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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 10, 1997
REGISTRATION NO. 333-16479
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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)
<TABLE>
<S> <C>
MARYLAND 74-2123597
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
300 ONE JACKSON PLACE
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
300 ONE JACKSON PLACE
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)
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Copies to:
<TABLE>
<S> <C>
JOSEPH P. KUBAREK, ESQ. JAY L. BERNSTEIN, ESQ.
JAECKLE FLEISCHMANN & MUGEL, LLP ROGERS & WELLS
800 FLEET BANK BUILDING 200 PARK AVENUE
12 FOUNTAIN PLAZA NEW YORK, NEW YORK 10167
BUFFALO, NEW YORK 14202 (212) 878-8000
(716) 856-0600
</TABLE>
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.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS, DATED JANUARY 10, 1997
PROSPECTUS
$100,000,000
PARKWAY PROPERTIES, INC.
COMMON SHARES
PREFERRED SHARES
DEPOSITARY SHARES
DEBT SECURITIES
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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 Shares"); (ii) shares of its preferred stock, par value
$0.001 per share (the "Preferred Shares"); (iii) Preferred Shares represented by
depositary shares (the "Depositary Shares"); and (iv) unsecured debt securities
("Debt Securities"), with an aggregate public offering price of up to
$100,000,000 in amounts, at prices and on terms to be determined at the time of
offering. The Common Shares, Preferred Shares, 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 Shares, any initial
public offering price; (ii) in the case of Preferred Shares, the specific
designation and stated value per share, any dividend, liquidation, redemption,
conversion, voting and other rights, and any initial public offering price;
(iii) in the case of Depositary Shares, the fractional share of Preferred Shares
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.
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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
Shares are 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 or its predecessor, The Parkway Company, 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, 300 One Jackson Place, 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. The Parkway Company's Annual Report on Form 10-KSB for the year
ended December 31, 1995 (Commission File No. 0-12505).
2. The Parkway Company's Quarterly Reports on Form 10-QSB for the
quarters ended March 31, 1996 and June 30, 1996, as amended by Form
10-QSB/A dated August 30, 1996 (Commission File No. 0-12505).
3. Parkway Properties, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996 (Commission File No. 1-11533).
4. The Parkway Company's Current Reports on Form 8-K/A dated March 1,
1996 and June 28, 1996 (Commission File No. 0-12505).
5. The Parkway Company's Current Reports on Form 8-K dated April 15,
1996, May 31, 1996, June 14, 1996 and July 9, 1996 (Commission File
No. 0-12505).
6. The Parkway Company's Proxy Material for its Annual Meeting of
Stockholders held on July 18, 1996 (Commission File No. 0-12505).
7. Parkway Properties, Inc.'s Current Reports on Form 8-K dated August
2, 1996, August 9, 1996, September 30, 1996, January 7, 1997,
January 9, 1997 and January 10, 1997 (Commission File No. 1-11533).
8. Parkway Properties, Inc.'s Current Reports on Form 8-K/A dated
August 30, 1996, October 22, 1996 and December 13, 1996 (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 this Prospectus and each accompanying Prospectus
Supplement is qualified in its entirety by the information appearing in the
documents incorporated by reference.
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. This Prospectus
contains or incorporates by reference forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended. Actual results
may differ materially from those projected in the forward-looking statements as
a result of the risk factors set forth in this Prospectus and the matters set
forth in this Prospectus generally.
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THE COMPANY
Parkway is a self-managed real estate investment company operating as a
real estate investment trust ("REIT"), specializing primarily in the ownership,
management and leasing of office properties in the Southeastern United States
(particularly the states of Mississippi, North Carolina, Georgia and Virginia)
and Texas. At December 31, 1996, Parkway owned or had an interest in 17 office
buildings in eight states with an aggregate of approximately 1.9 million 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 shares of common stock, par
value $0.001 per share, of Parkway (the "Common Shares") became listed on the
New York Stock Exchange, Inc. ("NYSE") under the symbol "PKY." Prior to this
date, the Common Shares 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 1.4 million square feet of
office space. Parkway Realty also performs brokerage services to third parties
on a commission basis. Parkway Realty manages Parkway's office buildings in
Jackson, Mississippi.
Parkway's offices are located at 300 One Jackson Place, 188 East Capitol
Street, Jackson, Mississippi 39201-2195. Its telephone number is (601) 948-4091.
RATIO OF EARNINGS TO FIXED CHARGES
Parkway's ratio of earnings to fixed charges for the three months ended
September 30, 1996 was 1.9, for the three months ended June 30, 1996 was 1.9,
for the three months ended March 31, 1996 was 2.1, 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 were Preferred Shares
outstanding only for a portion of the three months ended September 30, 1996.
Accordingly, the ratio of earnings to fixed charges and Preferred Shares
dividends is 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 Shares
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
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Indenture has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part and will be available for inspection at the corporate
trust office of the Trustee or as described above under "Available Information."
The Indenture is subject to, and governed by, the TIA. The statements made
hereunder relating to the Indenture and the Debt Securities to be issued
thereunder are summaries of certain provisions thereof and do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all provisions of the Indenture and such Debt Securities. All 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 December 31, 1996, the total outstanding debt of Parkway was
approximately $62,828,000, none of which was unsubordinated indebtedness and
none 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;
(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
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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;
(xiii) whether such Debt Securities will be issued in certificated
and/or book-entry form;
(xiv) whether such Debt Securities will be in registered or bearer
form and, if in registered form, the denominations thereof if other than
$1,000 and any integral multiple thereof and, if in bearer form, the
denominations thereof if other than $5,000 and terms and conditions
relating thereto;
(xv) the applicability, if any, of the defeasance and covenant
defeasance provisions described herein, or any modification thereof;
(xvi) if such Debt Securities are to be issued upon the exercise of
debt warrants, the time, manner and place of such Debt Securities to be
authenticated and delivered;
(xvii) whether and under what circumstances 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 Shares and Preferred Shares
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 Shares -- Restrictions
on Transfer" and "Description of Preferred Shares -- 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.
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.
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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. 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.
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
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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 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
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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 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 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.
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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 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
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denominated in a foreign currency that shall be deemed outstanding shall be the
U.S. dollar equivalent, determined on the issue date for such Debt Security, of
the principal amount (or, in the case of an Original Issue Discount Security,
the U.S. dollar equivalent on the issue date of such Debt Security of the amount
determined as provided in (i) above); (iii) the principal amount of an Indexed
Security that shall be deemed outstanding shall be the principal face amount of
such Indexed Security at original issuance, unless otherwise provided with
respect to such Indexed Security pursuant to the Indenture; and (iv) Debt
Securities owned by 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.
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
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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 ("Service") or a
change in applicable United States Federal income tax law occurring after the
date of the Indenture.
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the foreign
currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations of
a person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or such government which issued the foreign
currency in which the Debt Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligations held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt.
Unless otherwise provided in the applicable Prospectus Supplement, if after
Parkway has deposited funds and/or 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
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<PAGE> 16
of the European Community ("ECU"), both within the European Monetary System and
for the settlement of transactions by public institutions of or within the
European Community; or (iii) any currency unit or composite currency other than
the ECU for the purposes for which it was established.
Unless otherwise provided in the applicable Prospectus Supplement, all
payments of principal of (and premium, if any) and interest on any Debt Security
that is payable in a foreign currency that ceases to be used by its government
of issuance shall be made in U.S. dollars.
In the event 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.
DESCRIPTION OF PREFERRED SHARES
GENERAL
Parkway is authorized to issue Preferred Shares. 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 December 31, 1996 there were no Preferred Shares outstanding.
The following description of the Preferred Shares sets forth certain
general terms and provisions of the Preferred Shares to which any Prospectus
Supplement may relate. The statements below describing the Preferred Shares are
in all respects subject to and qualified in their entirety by reference to the
applicable
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<PAGE> 17
provisions of the Charter and Bylaws and any applicable articles supplementing
the Charter designating terms of a series of Preferred Shares (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 Shares and the preference, conversion or other rights, voting powers,
restrictions, limitation as to dividends, qualifications, or terms or conditions
of redemption of the Preferred Shares. The Preferred Shares 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
Shares offered thereby for specific terms thereof, including:
(i) The title and stated value of such Preferred Shares;
(ii) The number of such Preferred Shares offered, the liquidation
preference per share and the offering price of such Preferred Shares;
(iii) The dividend rate(s), period(s) and/or payment date(s) or
method(s) of calculation thereof applicable to such Preferred Shares;
(iv) The date from which dividends on such Preferred Shares shall
accumulate, if applicable;
(v) The procedures for any auction or remarketing, if any, for such
Preferred Shares;
(vi) The provision for a sinking fund, if any, for such Preferred
Shares;
(vii) The provision for redemption, if applicable, of such Preferred
Shares;
(viii) Any listing of such Preferred Shares on any securities
exchange;
(ix) The terms and conditions, if applicable, upon which such
Preferred Shares will be convertible into Common Shares, including the
conversion price (or manner of calculation thereof);
(x) Whether interests in such Preferred Shares will be represented by
Depositary Shares;
(xi) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Shares;
(xii) A discussion of U.S. federal income tax considerations
applicable to such Preferred Shares;
(xiii) The relative ranking of preferences of such Preferred Shares 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 Shares
ranking senior to or on a parity with such series of Preferred Shares 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
Shares, 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 Shares of Parkway, and to all equity securities ranking junior to such
Preferred Shares; (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 Shares; and (iii) junior to all equity securities
issued by Parkway the terms of which specifically provide that such equity
securities rank senior to the Preferred Shares. The term "equity securities"
does not include debt securities.
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DIVIDENDS
Holders of Preferred Shares 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 Shares 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 Shares for which dividends are non-cumulative, then the holders of
such series of the Preferred Shares 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 Shares 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 Shares of such series for any period unless (i) if such series of
Preferred Shares 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 Shares of such
series for all past dividend periods and the then current dividend period or
(ii) if such series of Preferred Shares 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 Shares 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 Shares of any series and the shares
of any other series of Preferred Shares ranking on a parity as to dividends with
the Preferred Shares of such series, all dividends declared upon Preferred
Shares of such series and any other series of Preferred Shares ranking on a
parity as to dividends with such Preferred Shares shall be declared pro rata so
that the amount of dividends declared per share of Preferred Shares of such
series and such other series of Preferred Shares shall in all cases bear to each
other the same ratio that accrued dividends per share on the Preferred Shares of
such series (which shall not include any accumulation in respect of unpaid
dividends for prior dividend periods if such Preferred Shares do not have a
cumulative dividend) and such other series of Preferred Shares 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 Shares of such series
which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Shares has a cumulative dividend, full cumulative
dividends on the Preferred Shares 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 Shares does not have a
cumulative dividend, full dividends on the Preferred Shares of such series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for payment for the then current dividend
period, no dividends (other than in Common Shares or other capital shares
ranking junior to the Preferred Shares 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 Shares, or any other
capital shares of Parkway ranking junior to or on a parity with the Preferred
Shares of such series as to dividends or upon liquidation, nor shall any Common
Shares, or any other capital shares of Parkway ranking junior to or on a parity
with the Preferred Shares 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 Shares of such series as to
dividends and upon liquidation). Any dividend payment made on a series of
Preferred Shares shall first be credited against the earliest accrued but unpaid
dividend due with respect to shares of such series which remain payable.
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REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred
Shares 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 Shares that is
subject to mandatory redemption will specify the number of such Preferred Shares
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 Preferred Shares 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 Shares of any series is payable only from the net
proceeds of the issuance of capital shares of Parkway, the terms of such
Preferred Shares 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 Shares 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
Shares has a cumulative dividend, full cumulative dividends on all shares of any
series of Preferred Shares 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 Shares does not have a cumulative dividend, full
dividends of the Preferred Shares 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 Shares shall be redeemed unless all outstanding Preferred
Shares of such series is simultaneously redeemed; provided, however, that the
foregoing shall not prevent the purchase or acquisition of Preferred Shares 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
Shares of such series. In addition, unless (i) if such series of Preferred
Shares has a cumulative dividend, full cumulative dividends on all outstanding
shares of any series of Preferred Shares 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 Shares does not have a cumulative
dividend, full dividends on the Preferred Shares 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 Shares of such series (except by conversion into or exchange for
capital stock of Parkway ranking junior to the Preferred Shares of such series
as to dividends and upon liquidation); provided, however, that the foregoing
shall not prevent the purchase or acquisition of Preferred Shares 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 Shares of
such series.
If fewer than all of the outstanding Preferred Shares 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 Shares of
any series to be redeemed at the address shown on the share transfer books of
Parkway. Each notice shall state: (i) the redemption date; (ii) the number of
shares and series of the Preferred Shares to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such Preferred Shares 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
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Shares of any series are to be redeemed, the notice mailed to each such holder
thereof shall also specify the number of Preferred Shares to be redeemed from
each such holder. If notice of redemption of any Preferred Shares 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 Shares so called for
redemption, then from and after the redemption date dividends will cease to
accrue on such Preferred Shares, 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 Common Shares or any other class or series of capital
shares of Parkway ranking junior to the Preferred Shares in the distribution of
assets upon any liquidation, dissolution or winding up of Parkway, the holders
of each series of Preferred Shares 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 Shares 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 Shares 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 Preferred Shares 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 Shares in the
distribution of assets, then the holders of the Preferred Shares 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 Shares, 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 Shares 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
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 Shares 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 Shares shall be in arrears for six or
more consecutive quarterly periods, the holders of such Preferred Shares (voting
separately as a class with all other series of Preferred Shares 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 Shares 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 Shares has a
cumulative dividend, all dividends accumulated on such Preferred Shares 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 Shares 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.
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Unless provided otherwise for any series of Preferred Shares, so long as
any Preferred Shares 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 Shares 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
Shares 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 Shares, 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 Shares 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 Shares
remain 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 or voting power of holders
of Preferred Shares and provided further that (a) any increase in the amount of
the authorized Preferred Shares or the creation or issuance of any other series
of Preferred Shares; or (b) any increase in the amount of authorized shares of
such series or any other series of Preferred Shares, in each case ranking on a
parity with or junior to the Preferred Shares 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 Shares 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 Shares 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 Shares
are convertible into Common Shares will be set forth in the applicable
Prospectus Supplement relating thereto. Such terms will include the number of
Common Shares into which the Preferred Shares 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
Shares 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 Shares.
STOCKHOLDER LIABILITY
As discussed below under "Description of Common Shares -- General,"
applicable Maryland law provides that no stockholder, including holders of
Preferred Shares, 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.
RESTRICTIONS ON OWNERSHIP
As discussed below under "Description of Common Shares -- Restrictions on
Transfer," for Parkway to qualify as a REIT under the Internal Revenue Code of
1986, as amended (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 Shares of
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Parkway. Therefore, the Designating Amendment for each series of Preferred
Shares may contain provisions restricting the ownership and transfer of the
Preferred Shares. The applicable Prospectus Supplement will specify any
additional ownership limitation relating to a series of Preferred Shares.
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Preferred Shares 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 Shares, as specified in the applicable Prospectus
Supplement. Preferred Shares 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 Shares
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 Shares represented by the Depositary
Shares evidenced by such Depositary Receipt, to all the rights and preferences
of the Preferred Shares 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 Shares by Parkway to a Preferred Shares
Depositary, Parkway will cause such Preferred Shares 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 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 Shares Depositary will be required to distribute all cash
dividends or other cash distributions received in respect of the applicable
Preferred Shares 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 Shares Depositary.
In the event of a distribution other than in cash, a Preferred Shares
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 Shares Depositary, unless such Preferred
Shares Depositary determines that it is not feasible to make such distribution,
in which case such Preferred Shares 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 Shares which have been converted or
exchanged.
WITHDRAWAL OF SHARES
Upon surrender of the Depositary Receipts at the corporate trust office of
the applicable Preferred Shares 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
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number of whole or fractional shares of the applicable Preferred Shares 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 Shares on the basis of the
proportion of Preferred Shares represented by each Depositary Share as specified
in the applicable Prospectus Supplement, but holders of such Preferred Shares
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 Shares to be withdrawn, the applicable Preferred Shares Depositary
will be required to deliver to such holder at the same time a new Depositary
Receipt evidencing such excess number of Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES
Whenever Parkway redeems Preferred Shares held by a Preferred Shares
Depositary, such Preferred Shares Depositary will be required to redeem as of
the same redemption date the number of Depositary Shares representing the
Preferred Shares so redeemed, provided Parkway shall have paid in full to such
Preferred Shares Depositary the redemption price of the Preferred Shares 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 Shares. 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 Shares 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 Shares Depositary.
VOTING OF THE PREFERRED SHARES
Upon receipt of notice of any meeting at which the holders of the
applicable Preferred Shares are entitled to vote, a Preferred Shares 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 Shares. 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 Shares) will be entitled to instruct such
Preferred Shares Depositary as to the exercise of the voting rights pertaining
to the amount of Preferred Shares represented by such holder's Depositary
Shares. Such Preferred Shares Depositary will be required to vote the amount of
Preferred Shares 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 Shares Depositary in order to enable such
Preferred Shares Depositary to do so. Such Preferred Shares Depositary will be
required to abstain from voting the amount of Preferred Shares represented by
such Depositary Shares to the extent it does not receive specific instructions
from the holders of Depositary Receipts evidencing such Depositary Shares. A
Preferred Shares 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 nonaction is in good faith and does not result from
negligence or willful misconduct of such Preferred Shares 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.
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CONVERSION OF PREFERRED SHARES
The Depositary Shares, as such, will not be convertible into Common Shares
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 Shares Depositary with written instructions to such
Preferred Shares Depositary to instruct Parkway to cause conversion of the
Preferred Shares represented by the Depositary Shares evidenced by such
Depositary Receipts into whole Common Shares, other Preferred Shares 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 Shares
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
Common Shares 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 Shares 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 Shares and any provision of a Deposit Agreement will be
permitted at any time to be amended by agreement between Parkway and the
applicable Preferred Shares Depositary. However, any amendment that materially
and adversely alters the rights of the holders of Depositary Receipts or that
would be materially and adversely inconsistent with the rights granted to the
holders of the related Preferred Shares 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 Shares 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 Shares
Depositary if (i) such termination is necessary to preserve Parkway's status as
a REIT or (ii) a majority of each series of Preferred Shares affected by such
termination consents to such termination, whereupon such Preferred Shares
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 Shares as are represented
by the Depositary Shares evidenced by such Depositary Receipts together with any
other property held by such Preferred Shares 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 Shares 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 Shares 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 Shares; or (iii) each share of the
related Preferred Shares shall have been converted into stock of Parkway not so
represented by Depositary Shares.
CHARGES OF A PREFERRED SHARES 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 Shares 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 Shares
Depositary for any duties requested by such
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holders to be performed which are outside of those expressly provided for in the
applicable Deposit Agreement.
RESIGNATION AND REMOVAL OF DEPOSITARY
A Preferred Shares 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 Shares Depositary, any such
resignation or removal to take effect upon the appointment of a successor
Preferred Shares Depositary. A successor Preferred Shares 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 Shares Depositary will be required to forward to holders of
Depositary Receipts any reports and communications from Parkway which are
received by such Preferred Shares Depositary with respect to the related
Preferred Shares.
Neither a Preferred Shares 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 Shares 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 Shares represented by
the applicable Depositary Shares), gross negligence or willful misconduct, and
neither Parkway nor any applicable Preferred Shares Depositary will be obligated
to prosecute or defend any legal proceeding in respect of any Depositary
Receipts, Depositary Shares or Preferred Shares represented thereby unless
satisfactory indemnity is furnished. Parkway and any Preferred Shares Depositary
will be permitted to rely on written advice of counsel or accountants, or
information provided by persons presenting Preferred Shares 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 Shares 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 Shares Depositary shall
be entitled to act on such claims, requests or instructions received from
Parkway.
DESCRIPTION OF COMMON SHARES
GENERAL
Parkway is authorized to issue up to 69,424,000 Common Shares. As of
January 6, 1997, there were 4,257,534 Common Shares outstanding and 280,648
Common Shares 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 Common Shares are fully paid and
non-assessable and have equal voting, distribution and liquidation rights.
Common Shares are not subject to call or redemption; provided, however, if the
Parkway Board of Directors determines that the direct or indirect ownership of
Common Shares 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 Common Shares.
The holders of Common Shares are entitled to one vote per share on all
matters to be voted upon by the stockholders. The holders of Common Shares have
no cumulative voting rights. Additionally, subject to the rights of holders of
Preferred Shares, holders of Common Shares are entitled to receive such
dividends as may be declared from time to time by the directors out of funds
legally available therefor.
The Common Shares currently outstanding are listed for trading on the NYSE
under the symbol "PKY." Parkway will apply to the NYSE to list the additional
Common Shares to be sold pursuant to any Prospectus Supplement, and Parkway
anticipates that such shares will be so listed.
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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 Shares, if any, to receive preferential distributions, each
outstanding Common Share 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. All ten
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 Common
Share held by them.
OTHER MATTERS
The transfer agent and registrar for the Common Shares is KeyCorp
Stockholder Services, Inc., Cleveland, Ohio.
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 Shares 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 Shares 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 Shares 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), 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.
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.
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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 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 Shares, 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 Shares at a price of $40.00 per
share (as adjusted for the three-for-two stock split effected
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April 30, 1996), 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 Shares (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
Shares; 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.
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 Shares (or, if sufficient Common Shares are 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 Shares (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 Common Shares (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 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 expects that it will be organized and will operate in a
manner so as to qualify to be taxed as a REIT under Sections 856 through 860 of
the Code commencing with its taxable year ending December 31, 1997. 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 continue to operate
in such a manner in the future,
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no assurance can be given that Parkway will operate in a manner so as to qualify
or remain qualified as a REIT. See "-- Failure to Qualify" below. 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.
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 ending December 31, 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 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 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, Parkway 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) which 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. In
addition, if Parkway acquires any additional asset from a C corporation (i.e., a
corporation generally subject to full corporate level tax) in a transaction in
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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 IRS regulations that
have not yet been promulgated).
Requirements for Qualification. The Code defines a REIT as a corporation,
trust or association (i) which is managed by one or more trustees or directors;
(ii) the beneficial ownership of which is evidenced by transferable shares or by
transferable certificates of beneficial interest; (iii) which would be taxable
as a domestic corporation, but for Sections 856 through 860 of the Code; (iv)
which is neither a financial institution nor an insurance company subject to
certain provisions of the Code; (v) the beneficial ownership of which is held by
100 or more persons; (vi) during the last half of each taxable year not more
than 50% in value of the outstanding stock of which is owned, directly or
indirectly, by five or fewer individuals (as defined in the Code to include
certain entities); and (vii) which meets certain other tests, described below,
regarding the nature of its income and assets. The Code provides that conditions
(i) through (iv), inclusive, must be met during the entire taxable year and that
condition (v) must be met during at least 335 days of a taxable year of 12
months, or during a 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 14 wholly-owned 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 currently
takes the position for private ruling purposes that a 100% owned subsidiary of
an entity electing REIT status will be classified as a "qualified REIT
subsidiary" even though the REIT did not own 100% of the subsidiary's
outstanding stock throughout the subsidiary's existence. The Service has treated
the subsidiary as liquidated immediately prior to the date of REIT election and
subsequently incorporated by the REIT. Thus, Jaeckle, Fleischman & Mugel, LLP,
counsel to Parkway, believes that in applying the requirements described herein,
the current subsidiaries of Parkway will be "qualified REIT subsidiaries". As
such, the separate existence of such subsidiaries will be ignored for federal
income tax purposes, 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 any partnership owned
and the noncorporate subsidiaries 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 currently ends on June 30. Parkway will
change its taxable year to the calendar year effective for the short period from
July 1, 1996 to December 31, 1996, in order to meet this requirement. In
addition, pursuant to applicable Treasury Regulations, in order 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.
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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,
and on its estimate of earnings and profits for the period ending December 31,
1996, 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 December
31, 1997. There is no assurance that the Service will not challenge Parkway's
calculation of earnings and profits. If such a challenge were successful, or if
Parkway otherwise retains any such non-REIT earnings and profits at the close of
its taxable year ending December 31, 1997, it will not qualify for taxation as a
REIT.
Income Tests. In order 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 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 its assets will in major part
give rise to rental income qualifying under the 75% and 95% gross income tests.
Parkway will receive some income that is not qualifying income for purposes of
the 75% and 95% gross income tests. Such income includes certain management and
brokerage fee income. The aggregate amount of such fees and other non-qualifying
income in any taxable year is not expected to cause Parkway to fail to qualify
under the 75% and 95% gross income tests.
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
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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% 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
nature of its assets which 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
shareholders 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 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.
30
<PAGE> 33
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 shareholder to the extent that
they do not exceed the adjusted basis of the 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 have been held for one year or less), assuming the shares are a capital
asset in the hands of the stockholders. 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 IRS 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.
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<PAGE> 34
Taxation of Foreign Stockholders and Tax-Exempt Stockholders. The rules
governing U.S. Federal income taxation of nonresident alien individuals, foreign
corporations, foreign partnerships and other foreign stockholders as well as
U.S. tax-exempt stockholders are complex, and no attempt will be made herein to
review these rules. Prospective stockholders who fall within these categories
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
shares, including any reporting requirements.
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 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 and/or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers, and agents that participate in the distribution
of Securities may be deemed to be underwriters, and any discounts or commissions
they receive from 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 Common Shares which are listed on the NYSE. Any Common Shares
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 Shares 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
32
<PAGE> 35
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.
EXPERTS
The consolidated financial statements of The Parkway Company (Parkway
Properties, Inc.'s predecessor) appearing in The Parkway Company's Annual Report
on Form 10-KSB for the year ended December 31, 1995, 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. Rogers & Wells, New York, New York
will act as counsel to any underwriters, dealers or agents.
33
<PAGE> 36
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............................................... $ 30,303
Blue Sky fees and expenses................................................ 20,000
Printing and engraving expenses........................................... 25,000
Legal fees and expenses................................................... 40,000
Accounting fees and expenses.............................................. 50,000
Miscellaneous............................................................. 4,697
-------
Total................................................................ $170,000
=======
</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 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.
II-1
<PAGE> 37
ITEM 16. EXHIBITS.
The following exhibits are filed herewith (or incorporated by reference):
<TABLE>
<S> <C>
(1) Form of Underwriting Agreement.*
(3.1) Articles of Incorporation, as amended, of Parkway (incorporated by reference to
Exhibit B to The Parkway Company's Proxy Material for its Annual Meeting of
Stockholders held on July 18, 1996).
(3.2) Bylaws of Parkway (incorporated by reference to Exhibit C to The Parkway Company's
Proxy Material for its Annual Meeting of Stockholders held on July 18, 1996).
(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.+
(b) Consent of Jaeckle Fleischmann & Mugel, LLP (incorporated by reference to Exhibit
5).
(24) Powers of Attorney (incorporated by reference to Exhibit 24 of Parkway's
Registration Statement on Form S-3 (No. 333-16479).
(25) Statement of eligibility of trustee.*
</TABLE>
- ---------------
+ Filed herewith.
* To be filed by amendment or to be incorporated by reference herein by a
Current Report on Form 8-K.
** Previously filed.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii)
do not apply if information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with or furnished to the Commission by the Registrant pursuant to
Sections 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-2
<PAGE> 38
(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.
(e) The undersigned Registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Trust Indenture Act.
II-3
<PAGE> 39
SIGNATURES
Pursuant to the requirements of the Securities of the Securities Act of
1933, the Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Amendment to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Jackson, State of Mississippi as of the 10th day of
January 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 10th day of January
1997.
<TABLE>
<CAPTION>
NAME 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
Daniel C. Arnold Director
George R. Farish Director
Roger P. Friou Director
Joe F. Lynch Director
C. Herbert Magruder Director
W. Lincoln Mossop, Jr. Director
</TABLE>
/s/ Sarah P. Clark
----------------------
Sarah P. Clark,
Individually and as
Attorney-in-fact
II-4
<PAGE> 1
Exhibit 5
JAECKLE FLEISCHMANN & MUGEL, LLP
ATTORNEYS AT LAW
FLEET BANK BUILDING TWELVE FOUNTAIN PLAZA BUFFALO, NEW YORK 14202-2292 USA
TEL (716) 856-0600 FAX (716) 856-0432
January 10, 1997
Parkway Properties, Inc.
300 One Jackson Place
188 East Capitol Street
Jackson, Mississippi 39201
Ladies and Gentlemen:
Re: Registration Statement on Form S-3, as amended (No. 333-16479)
--- --------------------------------------------------------------
under the Securities Act of 1933, covering the registration of
--------------------------------------------------------------
shares of common stock, $0.001 par value per share (the "Common
---------------------------------------------------------------
Shares"), preferred shares, $0.001 par value per share
------------------------------------------------------
("Preferred Shares"), Preferred Shares represented by Depositary
----------------------------------------------------------------
Shares, and unsecured convertible debt securities (collectively,
----------------------------------------------------------------
the "Securities") of Parkway Properties, Inc. ("Parkway")
---------------------------------------------------------
As your counsel we have examined the above Registration Statement and
we are familiar with the documents referred to therein, as well as Parkway's
Articles of Incorporation, as amended, and Bylaws, such records of proceedings
of Parkway as we deemed material, and such other proceedings of Parkway as we
deemed necessary for the purpose of this opinion.
We have examined the proceedings heretofore taken and we are informed
as to the procedures proposed to be followed by Parkway in connection with the
authorization, issuance and sale of the above described Securities. In our
opinion the Securities to be issued by Parkway will be, when issued and paid
for pursuant to the Registration Statement and the exhibits thereto, duly
authorized for issuance by all necessary corporate action and, upon the
issuance thereof in accordance with their terms, the Securities will be legally
issued, fully paid and non-assessable.
We consent to the filing of this opinion letter as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Jaeckle Fleischmann & Mugel, LLP
<PAGE> 1
EXHIBIT 8
JAECKLE FLEISCHMANN & MUGEL, LLP
A T T O R N E Y S A T L A W
FLEET BANK BUILDING TWELVE FOUNTAIN PLAZA BUFFALO, NEW YORK 14202-2292 USA
TEL (716) 856-0600 FAX (716) 856-0432
January 9, 1997
Parkway Properties, Inc.
300 One Jackson Place
188 East Capitol Street
Jackson, Mississippi 39201-2195
Re: Parkway Properties, Inc.; Sale and
Issuance of Shares of Common Stock
----------------------------------
Ladies and Gentlemen:
We are legal counsel to Parkway Properties, Inc., a Maryland
corporation (the "Company"), and have represented the Company in connection with
the preparation of its Registration Statement on Form S-3 (No. 333-16479). We
are furnishing this opinion at the request of the Company.
In rendering this opinion, we have reviewed (1) the
Prospectus, (2) the Registration Statement, (3) the Company's Charter and the
Certificates of Incorporation of each Subsidiary, (4) the Company's By-Laws and
the By-Laws of each Subsidiary, and (5) the Company's Federal Income Tax Return
for the year ended June 30, 1995.
We have reviewed with management of the Company the
investments and operations of the Company. We have also reviewed certain
documents in the Company relating to the ownership and operation of selected
real estate properties and other investments, including management agreements
and partnership agreements relating to such properties and forms of leases
relating to the Company's interest in such properties, and we rely upon
representations made to us by management of the Company that such documents are
representative of those existing and in effect with respect to other properties
of the Company. Our discussions with management focused, among other things, on
the number and holdings of shareholders of the Company; the proposed
distribution policy of the Company; various record keeping requirements; the
composition of the assets of the Company; the magnitude of personal property
included in its real property leases; the income generated from subleases of its
real property; and other matters which we deem relevant and upon which we rely
for purposes of rendering this opinion.
BUFFALO, NEW YORK - ROCHESTER, NEW YORK
<PAGE> 2
January 9, 1997
Page 2
Furthermore, in rendering this opinion we have relied upon
certain factual representations made by the Company. Although we have not
independently verified the truth, accuracy or completeness of these factual
representations and the underlying assumptions upon which they are based,
nothing has come to our attention that would cause us to question them. Such
representations include, but are not limited to, representations that:
(1) the Company has and will be operated in the manner
described in the Prospectus;
(2) the Company will file for its taxable year commencing
January 1, 1997 and ending December 31, 1997 (the "Current Year"), and
thereafter, an election under Section 856(c)(1) of the Internal Revenue Code of
1986, as amended ("Code"), to be treated as a real estate investment trust for
federal income tax purposes;
(3) the Company will make during the Current Year and
thereafter the distributions to shareholders required by Section
857(a)(1) of the Code;
(4) the Company will comply during the Current Year and
thereafter with Section 857(a)(2) of the Code and Treasury Regulation Section
1.857-8 pertaining to actual ownership of shares of the Company and the
maintenance of records with respect thereto;
(5) the Company will satisfy during the Current Year
and thereafter the organizational and ownership requirements set
forth in Section 856(a) of the Code;
(6) the Company will satisfy during the Current Year and
thereafter the tests set forth in Section 856(c)(5) of the Code relating to the
assets held by the Company at the end of each quarter in the applicable years in
that (i) 75% of the value of its total assets will be represented by real estate
assets, (ii) less than 25% of its total assets will be represented by
securities, (iii) less than 5% of the value of its total assets will be
represented by securities in any one issuer, and (iv) it will not own more than
10% of the outstanding voting securities of any one issuer;
(7) the Company will satisfy during the Current Year and
thereafter the tests set forth in Section 856(c)(2), (3) and (4) of the Code in
that at least 75% of its gross income will be derived from real estate assets
(principally "rents from real property" within the meaning of Sections 856-860
of the Code); an
<PAGE> 3
January 9, 1997
Page 3
additional 20% of its gross income will be derived from such sources or
dividends or interest or gain on the disposition of stock or securities; and
less than 30% of its gross income will be derived from the sale or other
disposition of (i) stock or securities held for less than one year, (ii)
property transferred in a prohibited transaction, and (iii) real property or
real property interests generally held for less than four years.
(8) for the Current Year and thereafter (i) the Company's
properties (and the properties owned by any partnership in which the Company is
a partner) have been and will be managed by independent contractors as required
pursuant to Section 856(d) of the Code ("Independent Contractors"), (ii) the
Independent Contractors have been and will be adequately and reasonably
compensated for any and all services performed by them for the Company, (iii)
the Independent Contractors have not and will not fall within any of the
relationships prohibited by Section 856(d)(3) of the Code, (iv) the Company will
not derive or receive income from the Independent Contractors, and (v) the
Company will not furnish or render services to tenants of the property owned by
it (or by any partnership in which the Company is a partner) which are primarily
for the convenience of the tenant and are other than those usually or
customarily rendered in connection with the rental of space for occupancy only,
other than through an Independent Contractor; and
(9) the rents to be received by the Company in the Current
Year and thereafter (i) have not been and will not be determined, in whole or in
part, from the net income or profits derived by the tenant from the property,
and (ii) less than 15% of the total rent under each lease has been and will be
attributable to personal property leased in connection with the lease of real
property.
(10) As of January 1, 1997, the Company did not have
any positive accumulated earnings and profits.
(11) All partnerships in which the Company or any of its
subsidiaries is a partner have been duly formed and have conducted their
business in accordance with the terms and provisions of the agreements under
which they were formed and the laws applicable to their formation and operation
in the jurisdictions to which they are subject.
Based upon the foregoing, we are of the opinion that:
1. The Company's organization and proposed method of
operation will enable it to qualify to be taxed as a real estate
<PAGE> 4
January 9, 1997
Page 4
investment trust under the Code commencing with Parkway's Current Year and for
its future taxable years.
2. Each of the partnerships in which the Company is a
partner qualifies for taxation as a partnership for federal income tax purposes.
We note, however, that the ability of the Company to qualify
as a real estate investment trust for any year will depend upon future events,
some of which are not within the Company's control, and it is not possible to
predict whether the facts set forth in the Prospectus or the Registration
Statement and this letter will continue to be accurate in the future. In
addition, our opinions are based on the current Code and the regulations
thereunder as now constituted, and the status of the Company as a real estate
investment trust for federal income tax purposes may be affected by changes in
the Code and the regulations thereunder.
This opinion is being furnished to you in connection with the
preparation of the Registration Statement and may not be used or relied upon for
any other purpose. We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to its attachment as an exhibit to the
Prospectus contained therein, as well as to the reference to this opinion
therein.
Very truly yours,
/s/ Jaeckle Fleischmann & Mugel, LLP
<PAGE> 1
Exhibit 23(a)
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-3, No. 333-16479) and
related Prospectus of Parkway Properties, Inc. for the registration of
1,250,000 shares of its common stock and to the incorporation by reference
therein of our report dated March 25, 1996, with respect to the consolidated
financial statements of The Parkway Company (Parkway Properties, Inc.'s
predecessor) included in its Annual Report (Form 10-KSB) for the year ended
December 31, 1995, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Jackson, Mississippi
January 9, 1997
