execute an agreement in form and substance
satisfactory to the Company to the effect that such Holder agrees to be bound
by, and to comply with, all of the obligations of a Holder under this Agreement.
5. HOLD-BACK AGREEMENTS
5.1 RESTRICTIONS ON PUBLIC SALE BY HOLDER OF REGISTRABLE SECURITIES.
(a) Each Holder of Registrable Securities agrees, if requested by the managing
underwriter or underwriters in an underwritten offering of any Registrable
Securities, not to effect any public sale or distribution or any other sale
pursuant to the exemption from the registration requirements of the Securities
Act
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available for private placements, of its remaining equity securities of the
Company, including a sale pursuant to Rule 144 (or any similar provision then in
force) under the Securities Act (except as part of such underwritten
registration), during the 13-day period prior to, and during the 90-day period
(or such shorter period as may be agreed to by the parties hereto) beginning on,
the effective date of such Registration Statement, to the extent timely notified
in writing by the Company or the managing underwriter or underwriters, unless
the underwriters managing the registered offering and the Company otherwise
agree.
(b) Each Holder of Registrable Securities agrees by
acquisition of such Registrable Securities not to effect any public sale or
distribution or any other sale pursuant to the exemption from the registration
requirements of the Securities Act available for private placements, of its
remaining equity securities of the Company, including a sale pursuant to Rule
144 (or any similar provision then in force) under the Securities Act (except as
part of such underwritten registration), during the period that a holder of
securities registrable under any of the agreements set forth on Schedule 11.2 is
prohibited from making any such sale or distribution as a result of a
underwritten public offering pursuant to such agreement.
5.2 RESTRICTION ON PUBLIC SALE BY THE COMPANY AND OTHERS. The Company
agrees (i) not to effect any public sale or distribution of any of its equity
securities during the 14-day period prior to, and during the 90-day period
beginning on, the effective date of a Demand Registration Statement filed
pursuant to Section 3 or such longer periods as may be required in the
reasonable judgment of the managing underwriter or underwriters (except as part
of such underwritten registration or pursuant to registrations on Forms S-4 or
S-8 or any successor form to such forms or in connection with an exchange offer
or an offering of securities solely to the existing stockholders or employees of
the Company), and (ii) that it will cause each holder of equity securities of
the Company purchased from the Company at any time after the date of this
Agreement (other than in a registered public offering) who as a result of such
purchase, owns more than 5% of the Common Stock on a fully diluted basis, to
agree not to effect any public sale or distribution or any other sale pursuant
to the exemption from the registration requirements of the Securities Act
available for private placements, of any such securities during such period,
including a sale pursuant to Rule 144 under the Securities Act (except as part
of such underwritten registration, if permitted).
6. REGISTRATION PROCEDURES
Upon the Company incurring registration obligations under
Section 3 or Section 4 and subject thereto (including, without limitation, the
Company's unfettered right to terminate or withdraw a registration under Section
4 for any or no reason), the Company will use its reasonable best efforts to
effect such registrations to permit the sale of such Registrable Securities in
accordance with the intended method or methods of distribution thereof, and
pursuant thereto the Company will, at its expense, as expeditiously as
reasonably possible:
(a) prepare and file with the Commission a Registration
Statement relating to such registration on any appropriate form under the
Securities Act, which form shall be available for the sale of the Registrable
Securities by the Holders thereof in accordance with the intended
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method or methods of distribution thereof, and use its reasonable best efforts
to cause such Registration Statement to become effective; PROVIDED, HOWEVER,
that before filing a Registration Statement or Prospectus or any amendments or
supplements thereto, including documents incorporated by reference after the
initial filing of any Registration Statement, the Company will furnish to the
Holders of the Registrable Securities covered by such Registration Statement,
their counsel and the underwriters, if any, copies of all such documents
proposed to be filed sufficiently in advance of filing to provide them with a
reasonable opportunity to review such documents and comment thereon;
(b) prepare and file with the Commission such amendments and
post-effective amendments to a Registration Statement as may be necessary to
keep such Registration Statement effective for a period of not less than 180
days (or such shorter period which shall terminate when all Registrable
Securities covered by such Registration Statement have been sold or withdrawn,
but not prior to the expiration of the 90-day period referred to in Section 4(3)
of the Securities Act and Rule 174 thereunder, if applicable); cause the related
Prospectus to be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Securities Act; and
comply with the provisions of the Securities Act applicable to it with respect
to the disposition of all securities covered by such Registration Statement
during the applicable Period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration Statement or
supplement to such Prospectus;
(c) notify each Holder of Registrable Securities included in
the Registration Statement, their counsel and the managing underwriters, if any,
at any time when a prospectus relating thereto is required to be delivered under
the Securities Act, promptly, and (if requested by any such Person) confirm such
notice in writing, (1) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective,
(2) of any request by the Commission for amendments or supplements to a
Registration Statement or related Prospectus or for additional information, (3)
of the issuance by the Commission of any stop order suspending the effectiveness
of a Registration Statement or the initiation of any proceedings for that
purpose, (4) if at any time the representations and warranties of the Company
contained in agreements contemplated by Section 6(n) cease to be true and
correct, (5) of the receipt by the Company of any notification with respect to
the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose, (6) of the happening of any event as a result of which the
Prospectus included in the Registration Statement (as then in effect) contains
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein (in
the case of the Prospectus or any preliminary Prospectus, in light of the
circumstances under which they were made) not misleading and (7) of the
Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate or that there exist circumstances
not yet disclosed to the public which make further sales under such Registration
Statement inadvisable pending such disclosure and post-effective amendment;
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(d) at any time when a prospectus relating thereto is required
to be delivered under the Securities Act, upon the occurrence of any event
contemplated by Section 6(c)(2)-(7), prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Securities being
sold thereunder, which Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(e) use reasonable best efforts to obtain the withdrawal of
any order suspending the effectiveness of the Registration Statement, or the
lifting of any suspension of the qualification of any of the Registrable
Securities for sale in any jurisdiction required pursuant to Section 6(i), as
soon as reasonably possible;
(f) if requested by a managing underwriter or any Holder of
Registrable Securities, immediately incorporate in a prospectus supplement or
post-effective amendment such information concerning such Holder of Registrable
Securities, the managing underwriter or underwriters or the intended method of
distribution as the managing underwriter or underwriters or the Holder of
Registrable Securities reasonably requests to be included therein and as is
appropriate in the reasonable judgment of the Company, including, without
limitation, information with respect to the number of shares of the Registrable
Securities being sold to such underwriter or underwriters, the purchase price
being paid therefor by such underwriter or underwriters and with respect to any
other terms of the underwritten (or best efforts underwritten) offering of the
Registrable Securities to be sold in such offering; make all required filings of
such Prospectus supplement or post-effective amendment as soon as notified of
the matters to be incorporated in such Prospectus supplement or post-effective
amendment; and supplement or make amendments to any Registration Statement if
requested by a managing underwriter of such Registrable Securities;
(g) furnish to each Holder of Registrable Securities included
in such Registration Statement and each managing underwriter, if any, without
charge, one manually-signed copy of the Registration Statement and any
post-effective amendments thereto, including financial statements and schedules,
and, upon request, all documents incorporated therein by reference and all
exhibits (including those incorporated by reference);
(h) deliver to each Holder of Registrable Securities included
in such Registration Statement, their counsel and the underwriters, if any,
without charge, as many copies of the Prospectus or Prospectuses (including each
preliminary Prospectus) and any amendment or supplement thereto as such Persons
may reasonably request; the Company consents to the use of such Prospectus or
any amendment or supplement thereto by each Holder of Registrable Securities
included in the Registration Statement and the underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus or any amendment or supplement thereto;
(i) prior to any public offering of Registrable Securities use
its reasonable best efforts to register or qualify, or cooperate with the
Holders of Registrable Securities
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included in the Registration Statement, the underwriters, if any, and their
respective counsel in connection with the registration or qualification of, such
Registrable Securities for offer and sale under the securities or blue sky laws
of such jurisdictions as any Holder or underwriter reasonably requests in
writing; use its reasonable best efforts to keep each such registration or
qualification effective, including through new filings or amendments or
renewals, during the period such Registration Statement is required to be kept
effective and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by the applicable Registration Statement; provided, however, that the
Company will not be required to qualify to do business or take any action that
would subject it to taxation or general service of process in any jurisdiction
where it is not then so qualified or subject;
(j) cooperate with the Holders of Registrable Securities
included in the Registration Statement and the managing underwriter or
underwriters, if any, to facilitate (x) the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be sold under the Registration Statement or (y) the timely
transfer of beneficial ownership of such Registrable Securities in machine
book-entry fashion under the auspices of The Depository Trust Company or other
similar organization; and cause such Registrable Securities to be in such
denominations and registered in such names as the managing underwriter or
underwriters, if any, or such Holders may request at least two business days
prior to any sale of Registrable Securities;
(k) use its reasonable best efforts to cause the Registrable
Securities covered by the Registration Statement to be registered with or
approved by such Governmental Bodies consistent with the provisions of Section
6(i) as may be necessary to enable the seller or sellers thereof or the managing
underwriter or underwriters, if any, to consummate the disposition of such
Registrable Securities;
(l) cause all Registrable Securities included in such
Registration Statement to be (1) listed, by the date of first sale of
Registrable Securities pursuant to such Registration Statement, on each
securities exchange on which shares of the same class and series have previously
been, or are concurrently to be, listed, if any, or (2) if the Registrable
Securities to be included in such Registration Statement are to be distributed
in an underwritten offering, quoted on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or the National Market System of
NASDAQ if the Common Stock is then quoted thereon and such Registrable
Securities qualify for inclusion thereon;
(m) provide a transfer agent and registrar for the Registrable
Securities not later than the effective date of such Registration Statement;
(n) enter into such agreements and take all such other
reasonable actions in connection therewith in order to expedite or facilitate
the disposition of such Registrable Securities and in such connection, in the
case of an underwritten offering, enter into an underwriting agreement in form,
scope and substance as is customary in underwritten offerings and use its best
efforts to comply with and satisfy the covenants and conditions of such
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underwriting agreement, including, without limitation, providing opinions of
counsel to the Company, indemnifications, and "comfort" letters from the
Company's independent certified public accountants;
(o) make available for inspection by a representative of the
Holders of Registrable Securities included in the Registration Statement, any
underwriter participating in any disposition pursuant to such Registration
Statement and any lawyer, accountant or other advisors retained by such selling
Holders or underwriter, all pertinent financial and other records, pertinent
corporate documents and properties of the Company as they may reasonably
request, and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such representative, underwriter,
lawyer, accountant or other advisors in connection with such Registration
Statement, provided, however, that any records, information or documents that
are furnished by the Company and that are non-public shall be used only in
connection with such registration and shall be kept confidential by such Persons
except to the extent disclosure of such records, information or documents is
required by law; and
(p) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make generally available
to its security holders earnings statements satisfying the provisions of Section
11(a) of the Securities Act, no later than 90 days after the end of any 12-month
period commencing at the end of any fiscal quarter in which Registrable
Securities are sold to underwriters in a firmly underwritten offering.
Each Holder of Registrable Securities as to which any
registration is being effected shall furnish promptly to the Company such
information regarding the distribution of such securities as the Company may
from time to time reasonably request in writing.
Each Holder of Registrable Securities (i) shall sell its
securities covered by any Registration Statement in accordance with the plan of
distribution provided for therein and (ii) upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
6(c)(2)-(7), shall forthwith discontinue disposition of Registrable Securities
covered by such Registration Statement or Prospectus until such Holder's receipt
of the copies of the supplemented or amended Prospectus contemplated by Section
6(d), or until it is advised in writing by the Company that the use of the
applicable Prospectus may be resumed, and has received copies of any additional
or supplemental filings which are incorporated by reference in such Prospectus,
and, if so directed by the Company, such Holder will, or will request the
managing underwriter or underwriters, if any, to, deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such securities current at the
time of receipt of such notice. In the event the Company shall give any such
notice, the time period mentioned in Section 6(b) during which a Registration
Statement is required to be kept effective shall be extended by the number of
days during the time period from and including the date of the giving of such
notice pursuant to Section 6(c) to and including the earlier of (x) the date
when each seller of Registrable Securities covered by such Registration
Statement shall have received the copies of the supplemented or amended
Prospectus contemplated by Section 6(d), or (y) the date when each such seller
is notified by the Company that it may resume use of the Prospectus as then in
effect. The
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Company shall be obligated to use its best efforts to cause such Registration
Statement and Prospectus to conform to all legal requirements and to notify the
Holders that the use of the applicable Prospectus may be resumed. Nothing in
this paragraph shall limit the obligations of the Company under Section 3.6 of
this Agreement.
7. REGISTRATION EXPENSES
All expenses incident to the Company's performance of or
compliance with this Agreement, including, without limitation, all registration
and filing fees, fees and expense of compliance with state securities or blue
sky laws, including reasonable fees and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the Registrable
Securities under the laws of such jurisdictions as the managing underwriter or
underwriters may reasonably designate, printing expenses, messenger, telephone
and delivery expenses, and fees and disbursements of counsel for the Company and
of all independent certified public accountants of the Company (including the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance), and of underwriters, any liability insurance and fees and
expenses of other Persons retained by the Company (all such expenses being
herein called "Registration Expenses") will be borne by the Company whether or
not the Registration Statement becomes effective. The Company will also pay its
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expense
of any annual audit, the fees and expenses incurred in connection with the
listing of the securities to be registered on any securities exchange on which
similar securities issued by the Company are then listed and the fees and
expenses of any Person, including special experts, retained by the Company. None
of the following expenses shall be paid by the Company: transfer taxes,
discounts, commissions or fees of underwriters, selling brokers, dealer managers
or similar securities industry professionals relating to the distribution of the
Registrable Securities and the legal fees and disbursements of counsel to the
Holders.
8. INDEMNIFICATION
8.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify,
defend, exonerate and hold harmless, to the full extent permitted by law, each
Holder of Registrable Securities registered pursuant to any registration
hereunder and each of its Affiliates or partners, each of their respective
members, officers, directors, employees, agents, representatives, successors and
assigns and each Person who controls such Holder, Affiliate or partner (within
the meaning of the Securities Act) against any and all actions, causes of
action, suits, losses, liabilities, obligations, damages, deficiencies, demands,
claims, judgments, taxes, assessments, settlement costs, court costs and other
costs and expenses, including, without limitation, interest, penalties, fines,
costs of investigation, discovery, case preparation, defense or appeal, expert
witness fees and expenses and reasonable attorneys' and paralegal fees and
disbursements (collectively, "Losses") incurred by any such Person in any
capacity and caused by any untrue statement of a material fact contained in any
Registration Statement, Prospectus or preliminary Prospectus or any omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein (in the case of a Prospectus or any preliminary
Prospectus, in the light of the circumstances under which they were made) not
misleading, except
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insofar as the same are caused by or contained in any information furnished in
writing to the Company by such Holder or its representative expressly for use
therein; provided, however, that such indemnification with respect to any
preliminary prospectus shall not be applicable if a copy of the Prospectus was
not sent or given by or on behalf of such Holder on the initial sale, if such is
required by law, at or prior to the written confirmation of the sale and if the
Prospectus (as amended or supplemented) would have cured the defect giving rise
to such Losses.
8.2 INDEMNIFICATION BY HOLDERS. In connection with any registration
hereunder, each Holder participating in such registration will promptly furnish
to the Company in writing such information and affidavits with respect to such
Holder as the Company reasonably requests for use in connection with any
Registration Statement or Prospectus and agrees to indemnify, defend, exonerate
and hold harmless, to the full extent permitted by law, the Company, its
directors, officers, agents and representatives and each Person who controls the
Company (within the meaning of the Securities Act) against any Losses incurred
by any such Person in any capacity and caused by any untrue statement of a
material fact or any omission of a material fact required to be stated in any
Registration Statement or Prospectus or preliminary Prospectus or necessary to
make the statements therein (in the case of a Prospectus, in the light of the
circumstances under which they were made) not misleading, to the extent, but
only to the extent, that such untrue statement or omission is contained in any
information or affidavit with respect to such Holder so furnished in writing by
such Holder or its representatives to the Company specifically for inclusion in
such Registration Statement or Prospectus; provided, however, that such
indemnification with respect to any preliminary prospectus shall not be
applicable if a copy of the Prospectus was not sent or given by or on behalf of
the Company on the initial sale, if such is required by law, at or prior to the
written confirmation of the sale and if the Prospectus (as amended or
supplemented) would have cured the defect giving rise to such Losses. In no
event shall the liability of any selling Holder hereunder be greater in amount
than the net dollar amount of the proceeds received by such Holder upon the sale
of the Registrable Securities giving rise to such indemnification obligation.
The Company shall be entitled to receive indemnities from underwriters to the
same extent as provided above with respect to information so furnished in
writing by such persons or their representatives to the Company specifically for
inclusion in any Prospectus or Registration Statement.
8.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled to
indemnification hereunder will (i) give prompt written notice to the
indemnifying party of any claim with respect to which it seeks indemnification
and (ii) permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party. Notwithstanding the
foregoing, any Person entitled to indemnification hereunder shall have the right
to employ separate counsel and to participate in the defense of such claim, but
the reasonable fees and expenses of such counsel shall be at the expense of such
Person unless (a) the indemnifying party has agreed in writing to pay such fees
or expenses, (b) the indemnifying party shall have failed to assume the defense
of such claim and employ counsel reasonably satisfactory to such Person or (c) a
conflict of interest may exist between such Person and the indemnifying party
(it being understood that (x) in the case of each of (a), (b) and (c) above, the
reasonable fees and expenses of such separate counsel to such Person shall be
paid by the indemnifying party and (y) in the case of (c) above, if the Person
notifies the indemnifying party in writing that such Person elects
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<PAGE> 18
to employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such claim
on behalf of such Person). If such defense is not assumed by the indemnifying
party, the indemnifying party will not be subject to any liability for any
settlement made without its consent (but such consent will not be unreasonably
withheld or delayed). No indemnifying party will be required to consent to entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to the
indemnified party of a release from all liability in respect to such claim or
litigation. An indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the reasonable fees
and expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim, in which event the indemnifying party shall be obligated to pay the fees
and expenses of such additional counsel or counsels. The Company may not enter
into any settlement of any claim relating to the offer and sale of Registrable
Securities that does not provide for the complete and unconditional release of
such Person.
8.4 CONTRIBUTION. If the indemnification provided for in this Section 8
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expense referred to
therein, then the indemnifying party in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action; provided,
however, that in no event shall the liability of any selling Holder hereunder be
greater in amount than the difference between the dollar amount of the proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such contribution obligation and all amounts previously contributed by such
Holder with respect to such losses, claims, damages, liabilities and expenses.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include
any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 8.4 were determined by PRO
RATA allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the immediately paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
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9. RULE 144
The Company agrees that it will file the reports required to
be filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder, to the extent required from
time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any Holder of Registrable Securities, the
Company will deliver to such Holder a written statement as to whether it has
complied with such information and requirements.
10. EFFECTIVENESS. This Agreement shall be effective upon the execution
and delivery of a counterpart by each of the parties hereto.
11. MISCELLANEOUS
11.1 NO ADEQUATE REMEDY AT LAW. In the event of a breach by the Company
of its obligations under this Agreement, each Holder, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate. The failure to file a
Registration Statement within 60 days of a written request delivered under
Section 3.1 shall constitute, in the absence of an injunction or a Blackout
Period having been imposed, a breach thereof entitling the Holders to remedies
hereunder.
11.2 NO INCONSISTENT AGREEMENT. (a) Except for the registration rights
contained in the agreements set forth on Schedule 11.2 hereto, the Company has
not previously entered into any agreement with respect to its capital stock
granting any registration rights to any Person.
(b) The Company will not on or after the date of this
Agreement enter into any agreement with respect to its securities, (i) which
grants registration rights to anyone on a preferred or pari passu position to
the Holders or (ii) which is inconsistent with the rights granted to the Holders
of Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof.
11.3 AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of the
Majority Holders. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter which relates exclusively to
the rights of Holders of Registrable Securities whose securities are being sold
pursuant to a Registration Statement and which does not directly or indirectly
affect the rights of other Holders may be given by Holders owning a majority of
the shares of the Registrable Securities being sold
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<PAGE> 20
by such Holders, PROVIDED that the provisions of this sentence may not be
amended, modified, or supplemented except in accordance with the provisions of
the immediately preceding sentence.
11.4 NOTICES. Any notice or other communication required or permitted
hereunder shall be deemed to be delivered if in writing (or in the form of a
telecopy) addressed as provided below and if either (a) actually delivered or
telecopied to said address, (b) in the case of overnight delivery of a notice,
the next business day after properly posted with postage prepaid, or (c) in the
case of a letter, 3 business days shall have elapsed after the same shall have
been deposited in the United States mails, postage prepaid and registered or
certified:
If to the Company, then to EastGroup Properties, Inc., 300 One
Jackson Place, 188 East Capitol Street, Jackson, Mississippi 39201,
Attention: President, or such other address or addresses of which the
Investor shall have been given notice, with concurrent copies to
Jaeckle Fleischmann & Mugel, LLP, Twelve Fountain Plaza, Buffalo, New
York 14202, Attention: Joseph P. Kubarek, Esq., or such other address
of which the Investor shall have been given notice.
If to any Holder of Registrable Securities, to it at its
address set forth on the books and records of the Company.
11.5 COUNTERPARTS. This Agreement and any amendments, waivers, consents
or supplements may be executed in two or more counterparts and by the parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and the
same instrument. This Agreement shall become effective upon the execution of a
counterpart by each of the parties hereto.
11.6 HEADINGS. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
11.7 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to agreements
made and to be performed entirely within such State.
11.8 CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. (a) Any action,
suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby may be instituted in any federal court of the
Southern District of New York or any state court located in New York County,
State of New York, and each party agrees not to assert, by way of motion, as a
defense or otherwise, in any such action, suit or proceeding, any claim that it
is not subject personally to the jurisdiction of such court, that the action,
suit or proceeding is brought in an inconvenient forum, that the venue of the
action, suit or proceeding is improper or that this Agreement or the subject
matter hereof may not be enforced in or by such court. The parties irrevocably
submit to the exclusive jurisdiction of such court in any such action, suit or
proceeding. Any and all service of process and any other notice in any such
action, suit or proceeding shall be effective against any party if given
personally or by registered or certified mail, return receipt requested, or by
any other means of mail that requires a signed receipt,
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<PAGE> 21
postage prepaid, mailed to such party as herein provided. Nothing herein
contained shall be deemed to affect the right of any party to serve process in
any manner permitted by law or to commence legal proceedings or otherwise
proceed against any other party in any other jurisdiction to enforce judgments
obtained in any action, suit or proceeding brought pursuant to this Section
11.8.
(b) Each of the parties hereby irrevocably waives trial by
jury in any action, suit, proceeding or counterclaim, whether at law or equity,
brought by either of them in connection with this Agreement or the transactions
contemplated hereby.
11.9 SEVERABILITY. The invalidity, illegality or unenforceability in
any jurisdiction of any provision in or obligation under this Agreement shall
not affect or impair the validity, legality and enforceability of the remaining
provisions or obligations under this Agreement or of such provision or
obligation in any other jurisdiction.
11.10 ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein, other than the provisions of any other
documents specifically referred to herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by the Company with respect to
the Registrable Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
11.11 ATTORNEYS' FEES. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees in addition to its reasonable costs and expenses and
any other available remedy.
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<PAGE> 22
11.12 CONSTRUCTION. The Company and the Investor acknowledge that each
of them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement with its legal counsel and that
this Agreement shall be construed as if jointly drafted by the Company and the
Investor.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
EASTGROUP PROPERTIES, INC.
By: /s/ N. Keith McKey
-----------------------------------------------------
Name: N. Keith McKey
Title: Chief Financial Officer and Executive Vice
President
FIVE ARROWS REALTY SECURITIES II L.L.C.
By: /s/ Matthew W. Kaplan
-----------------------------------------------------
Name: Matthew W. Kaplan
Title: Manager
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<PAGE> 1
Exhibit 99(d)
AGREEMENT AND WAIVER
--------------------
AGREEMENT AND WAIVER (the "Waiver"), dated as of September 25,
1998, between EastGroup Properties, Inc., a Maryland corporation (the
"Corporation" or the "Company"), and Five Arrows Realty Securities II L.L.C., a
Delaware limited liability company (the "Investor"). Terms used herein and not
otherwise defined herein shall have the meanings set forth in the Corporation's
Articles of Incorporation, as amended through and on the date hereof (the
"Charter") and the Articles Supplementary (the "Articles Supplementary")
classifying 2,800,000 shares of the Corporation's Series B Cumulative
Convertible Preferred Stock (the "Preferred Shares").
WHEREAS, the Corporation intends to issue and sell to the Investor,
and the Investor intends to purchase from the Corporation, the Preferred Shares;
WHEREAS, the Charter and the Articles Supplementary set forth
certain restrictions with respect to the ownership of the Corporation's capital
stock;
WHEREAS, the Corporation desires to waive certain of those
restrictions on the terms and conditions set forth in this Waiver; and
WHEREAS, the Corporation's Board of Directors has approved the
provisions of this Waiver.
NOW, THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION. The
Corporation hereby represents and warrants to the Investor as follows:
(a) No individual (as determined for purposes of Section 856(h)
of the Code but including "qualified trusts" (as defined in Section
856(h)(3)(E) of the Code)), Beneficially Owns more than 9.8% of the
number of shares of each class of the outstanding Stock and, to the
knowledge of the Corporation, no such individual Beneficially Owns more
than 5% of each such class. The Corporation has not granted any waiver
of the Ownership Limit in the Charter or Articles Supplementary.
(b) (i) Attached hereto as Exhibit A is a true and complete list
of the Tenants which have leases which provide for the payment of annual
"rents from real property" to the Company (as such term is defined in
Section 856(d) of the Code, and giving effect to the provisions of
Treasury Regulation Section 1.856-3(g)) in an amount, determined solely
with reference to the amount required to be included in the gross income
of the Company for purposes of applying Section 856(c) of the Code, in
excess of $500,000 (a "Major Lease") (it being understood that at any
time and from time to time
<PAGE> 2
the Corporation may, subject to Section 3(b) hereof, notify the Investor
that there has been an addition to or a change in Tenants and supply to
the Investor a revised Exhibit A, which shall become Exhibit A hereto as
of and after the date of receipt by the Investor of such revised Exhibit
A), (ii) the Corporation does not own, directly or indirectly (after
applying the constructive ownership rules of Section 856(d)(5) of the
Code) any stock or other equity interests in any such Tenant (as
determined for purposes of applying Section 856(d)(2)(B) of the Code)
and (iii) for purposes of Section 856(c)(2) of the Code, at least 98% of
the gross income of the Corporation for the calendar year ending
December 31, 1997, was derived from the sources specified in Section
856(c)(2) of the Code ("Qualifying Income"). For purposes of this
Agreement, the term "Tenant" refers to any corporation, partnership,
limited liability company, joint venture, unincorporated organization,
estate, trust, or any other entity that pays or is expected to pay
"rents from real property" (as such term is defined in Section 856(d) of
the Code) to the Corporation or to any entity all or part of the income
of which would be attributed to the Company for purposes of applying
Sections 856(c)(2) and 856(c)(3) of the Code.
(c) Under current law, the only basis upon which the Investor
could cause the Corporation to fail to qualify as a REIT solely by
reason of the ownership by the Investor of the Preferred Shares or
shares of Common Stock into which the Preferred Shares have been
converted (such Preferred Shares or shares of Common Stock, hereinafter,
the "Subject Shares") (it being understood that this representation does
not apply to any failure to qualify as a result of any action, inaction
or event, including but not limited to the provision of any service or
the institution of any legal proceeding, by any person, including but
not limited to the Investor, that could affect the Company's status as a
REIT), is by (i) the Investor owning, actually or Beneficially, shares
of Stock to the extent that such actual or Beneficial Ownership of Stock
would result in the Corporation being "closely-held" within the meaning
of Section 856(h) of the Code or (ii) actual or constructive ownership
of an interest in the Company that, after application of the
constructive ownership rules of Section 856(d)(5) of the Code, would
result in the Corporation being deemed to own, after application of such
rules, an interest in a Tenant that would cause the Corporation to own
or be deemed to own, for purposes of applying Section 856(d)(2)(B) of
the Code, 10% or more of the voting power or number of shares, or
interests in assets or net profits, as applicable, in such Tenant and
the income derived by the Corporation from such Tenants, when combined
with other income that is both (i) required to be taken into account by
the Company for purposes of applying Section 856(c) of the Code and (ii)
not described in Sections 856(c)(2)(A) through (H) or Sections
856(c)(3)(A) through (I) of the Code, as applicable, would cause the
Corporation to fail to satisfy any of the gross income requirements of
Section 856(c) of the Code.
2
<PAGE> 3
2. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
(a) Relying upon and assuming the accuracy of the
representations and warranties given by the Corporation set forth in
Section 1, the ownership by the Investor and The Public Employees
Retirement System of Ohio ("OPERS") of the Subject Shares will not
result in the Corporation being "closely-held" within the meaning of
Section 856(h) of the Code and will not result in the Corporation
otherwise failing to qualify as a REIT.
(b) Attached hereto as Exhibit B is a true and complete list of
the persons owning a capital or profits interest in the Investor, the
interest owned in the Investor by each such person, the persons owning
beneficial interests in the entities (other than OPERS) owning a capital
or profits interest in the Investor and the interest owned by each such
person.
(c) OPERS is a "qualified trust" as that term is defined in
Section 856(h)(3)(E) of the Code except to the extent that it not being
a "qualified trust" would not result in the Corporation being
"closely-held" within the meaning of Section 856(h) of the Code or would
not result in the Corporation otherwise failing to qualify as a REIT.
(d) The Investor and those persons owning a direct or indirect
interest in the Investor collectively own, directly or indirectly, no
more than 1% of the value of the Corporation, not including the Subject
Shares.
(e) No person has a beneficial interest in OPERS with a value of
more than 0.2% of the total value of all beneficial interests in OPERS.
(f) (i) Except as notified to the Corporation by the Investor
pursuant to Section 4(b), the Investor directly owns no stock or other
equity interest in excess of 4.9% in a Tenant identified on Exhibit A
(as the same may be amended from time to time), and (ii) except as
notified to the Corporation by the Investor pursuant to Section 4(b), no
Person owns a stock or other equity interest (as determined for purposes
of applying Section 856(d)(2)(B) of the Code) in a Tenant identified on
Exhibit A (as the same may be amended from time to time) that would both
(A) be attributable to Investor by operation of Section 318 of the Code,
as modified by Section 856(d)(5) of the Code and (B) result in the
Investor being deemed to own, pursuant to such section as so modified,
in excess of 4.9% of such stock or other equity interests in such
Tenant.
(g) For purposes of applying Section 856(h) of the Code, no
individual (as determined for purposes of applying Section 856(h) but
including "qualified trusts" other than OPERS) is or will be deemed to
own more than 0.2% of either the value or number of shares of the
outstanding Stock by virtue of the Investor's or OPERS' ownership of the
Subject Shares, except for the direct or indirect individual members of
Rothschild Realty Investors II L.L.C., no one of whom, following such
acquisition, will be deemed to own directly or indirectly (for purposes
of applying such section), more than 9.8% of either the value or number
of shares of the outstanding Stock.
3
<PAGE> 4
3. UNDERTAKINGS OF THE CORPORATION.
(a) Other than the waiver provided pursuant to this Waiver, the
Corporation will not grant any waiver of the Ownership Limit in the
Charter or the Articles Supplementary if such waiver would cause the
Corporation to be "closely-held" or a "pension-held REIT," both within
the meaning of Section 856(h) of the Code.
(b) Before the Corporation, or any entity, all or part of the
income of which would be attributed to the Company for purposes of
applying Sections 856(c)(2) and 856(c)(3) of the Code, enters into a
Major Lease, the Corporation will provide the name of the proposed
Tenant to the Investor. Investor shall inform (or be treated as
informing pursuant to Section 4(b) hereof) the Corporation if the
Investor owns or is deemed to own, for purposes of Section 856(d)(2)(B)
of the Code, more than a 4.9% interest in the proposed tenant.
(c) Except as provided in this Waiver, the Corporation will not
take any action or fail to take any reasonable action that it knows (or
reasonably should know) would reasonably be expected to result in (other
than (i) any action or failure to take action required to preserve the
Corporation's status as a REIT or (ii) any action or failure to take
action in reliance upon the representations and warranties of the
Investor in Section 2 or the undertakings of the Investor in Section 4),
(x) the Investor owning, actually or Beneficially, shares of Stock to
the extent that such actual or Beneficial Ownership of Stock would
result in the Corporation being "closely-held" within the meaning of
Section 856(h) of the Code or would result in the Corporation otherwise
failing to qualify as a REIT, in either case solely by reason of the
actual or Beneficial Ownership of the Subject Shares by the Investor and
OPERS, or (y) less than 97% of the gross income of the Corporation for
any year (for purposes of Section 856(c)(2) of the Code) being
Qualifying Income (it being understood that unless the Company has
failed to comply with Section 1(b) and 3(b) hereof, the Company shall be
entitled to assume for this purpose that it does not own and is not
deemed to own any interest in a Tenant described in Section 856(d)(2)(B)
of the Code by reason of the ownership of the Subject Shares by the
Investor, any person owning a capital or profits interest in the
Investor, OPERS, any person having a beneficial interest in OPERS, or
any transferee that executes a Successor Waiver Agreement (as defined in
Section 6), despite the receipt of any notice to the contrary pursuant
to Section 4(b)).
4. UNDERTAKINGS OF THE INVESTOR.
(a) The Investor and those persons identified on Exhibit B or
who, following the date hereof, acquire a direct or indirect capital or
profits interest in the Investor (the "Investor Group") will not take
any action or fail to take any reasonable action that the Investor or
any such Person knows (or reasonably should know) would reasonably be
expected to cause: (i) the Investor to be an individual for purposes of
Section 542(a)(2) of the Code as modified by Section 856(h) of the Code,
(ii) OPERS to fail to qualify as a "qualified trust" as that term is
defined in Section 856(h)(3)(E) of the
4
<PAGE> 5
Code, (iii) any individual (as determined for purposes of applying
Section 856(h) but including "qualified trusts" other than OPERS),
except for the direct or indirect individual members of Rothschild
Realty Investors II L.L.C., to be deemed to own more than 0.2% of either
the value or number of shares of the outstanding Stock by virtue of the
Investor's or OPERS' ownership of the Subject Shares, (iv) a direct or
indirect individual member of Rothschild Realty Investors II L.L.C. to
be deemed to own (for purposes of applying such section), more than 9.8%
of either the value or number of shares of the outstanding Stock, (v)
any person to have a beneficial interest in OPERS with a value of more
than 0.2% of the total value of all beneficial interests in OPERS, (vi)
except as notified to the Corporation by the Investor pursuant to
Section 4(b), Investor to directly acquire a stock or other equity
interest in a Tenant identified on Exhibit A (as the same may be amended
from time to time) following the date hereof in excess of 4.9% of such
stock or other equity interests in such Tenant and (vii) except as
notified to the Corporation by the Investor pursuant to Section 4(b),
any Person to acquire a stock or other equity interest (as determined
for purposes of applying Section 856(d)(2)(B) of the Code) in a Tenant
identified on Exhibit A, following the receipt of such Exhibit A (as the
same may be amended from time to time), that would both (A) result in
the Investor and the Corporation being deemed to own, by operation of
Section 318 of the Code, as modified by Section 856(d)(5) of the Code,
in excess of 4.9% of such stock or other equity interests in such
Tenant, and (B) result in the Corporation having gross income for any
year which is not Qualifying Income in excess of 2% of the gross income
of the Corporation (as determined for purposes of Section 856(c)(2) of
the Code.
(b) The Investor shall inform the Corporation (i) within 10
business days of receiving any notice from the Corporation set forth in
Section 3(b) hereof, if the Investor or any person having a direct or
indirect ownership interest in the Investor owns or is deemed to own,
for purposes of applying Section 856(d)(2)(B) of the Code, more than a
4.9% ownership interest in such proposed Tenant and the nature of such
ownership (any such failure to notify the Corporation within such 10
business day period will for all purposes be deemed to be an affirmative
statement by the Investor to the Corporation that neither the Investor
nor any person having a direct or indirect ownership interest in the
Investor owns or is deemed to own, for purposes of applying such
section, more than a 4.9% ownership interest in such proposed Tenant),
(ii) within 10 business days of the end of each quarter of the
Corporation's fiscal year, if the Investor or any person having a direct
or indirect ownership interest in the Investor owns or is deemed to own,
for purposes of applying Section 856(d)(2)(B) of the Code, more than a
4.9% ownership interest in any Tenant provided on Exhibit A (as the same
may be amended from time to time) and (iii) within 10 business days of
any reasonable request from the Corporation concerning the level of
ownership in any such Tenant.
5. WAIVER. On the basis of the accuracy of the representations and
warranties of the Investor contained in Section 2 and the undertakings in
Section 4, the Corporation, pursuant to subparagraph (2)(f)(i), and subject to
subparagraph (2)(b)(i), of Article V of the Charter, hereby exempts the Investor
from the restrictions on ownership of Equity Stock set forth in the Charter (the
"Ownership Restrictions"), including subparagraph 2(b)(i) of Article
5
<PAGE> 6
V of the Charter; such exemption to be effective only to the extent it does not
result in any individual (as determined for purposes of Section 856(h) of the
Code but excluding OPERS and any qualified trusts as defined in Section
856(h)(3)(E) of the Code) Beneficially Owning more than 9.8% of either the value
or number of shares of the Company's outstanding Stock or the Corporation
otherwise failing to qualify as a real estate investment trust under Section
856(a) of the Code.
6. TRANSFER OF SUBJECT SHARES; RIGHT OF FIRST REFUSAL. The
provisions of this Section 6 apply in the event the Investor seeks to transfer
Subject Shares in a manner that, but for this Section 6, would result in a
violation of the Ownership Restrictions.
(a) Subject to the provisions of this Section 6, the Corporation
hereby waives the Ownership Restrictions to the extent necessary to
enable the Investor to transfer ownership of Subject Shares to another
Person subsequent to the 24 month period beginning on the date hereof.
(b) The waiver described in paragraph (a) shall not become
effective until the right of first refusal period provided in Section 7
with respect to the Subject Shares that the Investor seeks to transfer
in excess of the number of Subject Shares that the intended transferee
(the "Intended Transferee") may acquire without violating the Ownership
Restrictions (the "Extra Subject Shares") has expired or otherwise
terminated without the Corporation having exercised its right to
purchase such Extra Subject Shares.
(c) The waiver described in paragraph (a) shall be conditioned
on obtaining from the Intended Transferee representations and
undertakings reasonably requested by the Corporation in order to ensure
that no individual (as determined for purposes of Section 856(h) of the
Code but excluding "qualified trusts" as defined in Section 856(h)(3)(E)
of the Code) will Beneficially Own more than 9.8% of either the value or
number of shares of the outstanding Stock following the Intended
Transferee's acquisition of the Subject Shares. The parties agree that
the phrase "representations and undertakings reasonably requested"
includes, but is not limited to, representations and undertakings
similar to those set forth in Section 2 and 4 hereof (but as modified by
this Section 6). Such representations and undertakings shall be included
in an agreement between the Corporation and the Intended Transferee
consistent with the terms of this Waiver (a "Successor Waiver
Agreement").
7. RIGHT OF FIRST REFUSAL. For purposes of this Section 7, the term
"Transfer" shall have the following meaning:
"TRANSFER" shall mean any direct or indirect disposition of an
interest whether by sale, exchange, merger, consolidation, transfer, assignment,
conveyance, distribution, pledge, inheritance, gift, mortgage, the creation of
any security interest in, or lien or encumbrance upon, any other disposition of
any kind and in any manner, by operation of law or otherwise, of Subject Shares
or any other transfer or agreement which would result in a change in the
percentage of the Subject Shares actually or Beneficially Owned by the Investor.
6
<PAGE> 7
(a) RESTRICTIONS. The Investor agrees that it will not Transfer
any Extra Subject Shares (or any direct or indirect interest therein) or
any stock certificate representing the same, now or hereafter at any
time owned by it, except to current partners of the Investor and as
required or permitted by this Section 7.
(b) BONA FIDE OFFERS. (a) If the Investor desires to Transfer
any Extra Subject Shares and such Investor shall have received a bona
fide written offer (a "Bona Fide Offer") that it intends to accept from
a Person (the "Outside Party") for the Transfer of such Extra Subject
Shares, the Investor shall give written notice (the "Option Notice") to
the Corporation setting forth such desire, which notice shall set forth
at least the name and address of the Outside Party and the price and
terms of the Bona Fide Offer and shall be accompanied by a copy of the
Bona Fide Offer, a statement executed by the Outside Party setting forth
the number of shares and type of Capital Stock beneficially owned (for
purposes of applying Section 13(d)(3) of the Securities Exchange Act of
1934) by such Outside Party and any Affiliate thereof, and evidence
reasonably demonstrating the Outside Party's ability to consummate such
offer. Upon the giving of such Option Notice, the Corporation shall have
the option to purchase for cash, at the price offered by the Outside
Party in the Bona Fide Offer, all, but not less than all, of the Extra
Subject Shares specified in the Option Notice, said option to be
exercised within ten (10) business days following the giving of such
Option Notice, by giving a counter-notice (a "Counter-Notice") to the
Investor. In the event that the Bona Fide Offer provides, in whole or in
part, for non-cash consideration, the "price" offered by the Outside
Party shall be deemed to be the amount of cash, if any, provided in the
Bona Fide offer plus the fair market value of the non-cash consideration
as initially determined in good faith by the majority of the
disinterested members of the Board, which determination may be
challenged by the Investor.
(c) Subject to paragraph (d), in the event that the Corporation
elects to purchase Extra Subject Shares pursuant to Section 7(a), the
Corporation will be obligated to purchase, and the Investor shall be
obligated to sell, such Extra Subject Shares at a closing (which shall
be the closing for all Extra Subject Shares being purchased in
connection with such Option Notice) to be held on the thirtieth business
day after the delivery of the Corporation's counter-notice to such
Investor at the principal executive offices of the Corporation, or at
such other time and place as may be mutually acceptable to the
Corporation and the Investor.
(d) If the Corporation elects not to purchase all of the Extra
Subject Shares subject to the Bona Fide Offer within the time limits
specified above, then the offer to sell any of the Extra Subject Shares
to the Corporation shall be deemed revoked and the Investor, at any time
within a period of sixty-five (65) business days following the
expiration of such time limits, may Transfer all (but not less than all)
of such Extra Subject Shares to the Outside Party at no lower price than
set forth in the Bona Fide Offer and on substantially the same economic
terms contained in the Bona Fide Offer; PROVIDED, HOWEVER, that in the
event the Investor has not so Transferred said Extra Subject Shares to
the Outside Party within said sixty-five (65) day period, then said
Extra
7
<PAGE> 8
Subject Shares thereafter shall continue to be subject to all of the
restrictions contained in this Waiver as though no Option Notice had
ever been given.
(e) At the closing of any purchase of Extra Subject Shares
pursuant to this Section 7, the Investor shall deliver certificates
representing such Extra Subject Shares duly endorsed for transfer and
accompanied by all requisite stock transfer taxes to the extent required
by the Bona Fide Offer to be paid by the Investor. Any Extra Subject
Shares purchased pursuant to this Section 7 shall be free and clear of
any and all liens, claims, options, charges, encumbrances, voting
trusts, irrevocable proxies or other rights of any kind or nature and at
the closing of the purchase the Investor shall represent and warrant to
such effect and to the effect that the Investor is the beneficial owner
of such Extra Subject Shares.
(f) If, in any instance, the Corporation elects not to exercise
its rights hereunder or elects to waive such rights, such election shall
not constitute a waiver of such the Corporation's rights to receive an
Option Notice in the case of any Transfer subsequently proposed by the
Investor.
8. VIOLATION.
(a) In the event of any breach of a representation or warranty
given by the Investor in Section 2 or a violation of any of the
undertakings set forth in Section 4 (other than as a result of a breach
by the Corporation of any of the representations or warranties of the
Corporation set forth in Section 1 or a violation by the Corporation of
any of the undertakings of the Corporation set forth in Section 3), in
addition to all rights provided in this Waiver, in the Charter or the
Articles Supplementary, or granted by law (including recovery of
damages), the Waiver set forth in Section 5 hereof shall, to the extent
reasonably determined by the Board to be necessary in order for the
Corporation to qualify for taxation as a REIT, be void ab initio and
shall result in a conversion of such portion (as reasonably determined
by the Board to be necessary) of the Subject Shares into Excess Stock
or, if an IRS Ruling Satisfactory to the Corporation has not been
obtained, shall to such extent cause the issuance or acquisition of all
or a portion of the Subject Shares to be void ab initio, in either case
to the same extent as if the Waiver in Section 5 hereof had never been
granted, and to be subject to the ownership limits and related
provisions set forth in the Charter and the Articles Supplementary.
(b) In addition to and not in limitation of the provisions of
paragraph (a), to the extent the Investor or OPERS attempts to acquire
Beneficial Ownership of Stock that would result in any individual (other
than OPERS or any other "qualified trust") Beneficially Owning in excess
of 9.8% of either the value or number of shares of the outstanding
Stock, such purported acquisition shall be void ab initio and shall
result in a conversion of such excess Stock into Excess Stock, or if an
IRS Ruling Satisfactory to the Corporation has not been obtained, shall
cause the issuance or acquisition of such Excess Stock to be void AB
INITIO.
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(c) In the event the Corporation breaches any of the
representations and warranties given by the Corporation in Section 1 or
any of the undertakings in Section 3 and such breach results in shares
of Common Stock issued upon conversion of the Preferred Shares or
Preferred Shares being exchanged for Excess Stock or automatic
repurchase in accordance with subparagraph 2(c) or (d) of Article V of
the Charter, the Investor shall be entitled to exercise all rights
provided herein or granted by law (including recovery of damages) or in
equity.
9. CHANGE IN LAW. In the event that there is a change in law or in
the interpretation of the law of which the Corporation or the Investor has
knowledge that may cause or has caused any Subject Shares held by the Investor
to be exchanged for Excess Stock or to be void ab initio, the Corporation and
the Investor shall communicate such knowledge to the other party and shall use
reasonable efforts (a) to prevent such occurrence or circumstance, (b) to amend
the documents and instruments with respect to the Subject Shares held by the
Investor to mitigate the effect of such change (provided, however, that in
effecting such amendment, the Corporation shall in no event be required to (i)
materially disproportionately disadvantage any other security holder of the
Corporation, (ii) provide the Investor as a holder of the Subject Shares with
better terms, on a whole, than existed with respect to such Preferred Shares or
Common Stock prior to such amendment or (iii) repurchase any securities of the
Corporation owned, directly or indirectly, by the Investor), and (c) unless
required by the Charter or the Articles Supplementary or in order to preserve
the Corporation's status as a REIT, to not disproportionately disadvantage the
Investor with respect to other security holders of the Corporation in
determining, if the Corporation is permitted to make such a determination, which
shares of the Corporation's Stock shall be void ab initio or exchanged for
Excess Stock or repurchased.
10. ASSIGNMENT. Except to the extent provided herein, no party
hereto may assign (by operation of law or otherwise) either this Waiver or any
if its rights, interests, or obligations hereunder without the prior written
consent of the other party in its sole and absolute discretion.
11. AMENDMENTS. The provisions of this Waiver, including the
provisions of this sentence (but excluding Exhibit A, which may be amended in
accordance with Section 1), may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless each of the parties hereto consents in writing to such amendment,
modification, supplement or waiver. Each such consent or waiver shall be
effective only in the specific instance and for the specific purpose for which
given.
12. NOTICE. All notices hereunder shall be in writing and shall be
given: (a) if to the Company, at 300 One East Jackson Place, 188 East Capitol
Street, Jackson, Mississippi 39201, Attention: President, or such other address
or addresses of which the Investor shall have been given notice, with copies to
Jaeckle Fleischmann & Mugel, LLP, Twelve Fountain Plaza, Buffalo, New York
14202, Attention: Joseph P. Kubarek, Esq., or such other address of which the
Investor shall have been given notice; and (b) if to the Investor, at Rothschild
Realty Inc., 1251 Avenue of the Americas, New York, New York 10020, Attn:
Matthew Kaplan, or such
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other address of which the Company shall have been given notice, with copies to
Schulte Roth & Zabel LLP, 900 Third Avenue, New York, New York 10022, Attn:
Andre Weiss, Esq., or such other address of which the Company shall have been
given notice. Any notice shall be deemed to have been given if personally
delivered or sent by United States mail or by commercial courier or delivery
service or by telegram or telex and shall be deemed received, unless earlier
received, (i) if sent by certified or registered mail, return receipt requested,
three business days after deposit in the mail, postage prepaid, (ii) if sent by
United States Express Mail or by commercial courier or delivery service, one
Business Day after delivery to a United States Post Office of delivery service,
postage prepaid, (iii) if sent by telegram, telex or facsimile transmission,
when receipt is acknowledged by answerback, and (iv) if delivered by hand, on
the date of receipt.
13. SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
14. HEADINGS. The headings in this Waiver are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
15. GOVERNING LAW. This Waiver shall be governed by and construed
in accordance with the laws of the State of Maryland as applied between
residents of that State entering into contracts wholly to be performed in that
State.
16. COUNTERPARTS. This Waiver may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Waiver as of the date first written above.
EASTGROUP PROPERTIES, INC.,
a Maryland corporation
By: /s/ N. Keith McKey
------------------------------------
Name: N. Keith McKey
Title: Chief Financial Officer and Executive Vice
President
FIVE ARROWS REALTY SECURITIES II L.L.C.,
a Delaware limited liability company
By: /s/ Matthew W. Kaplan
------------------------------------
Name: Matthew W. Kaplan
Title: Manager
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Exhibit 99(e)
JAECKLE FLEISCHMANN & MUGEL, LLP
ATTORNEYS AT LAW
FLEET BANK BUILDING TWELVE FOUNTAIN PLAZA BUFFALO, NEW YORK 14202-2292
TEL (716) 856-0600 FAX (716) 856-0432
September 25, 1998
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, No. 333-58309, (the
"Registration Statement"); Issuance and Sale of up
to 2,800,000 shares of Series B Cumulative
Convertible Preferred Stock, par value $0.0001 per
share ("Series B Preferred Stock")
--------------------------------------------------
As your counsel we have examined the Registration Statement
and Prospectus Supplement dated September 25, 1998 and we are familiar with the
documents referred to therein and incorporated therein by reference, 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 shares of Series B Preferred
Stock. In our opinion the shares of Series B Preferred Stock to be issued by
EastGroup will be, when issued and paid for pursuant to the Registration
Statement and Prospectus Supplement dated September 25, 1998 and the exhibits
thereto, duly authorized for issuance by all necessary corporate action and,
upon the issuance thereof in accordance with their terms, the shares of Series B
Preferred Stock will be legally issued, fully paid and non-assessable.
We consent to the incorporation by reference of this opinion
letter as an exhibit to the Registration Statement.
Very truly yours,
JAECKLE FLEISCHMANN & MUGEL, LLP
Buffalo, New York - Rochester, New York
