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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 30, 1997
REGISTRATION NO. 333-29259
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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PARKWAY PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 74-2123597
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
ONE JACKSON PLACE SUITE 1000
188 EAST CAPITOL STREET
JACKSON, MISSISSIPPI 39201-2195
(601) 948-4091
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
STEVEN G. ROGERS, DIRECTOR, PRESIDENT AND
CHIEF OPERATING OFFICER
ONE JACKSON PLACE SUITE 1000
188 EAST CAPITOL STREET
JACKSON, MISSISSIPPI 39201-2195
(601) 948-4091
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------------
Copies to:
JOSEPH P. KUBAREK, ESQ.
JAECKLE FLEISCHMANN & MUGEL, LLP
800 FLEET BANK BUILDING
TWELVE FOUNTAIN PLAZA
BUFFALO, NEW YORK 14202
(716) 856-0600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
IF THE ONLY SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED
PURSUANT TO A DIVIDEND OR INTEREST REINVESTMENT PLAN, PLEASE CHECK THE FOLLOWING
BOX. [ ]
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON
A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), OTHER THAN THE SECURITIES OFFERED ONLY IN
CONNECTION WITH DIVIDEND OR INTEREST REINVESTMENT PLANS, CHECK THE FOLLOWING
BOX. [X]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(b) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING BOX
AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER
EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(c)
UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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EXPLANATORY NOTE
This Registration Statement relates to securities which may be
offered from time to time by Parkway Properties, Inc. ("Parkway"). This
Registration Statement contains a form of basic prospectus (the "Basic
Prospectus") relating to Parkway which will be used in connection with an
offering of securities by Parkway. The specific terms of the securities to be
offered will be set forth in a prospectus supplement relating to such securities
(the "Prospectus Supplement").
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR
AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE
SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO
BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
PROSPECTUS
SUBJECT TO COMPLETION
DATED JUNE 30, 1997
$150,000,000
PARKWAY PROPERTIES, INC.
COMMON STOCK
PREFERRED STOCK
DEPOSITARY SHARES
DEBT SECURITIES
-----------------------------------------
Parkway Properties, Inc. ("Parkway") may from time to time
offer in one or more series or classes (i) shares of its common stock, par value
$0.001 per share (the "Common Stock"); (ii) shares of its preferred stock, par
value $0.001 per share (the "Preferred Stock"); (iii) Preferred Stock
represented by depositary shares (the "Depositary Shares"); and (iv) unsecured
debt securities ("Debt Securities"), with an aggregate public offering price of
up to $150,000,000 in amounts, at prices and on terms to be determined at the
time of offering. The Common Stock, Preferred Stock, Depositary Shares and Debt
Securities (collectively, the "Securities") may be offered, separately or
together, in one or more supplements to this Prospectus (each, a "Prospectus
Supplement").
The specific terms of the Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable (i) in the case of Common Stock,
any initial public offering price; (ii) in the case of Preferred Stock, the
specific designation and stated value per share, any dividend, liquidation,
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redemption, conversion, voting and other rights, and any initial public offering
price; (iii) in the case of Depositary Shares, the fractional share of Preferred
Stock represented by each such Depository Share; and (iv) in the case of Debt
Securities, the specific title, aggregate principal amount, currency, form
(which may be registered or bearer, or certificated or global), authorized
denominations, maturity, rate (or manner of calculation thereof) and time of
payment of interest, terms for redemption at the option of Parkway or repayment
at the option of the holder, terms for sinking fund payments, covenants and any
initial public offering price. In addition, such specific terms may include
limitations on direct or beneficial ownership and restrictions on transfer of
the Securities, in each case as may be consistent with Parkway's Articles of
Incorporation, as amended (the "Charter"), or as otherwise appropriate to
preserve the status of Parkway as a real estate investment trust ("REIT") for
federal income tax purposes.
The applicable Prospectus Supplement will also contain
information, where applicable, about certain United States federal income tax
considerations relating to, and any listing on a securities exchange of, the
Securities covered by such Prospectus Supplement.
The Securities may be offered directly, through agents
designated from time to time by Parkway, or to or through underwriters or
dealers. If any agents or underwriters are involved in the sale of any of the
Securities, their names, and any applicable purchase price, fee, commission or
discount arrangement between or among them, will be set forth, or will be
calculable from the information set forth, in the applicable Prospectus
Supplement. See "Plan of Distribution." No Securities may be sold without
delivery of the applicable Prospectus Supplement describing the method and terms
of the offering of such series of Securities.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
The date of this Prospectus is _________________________, 1997.
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AVAILABLE INFORMATION
Parkway is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by Parkway may be inspected at, and, upon
payment of the Commission's customary charges, copies obtained from, the Public
Reference Section maintained by the Commission, 450 Fifth Street, N.W.,
Washington, DC 20549. Such reports, proxy statements and other information are
also available for inspection and copying at prescribed rates at the
Commission's regional offices in New York, New York (7 World Trade Center, 13th
Floor, New York, New York 10048) and in Chicago, Illinois (Suite 1400, Citicorp
Center, 500 West Madison Street, Chicago, Illinois 60661-2511). The Commission
maintains a Web site (http:www.sec.gov) that also contains reports, proxy
statements and other information concerning Parkway. In addition, the Common
Stock is traded on the New York Stock Exchange, Inc. ("NYSE") under the symbol
"PKY" and can be inspected and copied at the offices of the NYSE, 20 Broad
Street, New York, New York 10005.
Parkway has filed with the Commission a Registration Statement
on Form S-3 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), and the rules and regulations promulgated
thereunder, with respect to the Securities. This Prospectus constitutes the
Prospectus of Parkway, filed as part of the Registration Statement. As permitted
by the rules and regulations of the Commission, this Prospectus omits certain
information contained in the Registration Statement, and reference is made to
the Registration Statement and the exhibits listed therein, which can be
inspected at the public reference facilities of the Commission noted above, and
copies of which can be obtained from the Commission at prescribed rates as
indicated above. Statements contained in this Prospectus as to the contents of
any contract or other documents are not necessarily complete, and in each
instance, reference is made to the copy of such contract or documents filed as
an exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Incorporated into this Prospectus by reference are the
documents listed below filed by Parkway under the Exchange Act. Copies of any
such documents, other than exhibits to such documents, are available without
charge to each person to whom a copy of this Prospectus has been delivered upon
written or oral request of such person from Parkway, One Jackson Place Suite
1000, 188 East Capitol Street, Jackson, Mississippi 39201-2195, Attention: Chief
Financial Officer, telephone number (601) 948-4091.
The following documents are hereby incorporated into this
Prospectus by reference and are made a part hereof:
1. Parkway Properties, Inc.'s Annual Report on Form
10-KSB for the year ended December 31, 1996
(Commission File No. 1-11533).
2. Parkway Properties, Inc.'s Proxy Material for its
Annual Meeting of Stockholders to be held on June
6, 1997 (Commission File No. 1-11533).
3. Parkway Properties, Inc.'s Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997
(Commission File No. 1-11533).
4. Parkway Properties, Inc.'s Current Report on Form
8-KA dated May 14, 1997 (Commission File No.
1-11533).
5. PARKWAY PROPERTIES, INC.'S CURRENT REPORT ON FORM
8-K DATED JUNE 27, 1997 (COMMISSION FILE NO.
1-11533).
Each document filed by Parkway subsequent to the date of this
Prospectus pursuant to Sections 13(a), 14 or 15(d) of the Exchange Act and prior
to the termination of the offering of all Securities to which this Prospectus
relates shall be deemed to be incorporated by reference in this Prospectus and
shall be part hereof from the date of filing of such document. Any statement
contained herein or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained in this Prospectus (in
the case of a previously filed document incorporated or deemed to be
incorporated by reference herein) in any accompanying Prospectus Supplement
relating to a specific offering of Securities or in any other subsequently filed
document that is also incorporated or deemed to be incorporated by reference
herein, modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus or any accompanying Prospectus Supplement.
Subject to the foregoing, all information appearing in
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this Prospectus and each accompanying Prospectus Supplement is qualified in its
entirety by the information appearing in the documents incorporated by
reference.
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Unless the context otherwise requires, all references in this
Prospectus to "Parkway" shall mean Parkway Properties, Inc. and its subsidiaries
on a consolidated basis or, where the context so requires, Parkway Properties,
Inc. only, and, as the context may require, their predecessors.
THE COMPANY
Parkway is a self-managed real estate investment company
specializing in the ownership, management and leasing of office properties in
the Southeastern United States (primarily the states of Georgia, Mississippi,
North Carolina, Tennessee and Virginia) and Texas. Parkway will elect to qualify
as a real estate investment trust ("REIT") under the Internal Revenue Code of
1986, as amended (the "Code") for the taxable year beginning January 1, 1997. At
June 12, 1997, Parkway owned or had an interest in 23 office buildings in nine
states with an aggregate of approximately 2,873,000 square feet of leasable
space.
Parkway was incorporated under the laws of the State of
Maryland on May 17, 1996. Formed as a wholly-owned subsidiary of The Parkway
Company, a Texas corporation, Parkway merged with The Parkway Company on August
2, 1996 (the "Merger") pursuant to the Agreement and Plan of Merger dated July
17, 1996 by and between Parkway and The Parkway Company. The Parkway Company and
its predecessors have been engaged in the real estate business since 1971. As a
result of the Merger, Parkway succeeded to the business and operations of The
Parkway Company. Additionally, on August 22, 1996 the shares of common stock,
par value $0.001 per share, of Parkway (the "Common Stock") became listed on the
New York Stock Exchange, Inc. ("NYSE") under the symbol "PKY." Prior to this
date, the Common Stock had been quoted on the NASDAQ National Market under the
symbol "PKWY."
Through its wholly-owned subsidiary, Parkway Realty Services,
Inc. ("Parkway Realty"), Parkway is also involved in the management of
commercial properties for which it receives management fees. Parkway Realty
currently manages and leases a portfolio of approximately 984,000 square feet of
office space. Parkway Realty also performs brokerage services to third parties
on a commission and fee basis. Parkway Realty manages Parkway's office buildings
in Jackson, Mississippi.
Parkway's principal executive offices are located at One
Jackson Place Suite 1000, 188 East Capitol Street, Jackson, Mississippi
39201-2195. Its telephone number is (601) 948-4091.
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RATIO OF EARNINGS TO FIXED CHARGES
Parkway's ratio of earnings to fixed charges for the three
months ended March 31, 1997 was 2.5, for the year ended December 31, 1996 was
1.9, for the year ended December 31, 1995 was 1.4, for the six months ended
December 31, 1994 was 1.4, for the year ended June 30, 1994 was 1.4, for the
year ended June 30, 1993 was 1.1 and for the year ended June 30, 1992 was 0.61.
There was Preferred Stock outstanding only for a portion of the three months
ended September 30, 1996. Accordingly, the ratio of earnings to fixed charges
and Preferred Stock dividends are identical to the ratio of earnings to fixed
charges for all periods other than that ending September 30, 1996. For the three
months ended September 30, 1996, the ratio of earnings to combined fixed charges
and Preferred Stock dividends was 1.8.
For purposes of computing these ratios, earnings have been
calculated by adding fixed charges, excluding capitalized interest, to pre-tax
income from continuing operations (net income or loss). Fixed charges consist of
interest costs, whether expensed or capitalized, the interest component of
rental expense and amortization of debt issuance costs.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus
Supplement, Parkway intends to use the net proceeds from the offering for
general corporate purposes including, without limitation, the acquisition of
real estate properties, whether by acquisition of properties directly or through
potential business combination transactions, development of new real estate
properties, the repayment of debt and to fund working capital requirements.
DESCRIPTION OF DEBT SECURITIES
The unsecured debt securities ("Debt Securities") will be
issued in one or more series under an Indenture (the "Indenture"), which may be
supplemented by supplemental indentures (each, an "Indenture Supplement"),
between Parkway and a trustee (the "Trustee") to be chosen by Parkway and
qualified to act as Trustee under the Trust Indenture Act of 1939, as amended
(the "TIA"). A copy of the form of the Indenture will be filed as an exhibit to
the Registration Statement of which this Prospectus is a part and will be
available for inspection at the corporate trust office of the Trustee or as
described above under "Available Information." The Indenture is subject to, and
governed by, the TIA. The statements made hereunder relating to the Indenture
and the Debt Securities to be issued thereunder are summaries of certain
provisions thereof and do not purport to be complete and are subject to, and are
qualified in their
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entirety by reference to, all provisions of the Indenture and such Debt
Securities. All section references appearing herein are to sections of the
Indenture, and capitalized terms used but not defined herein shall have the
respective meanings set forth in the Indenture.
GENERAL
The Debt Securities will be direct, unsecured obligations of
Parkway and will rank equally with all other unsecured and unsubordinated
indebtedness of Parkway. At March 31, 1997, the total outstanding debt of
Parkway was approximately $62,260,000, all of which was secured debt. Except as
may be set forth in an applicable Prospectus Supplement, the Debt Securities may
be issued without limit as to aggregate principal amount, in one or more series,
in each case as established from time to time in or pursuant to authority
granted by a resolution of the Board of Directors of Parkway or as established
in one or more Indenture Supplements. All Debt Securities of one series need not
be issued at the same time and, unless otherwise provided, a series may be
reopened, without the consent of the holders of the Debt Securities of such
series, for issuance of additional Debt Securities of such series.
The Indenture provides that there may be more than one Trustee
thereunder, each with respect to one or more series of Debt Securities. Any
Trustee under the Indenture may resign or be removed with respect to one or more
series of Debt Securities, and a successor Trustee may be appointed to act with
respect to such series. In the event that two or more persons are acting as
Trustee with respect to different series of Debt Securities, each such Trustee
shall be a trustee of a trust under the Indenture separate and apart from the
trust administered by any other Trustee, and, except as otherwise indicated
herein, any action described herein to be taken by a Trustee may be taken by
each such Trustee with respect to, and only with respect to, the one or more
series of Debt Securities for which it is Trustee under the Indenture.
Reference is made to the Prospectus Supplement relating to the
series of Debt Securities offered thereby for the specific terms thereof,
including:
(i) the title of such Debt Securities;
(ii) the aggregate principal amount of such Debt
Securities and any limit on such aggregate principal amount;
(iii) the percentage of the principal amount
at which such Debt Securities will be issued and, if other than the principal
amount thereof, the portion of the principal amount thereof payable upon
declaration of acceleration of the maturity thereof;
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(iv) the date or dates, or the method for
determining such date or dates, on which the principal of such
Debt Securities will be payable;
(v) the rate or rates (which may be fixed or
variable), or the method by which such rate or rates shall be determined, at
which such Debt Securities will bear interest, if any;
(vi) the date or dates, or the method for
determining such date or dates, from which any interest will accrue, the dates
on which any such interest will be payable, the record dates for such interest
payment dates, or the method by which any such date shall be determined, the
person to whom such interest shall be payable, and the basis upon which interest
shall be calculated if other than that of a 360-day year of twelve 30-day
months;
(vii) the place or places where the principal
of (and premium, if any) and interest, if any, on such Debt Securities will be
payable, such Debt Securities may be surrendered for registration of transfer or
exchange and notices or demands to or upon Parkway in respect of such Debt
Securities and the Indenture may be served;
(viii) the period or periods within which, the
price or prices at which and the terms and conditions upon which such Debt
Securities may be redeemed, in whole or in part, at the option of Parkway, if
Parkway is to have such an option;
(ix) the obligation, if any, of Parkway to
redeem, repay or purchase such Debt Securities pursuant to any sinking fund or
analogous provision or at the option of a holder thereof, and the period or
periods within which, the price or prices at which and the terms and conditions
upon which such Debt Securities will be redeemed, repaid or purchased, in whole
or in part, pursuant to such obligation;
(x) if other than U.S. dollars, the currency or
currencies in which such Debt Securities are denominated and payable, which may
be a foreign currency or units of two or more foreign currencies or a composite
currency or currencies, and the terms and conditions relating thereto;
(xi) whether the amount of payments of principal
of (and premium, if any) or interest, if any, on such Debt Securities may be
determined with reference to an index, formula or other method (which index,
formula or method may be, but need not be, based on a currency, currencies,
currency unit or units of composite currency or currencies) and the manner in
which such amounts shall be determined;
(xii) the events of default or covenants of
such Debt Securities, to the extent different from or in addition to those
described herein;
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(xiii) whether such Debt Securities will be
issued in certificated andor book-entry form;
(xiv) whether such Debt Securities will be in
registered or bearer form and, if in registered form, the denominations thereof
if other than $1,000 and any integral multiple thereof and, if in bearer form,
the denominations thereof if other than $5,000 and terms and conditions relating
thereto;
(xv) the applicability, if any, of the defeasance
and covenant defeasance provisions described herein, or any modification
thereof;
(xvi) if such Debt Securities are to be issued
upon the exercise of debt warrants, the time, manner and place of such Debt
Securities to be authenticated and delivered;
(xvii) whether and under what circumstances
Parkway will pay additional amounts on such Debt Securities in respect of any
tax, assessment or governmental charge and, if so, whether Parkway will have the
option to redeem such Debt Securities in lieu of making such payment;
(xviii) with respect to any Debt Securities that
provide for optional redemption or prepayment upon the occurrence of certain
events (such as a change of control of Parkway), (a) the possible effects of
such provisions on the market price of Parkway's securities or in deterring
certain mergers, tender offers or other takeover attempts, and the intention of
Parkway to comply with the requirements of Rule 14e-1 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and any other applicable
securities laws in connection with such provisions; (b) whether the occurrence
of the specified events may give rise to cross-defaults on other indebtedness
such that payment on such Debt Securities may be effectively subordinated; and
(c) the existence of any limitations on Parkway's financial or legal ability to
repurchase such Debt Securities upon the occurrence of such an event (including,
if true, the lack of assurance that such a repurchase can be effected) and the
impact, if any, under the Indenture of such a failure, including whether and
under what circumstances such a failure may constitute an Event of Default; and
(xix) any other terms of such Debt Securities
not inconsistent with the terms of the Indenture.
The Debt Securities may provide for less than the entire
principal amount thereof to be payable upon declaration of acceleration of the
maturity thereof ("Original Issue Discount Securities"). If material or
applicable, special U.S. federal income tax, accounting and other considerations
applicable to Original Issue Discount Securities will be described in the
applicable Prospectus Supplement.
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Except as described under "--Merger, Consolidation or Sale"
below or as may be set forth in any Prospectus Supplement, the Indenture does
not contain any other provisions that would limit the ability of Parkway to
incur indebtedness or that would afford holders of the Debt Securities
protection in the event of (i) a highly leveraged or similar transaction
involving Parkway or any affiliate of Parkway; (ii) a change of control; or
(iii) a reorganization, restructuring, merger or similar transaction involving
Parkway that may adversely affect the holders of the Debt Securities. In
addition, subject to the limitations set forth under "--Merger, Consolidation or
Sale" below, Parkway may, in the future, enter into certain transactions, such
as the sale of all or substantially all of its assets or the merger or
consolidation of Parkway, that would increase the amount of Parkway's
indebtedness or substantially reduce or eliminate Parkway's assets, which may
have an adverse effect on Parkway's ability to service its indebtedness,
including the Debt Securities. In addition, restrictions on ownership and
transfers of Common Stock and Preferred Stock are designed to preserve its
status as a REIT and, therefore, may act to prevent or hinder a change of
control. See "Description of Common Stock--Restrictions on Transfer" and
"Description of Preferred Stock--Restrictions on Ownership." Reference is made
to the applicable Prospectus Supplement for information with respect to any
deletions from, modifications of or additions to the events of default or
covenants that are described below, including any addition of a covenant or
other provision providing event risk or similar protection.
Reference is made to "--Certain Covenants" below and to the
description of any additional covenants with respect to a series of Debt
Securities in the applicable Prospectus Supplement. Except as otherwise
described in the applicable Prospectus Supplement, compliance with such
covenants generally may not be waived with respect to a series of Debt
Securities by the Board of Directors of Parkway or by the Trustee unless the
Holders of at least a majority in principal amount of all outstanding Debt
Securities of such series consent to such waiver, except to the extent that the
defeasance and covenant defeasance provisions of the Indenture described under
"--Discharge, Defeasance and Covenant Defeasance" below apply to such series of
Debt Securities. See "--Modification of the Indenture."
Debt Securities may be denominated and payable in a foreign
currency or units of two or more foreign currencies or a composite currency or
currencies. As more fully described in the applicable Prospectus Supplement,
awards or judgments by a court in the United States in connection with a claim
with respect to any Debt Securities denominated other than in United States
dollars (or a judgment denominated other than in United States dollars in
respect of such claims) may be converted into United States dollars at a rate of
exchange prevailing on a date determined pursuant to applicable law.
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DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus
Supplement, the Debt Securities of any series which are registered securities,
other than registered securities issued in global form (which may be of any
denomination), shall be issuable in denominations of $1,000 and any integral
multiple thereof and the Debt Securities which are bearer securities, other than
bearer securities issued in global form (which may be of any denomination),
shall be issuable in denominations of $5,000.
Unless otherwise described in the applicable Prospectus
Supplement, the principal of (and premium, if any) and interest on any series of
Debt Securities will be payable at the corporate trust office of the Trustee,
provided that, at the option of Parkway, payment of interest may be made by
check mailed to the address of the Person entitled thereto as it appears in the
applicable Security Register or by wire transfer of funds to such Person at an
account maintained within the United States.
Unless otherwise described in the applicable Prospectus
Supplement, any interest not punctually paid or duly provided for on any
Interest Payment Date with respect to a Debt Security ("Defaulted Interest")
will forthwith cease to be payable to the Holder on the applicable Regular
Record Date and may either be paid to the Person in whose name such Debt
Security is registered at the close of business on a special record date (the
"Special Record Date") for the payment of such Defaulted Interest to be fixed by
the Trustee, notice whereof shall be given to the Holder of such Debt Security
not less than 10 days prior to such Special Record Date, or may be paid at any
time in any other lawful manner, all as more completely described in the
Indenture.
Subject to certain limitations imposed upon Debt Securities
issued in book entry form, the Debt Securities of any series will be
exchangeable for other Debt Securities of the same series and of a like
aggregate principal amount and tenor of different authorized denominations upon
surrender of such Debt Securities at the corporate trust office of the Trustee
referred to above. In addition, subject to certain limitations imposed upon Debt
Securities issued in book entry form, the Debt Securities of any series may be
surrendered for registration of transfer thereof at the corporate trust office
of the Trustee referred to above. Every Debt Security surrendered for
registration of transfer or exchange shall be duly endorsed or accompanied by a
written instrument of transfer. No service charge will be made for any
registration of transfer or exchange of any Debt Securities, but the Trustee or
Parkway may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. If the applicable
Prospectus Supplement refers to any transfer agent (in addition to the Trustee)
initially designated by Parkway with respect to any series of Debt Securities,
Parkway may at any time rescind the designation of any such transfer agent or
approve a change in the location through which any such transfer agent acts,
except that Parkway will be required to maintain a transfer agent in each place
of payment for such series.
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Parkway may at any time designate additional transfer agents with respect to any
series of Debt Securities.
Neither Parkway nor the Trustee shall be required (i) to
issue, register the transfer of or exchange any Debt Security if such Debt
Security may be among those selected for redemption during a period beginning at
the opening of business 15 days before selection of the Debt Securities to be
redeemed and ending at the close of business on (a) if such Debt Securities are
issuable only as Registered Securities, the day of the mailing of the relevant
notice of redemption and (b) if such Debt Securities are issuable as Bearer
Securities, the day of the first publication of the relevant notice of
redemption or, if such Debt Securities are also issuable as Registered
Securities and there is no publication, the mailing of the relevant notice of
redemption; or (ii) to register the transfer of or exchange any Registered
Security so selected for redemption in whole or in part, except, in the case of
any Registered Security to be redeemed in part, the portion thereof not to be
redeemed; or (iii) to exchange any Bearer Security so selected for redemption
except that such a Bearer Security may be exchanged for a Registered Security of
that series and like tenor, provided that such Registered Security shall be
simultaneously surrendered for redemption; or (iv) to issue, register the
transfer of or exchange any Debt Security which has been surrendered for
repayment at the option of the Holder, except the portion, if any, of such Debt
Security not to be so repaid.
MERGER, CONSOLIDATION OR SALE
Parkway may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into, any other entity,
provided that (i) Parkway shall be the continuing entity or the successor entity
(if other than Parkway) formed by or resulting from any such consolidation or
merger or which shall have received the transfer of such assets shall expressly
assume payment of the principal of (and premium, if any) and interest on all the
Debt Securities and the due and punctual performance and observance of all of
the covenants and conditions contained in the Indenture; (ii) immediately after
giving effect to such transaction and treating any indebtedness which becomes an
obligation of Parkway or any Subsidiary as a result thereof as having been
incurred by Parkway or such Subsidiary at the time of such transaction, no Event
of Default under the Indenture, and no event which, after notice of the lapse of
time, or both, would become such an Event of Default, shall have occurred and be
continuing; and (iii) an officer's certificate and legal opinion covering such
conditions shall be delivered to the Trustee.
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CERTAIN COVENANTS
Existence. Except as permitted under "--Merger, Consolidation
or Sale" above, Parkway is required to do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, rights
and franchises; provided, however, that Parkway shall not be required to
preserve any right or franchise if it determines that the preservation thereof
is no longer desirable in the conduct of its business and that the loss thereof
is not disadvantageous in any material respect to the Holders of the Debt
Securities.
Maintenance of Properties. Parkway is required to cause all of
its material properties used or useful in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and to cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of Parkway may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided, however, that Parkway and its Subsidiaries shall not be
prevented from selling or otherwise disposing for value their respective
properties in the ordinary course of business.
Insurance. Parkway is required to, and is required to cause
each of its Subsidiaries to, keep all of its insurable properties insured
against loss or damage at least equal to their then full insurable value with
financially sound and reputable insurance companies.
Payment of Taxes and Other Claims. Parkway is required to pay
or discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon it or any Subsidiary or upon its income, profits or property or
that of any Subsidiary; and (ii) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of
Parkway or any Subsidiary; provided, however, that Parkway shall not be required
to pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings.
Provision of Financial Information. The Holders of Debt
Securities will be provided with copies of the annual reports and quarterly
reports of Parkway. Whether or not Parkway is subject to Sections 13 or 15(d) of
the Exchange Act and for so long as any Debt Securities are outstanding, Parkway
will, to the extent permitted under the Exchange Act, be required to file with
the Commission the annual reports, quarterly reports and other documents which
Parkway would have been required to file with the Commission pursuant to such
Sections 13 or 15(d) (the "Financial Statements") if Parkway were so subject,
such documents to be filed with the Commission on or prior to the respective
dates (the "Required Filing Dates") by which Parkway would have been required so
to file such documents if Parkway were so subject. Parkway will also in any
event (i) within 15 days of each Required Filing Date (a) transmit by
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mail to all Holders of Debt Securities, as their names and addresses appear in
the Security Register, without cost to such Holders, copies of the annual
reports and quarterly reports which Parkway would have been required to file
with the Commission pursuant to Sections 13 or 15(d) of the Exchange Act if
Parkway were subject to such sections and (b) file with the Trustee copies of
the annual reports, quarterly reports and other documents which Parkway would
have been required to file with the Commission pursuant to Sections 13 or 15(d)
of the Exchange Act if Parkway were subject to such sections and (ii) if filing
such documents by Parkway with the Commission is not permitted under the
Exchange Act, promptly upon written request and payment of the reasonable cost
of duplication and delivery, supply copies of such documents to any prospective
Holder.
Additional Covenants. Any additional or different covenants of
Parkway with respect to any series of Debt Securities will be set forth in the
Prospectus Supplement relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that the following events are "Events
of Default" with respect to any series of Debt Securities issued thereunder: (i)
default for 30 days in the payment of any installment of interest on any Debt
Security of such series; (ii) default in the payment of the principal of (or
premium, if any, on) any Debt Security of such series at its maturity; (iii)
default in making any sinking fund payment as required for any Debt Security of
such series; (iv) default in the performance of any other covenant of Parkway
contained in the Indenture (other than a covenant added to the Indenture solely
for the benefit of a series of Debt Securities issued thereunder other than such
series), such default having continued for 60 days after written notice as
provided in the Indenture; (v) default in the payment of an aggregate principal
amount exceeding $1,000,000 of any evidence of recourse indebtedness of Parkway
or any mortgage, indenture or other instrument under which such indebtedness is
issued or by which such indebtedness is secured, such default having occurred
after the expiration of any applicable grace period and having resulted in the
acceleration of the maturity of such indebtedness, but only if such indebtedness
is not discharged or such acceleration is not rescinded or annulled; (vi)
certain events of bankruptcy, insolvency or reorganization, or court appointment
of a receiver, liquidator or trustee of Parkway or any Significant Subsidiary,
as defined below, or any of their respective property; and (vii) any other Event
of Default provided with respect to a particular series of Debt Securities. The
term "Significant Subsidiary" means each significant subsidiary (as defined in
Regulation S-X promulgated under the Securities Act of 1933, as amended (the
"Securities Act")) of Parkway.
If an Event of Default under the Indenture with respect to
Debt Securities of any series at the time outstanding occurs and is continuing,
then in every such case the Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Debt Securities of that
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series may declare the principal amount (or, if the Debt Securities of that
series are Original Issue Discount Securities or Indexed Securities, such
portion of the principal amount as may be specified in the terms thereof) of all
of the Debt Securities of that series to be due and payable immediately by
written notice thereof to Parkway (and to the Trustee if given by the Holders),
provided that in the case of an Event of Default described under clause (vi) of
the preceding paragraph, acceleration is automatic. However, at any time after
such a declaration of acceleration with respect to Debt Securities of such
series (or of all Debt Securities then outstanding under the Indenture, as the
case may be) has been made, but before a judgment or decree for payment of the
money due has been obtained by the Trustee, the Holders of not less than a
majority in principal amount of Outstanding Debt Securities of such series (or
of all Debt Securities then outstanding under the Indenture, as the case may be)
may rescind and annul such declaration and its consequences if (i) Parkway shall
have deposited with the applicable Trustee all required payments of the
principal of (and premium, if any) and interest on the Debt Securities of such
series (or of all Debt Securities then outstanding under the Indenture, as the
case may be), plus certain fees, expenses, disbursements and advances of the
Trustee and (ii) all Events of Default, other than the nonpayment of accelerated
principal of (or specified portion thereof), or premium (if any) or interest on
the Debt Securities of such series (or of all Debt Securities then outstanding
under the Indenture, as the case may be) have been cured or waived as provided
in the Indenture. The Indenture also provides that the Holders of not less than
a majority in principal amount of the Outstanding Debt Securities of any series
(or of all Debt Securities then outstanding under the Indenture, as the case may
be) may waive any past default with respect to such series and its consequences,
except a default (a) in the payment of the principal of (or premium, if any) or
interest on any Debt Security of such series or (b) in respect of a covenant or
provision contained in the Indenture that cannot be modified or amended without
the consent of the Holder of each Outstanding Debt Security affected thereby.
The Trustee will be required to give notice to the Holders of
Debt Securities within 90 days of a default under the Indenture unless such
default has been cured or waived; provided, however, that the Trustee may
withhold notice to the Holders of any series of Debt Securities of any default
with respect to such series (except a default in the payment of the principal of
(or premium, if any) or interest on any Debt Security of such series or in the
payment of any sinking fund installment in respect of any Debt Security of such
series) if specified Responsible Officers of the Trustee consider such
withholding to be in the interest of such Holders.
The Indenture provides that no Holders of Debt Securities of
any series may institute any proceedings, judicial or otherwise, with respect to
the Indenture or for any remedy thereunder, except in the case of failure of the
Trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an Event of Default from the Holders of not
less than 25% in principal amount of the Outstanding Debt Securities of such
series, as well as an offer of indemnity reasonably satisfactory to it. This
provision will not prevent, however, any holder of Debt Securities from
instituting suit for the enforcement of payment of the
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principal of (and premium, if any) and interest on such Debt Securities at the
respective due dates thereof.
Subject to provisions in the Indenture relating to its duties
in case of default, the Trustee is under no obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any Holders
of any series of Debt Securities then outstanding under the Indenture, unless
such Holders shall have offered to the Trustee thereunder reasonable security or
indemnity. The Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series (or of all Debt Securities then
outstanding under the Indenture, as the case may be) shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or of exercising any trust or power conferred upon the
Trustee. However, the Trustee may refuse to follow any direction which is in
conflict with any law or the Indenture, which may involve the Trustee in
personal liability or which may be unduly prejudicial to the holders of Debt
Securities of such series not joining therein.
Within 120 days after the close of each fiscal year, Parkway
must deliver to the Trustee a certificate, signed by one of several specified
officers of Parkway, stating whether or not such officer has knowledge of any
default under the Indenture and, if so, specifying each such default and the
nature and status thereof.
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture will be
permitted to be made only with the consent of the Holders of not less than a
majority in principal amount of all Outstanding Debt Securities or series of
Outstanding Debt Securities which are affected by such modification or amendment
(voting as one class); provided, however, that no such modification or amendment
may, without the consent of the Holders of each such Debt Security affected
thereby, (i) change the Stated Maturity of the principal of, or premium (if any)
or any installment of interest on, any such Debt Security; (ii) reduce the
principal amount of, or the rate or amount of interest on, or any premium
payable on redemption of, any such Debt Security, or reduce the amount of
principal of an Original Issue Discount Security that would be due and payable
upon declaration of acceleration of the maturity thereof or would be provable in
bankruptcy, or adversely affect any right of repayment of the holder of any such
Debt Security; (iii) change the place of payment, or the coin or currency, for
payment of principal of, premium, if any, or interest on any such Debt Security;
(iv) impair the right to institute suit for the enforcement of any payment on or
with respect to any such Debt Security; (v) reduce the above stated percentage
of outstanding Debt Securities of any series necessary to modify or amend the
Indenture, to waive compliance with certain provisions thereof or certain
defaults and consequences thereunder or to reduce the quorum or voting
requirements set forth in the Indenture; or (vi) modify any of the foregoing
provisions or any of the provisions relating to the waiver of certain past
defaults
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or certain covenants, except to increase the required percentage to effect such
action or to provide that certain other provisions may not be modified or waived
without the consent of the Holders of such Debt Security.
The Indenture provides that the Holders of not less than a
majority in principal amount of a series of Outstanding Debt Securities have the
right to waive compliance by Parkway with certain covenants relating to such
series of Debt Securities in the Indenture.
Modifications and amendments of the Indenture will be
permitted to be made by Parkway and the Trustee without the consent of any
Holder of Debt Securities for any of the following purposes: (i) to evidence the
succession of another Person to Parkway as obligor under the Indenture; (ii) to
add to the covenants of Parkway for the benefit of the Holders of all or any
series of Debt Securities or to surrender any right or power conferred upon
Parkway in the Indenture; (iii) to add Events of Default for the benefit of the
Holders of all or any series of Debt Securities; (iv) to add or change any
provisions of the Indenture to facilitate the issuance of, or to liberalize
certain terms of, Debt Securities in bearer form, or to permit or facilitate the
issuance of Debt Securities in uncertificated form, provided, that such action
shall not adversely affect the interests of the Holders of the Debt Securities
of any series in any material respect; (v) to change or eliminate any provisions
of the Indenture, provided that any such change or elimination shall become
effective only when there are no Debt Securities Outstanding of any series
created prior thereto which are entitled to the benefit of such provision; (vi)
to secure the Debt Securities; (vii) to establish the form or terms of Debt
Securities of any series; (viii) to provide for the acceptance of appointment by
a successor Trustee or facilitate the administration of the trusts under the
Indenture by more than one Trustee; (ix) to cure any ambiguity, defect or
inconsistency in the Indenture, provided that such action shall not adversely
affect the interests of Holders of Debt Securities of any series in any material
respect; or (x) to supplement any of the provisions of the Indenture to the
extent necessary to permit or facilitate defeasance and discharge of any series
of such Debt Securities, provided that such action shall not adversely affect
the interests of the Holders of the Debt Securities of any series in any
material respect.
The Indenture provides that in determining whether the Holders
of the requisite principal amount of Outstanding Debt Securities of a series
have given any request, demand, authorization, direction, notice, consent or
waiver thereunder or whether a quorum is present at a meeting of Holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security that
shall be deemed to be outstanding shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof; (ii) the principal amount
of a Debt Security denominated in a foreign currency that shall be deemed
outstanding shall be the U.S. dollar equivalent, determined on the issue date
for such Debt Security, of the principal amount (or, in the case of an Original
Issue Discount Security, the U.S. dollar equivalent on the issue date of such
Debt Security of the amount determined as provided in (i) above); (iii) the
principal amount of an Indexed Security that shall be deemed outstanding shall
be the principal face amount of such
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Indexed Security at original issuance, unless otherwise provided with respect to
such Indexed Security pursuant to the Indenture; and (iv) Debt Securities owned
by Parkway or any other obligor upon the Debt Securities or any affiliate to
Parkway or of such other obligor shall be disregarded.
The Indenture contains provisions for convening meetings of
the Holders of Debt Securities of a series. A meeting will be permitted to be
called at any time by the Trustee, and also, upon request, by Parkway or the
holders of at least 25% in principal amount of the Outstanding Debt Securities
of such series, in any such case upon notice given as provided in the Indenture.
Except for any consent that must be given by the Holder of each Debt Security
affected by certain modifications and amendments of the Indenture, any
resolution presented at a meeting or adjourned meeting duly reconvened at which
a quorum is present will be permitted to be adopted by the affirmative vote of
the Holders of a majority in principal amount of the Outstanding Debt Securities
of that series; provided, however, that, except as referred to above, any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by the
Holders of a specified percentage, which is less than a majority, in principal
amount of the Outstanding Debt Securities of a series may be adopted at a
meeting or adjourned meeting duly reconvened at which a quorum is present by the
affirmative vote of the Holders of such specified percentage in principal amount
of the Outstanding Debt Securities of that series. Any resolution passed or
decision taken at any meeting of Holders of Debt Securities of any series duly
held in accordance with the Indenture will be binding on all Holders of Debt
Securities of that series. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be Persons holding or
representing a majority in principal amount of the Outstanding Debt Securities
of a series; provided, however, that if any action is to be taken at such
meeting with respect to a consent or wavier which may be given by the Holders of
not less than a specified percentage in principal amount of the Outstanding Debt
Securities of a series, the Persons holding or representing such specified
percentage in principal amount of the Outstanding Debt Securities of such series
will constitute a quorum.
Notwithstanding the foregoing provisions, if any action is to
be taken at a meeting of Holders of Debt Securities of any series with respect
to any request, demand, authorization, direction, notice, consent, waiver or
other action that the Indenture expressly provides may be made, given or taken
by the Holders of a specified percentage in principal amount of all Outstanding
Debt Securities affected thereby, or of the Holders of such series and one or
more additional series: (i) there shall be no minimum quorum requirement for
such meeting and (ii) the principal amount of the Outstanding Debt Securities of
such series that vote in favor of such request, demand, authorization,
direction, notice, consent, waiver or other action shall be taken into account
in determining whether such request, demand, authorization, direction, notice,
consent, waiver or other action has been made, given or taken under the
Indenture.
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DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Parkway may discharge certain obligations to Holders of any
series of Debt Securities that have not already been delivered to the Trustee
for cancellation and that either have become due and payable or will become due
and payable within one year (or scheduled for redemption within one year) by
irrevocably depositing with the Trustee, in trust, funds in such currency or
currencies, currency unit or units or composite currency or currencies in which
such Debt Securities are payable in an amount sufficient to pay the entire
indebtedness on such Debt Securities in respect of principal (and premium, if
any) and interest to the date of such deposit (if such Debt Securities have
become due and payable) or to the Stated Maturity or Redemption Date, as the
case may be.
The Indenture provides that, if the provisions of Article
Fourteen are made applicable to the Debt Securities of or within any series
pursuant to the Indenture, Parkway may elect either (i) to defease and be
discharged from any and all obligations with respect to such Debt Securities
(except for the obligation to pay additional amounts, if any, upon the
occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Debt Securities and the obligations to register the
transfer or exchange of such Debt Securities, to replace temporary or mutilated,
destroyed, lost or stolen Debt Securities, to maintain an office or agency in
respect of such Debt Securities and to hold moneys for payment in trust)
("defeasance") or (ii) to be released from its obligations with respect to such
Debt Securities under the Indenture (including the restrictions described under
"--Certain Covenants" above) and its obligations with respect to any other
covenant, and any omission to comply with such obligations shall not constitute
a default or an Event of Default with respect to such Debt Securities ("covenant
defeasance"), in either case upon the irrevocable deposit by Parkway with the
Trustee, in trust, of an amount, in such currency or currencies, currency unit
or units or composite currency or currencies in which such Debt Securities are
payable at Stated Maturity, or Government Obligations (as defined below), or
both, applicable to such Debt Securities which through the scheduled payment of
principal and interest in accordance with their terms will provide money in an
amount sufficient to pay the principal of (and premium, if any) and interest on
such Debt Securities, and any mandatory sinking fund or analogous payments
thereon, on the scheduled due dates therefor.
Such a trust will only be permitted to be established if,
among other things, Parkway has delivered to the Trustee an Opinion of Counsel
(as specified in the Indenture) to the effect that the Holders of such Debt
Securities will not recognize income, gain or loss for U.S. federal income tax
purposes as a result of such defeasance or covenant defeasance and will be
subject to U.S. federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance or covenant
defeasance had not occurred, and such Opinion of Counsel, in the case of
defeasance, must refer to and be based upon a ruling of the Internal Revenue
Service (the "Service") or a change in applicable United States Federal income
tax law occurring after the date of the Indenture.
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"Government Obligations" means securities which are (i) direct
obligations of the United States of America or the government which issued the
foreign currency in which the Debt Securities of a particular series are
payable, for the payment of which its full faith and credit is pledged or (ii)
obligations of a person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such government which issued
the foreign currency in which the Debt Securities of such series are payable,
the payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America or such other government, which, in
either case, are not callable or redeemable at the option of the issuer thereof,
and shall also include a depository receipt issued by a bank or trust company as
custodian with respect to any such Government Obligation or a specific payment
of interest on or principal of any such Government Obligations held by such
custodian for the account of the holder of a depository receipt, provided that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the Government Obligation or
the specific payment of interest on or principal of the Government Obligation
evidenced by such depository receipt.
Unless otherwise provided in the applicable Prospectus
Supplement, if after Parkway has deposited funds andor Government Obligations
to effect defeasance or covenant defeasance with respect to Debt Securities of
any series: (i) the Holder of a Debt Security of such series is entitled to, and
does, elect pursuant to the Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security; or
(ii) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security shall be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium, if any) and interest on such Debt Security as they become due out
of the proceeds yielded by converting the amount so deposited in respect of such
Debt Security into the currency, currency unit or composite currency in which
such Debt Security becomes payable as a result of such election or such
Conversion Event based on the applicable market exchange rate. "Conversion
Event" means the cessation of use of (i) a currency, currency unit or composite
currency both by the government of the country which issued such currency and
for the settlement of transactions by a central bank or other public
institutions of or within the international banking community; (ii) the European
Currency Unit as defined and revised from time to time by the Council of the
European Community ("ECU"), both within the European Monetary System and for the
settlement of transactions by public institutions of or within the European
Community; or (iii) any currency unit or composite currency other than the ECU
for the purposes for which it was established.
Unless otherwise provided in the applicable Prospectus
Supplement, all payments of principal of (and premium, if any) and interest on
any Debt Security that is payable in a
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foreign currency that ceases to be used by its government of issuance shall be
made in U.S. dollars.
In the event Parkway effects covenant defeasance with respect
to any Debt Securities and such Debt Securities are declared due and payable
because of the occurrence of any Event of Default other than the Event of
Default described in clause (iv) under "--Events of Default, Notice and Waiver"
or described in clause (vii) under "--Events of Default, Notice and Waiver" with
respect to any other covenant as to which there has been covenant defeasance,
the amount in such currency, currency unit or composite currency in which such
Debt Securities are payable, and Government Obligations on deposit with the
Trustee, will be sufficient to pay amounts due on such Debt Securities at the
time of their Stated Maturity but may not be sufficient to pay amounts due on
such Debt Securities at the time of the acceleration resulting from such event
of Default. However, Parkway would remain liable to make payment of such amounts
due at the time of acceleration.
The applicable Prospectus Supplement may further describe the
provisions, if any, permitting such defeasance or covenant defeasance, including
any modification to the provisions described above, with respect to the Debt
Securities of or within a particular series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any of the Debt
Securities are convertible into capital stock of or equity interest in Parkway
will be set forth in the applicable Prospectus Supplement relating thereto. Such
terms will include the amount of capital stock of or equity interest in Parkway
into which the Debt Securities are convertible, the conversion price (or manner
of calculation thereof), the conversion period, provisions as to whether
conversions will be at the option of the holders of the Debt Securities or
Parkway, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of such Debt
Securities and any restrictions on conversion, including restrictions directed
at maintaining Parkway's REIT status.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in
part in the form of one or more global securities (the "Global Securities") that
will be deposited with, or on behalf of, a depositary (the "Depositary")
identified in the applicable Prospectus Supplement relating to such series.
Global Securities may be issued in either registered or bearer form and in
either temporary or permanent form. The specific terms of the depositary
arrangement with respect to a series of Debt Securities will be described in the
applicable Prospectus Supplement relating to such series.
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DESCRIPTION OF PREFERRED STOCK
GENERAL
Parkway is authorized to issue Preferred Stock. The Board of
Directors of Parkway may classify or reclassify any unissued shares of its
capital stock from time to time by setting, altering or voiding the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends or distributions, qualifications, or terms or conditions of redemption
of such shares. As of June 12, 1997 there was no Preferred Stock outstanding.
The following description of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which any
Prospectus Supplement may relate. The statements below describing the Preferred
Stock are in all respects subject to and qualified in their entirety by
reference to the applicable provisions of the Charter and Bylaws and any
applicable articles supplementing the Charter designating terms of a series of
Preferred Stock (a "Designating Amendment").
TERMS
Subject to the limitations prescribed by the Charter, the
Board of Directors is authorized to fix the number of shares constituting each
series of Preferred Stock and the preference, conversion or other rights, voting
powers, restrictions, limitation as to dividends, qualifications, or terms or
conditions of redemption of the Preferred Stock. The Preferred Stock will, when
issued, be fully paid and nonassessable by Parkway (except as described under
"--Stockholder Liability" below) and will have no preemptive rights.
Reference is made to the Prospectus Supplement relating to the
Preferred Stock offered thereby for specific terms thereof, including:
(i) The title and stated value of such Preferred
Stock;
(ii) The number of such shares of Preferred Stock
offered, the liquidation preference per share and the offering
price of such Preferred Stock;
(iii) The dividend rate(s), period(s) andor payment date(s)
or method(s) of calculation thereof applicable to such Preferred Stock;
(iv) The date from which dividends on such Preferred
Stock shall accumulate, if applicable;
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(v) The procedures for any auction or remarketing, if
any, for such Preferred Stock;
(vi) The provision for a sinking fund, if any, for such
Preferred Stock;
(vii) The provision for redemption, if applicable,
of such Preferred Stock;
(viii) Any listing of such Preferred Stock on any
securities exchange;
(ix) The terms and conditions, if applicable, upon which
such Preferred Stock will be convertible into Common Stock, including the
conversion price (or manner of calculation thereof);
(x) Whether interests in such Preferred Stock will be
represented by Depositary Shares;
(xi) Any other specific terms, preferences, rights,
limitations or restrictions of such Preferred Stock;
(xii) A discussion of U.S. federal income tax
considerations applicable to such Preferred Stock;
(xiii) The relative ranking of preferences of such Preferred
Stock as to dividend rights and rights upon liquidation, dissolution or winding
up of the affairs of Parkway;
(xiv) Any limitations on issuance of any series of
Preferred Stock ranking senior to or on a parity with such series of Preferred
Stock as to dividend rights and rights upon liquidation, dissolution or winding
up of the affairs of Parkway; and
(xv) Any limitations on direct or beneficial ownership
and restrictions on transfer, in each case as may be appropriate to preserve the
status of Parkway as a REIT.
RANK
Unless otherwise specified in the Prospectus Supplement, the
Preferred Stock, will, with respect to dividend rights and rights upon
liquidation, dissolution or winding up of Parkway, rank (i) senior to all
classes or series of Common Stock of Parkway, and to all equity securities
ranking junior to such Preferred Stock; (ii) on a parity with all equity
securities issued by Parkway the terms of which specifically provide that such
equity securities rank on a parity with the Preferred Stock; and (iii) junior to
all equity securities issued by Parkway the terms of
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which specifically provide that such equity securities rank senior to the
Preferred Stock. The term "equity securities" does not include debt securities.
DIVIDENDS
Holders of Preferred Stock of each series will be entitled to
receive, when, as and if declared by the Board of Directors of Parkway, out of
assets of Parkway legally available for payment, cash dividends at such rates
and on such dates as will be set forth in the applicable Prospectus Supplement.
Each such dividend shall be payable to holders of record as they appear on the
share transfer books of Parkway on such record dates as shall be fixed by the
Board of Directors of Parkway.
Dividends on any series of Preferred Stock may be cumulative
or non-cumulative, as provided in the applicable Prospectus Supplement.
Dividends, if cumulative, will be cumulative from and after the date set forth
in the applicable Prospectus Supplement. If the Board of Directors of Parkway
fails to declare a dividend payable on a dividend payment date on any series of
the Preferred Stock for which dividends are non-cumulative, then the holders of
such series of the Preferred Stock will have no right to receive a dividend in
respect of the dividend period ending on such dividend payment date, and Parkway
will have no obligation to pay the dividend accrued for such period, whether or
not dividends on such series are declared payable on any future dividend payment
date.
If Preferred Stock of any series are outstanding, no dividends
will be declared or paid or set apart for payment on any capital stock of
Parkway of any other series ranking, as to dividends, on a parity with or junior
to the Preferred Stock of such series for any period unless (i) if such series
of Preferred Stock has a cumulative dividend, full cumulative dividends have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for such payment on the Preferred Stock of
such series for all past dividend periods and the then current dividend period
or (ii) if such series of Preferred Stock does not have a cumulative dividend,
full dividends for the then current dividend period have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for such payment on the Preferred Stock of such
series. When dividends are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon Preferred Stock of any series and the shares
of any other series of Preferred Stock ranking on a parity as to dividends with
the Preferred Stock of such series, all dividends declared upon Preferred Stock
of such series and any other series of Preferred Stock ranking on a parity as to
dividends with such Preferred Stock shall be declared pro rata so that the
amount of dividends declared per share of Preferred Stock of such series and
such other series of Preferred Stock shall in all cases bear to each other the
same ratio that accrued dividends per share on the Preferred Stock of such
series (which shall not include any accumulation in respect of unpaid dividends
for prior dividend periods if such Preferred Stock do not have a cumulative
dividend)
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and such other series of Preferred Stock bear to each other. No interest, or sum
of money in lieu of interest, shall be payable in respect of any dividend
payment or payments on Preferred Stock of such series which may be in arrears.
Except as provided in the immediately preceding paragraph,
unless (i) if such series of Preferred Stock has a cumulative dividend, full
cumulative dividends on the Preferred Stock of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past dividend periods and the then
current dividend period; and (ii) if such series of Preferred Stock does not
have a cumulative dividend, full dividends on the Preferred Stock of such series
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for the then current
dividend period, no dividends (other than in shares of Common Stock or other
capital shares ranking junior to the Preferred Stock of such series as to
dividends and upon liquidation) shall be declared or paid or set aside for
payment or other distribution shall be declared or made upon the Common Stock,
or any other capital shares of Parkway ranking junior to or on a parity with the
Preferred Stock of such series as to dividends or upon liquidation, nor shall
any shares of Common Stock, or any other capital shares of Parkway ranking
junior to or on a parity with the Preferred Stock of such series as to dividends
or upon liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund for
the redemption of any such shares) by Parkway (except by conversion into or
exchange for other capital shares of Parkway ranking junior to the Preferred
Stock of such series as to dividends and upon liquidation). Any dividend payment
made on a series of Preferred Stock shall first be credited against the earliest
accrued but unpaid dividend due with respect to shares of such series which
remain payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the
Preferred Stock will be subject to mandatory redemption or redemption at the
option of Parkway, as a whole or in part, in each case upon the terms, at the
times and at the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred
Stock that is subject to mandatory redemption will specify the number of such
shares of Preferred Stock that shall be redeemed by Parkway in each year
commencing after a date to be specified, at a redemption price per share to be
specified, together with an amount equal to all accrued and unpaid dividends
thereon (which shall not, if such shares of Preferred Stock do not have a
cumulative dividend, include any accumulation in respect of unpaid dividends for
prior dividend periods) to the date of redemption. The redemption price may be
payable in cash or other property, as specified in the applicable Prospectus
Supplement. If the redemption price for Preferred Stock
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of any series is payable only from the net proceeds of the issuance of capital
shares of Parkway, the terms of such Preferred Stock may provide that, if no
such capital shares have been issued or to the extent the net proceeds from any
issuance are insufficient to pay in full the aggregate redemption price then
due, such Preferred Stock shall automatically and mandatorily be converted into
the applicable capital shares of Parkway pursuant to conversion provisions
specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if such series of
Preferred Stock has a cumulative dividend, full cumulative dividends on all
shares of any series of Preferred Stock have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment for all past dividend periods and the then current dividend
period; and (ii) if such series of Preferred Stock does not have a cumulative
dividend, full dividends of the Preferred Stock of any series have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for the then current dividend period, no
shares of any series of Preferred Stock shall be redeemed unless all outstanding
Preferred Stock of such series is simultaneously redeemed; provided, however,
that the foregoing shall not prevent the purchase or acquisition of Preferred
Stock of such series to preserve the REIT status of Parkway or pursuant to a
purchase or exchange offer made on the same terms to holders of all outstanding
Preferred Stock of such series. In addition, unless (i) if such series of
Preferred Stock has a cumulative dividend, full cumulative dividends on all
outstanding shares of any series of Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past dividend periods and the then
current dividend period; and (ii) if such series of Preferred Stock does not
have a cumulative dividend, full dividends on the Preferred Stock of any series
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for the then current
dividend period, Parkway shall not purchase or otherwise acquire directly or
indirectly any Preferred Stock of such series (except by conversion into or
exchange for capital stock of Parkway ranking junior to the Preferred Stock of
such series as to dividends and upon liquidation); provided, however, that the
foregoing shall not prevent the purchase or acquisition of Preferred Stock of
such series to preserve the REIT status of Parkway or pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding Preferred
Stock of such series.
If fewer than all of the outstanding Preferred Stock of any
series are to be redeemed, the number of shares to be redeemed will be
determined by Parkway and such shares may be redeemed pro rata from the holders
of record of such shares in proportion to the number of such shares held or for
which redemption is requested by such holder (with adjustments to avoid
redemption of fractional shares) or by lot in a manner determined by Parkway.
Notice of redemption will be mailed at least 30 days but not
more than 60 days before the redemption date to each holder of record of
Preferred Stock of any series to be redeemed at the address shown on the share
transfer books of Parkway. Each notice shall state:
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(i) the redemption date; (ii) the number of shares and series of the Preferred
Stock to be redeemed; (iii) the redemption price; (iv) the place or places where
certificates for such Preferred Stock are to be surrendered for payment of the
redemption price; (v) that dividends on the shares to be redeemed will cease to
accrue on such redemption date; and (vi) the date upon which the holder's
conversion rights, if any, as to such shares shall terminate. If fewer than all
the Preferred Stock of any series are to be redeemed, the notice mailed to each
such holder thereof shall also specify the number of Preferred Stock to be
redeemed from each such holder. If notice of redemption of any Preferred Stock
has been given and if the funds necessary for such redemption have been set
aside by Parkway in trust for the benefit of the holders of any Preferred Stock
so called for redemption, then from and after the redemption date dividends will
cease to accrue on such Preferred Stock, and all rights of the holders of such
shares will terminate, except the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of Parkway, then, before any distribution or payment
shall be made to the holders of any shares of Common Stock or any other class or
series of capital shares of Parkway ranking junior to the Preferred Stock in the
distribution of assets upon any liquidation, dissolution or winding up of
Parkway, the holders of each series of Preferred Stock shall be entitled to
receive out of assets of Parkway legally available for distribution to
stockholders liquidating distributions in the amount of the liquidation
preference per share (set forth in the applicable Prospectus Supplement), plus
an amount equal to all dividends accrued and unpaid thereon (which shall not
include any accumulation in respect of unpaid dividends for prior dividend
periods if such Preferred Stock do not have a cumulative dividend). After
payment of the full amount of the liquidating distributions to which they are
entitled, the holders of Preferred Stock will have no right or claim to any of
the remaining assets of Parkway. In the event that, upon any such voluntary or
involuntary liquidation, dissolution or winding up, the available assets of
Parkway are insufficient to pay the amount of the liquidating distributions on
all outstanding shares of Preferred Stock and the corresponding amounts payable
on all shares of other classes or series of capital shares of Parkway ranking on
a parity with the Preferred Stock in the distribution of assets, then the
holders of the Preferred Stock and all other such classes or series of capital
shares shall share ratably in any such distribution of assets in proportion to
the full liquidating distributions to which they would otherwise be respectively
entitled.
If liquidating distributions shall have been made in full to
all holders of Preferred Stock, the remaining assets of Parkway shall be
distributed among the holders of any other classes or series of capital shares
ranking junior to the Preferred Stock upon liquidation, dissolution or winding
up, according to their respective rights and preferences and in each case
according to their respective number of shares. For such purposes, the
consolidation or merger of Parkway with or into any other corporation, trust or
entity, or the sale, lease or conveyance
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of all or substantially all of the property or business of Parkway, shall not be
deemed to constitute a liquidation, dissolution or winding up of Parkway.
VOTING RIGHTS
Holders of Preferred Stock will not have any voting rights,
except as set forth below or as otherwise from time to time required by law or
as indicated in the applicable Prospectus Supplement.
Whenever dividends on any Preferred Stock shall be in arrears
for six or more consecutive quarterly periods, the holders of such Preferred
Stock (voting separately as a class with all other series of Preferred Stock
upon which like voting rights have been conferred and are exercisable) will be
entitled to vote for the election of two additional trustees of Parkway at a
special meeting called by the holders of record of at least ten percent (10%) of
any series of Preferred Stock so in arrears (unless such request is received
less than 90 days before the date fixed for the next annual or special meeting
of the stockholders) or at the next annual meeting of stockholders, and at each
subsequent annual meeting until (i) if such series of Preferred Stock has a
cumulative dividend, all dividends accumulated on such Preferred Stock for the
past dividend periods and the then current dividend period shall have been fully
paid or declared and a sum sufficient for the payment thereof set aside for
payment or (ii) if such series of Preferred Stock does not have a cumulative
dividend, four consecutive quarterly dividends shall have been fully paid or
declared and a sum sufficient for the payment thereof set aside for payment. In
such case, the entire Board of Directors of Parkway will be increased by two
directors.
Unless provided otherwise for any series of Preferred Stock,
so long as any shares of Preferred Stock remain outstanding, Parkway will not,
without the affirmative vote or consent of the holders of at least two-thirds of
the shares of each series of Preferred Stock outstanding at the time, given in
person or by proxy, either in writing or at a meeting (such series voting
separately as a class), (i) authorize or create, or increase the authorized or
issued amount of, any class or series of capital stock ranking prior to such
series of Preferred Stock with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up or reclassify
any authorized capital stock of Parkway into such shares, or create, authorize
or issue any obligation or security convertible into or evidencing the right to
purchase any such shares; or (ii) amend, alter or repeal the provisions of the
Charter or the Designating Amendment for such series of Preferred Stock, whether
by merger, consolidation or otherwise (an "Event"), so as to materially and
adversely affect any right, preference, privilege or voting power of such series
of Preferred Stock or the holder thereof; provided, however, as to the
occurrence of any of the Events set forth in (ii) above, so long as the
Preferred Stock remains outstanding with the terms thereof materially unchanged,
taking into account that upon the occurrence of an Event, Parkway may not be the
surviving entity, the occurrence of any such Event shall not be deemed to
materially and adversely affect such rights, preferences, privileges
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or voting power of holders of Preferred Stock and provided further that (a) any
increase in the amount of the authorized Preferred Stock or the creation or
issuance of any other series of Preferred Stock; or (b) any increase in the
amount of authorized shares of such series or any other series of Preferred
Stock, in each case ranking on a parity with or junior to the Preferred Stock of
such series with respect to payment of dividends or the distribution of assets
upon liquidation, dissolution or winding up, shall not be deemed to materially
and adversely affect such rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior
to the time when the act with respect to which such vote would otherwise be
required shall be effected all outstanding shares of such series of Preferred
Stock shall have been redeemed or called for redemption and sufficient funds
shall have been deposited in trust to effect such redemption.
Under Maryland law, notwithstanding anything to the contrary
set forth above, holders of each series of Preferred Stock will be entitled to
vote upon any proposed amendment to the Charter if the amendment would change
the contract rights of such shares as expressly set forth in the Charter.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of
Preferred Stock are convertible into Common Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include the
number of shares of Common Stock into which the shares of Preferred Stock are
convertible, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversions will be at the option of
the holders of the Preferred Stock or Parkway, the events requiring an
adjustment of the conversion price and provisions affecting conversion in the
event of the redemption of such series of Preferred Stock.
STOCKHOLDER LIABILITY
As discussed below under "Description of Common
Stock--General," applicable Maryland law provides that no stockholder, including
holders of Preferred Stock, will be personally liable for the acts and
obligations of Parkway and that the funds and property of Parkway will be the
only recourse for such acts or obligations.
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RESTRICTIONS ON OWNERSHIP
As discussed below under "Description of Common
Stock--Restrictions on Transfer," for Parkway to qualify as a REIT under the
Code, not more than 50% in value of its outstanding capital shares may be owned,
directly or indirectly, by five or fewer individuals (as defined in the Code to
include certain entities) during the last half of a taxable year. To assist
Parkway in meeting this requirement, Parkway may take certain actions to limit
the beneficial ownership, directly or indirectly, by a single person of
Parkway's outstanding equity securities, including any Preferred Stock of
Parkway. Therefore, the Designating Amendment for each series of Preferred Stock
may contain provisions restricting the ownership and transfer of the Preferred
Stock. The applicable Prospectus Supplement will specify any additional
ownership limitation relating to a series of Preferred Stock.
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Preferred Stock will
be set forth in the applicable Prospectus Supplement.
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
Parkway may issue receipts ("Depositary Receipts") for
Depositary Shares, each of which will represent a fractional interest of a share
of a particular series of Preferred Stock, as specified in the applicable
Prospectus Supplement. Preferred Stock of each series represented by Depositary
Shares will be deposited under a separate deposit agreement (each, a "Deposit
Agreement") among Parkway, the depositary named therein (a "Preferred Stock
Depositary"), and the holders from time to time of the Depositary Receipts.
Subject to the terms of the applicable Deposit Agreement, each owner of a
Depositary Receipt will be entitled, in proportion to the fractional interest of
a share of a particular series of Preferred Stock represented by the Depositary
Shares evidenced by such Depositary Receipt, to all the rights and preferences
of the Preferred Stock represented by such Depositary Shares (including
dividend, voting, conversion, redemption and liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts
issued pursuant to the applicable Deposit Agreement. Immediately following the
issuance and delivery of the Preferred Stock by Parkway to a Preferred Stock
Depositary, Parkway will cause such Preferred Stock Depositary to issue, on
behalf of Parkway, the Depositary Receipts. Copies of the applicable form of
Deposit Agreement and Depositary Receipt may be obtained from Parkway
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upon request, and the statements made hereunder relating to Deposit Agreements
and the Depositary Receipts to be issued thereunder are summaries of certain
anticipated provisions thereof and do not purport to be complete and are subject
to, and qualified in their entirety by reference to, all of the provisions of
the applicable Deposit Agreement and related Depositary Receipts.
DIVIDENDS AND OTHER DISTRIBUTIONS
A Preferred Stock Depositary will be required to distribute
all cash dividends or other cash distributions received in respect of the
applicable Preferred Stock to the record holders of Depositary Receipts
evidencing the related Depositary Shares in proportion to the number of such
Depositary Receipts owned by such holders, subject to certain obligations of
holders to file proofs, certificates and other information and to pay certain
charges and expenses to such Preferred Stock Depositary.
In the event of a distribution other than in cash, a Preferred
Stock Depositary will be required to distribute property received by it to the
record holders of Depositary Receipts entitled thereto, subject to certain
obligations of holders to file proofs, certificates and other information and to
pay certain charges and expenses to such Preferred Stock Depositary, unless such
Preferred Stock Depositary determines that it is not feasible to make such
distribution, in which case such Preferred Stock Depositary may, with the
approval of Parkway, sell such property and distribute the net proceeds from
such sale to such holders.
No distribution will be made in respect of any Depositary
Share to the extent that it represents any Preferred Stock which have been
converted or exchanged.
WITHDRAWAL OF SHARES
Upon surrender of the Depositary Receipts at the corporate
trust office of the applicable Preferred Stock Depositary (unless the related
Depositary Shares have previously been called for redemption or converted), the
holders thereof will be entitled to delivery at such office, to or upon each
such holder's order, of the number of whole or fractional shares of the
applicable Preferred Stock and any money or other property represented by the
Depositary Shares evidenced by such Depositary Receipts. Holders of Depositary
Receipts will be entitled to receive whole or fractional shares of the related
Preferred Stock on the basis of the proportion of Preferred Stock represented by
each Depositary Share as specified in the applicable Prospectus Supplement, but
holders of such Preferred Stock will not thereafter be entitled to receive
Depositary Shares therefor. If the Depositary Receipts delivered by the holder
evidence a number of Depositary Shares in excess of the number of Depositary
Shares representing the number of Preferred Stock to be withdrawn, the
applicable Preferred Stock Depositary will be
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required to deliver to such holder at the same time a new Depositary Receipt
evidencing such excess number of Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES
Whenever Parkway redeems Preferred Stock held by a Preferred
Stock Depositary, such Preferred Stock Depositary will be required to redeem as
of the same redemption date the number of Depositary Shares representing the
Preferred Stock so redeemed, provided Parkway shall have paid in full to such
Preferred Stock Depositary the redemption price of the Preferred Stock to be
redeemed plus an amount equal to any accrued and unpaid dividends thereon to the
date fixed for redemption. The redemption price per Depositary Share will be
equal to the redemption price and any other amounts per share payable with
respect to the Preferred Stock. If fewer than all the Depositary Shares are to
be redeemed, the Depositary Shares to be redeemed will be selected pro rata (as
nearly as may be practicable without creating fractional Depositary Shares) or
by any other equitable method determined by Parkway that preserves the REIT
status of Parkway.
From and after the date fixed for redemption, all dividends in
respect of the Preferred Stock so called for redemption will cease to accrue,
the Depositary Shares so called for redemption will no longer be deemed to be
outstanding and all rights of the holders of the Depositary Receipts evidencing
the Depositary Shares so called for redemption will cease, except the right to
receive any moneys payable upon such redemption and any money or other property
to which the holders of such Depositary Receipts were entitled upon such
redemption upon surrender thereof to the applicable Preferred Stock Depositary.
VOTING OF THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of
the applicable Preferred Stock are entitled to vote, a Preferred Stock
Depositary will be required to mail the information contained in such notice of
meeting to the record holders of the Depositary Receipts evidencing the
Depositary Shares which represent such Preferred Stock. Each record holder of
Depositary Receipts evidencing Depositary Shares on the record date (which will
be the same date as the record date for the Preferred Stock) will be entitled to
instruct such Preferred Stock Depositary as to the exercise of the voting rights
pertaining to the amount of Preferred Stock represented by such holder's
Depositary Shares. Such Preferred Stock Depositary will be required to vote the
amount of Preferred Stock represented by such Depositary Shares in accordance
with such instructions, and Parkway will agree to take all reasonable action
which may be deemed necessary by such Preferred Stock Depositary in order to
enable such Preferred Stock Depositary to do so. Such Preferred Stock Depositary
will be required to abstain from voting the amount of Preferred Stock
represented by such Depositary Shares to the extent it does
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not receive specific instructions from the holders of Depositary Receipts
evidencing such Depositary Shares. A Preferred Stock Depositary will not be
responsible for any failure to carry out any instruction to vote, or for the
manner or effect of any such vote made, as long as any such action or non-action
is in good faith and does not result from negligence or willful misconduct of
such Preferred Stock Depositary.
LIQUIDATION PREFERENCE
In the event of the liquidation, dissolution or winding up of
Parkway, whether voluntary or involuntary, the holders of each Depositary
Receipt will be entitled to the fraction of the liquidation preference accorded
each Preferred Share represented by the Depositary Share evidenced by such
Depositary Receipt, as set forth in the applicable Prospectus Supplement.
CONVERSION OF PREFERRED STOCK
The Depositary Shares, as such, will not be convertible into
Common Stock or any other securities or property of Parkway. Nevertheless, if so
specified in the applicable Prospectus Supplement relating to an offering of
Depositary Shares, the Depositary Receipts may be surrendered by holders thereof
to the applicable Preferred Stock Depositary with written instructions to such
Preferred Stock Depositary to instruct Parkway to cause conversion of the
Preferred Stock represented by the Depositary Shares evidenced by such
Depositary Receipts into whole shares of Common Stock, other Preferred Stock or
other shares of stock, and Parkway will agree that upon receipt of such
instructions and any amounts payable in respect thereof, it will cause the
conversion thereof utilizing the same procedures as those provided for delivery
of Preferred Stock to effect such conversion. If the Depositary Shares evidenced
by a Depositary Receipt are to be converted in part only, a new Depositary
Receipt or Receipts will be issued for any Depositary Shares not to be
converted. No fractional shares of Common Stock will be issued upon conversion,
and if such conversion will result in a fractional share being issued, an amount
will be paid in cash by Parkway equal to the value of the fractional interest
based upon the closing price of the Common Stock on the last business day prior
to the conversion.
AMENDMENT AND TERMINATION OF A DEPOSIT AGREEMENT
Any form of Depositary Receipt evidencing Depositary Shares
which will represent Preferred Stock and any provision of a Deposit Agreement
will be permitted at any time to be amended by agreement between Parkway and the
applicable Preferred Stock Depositary. However, any amendment that materially
and adversely alters the rights of the holders of Depositary Receipts or that
would be materially and adversely inconsistent with the
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rights granted to the holders of the related Preferred Stock will not be
effective unless such amendment has been approved by the existing holders of at
least two-thirds of the applicable Depositary Shares evidenced by the applicable
Depositary Receipts then outstanding. No amendment shall impair the right,
subject to certain anticipated exceptions in the Deposit Agreements, of any
holders of Depositary Receipts to surrender any Depositary Receipt with
instructions to deliver to the holder the related Preferred Stock and all money
and other property, if any, represented thereby, except in order to comply with
law. Every holder of an outstanding Depositary Receipt at the time any such
amendment becomes effective shall be deemed, by continuing to hold such
Depositary Receipt, to consent and agree to such amendment and to be bound by
the applicable Deposit Agreement as amended thereby.
A Deposit Agreement will be permitted to be terminated by
Parkway upon not less than 30 days' prior written notice to the applicable
Preferred Stock Depositary if (i) such termination is necessary to preserve
Parkway's status as a REIT or (ii) a majority of each series of Preferred Stock
affected by such termination consents to such termination, whereupon such
Preferred Stock Depositary will be required to deliver or make available to each
holder of Depositary Receipts, upon surrender of the Depositary Receipts held by
such holder, such number of whole or fractional Preferred Stock as are
represented by the Depositary Shares evidenced by such Depositary Receipts
together with any other property held by such Preferred Stock Depositary with
respect to such Depositary Receipts. Parkway will agree that if a Deposit
Agreement is terminated to preserve Parkway's status as a REIT, then Parkway
will use its best efforts to list the Preferred Stock issued upon surrender of
the related Depositary Shares on a national securities exchange. In addition, a
Deposit Agreement will automatically terminate if (i) all outstanding Depositary
Shares thereunder shall have been redeemed; (ii) there shall have been a final
distribution in respect of the related Preferred Stock in connection with any
liquidation, dissolution or winding up of Parkway and such distribution shall
have been distributed to the holders of Depositary Receipts evidencing the
Depositary Shares representing such Preferred Stock; or (iii) each share of the
related Preferred Stock shall have been converted into stock of Parkway not so
represented by Depositary Shares.
CHARGES OF A PREFERRED STOCK DEPOSITARY
Parkway will pay all transfer and other taxes and governmental
charges arising solely from the existence of a Deposit Agreement. In addition,
Parkway will pay the fees and expenses of a Preferred Stock Depositary in
connection with the performance of its duties under a Deposit Agreement.
However, holders of Depositary Receipts will pay the fees and expenses of a
Preferred Stock Depositary for any duties requested by such holders to be
performed which are outside of those expressly provided for in the applicable
Deposit Agreement.
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RESIGNATION AND REMOVAL OF DEPOSITARY
A Preferred Stock Depositary will be permitted to resign at
any time by delivering to Parkway notice of its election to do so, and Parkway
will be permitted at any time to remove a Preferred Stock Depositary, any such
resignation or removal to take effect upon the appointment of a successor
Preferred Stock Depositary. A successor Preferred Stock Depositary will be
required to be appointed within 60 days after delivery of the notice of
resignation or removal and will be required to be a bank or trust company having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000.
MISCELLANEOUS
A Preferred Stock Depositary will be required to forward to
holders of Depositary Receipts any reports and communications from Parkway which
are received by such Preferred Stock Depositary with respect to the related
Preferred Stock.
Neither a Preferred Stock Depositary nor Parkway will be
liable if it is prevented from or delayed in, by law or any circumstances beyond
its control, performing its obligations under a Deposit Agreement. The
obligations of Parkway and Preferred Stock Depositary under a Deposit Agreement
will be limited to performing their duties thereunder in good faith and without
negligence (in the case of any action or inaction in the voting of Preferred
Stock represented by the applicable Depositary Shares), gross negligence or
willful misconduct, and neither Parkway nor any applicable Preferred Stock
Depositary will be obligated to prosecute or defend any legal proceeding in
respect of any Depositary Receipts, Depositary Shares or Preferred Stock
represented thereby unless satisfactory indemnity is furnished. Parkway and any
Preferred Stock Depositary will be permitted to rely on written advice of
counsel or accountants, or information provided by persons presenting Preferred
Stock represented thereby for deposit, holders of Depositary Receipts or other
persons believed in good faith to be competent to give such information, and on
documents believed in good faith to be genuine and signed by a proper party.
In the event a Preferred Stock Depositary shall receive
conflicting claims, requests or instructions from any holders of Depositary
Receipts, on the one hand, and Parkway on the other hand, such Preferred Stock
Depositary shall be entitled to act on such claims, requests or instructions
received from Parkway.
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DESCRIPTION OF COMMON STOCK
GENERAL
Parkway is authorized to issue up to 70,000,000 shares of
Common Stock. As of June 12, 1997, there were 6,287,130 shares of Common Stock
outstanding and 254,644 shares of Common Stock reserved for issuance upon the
exercise of options granted under Parkway's 1991 Directors Stock Option Plan and
Parkway's 1994 Stock Option Plan. All of the issued and outstanding shares of
Common Stock are fully paid and non-assessable and have equal voting,
distribution and liquidation rights. Shares of Common Stock are not subject to
call or redemption; provided, however, if the Parkway Board of Directors
determines that the direct or indirect ownership of Common Stock has or may
become concentrated to an extent which threatens Parkway's status as a REIT, the
Board of Directors may call for the redemption of a number of shares of Common
Stock.
The holders of Common Stock are entitled to one vote per share
on all matters to be voted upon by the stockholders. The holders of Common Stock
have no cumulative voting rights. Additionally, subject to the rights of holders
of Preferred Stock, holders of Common Stock are entitled to receive such
dividends as may be declared from time to time by the directors out of funds
legally available therefor.
The shares of Common Stock currently outstanding are listed
for trading on the NYSE under the symbol "PKY." Parkway will apply to the NYSE
to list the additional shares of Common Stock to be sold pursuant to any
Prospectus Supplement, and Parkway anticipates that such shares will be so
listed.
Under Maryland law, stockholders are generally not liable for
Parkway's debts or obligations. If Parkway is liquidated, subject to the right
of any holders of Preferred Stock, if any, to receive preferential
distributions, each outstanding share of Common Stock will be entitled to
participate pro rata in the assets remaining after payment of, or adequate
provision for, all known debts and liabilities of Parkway.
PROVISIONS OF PARKWAY'S CHARTER AND BYLAWS
Parkway's Charter provide that the number of directors will be
ten, which number may be increased or decreased pursuant to Parkway's Bylaws.
Currently, the number of directors is nine and all nine positions on the Board
of Directors are filled by the vote of the stockholders at the annual meeting.
Stockholders do not have cumulative voting rights in the election of directors.
Stockholders are entitled to one vote for each share of Common Stock held by
them.
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OTHER MATTERS
The transfer agent and registrar for the Common Stock is
Harris Trust and Savings Bank, Chicago, Illinois.
RESTRICTIONS ON TRANSFER
Ownership Limits. For Parkway to qualify as a REIT under the
Code, no more than 50% in value of its outstanding Common Stock may be owned,
actually and constructively under the applicable attribution provisions of the
Code, by five or fewer individuals (as defined in the Code to include certain
entities) during the last half of a taxable year (other than the first year) or
during a proportionate part of a shorter taxable year. The Common Stock must
also be beneficially owned by 100 or more persons during at least 335 days of a
taxable year (other than the first year) or during a proportionate part of a
shorter taxable year. Because Parkway intends to elect to be treated as a REIT,
the Charter contains restrictions on the acquisition of Common Stock intended to
ensure compliance with these requirements.
Pursuant to the provisions of the Charter, if a transfer of
stock occurs whereby any person would own, beneficially or constructively, in
excess of 9.8 percent (in value or in number, whichever is more restrictive) of
the outstanding capital stock of Parkway (excluding Excess Shares, as defined
below), then such amount in excess of the 9.8 percent limit shall automatically
be converted into shares of a separate class of stock, the excess stock, par
value $0.001 per share, of Parkway (the "Excess Shares"), and any such transfer
will be void ab initio. However, such restrictions will not prevent the
settlement of a transaction entered into through the facilities of any
interdealer quotation system or national securities exchange upon which shares
of capital stock of Parkway are traded, provided that certain transactions may
be settled by providing Excess Shares. Although holders of Excess Shares have no
dividend or voting rights, such holders do have certain rights in the event of
any liquidation, dissolution or winding up of the corporation. The Charter
further provides that the Excess Shares will be held by Parkway as trustee for
the person or persons in whose hands the shares would not be Excess Shares and
certain price-related restrictions are satisfied. These provisions are designed
to enable Parkway to meet the share ownership requirements applicable to REITs
under the Code, but may also have an anti-takeover effect. Parkway currently has
30,000,000 Excess Shares authorized pursuant to its Charter.
Each stockholder shall, upon request by Parkway, furnish such
information that Parkway may reasonably request in order to determine Parkway's
status as a REIT, to comply with the requirements of any taxing authority or
governmental agency or to determine any such compliance.
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The foregoing ownership limitations may have the effect of
precluding acquisition of control of Parkway without the consent of the Board of
Directors.
Special Voting Requirements for Certain Business Combinations.
Pursuant to Maryland law, Parkway is governed by special procedures that apply
to certain business combinations between a corporation and interested
stockholders. The purpose of such provisions is to protect the corporation and
its stockholders against hostile takeovers by requiring that certain criteria
are satisfied. These criteria include prior approval by the board of directors,
prior approval by a majority or supermajority vote of disinterested stockholders
and requirements that a "fair price" be paid to the disinterested stockholders.
Maryland law provides that a Maryland corporation may not
engage in any "business combination" with any "interested stockholder." An
"interested stockholder" is defined, in essence, as any person owning
beneficially, directly or indirectly, ten percent or more of the outstanding
voting stock of a Maryland corporation. Unless an exemption applies, Parkway may
not engage in any business combination with an interested stockholder for a
period of five years after the interested stockholder became an interested
stockholder, and thereafter may not engage in a business combination unless it
is recommended by the board of directors and approved by the affirmative vote of
at least (i) eighty percent of the votes entitled to be cast by the holders of
all outstanding voting stock of Parkway, voting together as a single voting
group and (ii) two-thirds of the votes entitled to be cast by all holders of
outstanding shares of voting stock other than voting stock held by the
interested stockholder. The voting requirements do not apply at any time to
business combinations with an interested stockholder or its affiliates if
approved by the board of directors of the corporation prior to the time the
interested stockholder first became an interested stockholder. Additionally, if
the business combination involves the receipt of consideration by the
stockholders in exchange for the corporation's stock, the voting requirements do
not apply if certain "fair price" conditions are met.
Control Share Acquisitions. Maryland law provides for the
elimination of the voting rights of shares held by any person who makes a
"control share acquisition" except to the extent that such acquisition is exempt
or is approved by at least two-thirds of all votes entitled to be cast on the
matter, excluding shares of capital stock owned by the acquirer or by officers
or directors who are employees of the corporation whose shares were acquired. A
"control share acquisition" is the direct or indirect acquisition by any person
of ownership of, or the power to direct the exercise of voting power with
respect to, shares of voting stock ("control shares") that would, if aggregated
with all other voting stock owned by such person, entitle such person to
exercise voting power in electing directors within one of the following ranges
of voting power: (i) one-fifth or more but less than one-third; (ii) one-third
or more but less than a majority; or (iii) a majority or more of voting power.
A person who has made or proposes to make a control share
acquisition, upon the satisfaction of certain conditions (including an
undertaking to pay expenses), may compel the
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board of directors to call a special meeting of stockholders to be held within
50 days of demand to consider the voting rights of the shares. If no request for
a meeting is made, the corporation may itself present the question at any
stockholders meeting. If voting rights are not approved at the meeting or if the
acquiring person does not deliver an acquiring person statement as permitted by
the statute, then, subject to certain conditions and limitations, the
corporation may redeem any or all of the control shares (except those for which
voting rights have previously been approved) for fair value determined, without
regard to voting rights, as of the date of the last control share acquisition or
as of the date of any meeting of stockholders at which the voting rights of such
shares are considered and not approved.
If voting rights for control shares are approved at a
stockholders meeting and the acquirer becomes entitled to vote a majority of the
shares entitled to vote, all other stockholders may exercise appraisal rights.
The fair value of the stock as determined for purposes of such appraisal rights
may not be less than the highest price per share paid in the control share
acquisition, and certain limitations and restrictions otherwise applicable to
the exercise of dissenters' rights do not apply in the context of a control
share acquisition. The control share acquisition statute does not apply to stock
acquired in a merger, consolidation or stock exchange if the corporation is a
party to the transaction.
Supermajority Votes. The Charter provides that (i) no term or
provision of the Charter may be added, amended or repealed in any respect which,
in the determination of the Board of Directors, cause Parkway not to qualify as
a REIT under the Code; (ii) the sections of the Charter concerning the removal
of directors, amendment of the Bylaws, the indemnification of agents and
limitation of liability of directors and officers and the section concerning
special stockholder vote requirements shall not be amended or repealed; and
(iii) no provision imposing cumulative voting in the election of directors may
be added to the Charter, except, in addition to any vote required by the terms
of then outstanding Preferred Stock, upon the affirmative vote of the holders of
not less than eighty percent of all votes entitled to be cast on the matter.
Stockholders Rights Agreement. Stockholders, pursuant to a
Rights Agreement, have the right to purchase Common Stock at a price of $40.00
per share, subject to adjustment, on a Distribution Date which will occur on the
earliest of (i) the date of Parkway's public announcement that a person or group
of affiliated or associated persons (an "Acquiring Person") has acquired, or
obtained the right to acquire, beneficial ownership of 20% or more of the
outstanding Common Stock (the "Stock Acquisition Date"); (ii) 10 days following
the commencement of a tender offer or exchange offer that would result in a
person or group beneficially owning 30% or more of the outstanding Common Stock;
or (iii) 10 days after the Board of Directors shall declare any person to be an
"Adverse Person," as defined in the Rights Agreement. The Rights are not
exercisable until the Distribution Date and expire at the close of business on
September 6, 2005, unless earlier redeemed by Parkway.
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In the event any person becomes an Acquiring Person, each
holder of a Right will have the right to receive, upon exercise of the Right and
payment of the purchase price, Common Stock (or, if sufficient Common Stock is
unavailable and subject to certain limitations, cash, property or other
securities of Parkway) having a value equal to two times the purchase price of
the Right (referred to as the "Subscription Right"). The Subscription Right is
exercisable during the 60-day period following the later of the Stock
Acquisition Date or the effective date of a registration statement covering the
Common Stock (or other securities, if applicable) subject to the Subscription
Right (referred to as the "Subscription Period"). Notwithstanding any of the
foregoing, all Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring Person will be null
and void.
In the event that, at any time following the Stock Acquisition
Date, (i) Parkway engages in a merger or other business combination transaction
or (ii) 50% or more of Parkway's assets or earning power is sold or transferred,
each holder of a Right (except Rights which previously have been voided pursuant
to the Rights Agreement) shall thereafter have the right to receive, upon
exercise, common stock of the acquiring company having a value equal to two
times the purchase price of the Right.
The purchase price payable, and the number of shares of Common
Stock (or the number and kind of other securities or property, as the case may
be) issuable upon exercise of the Rights are subject to adjustment from time to
time to prevent dilution.
FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTORY NOTES
The following discussion summarizes certain Federal income tax
considerations that may be relevant to a prospective stockholder of Parkway.
This discussion is based on current law. The discussion is not exhaustive of all
possible tax considerations and does not discuss any state, local or foreign tax
considerations. It also does not discuss all of the aspects of Federal income
taxation that may be relevant to a prospective stockholder in light of his or
her particular circumstances or to certain types of stockholders (including
insurance companies, tax-exempt entities, financial institutions or
broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States) who are subject to special treatment under the
Federal income tax laws.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT WITH HIS OR
HER OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE
PURCHASE, OWNERSHIP AND SALE OF SECURITIES IN AN
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ENTITY ELECTING TO BE TAXED AS A REIT, INCLUDING THE FEDERAL, STATE, LOCAL,
FOREIGN, AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND
ELECTION AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
TAXATION OF THE COMPANY
General. Parkway will elect to be taxed as a REIT under
Sections 856 through 860 of the Code effective January 1, 1997. Parkway's
qualification and taxation as a REIT depends upon its ability to meet on a
continuing basis, through actual annual operating results, distribution levels
and diversity of stock ownership, the various qualification tests and
organizational requirements imposed under the Code, as discussed below. Although
management of Parkway believes that Parkway is organized and operating in a
manner that permits it to qualify as a REIT, and intends to operate in such a
manner in the future, no assurance can be given that Parkway will be able to
continue to operate in a manner so as to qualify or remain qualified as a REIT.
See "--Failure to Qualify" below.
Jaeckle Fleischmann & Mugel, LLP has acted as counsel to
Parkway in connection with the offering and Parkway's election to be taxed as a
REIT. In the opinion of Jaeckle, Fleischmann & Mugel, LLP, assuming that the
elections and other procedural steps described in the following discussion of
"Requirements for Qualification" are completed by Parkway in a timely fashion,
Parkway's organization and proposed method of operation will enable it to
qualify to be taxed as a REIT under the Code commencing with Parkway's taxable
year beginning January 1, 1997, and for its future taxable years. Investors
should be aware, however, that opinions of counsel are not binding upon the
Service or any court. It must be emphasized that the opinion is based on various
assumptions and is conditioned upon certain representations made by Parkway as
to factual matters, including representations regarding the nature of Parkway's
properties and the future conduct of its business. Such factual assumptions and
representations are described below in this discussion of "Federal Income Tax
Considerations" and are set out in the federal income tax opinion that will be
delivered by Jaeckle Fleischmann & Mugel, LLP at the closing of the offering.
Moreover, such qualification and taxation as a REIT depends upon Parkway's
ability to meet on a continuing basis, through actual annual operating results,
distribution levels and share ownership, the various qualification tests imposed
under the Code discussed below. Jaeckle Fleischmann & Mugel, LLP will not review
Parkway's compliance with those tests on a continuing basis. Accordingly, no
assurance can be given that the actual results of Parkway's operations for any
particular taxable year will satisfy such requirements. For a discussion of the
tax consequences of the failure to qualify as a REIT, see "Failure to Qualify"
below.
The following is a general summary of the Code provisions that
govern the Federal income tax treatment of a REIT and its stockholders. These
provisions of the Code are
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highly technical and complex. This summary is qualified in its entirety by the
applicable Code provisions, the regulations promulgated thereunder ("Treasury
Regulations"), and administrative and judicial interpretations thereof.
If Parkway qualifies for taxation as a REIT and distributes to
its stockholders at least 95% of its REIT taxable income, it generally will not
be subject to Federal corporate income taxes on the portion of its ordinary or
capital gain income that it currently distributes to stockholders. This
treatment substantially eliminates the "double taxation" (at the corporate and
stockholder levels) that generally results from investment in a corporation.
Even if Parkway qualifies as a REIT, it will be subject to Federal income tax in
the following circumstances. First, Parkway will be taxed at regular corporate
rates on any undistributed taxable income, including undistributed net capital
gains. Second, under certain circumstances, the company may be subject to the
"alternative minimum tax" on its items of tax preference. Third, if Parkway has
(i) net income from the sale or other disposition of "foreclosure property"
(which is, in general, property acquired by foreclosure or otherwise on default
of a loan secured by the property) that is held primarily for sale to customers
in the ordinary course of business or (ii) other non-qualifying income from
foreclosure property, it will be subject to tax at the highest corporate rate on
such income. Fourth, if Parkway has net income from prohibited transactions
(which are, in general, certain sales or other dispositions of property (other
than foreclosure property) held primarily for sale to customers in the ordinary
course of business), such income will be subject to a 100% tax. Fifth, if
Parkway should fail to satisfy the 75% gross income test or the 95% gross income
test (as discussed below), and has nonetheless maintained its qualification as a
REIT because certain other requirements have been met, it will be subject to a
100% tax on the net income attributable to the greater of the amount by which it
fails the 75% or 95% test, multiplied by a fraction intended to reflect its
profitability. Sixth, if Parkway should fail to distribute during each calendar
year at least the sum of (i) 85% of its REIT ordinary income for such year; (ii)
95% of its REIT capital gain net income for such year; and (iii) any
undistributed taxable income from prior years, Parkway would be subject to a 4%
excise tax on the excess of such required distribution over the amounts actually
distributed. Seventh, Parkway will be subject to tax at the highest corporate
rates on built-in gains recognized within a 10 year period of its election to be
taxable as a REIT on assets it formerly held while it was a C corporation (i.e.,
a corporation generally subject to full corporate level tax). In addition, if
Parkway acquires any additional asset from a C corporation in a transaction in
which the basis of the asset in Parkway's hands is determined by reference to
the basis of the asset (or any other property) in the hands of the C
corporation, and Parkway recognizes gain on the disposition of such asset during
the 10-year period beginning on the date on which such asset was acquired by it,
then, to the extent of such asset's built-in gain (the excess of the fair market
value of such property at the time of acquisition by Parkway over the adjusted
basis of such property at such time), such gain will be subject to tax at the
highest regular corporate rate applicable (as provided in Service regulations
that have not yet been promulgated).
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Requirements for Qualification. The Code defines a REIT as a
corporation, trust or association (i) which is managed by one or more trustees
or directors; (ii) the beneficial ownership of which is evidenced by
transferable shares or by transferable certificates of beneficial interest;
(iii) which would be taxable as a domestic corporation, but for Sections 856
through 860 of the Code; (iv) which is neither a financial institution nor an
insurance company subject to certain provisions of the Code; (v) the beneficial
ownership of which is held by 100 or more persons; (vi) during the last half of
each taxable year not more than 50% in value of the outstanding stock of which
is owned, directly or indirectly, by five or fewer individuals (as defined in
the Code to include certain entities); and (vii) which meets certain other
tests, described below, regarding the nature of its income and assets. The Code
provides that conditions (i) through (iv), inclusive, must be met during the
entire taxable year and that condition (v) must be met during at least 335 days
of a taxable year of 12 months, or during a proportionate part of a taxable year
of less than 12 months. Conditions (v) and (vi) will not apply until after the
first taxable year for which an election is made to be taxed as a REIT. Parkway
satisfies the requirements (i) through (iv) as of January 1, 1997. Parkway's
Charter contains restrictions regarding the transfer of its shares that are
intended to assist it in satisfying the share ownership requirements described
in (v) and (vi) above.
Parkway currently has 12 subsidiaries and may have additional
subsidiaries in the future. Code Section 856(i) provides that a corporation that
is a "qualified REIT subsidiary" shall not be treated as a separate corporation,
and all assets, liabilities and items of income, deduction and credit of a
"qualified REIT subsidiary" shall be treated as assets, liabilities and items of
income, deduction and credit of the REIT. A "qualified REIT subsidiary" is a
corporation, all of the capital stock of which has been held by the REIT at all
times during the period such corporation was in existence. The Service has ruled
in numerous private letter rulings that a 100% owned subsidiary of an entity
electing REIT status will be classified as a "qualified REIT subsidiary" even
though the parent entity did not own 100% of the subsidiary's outstanding stock
throughout the subsidiary's existence. In these rulings, the Service treats the
subsidiary as liquidated immediately prior to the date of REIT election and
subsequently incorporated by the REIT. Thus, in applying the requirements
described herein, any "qualified REIT subsidiaries" of Parkway will be ignored,
and all assets, liabilities and items of income, deduction and credit of such
subsidiaries will be treated as assets, liabilities and items of income,
deduction and credit of Parkway. The qualified REIT subsidiaries, therefore,
will not be subject to federal corporate income taxation, although they may be
subject to state and local taxation.
In the case of a REIT that is a partner in a partnership,
Treasury Regulations provide that the REIT will be deemed to own its
proportionate share of the assets of the partnership and will be deemed to be
entitled to the gross income of the partnership attributable to such share. In
addition, the assets and gross income of the partnership will retain the same
character in the hands of the REIT for purposes of Section 856 of the Code,
including satisfying the gross income and asset tests described below. Thus,
Parkway's proportionate share of the assets, liabilities and items of income of
the partnership owned and the noncorporate subsidiaries
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of any such partnership will be treated as assets, liabilities and items of
income of Parkway for purposes of applying the requirements described herein.
A corporation may not elect to become a REIT unless its
taxable year is the calendar year. Parkway's taxable year is the calendar year.
In addition, pursuant to applicable Treasury Regulations, to be able to elect to
be taxed as a REIT, Parkway must maintain certain records and request on an
annual basis certain information from its stockholders designed to disclose the
actual ownership of its outstanding shares. Parkway intends to comply with such
requirements.
Earnings and Profits Calculation. In order to elect REIT
status, Parkway cannot have earnings and profits which have been generated
during years in which Parkway was not qualified as a REIT. For this purpose,
under the Code, earnings and profits of companies which have been acquired by
Parkway, and the earnings and profits of any of Parkway's subsidiaries, are
included in calculating Parkway's earnings and profits account. The
determination of the earnings and profits account of a company is a highly
technical and complex undertaking. Parkway's predecessor, The Parkway Company,
was organized in 1971 and over the years has acquired several companies. In
calculating the earnings and profits account, studies have been undertaken of
not only Parkway's earnings and profits history, but also the history of all
acquired companies. Based on these studies Parkway believes that it did not have
any positive accumulated earnings and profits on January 1, 1997, the effective
date of its REIT election. In the event its earnings and profits account was
positive, Parkway will be required to distribute dividends sufficient to reduce
that account to zero prior to the end of calendar year 1997. Any determination
made by Parkway with respect to its earnings and profits account is not binding
on the Service. In the event the Service were to successfully challenge
Parkway's calculation of its earnings and profits, a possible outcome of such
challenge could be the termination of Parkway's status as a REIT and the payment
of corporate level income tax on its taxable income.
Income Tests. In order for Parkway to maintain qualification
as a REIT, three separate percentage tests relating to the source of its gross
income must be satisfied annually. First, at least 75% of the REIT's gross
income (excluding gross income from prohibited transactions) for each taxable
year must be derived directly or indirectly from investments relating to real
property or mortgages on real property (including "rents from real property"
and, in certain circumstances, interest) or from certain types of temporary
investments. Second, at least 95% of the REIT's gross income (excluding gross
income from prohibited transactions) for each taxable year must be derived from
such real property investments described above, and from dividends, interest and
gain from the sale or disposition of stock or securities, or from any
combination of the foregoing. Third, gain from the sale or other disposition of
(i) stock or securities held for less than one year; (ii) prohibited
transactions; and (iii) certain real property held for less than four years
(apart from involuntary conversions and sales of foreclosure
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property) must represent less than 30% of the REIT's gross income (including
gross income from prohibited transactions) for each taxable year.
Rents received by Parkway will qualify as "rents from real
property" in satisfying the above gross income tests only if several conditions
are met. First, the amount of rent must not be based in whole or in part on the
income or profits of any person. However, amounts received or accrued generally
will not be excluded from "rents from real property" solely by reason of being
based on a fixed percentage or percentages of receipts or sales. Second, rents
received from a tenant will not qualify as "rents from real property" if
Parkway, or a direct or indirect owner of 10% or more of Parkway, directly or
constructively owns 10% or more of such tenant (a "Related Party Tenant").
Third, if rent attributable to personal property that is leased in connection
with a lease of real property is greater than 15% of the total rent received
under the lease, then the portion of rent attributable to such personal property
will not qualify as "rents from real property." Finally, for rents received to
qualify as "rents from real property," Parkway generally must not operate or
manage the property, or furnish or render services to tenants, other than
through an "independent contractor" who is adequately compensated and from whom
Parkway derives no revenue. The "independent contractor" requirement, however,
does not apply to the extent the services provided by Parkway are "usually or
customarily rendered" in connection with the rental of space for occupancy only
and are not otherwise considered "rendered to the occupant." Parkway believes
that all services that are provided to its tenants will be considered "usually
or customarily" rendered in connection with the rental of comparable properties.
Further, any noncustomary services will be provided only through qualifying
independent contractors. Parkway believes that the income generated from its
assets owned on January 1, 1997 and its proposed method of operations will
permit it to meet the income tests outlined above.
If Parkway fails to satisfy one or both of the 75% or 95%
gross income tests for any taxable year, it may nevertheless qualify as a REIT
for such year if it is entitled to relief under certain provisions of the Code.
These relief provisions generally will be available if its failure to meet such
tests was due to reasonable cause and not due to willful neglect, Parkway
attaches a schedule of the sources of its income to its federal income tax
return for such years, and any incorrect information on the schedules was not
due to fraud with intent to evade tax. It is not possible, however, to state
whether in all circumstances Parkway would be entitled to the benefit of these
relief provisions. As discussed above in "General," even if these relief
provisions were to apply, a tax would be imposed with respect to the excess net
income.
Asset Tests. At the close of each quarter of its taxable year,
Parkway must also satisfy three tests relating to the nature of its assets.
First, at least 75% of the value of Parkway's total assets must be represented
by certain real estate assets (including temporary investments in stock or debt
instruments purchased with the proceeds of a stock or debt offering of Parkway
and held during the one year period from Parkway's receipt of capital in
connection with said offering), cash, cash items and government securities.
Second, not more than 25%
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of Parkway's total assets may be represented by securities other than those in
the 75% asset class. Third, of the investments included in the 25% asset class,
the value of any one issuer's securities owned by Parkway may not exceed 5% of
the value of Parkway's total assets, and Parkway may not own more than 10% of
any one issuer's outstanding voting securities (excluding securities of a
qualified REIT subsidiary or another REIT). Parkway believes that the assets
that it owned on January 1, 1997 will permit it to meet the asset tests outlined
above.
If Parkway should fail to satisfy the asset tests at the end
of a calendar quarter, such a failure would not cause it to lose its REIT status
if (i) it satisfied the asset tests at the close of the preceding calendar
quarter, and (ii) the discrepancy between the value of Parkway's assets and the
asset tests either did not exist immediately after the acquisition of any
particular asset or was not wholly or partly caused by such an acquisition
(e.g., the discrepancy arose from changes in the market values of its assets).
If the conditions described in clause (ii) of the preceding sentence were not
satisfied, Parkway still could avoid disqualification by eliminating any
discrepancy within 30 days after the close of the calendar quarter in which it
arose.
Annual Distribution Requirements. Parkway, in order to qualify
as a REIT, is required to distribute dividends (other than capital gain
dividends) to its stockholders in an amount at least equal to (i) the sum of (a)
95% of its "REIT taxable income" (computed without regard to the dividends paid
deduction and its net capital gain) and (b) 95% of the net income (after tax),
if any, from foreclosure property, minus (ii) the sum of certain items of
noncash income. Such distributions must be paid in the taxable year to which
they relate, or in the following taxable year if declared before Parkway timely
files its tax return for such year and if paid on or before the first regular
dividend payment after such declaration. To the extent that Parkway does not
distribute all of its net capital gain or distributes at least 95%, but less
than 100%, of its "REIT taxable income," as adjusted, it will be subject to tax
on the nondistributed amount at regular capital gains and ordinary corporate tax
rates. Furthermore, if Parkway should fail to distribute during each calendar
year at least the sum of (i) 85% of its REIT ordinary income for such year; (ii)
95% of its REIT capital gain income for such year; and (iii) any undistributed
taxable income from prior periods, it will be subject to a 4% excise tax on the
excess of such required distribution over the amounts actually distributed.
Parkway intends to make timely distributions sufficient to
satisfy the annual distribution requirements. It is possible, however, that
Parkway, from time to time, may not have sufficient cash or liquid assets to
meet the distribution requirements due to timing differences between the actual
receipt of income and actual payment of deductible expenses, and the inclusion
of such income and deduction of such expenses in arriving at Parkway's REIT
taxable income, or if the amount of nondeductible expenses such as principal
amortization or capital expenditures exceed the amount of noncash deductions. In
the event that such timing differences occur, in order to meet the distribution
requirements, Parkway may arrange for short-term, or possible long-term,
borrowing to permit the payment of required dividends. If
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<PAGE> 50
the amount of nondeductible expenses exceeds noncash deductions, Parkway may
refinance its indebtedness to reduce principal payments and borrow funds for
capital expenditures.
Under certain circumstances, Parkway may be able to rectify a
failure to meet the distribution requirement for a year by paying "deficiency
dividends" to stockholders in a later year that may be included in Parkway's
deduction for dividends paid for the earlier year. Thus, Parkway may be able to
avoid being taxed on amounts distributed as deficiency dividends; however, it
will be required to pay interest to the Service based upon the amount of any
deduction taken for deficiency dividends.
Failure to Qualify. If Parkway fails to qualify for taxation
as a REIT in any taxable year and no relief provisions apply, Parkway will be
subject to tax (including any applicable alternative minimum tax) on its taxable
income at regular corporate rates. Distributions to stockholders in any year in
which Parkway fails to qualify will not be deductible by it, nor will such
distributions be required to be made. In such event, to the extent of current
and accumulated earnings and profits, all distributions to stockholders will be
taxable as ordinary income, and, subject to certain limitations in the Code,
corporate distributees may be eligible for the dividends received deduction.
Unless entitled to relief under specific statutory provisions, Parkway also will
be disqualified from taxation as a REIT for the four taxable years following the
year during which qualification was lost. It is not possible to state whether in
all circumstances Parkway would be entitled to such statutory relief.
TAXATION OF STOCKHOLDERS
Taxation of Taxable Domestic Stockholders. As long as Parkway
qualifies as a REIT, distributions made to its taxable domestic stockholders out
of current or accumulated earnings and profits (and not designated as capital
gain dividends) will be taken into account by them as ordinary income, and
corporate stockholders will not be eligible for the dividends received deduction
as to such amounts. Domestic stockholders generally are stockholders who are (i)
citizens or residents of the United States; (ii) corporations, partnerships or
other entities created or organized in or under the laws of the United States or
any political subdivision thereof; or (iii) estates or trusts the income of
which is subject to United States federal income taxation regardless of its
source. Distributions that are designated as capital gain dividends will be
taxed as long-term capital gains (to the extent they do not exceed Parkway's
actual net capital gain for the taxable year) without regard to the period for
which the stockholder has held his or her shares. However, corporate
stockholders may be required to treat up to 20% of certain capital gain
dividends as ordinary income. Distributions in excess of current and accumulated
earnings and profits will not be taxable to a stockholder to the extent that
they do not exceed the adjusted basis of such stockholder's shares, but rather
will reduce the adjusted basis of such shares. To the extent that such
distributions exceed the adjusted basis of a stockholder's shares, they will be
included in income as long-term capital gain (or short-term capital gain if the
shares
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<PAGE> 51
have been held for one year or less), assuming the shares are a capital asset in
the hands of the stockholder. In addition, any dividend declared by Parkway in
October, November or December of any year payable to a stockholder of record on
a specific date in any such month shall be treated as both paid by Parkway and
received by the stockholder on December 31 of such year, provided that the
dividend is actually paid by Parkway during January of the following calendar
year. Stockholders may not include in their individual income tax returns any
net operating losses or capital losses of Parkway.
In general, any gain or loss realized upon a taxable
disposition of shares by a stockholder who is not a dealer in securities will be
treated as a long term capital gain or loss if the shares have been held for
more than one year and otherwise a short term capital gain or loss. However, any
loss upon a sale or exchange of shares by a stockholder who has held such shares
for six months or less (after applying certain holding period rules) will be
treated as long-term capital loss to the extent of distributions from Parkway
required to be treated by such stockholder as long-term capital gain.
Backup Withholding. Parkway will report to its domestic
stockholders and the Service the amount of dividends paid during each calendar
year, and the amount of tax withheld, if any, with respect thereto. Under the
backup withholding rules, a stockholder may be subject to backup withholding at
the rate of 31% with respect to dividends paid unless such holder (i) is a
corporation or comes within certain other exempt categories and, when required,
demonstrates this fact, or (ii) provides a taxpayer identification number,
certifies as to no loss of exemption from backup withholding, and otherwise
complies with applicable requirements of the backup withholding rules. A
stockholder who does not provide Parkway with its correct taxpayer
identification number may also be subject to penalties imposed by the Service.
Any amount paid as backup withholding will be creditable against the
stockholder's income tax liability. In addition, Parkway may be required to
withhold a portion of capital gain distributions made to any stockholders who
fail to certify their non-foreign status to Parkway. See "Taxation of Non-U.S.
Stockholders" below.
Taxation of Tax-Exempt Stockholders. Most tax-exempt entities,
including employees' pension trusts, are not subject to Federal income tax
except to the extent of "unrelated business taxable income" ("UBTI"). The
Service has ruled that amounts distributed by a REIT to a tax-exempt employees'
pension trust do not constitute UBTI. Based upon this ruling and the analysis
therein, and subject to the discussion below regarding qualified pension trust
investors, distributions by Parkway to a stockholder that is a tax-exempt entity
generally should not constitute UBTI, provided that the tax-exempt entity has
not financed the acquisition of its shares with "acquisition indebtedness"
within the meaning of the Code and the shares of Common Stock are not otherwise
used in an unrelated trade or business of the tax-exempt entity. Revenue
rulings, however, are interpretative in nature and subject to revocation or
modification by the Service.
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<PAGE> 52
A "qualified trust" (defined to be any trust described in
section 401(a) of the Code and exempt from tax under section 501(a) of the Code)
that holds more than 10% of the value of the shares of a REIT may be required,
under certain circumstances, to treat a portion of distributions from the REIT
as UBTI. This requirement will apply for a taxable year only if (i) the REIT
satisfies the requirement that not more than 50% of the value of its shares be
held by five or fewer individuals (the "five or fewer requirement") only by
relying on a special "look-through" rule under which shares held by qualified
trust stockholders are treated as held by the beneficiaries of such trusts in
proportion to their actuarial interests therein; and (ii) the REIT is
"predominantly held" by qualified trusts. A REIT is "predominantly held" by
qualified trusts if either (i) a single qualified trust holds more than 25% of
the value of the REIT shares, or (ii) one or more qualified trusts, each owning
more than 10% of the value of the REIT shares, hold in the aggregate more than
50% of the value of the REIT shares. If the foregoing requirements are met, the
percentage of any REIT dividend treated as UBTI to a qualified trust that owns
more than 10% of the value of the REIT shares is equal to the ratio of (i) the
UBTI earned by the REIT (computed as if the REIT were a qualified trust and
therefore subject to tax on its UBTI) to (ii) the total gross income (less
certain associated expenses) of the REIT for the year in which the dividends are
paid. A de minimis exception applies where the ratio set forth in the preceding
sentence is less than 5% for any year.
The provisions requiring qualified trusts to treat a portion
of REIT distributions as UBTI will not apply if the REIT is able to satisfy the
five or fewer requirement without relying on the "look-through" rule. The
restrictions on ownership of Common Stock in Parkway's Charter should prevent
application of the foregoing provisions to qualified trusts purchasing Common
Stock of Parkway pursuant to the offering, absent a waiver of the restrictions
by the Board of Directors.
Taxation of Non-U.S. Stockholders. The rules governing U.S.
Federal income taxation of nonresident alien individuals, foreign corporations,
foreign partnerships and other foreign stockholders (collectively, "Non-U.S.
Stockholders") are complex, and no attempt will be made herein to provide more
than a limited summary of such rules. The discussion does not consider any
specific facts or circumstances that may apply to a particular Non-U.S.
Stockholder. Prospective Non-U.S. Stockholders should consult with their own tax
advisors to determine the impact of U.S. Federal, state and local income tax
laws with regard to an investment in the Common Stock, including any reporting
requirements.
Distributions that are not attributable to gain from sales or
exchanges by Parkway of U.S. real property interests and not designated by
Parkway as capital gain dividends will be treated as dividends of ordinary
income to the extent that they are made out of current or accumulated earnings
and profits of Parkway. Such distributions, ordinarily, will be subject to a
withholding tax equal to 30% of the gross amount of the distribution unless an
applicable tax treaty reduces such rate. However, if income from the investment
in Common Stock is treated as effectively connected with the Non-U.S.
Stockholder's conduct of a U.S. trade or business,
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<PAGE> 53
the Non-U.S. Stockholder generally will be subject to a tax at graduated rates,
in the same manner as U.S. stockholders are taxed with respect to such dividends
(and may also be subject to a branch profits tax of up to 30% if the stockholder
is a foreign corporation). Parkway expects to withhold U.S. income tax at the
rate of 30% on the gross amount of any dividends paid to a Non-U.S. Stockholder
that are not designated as capital gain dividends unless (i) a lower treaty rate
applies and the required form evidencing eligibility for that reduced rate is
filed with Parkway or (ii) the Non-U.S. Stockholder files IRS Form 4224 with
Parkway claiming that the distribution is income treated as effectively
connected to a U.S. trade or business.
Distributions in excess of current and accumulated earnings
and profits of Parkway will not be taxable to a stockholder to the extent that
they do not exceed the adjusted basis of the stockholder's Common Stock, but
rather will reduce the adjusted basis of such shares. To the extent that such
distributions exceed the adjusted basis of a Non-U.S. Stockholder's shares, they
will give rise to tax liability if the Non-U.S. Stockholder would otherwise be
subject to tax on any gain from the sale or disposition of his or her Common
Stock as described below. If at any time Parkway is not a "domestically
controlled REIT," as defined below, Parkway must withhold U.S. income tax at the
rate of 10% on distributions to Non-U.S. Stockholders that are not paid out of
current or accumulated earnings and profits unless the Non-U.S. Stockholders
provide Parkway with withholding certificates evidencing their exemption from
withholding tax. If it cannot be determined at the time that such a distribution
is made whether or not such distribution will be in excess of current and
accumulated earnings and profits, the distribution will be subject to
withholding at the rate applicable to dividends. However, the Non-U.S.
Stockholder may seek a refund of such amounts from the Service if it is
subsequently determined that such distribution was, in fact, in excess of
current and accumulated earnings and profits of Parkway.
For any year in which Parkway qualifies as a REIT,
distributions that are attributable to gain from sales or exchanges by Parkway
of U.S. real property interests will be taxed to a Non-U.S. Stockholder under
the provisions of the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, these distributions are taxed to a Non-U.S.
Stockholder as if such gain were effectively connected with a U.S. business.
Thus, Non-U.S. Stockholders will be taxed on such distributions at the normal
capital gain rates applicable to U.S. stockholders (subject to applicable
alternative minimum tax and a special alternative minimum tax in the case of
nonresident alien individuals). Also, distributions subject to FIRPTA may be
subject to a 30% branch profits tax in the hands of a corporate Non-U.S.
Stockholder not entitled to treaty relief or exemption. Parkway is required by
applicable Treasury Regulations to withhold 35% of any distribution that could
be designated by Parkway as a capital gain dividend. This amount is creditable
against the Non-U.S. Stockholder's FIRPTA tax liability.
Gain recognized by a Non-U.S. Stockholder upon a sale of
Common Stock generally will not be taxed under FIRPTA if Parkway is a
"domestically controlled REIT,"
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defined generally as a REIT in which at all times during a specified testing
period less than 50% in value of its shares was held directly or indirectly by
Non-U.S. Stockholders. Parkway believes that it currently qualifies as a
"domestically controlled REIT," and that the sale of Common Stock will not
therefore be subject to tax under FIRPTA. Because Parkway is publicly traded,
however, no assurance can be given that Parkway will continue to be a
domestically controlled REIT. Even if Parkway is not a "domestically controlled
REIT," a Non-U.S. Stockholder's sale of Common Stock generally will not be
subject to tax under FIRPTA as a sale of U.S. real property interests provided
that (i) Parkway's Common Stock is "regularly traded" on an established
securities market, and (ii) the selling Non-U.S. Stockholder held 5% or less of
Parkway's Common Stock at all times during the specified testing period. In
addition, gain not subject to FIRPTA will be taxable to a Non-U.S. Stockholder
if (i) the investment in Common Stock is treated as effectively connected with
the Non-U.S. Stockholder's trade or business, in which case the Non-U.S.
Stockholder will be subject to the same treatment as the U.S. stockholders with
respect to such gain; or (ii) the Non-U.S. Stockholder is a nonresident alien
individual who was present in the United States for 183 days or more during the
taxable year and has a "tax home" in the United States, in which case the
nonresident alien individual will be subject to a 30% withholding tax on the
individual's capital gains. If the gain on the sale of Common Stock were to be
subject to tax under FIRPTA, the Non-U.S. Stockholder would be subject to the
same treatment as U.S. stockholders with respect to such gain (subject to
applicable alternative minimum tax and a special alterative minimum tax in the
case of nonresident alien individuals).
State and Local Taxes. Parkway and its stockholders may be
subject to state or local taxation in various state or local jurisdictions,
including those in which it or they transact business or reside (although
stockholders who are individuals generally should not be required to file state
income tax returns outside of their state of residence with respect to Parkway's
operations and distributions). The state and local tax treatment of Parkway and
its stockholders may not conform to the Federal income tax consequences
discussed above. Consequently, prospective stockholders should consult their own
tax advisors regarding the effect of state and local tax laws on an investment
in the Securities.
PLAN OF DISTRIBUTION
Parkway may sell Securities to or through underwriters or
dealers for public offering and sale by or through them, and also may sell
Securities directly to other purchasers or agents or through any combination of
these methods of sale.
The distribution of the Securities may be effected from time
to time in one or more transactions at a fixed price or prices, which may be
changed, or at market prices
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prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices.
In connection with the sale of Securities, underwriters may
receive compensation from Parkway or for purchasers of Securities, for whom they
may act as agents, in the form of discounts, concessions or commissions.
Underwriters may sell Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters andor commissions from the purchasers for whom they may act as
agents. Underwriters, dealers, and agents that participate in the distribution
of Securities may be deemed to be underwriters, and any discounts or commissions
they receive from Parkway and any profit on the resale of Securities they
realize may be deemed to be underwriting discounts and commissions, under the
Securities Act. Any such underwriter or agent will be identified, and any such
compensation received from Parkway will be described, in the applicable
Prospectus Supplement.
Unless otherwise specified in the related Prospectus
Supplement, each series of Securities will be a new issue with no established
trading market, other than the shares of Common Stock which are listed on the
NYSE. Any shares of Common Stock sold pursuant to a Prospectus Supplement will
be listed on such exchange, subject to official notice of issuance. Parkway may
elect to list any series of Debt Securities, Preferred Stock or Depositary
Shares on an exchange, but is not obligated to do so. It is possible that one or
more underwriters may make a market in a series of Securities, but will not be
obligated to do so and may discontinue any market making at any time without
notice. Therefore, no assurance can be given as to the liquidity of the trading
market for the Securities.
Under agreements Parkway may enter into, underwriters, dealers
and agents who participate in the distribution of Securities may be entitled to
indemnification by Parkway against certain liabilities, including liabilities
under the Securities Act.
Underwriters, dealers and agents may engage in transactions
with, or perform services for, or be customers of, Parkway in the ordinary
course of business.
If so indicated in the applicable Prospectus Supplement,
Parkway will authorize underwriters or other persons acting as Parkway's agents
to solicit offers by certain institutions to purchase Securities from Parkway
pursuant to contracts providing for payment and delivery on a future date.
Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by Parkway. The obligations of any purchaser under
any such contract will be subject to the condition that the purchase of the
Securities shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject. The underwriters and such other
agents will not have any responsibility in respect of the validity or
performance of such contracts.
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EXPERTS
The consolidated financial statements of Parkway appearing in
Parkway's Annual Report on Form 10-KSB for the year ended December 31, 1996,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
LEGAL MATTERS
The legality of the Securities will be passed upon for Parkway
by Jaeckle Fleischmann & Mugel, LLP, Buffalo, New York.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in
connection with the issuance and distribution of the Securities, other than
underwriting discounts and commissions. All of the amounts shown are estimated
except the Securities and Exchange Commission ("Commission") registration fee.
<TABLE>
<S> <C>
Commission Registration Fee............................................................. $45,455
New York Stock Exchange, Inc. Listing Fee................................................ 20,588
Blue Sky fees and expenses............................................................. 0
Printing and engraving expenses.......................................................... 50,000
Legal fees and expenses.................................................................. 60,000
Accounting fees and expenses............................................................. 50,000
Miscellaneous........................................................................... 3,957
--------
Total...........................................................................$185,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Parkway's Articles of Incorporation, as amended (the
"Charter"), contain a provision authorizing Parkway to indemnify, to the fullest
extent permitted by Maryland law, its directors and officers, whether serving
Parkway or, at its request, any other entity. Additionally, the Charter provides
that to the fullest extent permitted by Maryland law, no director or officer
shall be liable to Parkway or its stockholders for money damages.
Section 2-418 of the Maryland General Corporation Law (the
"Indemnification Statute"), the law of the state in which Parkway is organized,
empowers a company, subject to certain limitations, to indemnify its officers
and directors against expenses, including attorneys' fees, judgments, penalties,
fines, settlements and expenses, actually and reasonably incurred by them in any
suit or proceeding to which they are parties unless the act or omission of the
director was material to the matter giving rise to the proceeding and was
committed in bad faith, or was the result of active and deliberate dishonesty,
or the director received an improper
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personal benefit or, with respect to a criminal action or proceeding, the
director had no reasonable cause to believe their conduct was unlawful.
Parkway has entered into an indemnification agreement (the
"Indemnification Agreement") with each of its directors and officers, and the
Board of Directors has authorized Parkway to enter into an Indemnification
Agreement with each of the future directors and officers of Parkway. The
Indemnification Statute permits a corporation to indemnify its directors and
officers. However, the protection that is specifically afforded by the
Indemnification Statute authorizes other arrangements for indemnification of
directors and officers, including insurance. The Indemnification Agreement is
intended to provide indemnification to the maximum extent allowable by, or not
in violation of, or offensive to, any law of the State of Maryland.
The Indemnification Agreement provides that Parkway shall
indemnify a director or officer who is a party to the agreement (the
"Indemnitee") if he or she was or is a party to or otherwise involved in any
proceeding by reason of the fact that he or she was or is a director or officer
of Parkway, or was or is serving at its request in a certain capacity of another
entity, against losses incurred in connection with the defense or settlement of
such proceeding. This indemnification shall be provided to the fullest extent
permitted by the Indemnification Agreement. This is similar to the
indemnification provided by the Indemnification Statute except that
indemnification is not available under the Indemnification Agreement to the
Indemnitee who pays any amount in settlement of a proceeding without Parkway's
written consent.
ITEM 16. EXHIBITS.
The following exhibits are filed herewith (or incorporated by
reference):
<TABLE>
<S> <C>
(1) Form of Underwriting Agreement.*
(3)(a) Articles of Incorporation, as amended, of Parkway.**
(b) Bylaws of Parkway.**
(4) Form of Indenture.*
(5) Opinion of Jaeckle Fleischmann & Mugel, LLP regarding legality
of securities being REGISTERED.**
(8) Opinion of Jaeckle Fleischmann & Mugel, LLP regarding
tax matters.*
(12) Statement regarding computation of ratios.**
(23)(a) Consent of Ernst & Young LLP.+
</TABLE>
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<PAGE> 59
<TABLE>
<S> <C>
(b) Consent of Jaeckle Fleischmann & Mugel, LLP
(incorporated by reference to Exhibit 5).
(24) Powers of Attorney.**
(25) Statement of eligibility of trustee.*
- ----------
<FN>
+ Filed herewith.
* To be filed by amendment or to be incorporated by
reference herein by a Current Report on Form 8-K.
** Previously filed.
</TABLE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers
or sales are being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required
by Section 10(a)(3) of the Securities Act of 1933, as amended (the "Securities
Act");
(ii) To reflect in the prospectus any
facts or events arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in
the Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than a 20 percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective Registration
Statement; and
(iii) To include any material information
with respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement; provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed with or furnished to the Commission by
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the Registrant pursuant to Sections 13 or 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any
liability under the Securities Act, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that,
for purposes of determining any liability under the Securities Act, each filing
of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(d) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability
under the Securities Act, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form or prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability
under the Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
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(e) The undersigned Registrant hereby undertakes to file an
application for the purpose of determining the eligibility of the trustee to act
under subsection (a) of Section 310 of the Trust Indenture Act in accordance
with the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Trust Indenture Act.
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SIGNATURES
----------
Pursuant to the requirements of the Securities of the
Securities Act of 1933, the Registrant certifies that it has reasonable grounds
to believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Jackson, State of
Mississippi as of the 27th of June 1997.
PARKWAY PROPERTIES, INC.
By: /s/ Steven G. Rogers
------------------------------------
Steven G. Rogers
Director, President and
Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement and the foregoing Powers of Attorney have been
signed by the following person in the capacities indicated on the 27th day
of June 1997.
<TABLE>
<CAPTION>
Name and Title Title
- -------------- -----
<S> <C> <C>
_
Leland R. Speed Director and Chief |
Executive Officer |
|
Steven G. Rogers Director, President and |
Operating Officer |
|
Sarah P. Clark Vice President, Chief |
Financial Officer, |
Treasurer and Secretary | /s/ Sarah P. Clark
| -----------------------
Daniel C. Arnold Director | Sarah P. Clark
| Individually
George R. Farish Director | and as
| Attorney-In-Fact
Roger P. Friou Director |
|
Joe F. Lynch Director |
|
C. Herbert Magruder Director |
|
W. Lincoln Mossop, Jr. Director _|
</TABLE>
II-6
<PAGE> 1
Exhibit 23(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Amendment No. 1 to Registration Statement (Form S-3, No. 333-29259) and related
Prospectus of Parkway Properties, Inc. for the registration of shares of its
common stock, preferred stock, preferred stock represented by depository shares
and unsecured debt securities with an aggregate public offering price of up to
$150,000,000 and to the incorporation by reference therein of our report dated
March 27, 1997, with respect to the consolidated financial statements of
Parkway Properties, Inc. included in its Annual Report (Form 10-KSB) for the
year ended December 31, 1996, filed with the Securities and Exchange
Commission.
ERNST & YOUNG LLP
Jackson, Mississippi
June 30, 1997
