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Rule No. 424(b)(5)
Registration No. 333-29259
PROSPECTUS SUPPLEMENT
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(TO PROSPECTUS DATED JUNE 30, 1997)
451,128 SHARES
PARKWAY PROPERTIES, INC.
COMMON STOCK
All of the shares of common stock, $0.001 par value per share (the
"Common Stock"), of Parkway Properties, Inc. ("Parkway" or the "Company"),
offered hereby (the "Offering") are being sold by Parkway. On February 18,
1998, the last reported sale price of the Common Stock on the New York Stock
Exchange, Inc. (the "NYSE") was $33.25 per share. The Common Stock is listed on
the NYSE under the symbol "PKY."
Parkway is a self-administered real estate investment trust ("REIT")
specializing in the acquisition, ownership, management, financing and leasing of
office properties in the Southeastern United States and Texas. Parkway and its
predecessors have been public companies engaged in the real estate business
since 1971, and have successfully operated and grown through several major real
estate cycles. As of January 31, 1998, Parkway owned or had an interest in 33
office properties in eleven states encompassing approximately 4.8 million net
rentable square feet (the "Properties"). The Company seeks to acquire Class A,
A- or B+ office properties ranging in size from 50,000 to 500,000 net rentable
square feet in markets characterized by above average employment and population
growth.
SEE "RISK FACTORS" COMMENCING ON PAGE S-3 FOR CERTAIN FACTORS AND
CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE COMMON STOCK.
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 SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
A.G. Edwards & Sons, Inc. (the "Underwriter") has agreed to purchase
the Common Stock from the Company at a price of $31.59 per share, resulting in
aggregate proceeds to the Company of $14,251,133.52 before payment of expenses
by the Company estimated at $20,000, subject to the terms and conditions of an
Underwriting Agreement. The Underwriter intends to sell the shares of Common
Stock to the sponsor of a newly-formed unit investment trust at an aggregate
purchase price of $14,401,133.58, resulting in an aggregate underwriting
discount of $150,000.06. See "Underwriting."
The Common Stock offered hereby is offered by the Underwriter, subject
to prior sale, when, as and if delivered to and accepted by the Underwriter, and
subject to its right to reject orders in whole or in part. It is expected that
delivery of the Common Stock offered hereby will be made on or about February
23, 1998.
A.G. EDWARDS & SONS, INC.
The date of this Prospectus Supplement is February 18, 1998.
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THE UNDERWRITER MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR
OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH TRANSACTIONS MAY INCLUDE
THE PURCHASE OF COMMON STOCK TO STABILIZE ITS MARKET PRICE AND THE PURCHASE OF
COMMON STOCK TO COVER A SHORT POSITION. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
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RISK FACTORS
Unless the context otherwise requires, all references in this
Prospectus Supplement to "Parkway" or the "Company" shall mean Parkway
Properties, Inc. and its subsidiaries on a consolidated basis and, as the
context may require, their predecessors. The per share information set forth
herein gives retroactive effect to a three-for-two stock split effected by the
Company on April 30, 1996. Prospective investors should carefully consider the
following information in conjunction with the other information contained or
incorporated by reference in this Prospectus Supplement and the accompanying
Prospectus before making a decision to purchase shares of Common Stock. This
Prospectus Supplement contains and the accompanying Prospectus contains or
incorporates by reference forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). The Company's actual results could
differ materially from those set forth in the forward-looking statements.
FAILURE TO MANAGE RAPID GROWTH AND INTEGRATE OPERATIONS
Parkway is currently experiencing a period of rapid growth. Parkway
has acquired 17 office properties with approximately 2.8 million net rentable
square feet since January 1, 1997 (the "Recent Acquisitions"). The integration
of the Recent Acquisitions into existing management and operating structures
presents a significant management challenge. Although Parkway believes it has
sufficient management depth to lead Parkway through this period of rapid growth,
there can be no assurance that Parkway will be able to assimilate the Recent
Acquisitions or any further acquisitions into its portfolio without certain
operating disruptions and unanticipated costs. The failure to successfully
integrate the Recent Acquisitions could have a material adverse effect on the
results of operations and financial condition of Parkway and its ability to pay
expected distributions to stockholders. Also, Parkway is evaluating many
potential acquisitions, the process of which involves costs which are non-
recoverable. There can be no assurance that properties which are acquired will
perform in accordance with expectations or that cost estimates for improvements
to the acquired properties in order to bring them up to the Company's standards
will be accurate. In addition, Parkway has expanded its current self-management
for office properties it owns or may acquire in Houston, Atlanta, Dallas,
Charlotte, Winston-Salem, Columbia and Memphis. There can be no assurance that
the cost benefits anticipated in connection with such self-management will be
achieved or that Parkway will successfully integrate the operational structure
necessary for the self-management of such properties.
REAL ESTATE FINANCING RISKS
The required repayment of debt or interest thereon could adversely
affect Parkway's financial condition. Parkway is subject to the risks normally
associated with debt
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financing, including the risk that Parkway's cash flow will be insufficient to
meet required payments of principal and interest, the risk of violating loan
covenants, the risk of rising interest rates on Parkway's variable rate debt and
the risk that Parkway will not be able to repay or refinance existing
indebtedness on its Properties at maturity (which generally will not have been
fully amortized at maturity) or that the terms of such refinancing will not be
as favorable as the terms of existing indebtedness. There can be no assurance
that Parkway will be able to refinance any indebtedness it may incur or
otherwise obtain funds by selling assets or raising equity to make required
payments on indebtedness.
As of January 31, 1998, thirteen of the Properties secured non-
recourse mortgage indebtedness totaling approximately $104.9 million, three of
the Properties secured the Company's acquisition revolving credit facility (the
"Acquisition Facility") and a building owned by a partnership in which Parkway
is a 50% partner secured mortgage indebtedness of approximately $820,000. In
addition, properties which Parkway may acquire in the future could be mortgaged
to secure payment of indebtedness. If Parkway is unable to generate funds to
cover required payments of principal and interest on borrowings secured by any
of these properties, the mortgage securing such properties could be foreclosed
upon by, or such properties could otherwise be transferred to, the mortgagee
with a consequent loss of income and asset value to Parkway.
Rising interest rates could adversely affect Parkway's cash flow.
Advances under the Acquisition Facility and the Company's working capital
revolving credit facility (the "Working Capital Facility") will bear interest at
variable rates. In addition, Parkway may incur indebtedness in the future that
also bears interest at a variable rate or may be required to refinance its debt
at higher rates. Accordingly, increases in interest rates could increase
Parkway's interest expense, which could adversely affect Parkway's financial
condition and ability to pay expected distributions to stockholders.
Parkway's organizational documents contain no limitation on debt which
could adversely affect Parkway's cash flow. Parkway currently has a policy of
maintaining what the Company believes to be conservative leverage. As of
January 31, 1998, Parkway's ratio of debt to total market capitalization was
approximately 26.6%. Also as of January 31, 1998, Parkway had outstanding
consolidated indebtedness of approximately $120.6 million, all of which is
secured and approximately $104.9 million of which is fixed rate indebtedness.
As of January 31, 1998 there was approximately $12 million outstanding under the
Acquisition Facility and approximately $3.7 million outstanding under the
Working Capital Facility. Parkway's organizational documents do not contain any
limitation on the amount of indebtedness it may incur. Accordingly, the Board
of Directors could alter or eliminate its current debt policy and would do so,
for example, if it were necessary in order for Parkway to continue to qualify as
a REIT. If this policy were changed, Parkway could become more highly
leveraged, resulting in an increase in debt service that could adversely affect
Parkway's financial condition and cash available for distribution to
stockholders and could increase the risk of default on Parkway's indebtedness.
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REAL ESTATE INVESTMENT RISKS
General Risks. Parkway's investments generally consist of investments
in office buildings and as such will be subject to varying degrees of risk
generally incident to the ownership of real property. The underlying value of
Parkway's real estate investments and Parkway's financial condition and ability
to make expected distributions to its stockholders will be dependent upon its
ability to operate the Properties in a manner sufficient to maintain or increase
revenues and to generate sufficient income in excess of operating expenses.
Income from the Properties may be adversely affected by changes in national
economic conditions, changes in local market conditions due to changes in
general or local economic conditions and neighborhood characteristics, changes
in interest rates and in the availability, cost and terms of mortgage
financings, the impact of present or future environmental legislation and
compliance with environmental laws, the ongoing need for capital improvements,
particularly in older structures, changes in real estate tax rates and other
operating expenses, adverse changes in governmental rules and fiscal policies,
adverse changes in zoning laws, civil unrest, acts of God, including earthquakes
and other natural disasters (which may result in uninsured losses), acts of war
and other factors which are beyond the control of Parkway.
Dependence on Primary Markets. Substantially all of the Properties
are located in the Southeastern United States and Texas and, therefore,
Parkway's financial condition and its ability to make expected distributions to
stockholders will be linked to economic conditions in these markets as well as
the market for office space generally. To the extent that these conditions
impact the market rents for office space, they could have an adverse effect on
Parkway's financial condition and ability to make expected distributions to
stockholders.
Acquisition and Development Risks. Parkway intends to pursue
acquisitions of additional properties and, under appropriate circumstances, may
pursue development opportunities. Acquisitions entail risks that such
properties will fail to perform in accordance with expectations and that
estimates of the cost of improvements necessary to market, acquire and operate
the properties will prove inaccurate as well as general risks associated with
any new real estate or operating company acquisitions. The fact that Parkway
generally must distribute 95% of its ordinary taxable income in order to
maintain its qualification as a REIT may limit Parkway's ability to rely upon
lease income from its Properties or subsequently acquired properties to finance
acquisitions or new developments. As a result, if debt or equity financing were
not available on acceptable terms, further acquisitions or development
activities might be curtailed or Parkway's financial condition and cash
available for distribution to stockholders might be adversely affected.
Tenant Defaults. A substantial part of Parkway's revenues and income
is derived from rental income from real property. Consequently, Parkway's
financial condition and ability to make expected distributions to stockholders
and to use its Properties as collateral for its borrowings would be adversely
affected if a significant number of tenants
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failed to meet their lease obligations. In the event of a default by a tenant,
Parkway may experience delays in enforcing its rights as lessor and may incur
substantial costs in protecting its investment. At any time, a tenant may also
seek protection under the bankruptcy laws, which could result in the rejection
and termination of such tenant's lease and thereby adversely affect Parkway's
financial condition and ability to make expected distributions to stockholders.
If a tenant rejects its lease pursuant to applicable bankruptcy laws, Parkway's
claim for breach of the lease in excess of any applicable security deposit would
(absent collateral securing the claim) be treated as a general unsecured claim.
The amount of the claim would be capped at the amount owed for unpaid pre-
petition lease payments unrelated to the rejection, plus the greater of one
year's lease payment or 15% of the remaining lease payments payable under the
lease (but not to exceed the amount of three years' lease payments).
Value and Illiquidity of Real Estate. Real estate investments are
relatively illiquid. Parkway's ability to vary its portfolio in response to
changes in economic and other conditions will therefore be limited. If Parkway
must sell an investment, there can be no assurance that it will be able to
dispose of the investment in the time period it desires or that the sales price
of the investment will recoup or exceed the amount of Parkway's cost for the
investment.
Environmental Matters. Parkway's operating costs may be affected by
the obligation to pay for the cost of complying with existing environmental
laws, ordinances and regulations, as well as the cost of complying with future
legislation. Under various federal, state and local environmental laws,
ordinances and regulations, a current or previous owner or operator of real
property may be liable for the costs of removal or remediation of hazardous or
toxic substances on, under, or in such property. Such laws often impose
liability whether or not the owner or operator knew of, or was responsible for,
the presence of such hazardous or toxic substances. In addition, the presence
of hazardous or toxic substances, or the failure to remediate such property
properly, may adversely affect the owner's ability to borrow by using such real
property as collateral. Persons who arrange for the transportation, disposal or
treatment of hazardous or toxic substances may also be liable for the costs of
removal or remediation of such substances at the disposal or treatment facility,
whether or not such facility is or ever was owned or operated by such person.
Certain environmental laws and common law principles could be used to impose
liability for releases of hazardous materials, including asbestos-containing
materials ("ACMs"), into the environment, and third parties may seek recovery
from owners or operators of real properties for personal injury associated with
exposure to released ACMs or other hazardous materials. Parkway is not aware of
any material ACM problems at its Properties. However, there can be no assurance
that ACMs do not exist at Properties owned by Parkway. If there are ACMs at the
Properties that require removal or other remediation, the cost thereof could be
substantial. This fact could have an adverse effect on the value of such
Property.
Environmental laws may also impose restrictions on the manner in which
a property may be used or transferred or in which businesses may be operated,
and these
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restrictions may require expenditures. In connection with the ownership and
operation of its Properties, Parkway may be potentially liable for any such
costs. The cost of defending against claims of liability or remediating
contaminated property and the cost of complying with environmental laws could
materially adversely affect Parkway's results of operations and financial
condition and ability to make expected distributions to stockholders. Phase I
environmental site assessments ("ESAs") have been conducted at all but one of
the office Properties by qualified independent environmental engineers. The
purpose of Phase I ESAs is to identify potential sources of contamination for
which any of the Properties may be responsible and to assess the status of
environmental regulatory compliance. The ESAs have not revealed any
environmental liability or compliance concerns that Parkway believes would have
a material adverse effect on its business, assets, results of operations or
liquidity. With the exception of Veritas Technology Center ("Veritas"), which is
adjacent to a Texaco-branded service station, Parkway is not aware of any such
liability or concerns. Nevertheless, it is possible that these ESAs did not
reveal all environmental liabilities or compliance concerns or that material
environmental liabilities or compliance concerns exist of which Parkway is
currently unaware. Parkway has not been notified by any governmental authority,
and has no other knowledge of, any material noncompliance, liability or claim
relating to hazardous or toxic substances or other environmental substances in
connection with any of the Properties. Parkway intends to perform additional
Phase I ESAs with respect to properties acquired in the future.
Environmental due diligence performed in connection with the purchase
of the Veritas property disclosed that the Texaco-branded service station
located on the neighboring property has released certain petroleum products
which may have migrated from the station to the Veritas property. The owner of
the neighboring property, Star Enterprise ("Star"), pursuant to an indemnity
agreement (the "Indemnity Agreement") dated January 1998 between Star and
Veritas Real Estate (U.S.A.), Inc. (the prior owner of the Veritas property),
has agreed to indemnify and hold harmless all future owners of the Veritas
property from all losses incurred in connection with the presence of petroleum
hydrocarbons on the Veritas property from the station. Parkway believes that
Star has sufficient financial reserves to indemnify Parkway for any potential
costs related to the clean up of the petroleum hydrocarbons. However, if Star
is unable to fully comply with its indemnity obligation Parkway may be subject
to liability and costs associated with any clean up of the petroleum
hydrocarbons.
Competition. All of the Properties owned by Parkway are located in
developed areas. There are numerous other office properties and real estate
companies within the market area of each such Property which will compete with
Parkway for tenants and acquisition and development opportunities. The number
of competitive office properties and real estate companies in such areas could
have a material effect on (i) Parkway's ability to rent space at the Properties;
(ii) the amount of rents currently charged and to be charged upon expiration of
leases; (iii) the amount of tenant improvements and other tenant concessions
required to lease the Properties; and (iv) acquisition and development
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opportunities. Parkway will compete for tenants and acquisitions with other
competitors who may have greater resources than Parkway.
Uninsured and Underinsured Losses. Parkway has obtained or has caused
its tenants to obtain commercial general liability, fire and extended coverage
insurance with respect to its Properties of the types and in the amounts which
Parkway believes is of the type and amount customarily obtained for or by an
owner of office properties. Parkway plans to obtain similar coverage for any
properties acquired in the future. However, there are certain types of losses,
generally of a catastrophic nature, such as earthquakes and floods, that may be
uninsurable or not economically insurable. The Board of Directors and management
of Parkway will use their discretion in determining amounts, coverage limits and
deductibility provisions of insurance, with a view to maintaining appropriate
insurance coverage on the investments of Parkway, as the case may be, at a
reasonable cost and on suitable terms. This may result in insurance coverage
that, in the event of a substantial loss, would not be sufficient to pay the
full current market value or current replacement cost of the lost investment of
Parkway. Inflation, changes in building codes and ordinances, environmental
considerations, and other factors also might make it not feasible to use
insurance proceeds to replace the property after such property has been damaged
or destroyed. Under such circumstances, the insurance proceeds received by
Parkway might not be adequate to restore its economic position with respect to
such property.
Property Taxes. The Properties are subject to real property taxes.
The real property taxes on the Properties may increase or decrease as property
tax rates change and as the value of the Properties are assessed or reassessed
by taxing authorities. If property taxes increase, Parkway's ability to make
distributions to its stockholders could be adversely affected.
Cost of Compliance with Americans with Disabilities Act. Under the
Americans with Disabilities Act of 1990, as amended (the "ADA"), all public
accommodations are required to meet certain federal requirements related to
access and use by disabled persons. Compliance with the public accommodations
provision of the ADA could require the removal of access barriers, and
noncompliance could result in the imposition of fines or awards of damages.
Additional legislation may impose further burdens or restrictions on owners with
respect to access by disabled persons. In many instances, the applicability and
requirements of the ADA are not clear. Accordingly, the cost of compliance with
the ADA or such legislation is not currently ascertainable, and, while such
costs are not expected to have a material adverse effect on Parkway's financial
condition, such costs could be substantial. Parkway has not undertaken ADA
studies of all of its Properties and, as to those Properties with respect to
which Parkway has not undertaken ADA studies, possible costs of compliance could
arise.
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CONFLICTS OF INTEREST
Leland R. Speed serves as Chairman of both Parkway and EastGroup
Properties, Inc., a REIT with a focus on industrial properties in sunbelt states
and California. As both companies carry out their strategic plans, management
of each company has stated its intention not to transfer properties between the
two entities, and each company intends to pursue its distinct corporate plan.
There can be no assurance that conflicts of interest will not arise between the
two companies in the future.
LIMITS ON CHANGES IN CONTROL
Certain provisions contained in Parkway's Articles of Incorporation,
as amended (the "Charter"), and Bylaws, as amended, certain of Parkway's
agreements and certain provisions of Maryland law may have the effect of
discouraging a third party from making an acquisition proposal for Parkway and
may thereby inhibit a change in control of Parkway. These include provisions of
the Maryland General Corporation Law relating to certain "business combinations"
and "control share" acquisitions involving Maryland corporations, Parkway's
Rights Agreement (described under "Description of Common Stock" in the
accompanying Prospectus), Parkway's Change in Control Agreements with certain
executive officers, and certain provisions of the Charter intended to protect
Parkway's status as a REIT described below under "--Possible Adverse Consequence
of Limits on Ownership of Common Stock." Such provisions may (i) deter tender
offers for Common Stock, which may be attractive to the stockholders; or (ii)
deter purchases of large blocks of Common Stock, thereby limiting the
opportunity for stockholders to receive a premium for their Common Stock over
then-prevailing market prices.
POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF COMMON STOCK
Certain provisions of the Charter provide that if a transfer of stock
of Parkway or a change in the capital structure of Parkway would result in (i)
any person (as defined in the Charter) directly or indirectly acquiring
beneficial ownership of more than 9.8% (in value or in number, whichever is more
restrictive) of the outstanding capital stock of Parkway excluding Excess Stock
(as defined below); (ii) the outstanding shares of Parkway being constructively
or beneficially owned by fewer than 100 persons; (iii) Parkway being "closely
held" within the meaning of Section 856 of the Internal Revenue Code of 1986, as
amended (the "Code"), then: (A) any proposed transfer will be void ab initio
and will not be recognized by Parkway; (B) Parkway will have the right to redeem
the shares proposed to be transferred; and (C) the shares proposed to be
transferred will be automatically converted into and exchanged for shares of a
separate class of stock, the excess stock, par value $0.001 per share, of
Parkway ("Excess Stock"), having no dividend or voting rights. Holders of
Excess Stock do have certain rights in the event of any liquidation, dissolution
or winding up of the Company. The Charter further provides that the Excess
Stock will be held by
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Parkway as trustee for the person or persons to whom the shares are ultimately
transferred, until such time as the shares are retransferred to a person or
persons in whose hands the shares would not be Excess Stock and certain price-
related restrictions are satisfied. These provisions are designed to enable
Parkway to meet the share ownership requirements applicable to REITs under the
Code, but may also have the effect of discouraging tender offers or purchases of
large blocks of stock, thereby limiting the opportunity for stockholders to
receive a premium for their Common Stock over then-prevailing market prices.
POSSIBLE ADVERSE IMPACT OF MARKET CONDITIONS ON MARKET PRICE
The market value of the Common Stock could be substantially affected
by general market conditions, including changes in interest rates, government
regulatory action and changes in tax laws. An increase in market interest rates
may lead purchasers of the Common Stock to demand a higher annual dividend yield
on the Common Stock, which could adversely affect the market price of the Common
Stock. Moreover, numerous other factors, such as government regulatory action
and changes in tax laws, could have a significant impact on the future market
price of the Common Stock or other securities.
REIT ELECTION TAX RISKS
Parkway has determined to qualify and is operating so as to qualify as
a REIT under the Code, commencing with its taxable year beginning January 1,
1997. Although management of Parkway believes that Parkway has been organized
and will operate in such a manner, no assurance can be given that Parkway will
be able to continue to operate in a manner so as to qualify or remain so
qualified. Qualification as a REIT depends upon Parkway meeting and continuing
to meet the various highly technical and complex Code provisions and REIT
qualification rules, which include (i) maintaining ownership of specified
minimum levels of real estate related assets; (ii) generating specified minimum
levels of real estate related income; (iii) maintaining certain ownership
restrictions on Parkway shares; (iv) having no positive earnings and profits
account from years in which Parkway was not qualified as a REIT; and (v)
distributing at least 95% of all real estate investment taxable income on an
annual basis. There are only limited judicial and administrative
interpretations of such rules. Furthermore, the determination of various
factual matters and circumstances not entirely within Parkway's control may
affect Parkway's ability to qualify as a REIT.
If Parkway fails to qualify as a REIT, Parkway will be subject to
federal income tax (including any applicable alternative minimum tax) on its
taxable income at corporate rates. In addition, unless entitled to relief under
certain statutory provisions, Parkway will be disqualified from treatment as a
REIT for the four taxable years following the year during which qualification is
lost. This treatment would reduce the net earnings of Parkway available for
investment or distribution to stockholders because of the additional tax
liability to Parkway for the year or years involved. In addition, distributions
would no
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longer be required to be made. To the extent that distributions to
stockholders had been made in anticipation of Parkway's qualifying as a REIT,
Parkway might be required to borrow funds or to liquidate certain of its
investments to pay the applicable tax. See "Federal Income Tax Considerations--
Taxation of the Company" in the Prospectus attached hereto.
The Clinton administration's fiscal year 1999 proposed budget includes
certain provisions respecting REITs. Those proposals include (a) changing the
REIT asset tests to prevent a REIT from owning securities in a C corporation
that represent either 10% of the corporation's vote or value; (b) requiring
recognition of built-in gains on otherwise tax free acquisitions by REITs of C
corporations; (c) significantly restricting the ability of certain REITs, known
as "paired share" REITS (Parkway is not a paired share REIT) from acquiring or
operating new properties which, under existing grandfather provisions, enabled
such paired share REITs to effectively operate an active trade or business; and
(d) changing the "five or fewer" test with respect to the prohibition on
closely-held REITs so that corporations, trusts and partnerships would be
treated as persons, and would not be looked through in applying the "five or
fewer" test. These proposals are subject to congressional review and action, and
it is not possible to determine at this time the likelihood that any of these
proposals will be adopted, and, if adopted, their ultimate form, timing or
application.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. This Prospectus Supplement, the
accompanying Prospectus and other materials filed or to be filed by the Company
with the Securities and Exchange Commission (the "Commission") under the
Exchange Act and incorporated by reference in the accompanying Prospectus
contain or will contain forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act. Such statements
include information relating to acquisitions and other business development
activities, future capital expenditures, financing sources and availability and
the effects of regulations (including environmental regulation) and competition.
Such forward-looking information involves important risks and uncertainties that
could significantly affect anticipated results in the future and, accordingly,
such results may differ from those expressed in any forward-looking statements
contained in this Prospectus Supplement or the accompanying Prospectus or
incorporated by reference in such Prospectus. These risks and uncertainties
include, but are not limited to, uncertainties affecting real estate businesses
generally (such as entry into new leases, renewals of leases and dependence on
tenants' business operations), risks relating to acquisition and development
activities, possible environmental liabilities, risks relating to leverage, debt
service and obligations with respect to the payment of dividends (including
availability of financing terms acceptable to the Company and sensitivity of the
Company's operations to fluctuations in interest rates), the potential for the
need to use borrowings to make distributions necessary for the Company to
qualify as a REIT or to fund the payment of dividends, dependence on the primary
markets
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in which the Properties are located, the existence of complex
regulations relating to the Company's status as a REIT and the adverse
consequences of the failure of the Company to qualify as a REIT and the
potential adverse impact of market interest rates on the market price for the
Company's securities.
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RECENT DEVELOPMENTS
Proposed Acquisition. On February 17, 1998, the Company announced
that it had entered into an agreement to purchase a portfolio of 13 office
buildings (the "Brookdale Portfolio") with an aggregate of approximately 1.5
million net rentable square feet for a total investment of approximately $165
million, or $113 per net rentable square foot. The properties included in this
portfolio are located in Fort Lauderdale, Florida, Greenville, South Carolina,
Knoxville, Tennessee, Dallas and Houston, Texas, and Northern Virginia and
Virginia Beach, Virginia. This investment, which is expected to close at the
end of February 1998, is subject to customary closing conditions. There can be
no assurance that Parkway will acquire these properties or on what terms such
acquisition will occur.
Financing Activities. In connection with the purchase of the
Brookdale Portfolio, Parkway is seeking to increase its Acquisition Facility
from $55 million to $85 million and reduce the interest rate on the Acquisition
Facility from LIBOR plus 1.75% to LIBOR plus 1.40% (which equals 7.03% as of
February 17, 1998). The Acquisition Facility matures on June 30, 1998. Also in
connection with the purchase of the Brookdale Portfolio, Parkway is seeking to
secure a line of credit with a syndicate of commercial lenders for a maximum
principal amount of $75 million to be secured by negative pledges with respect
to the 13 properties in the Brookdale Portfolio (the "February Facility"). The
February Facility is anticipated to have an interest rate of LIBOR plus 1.40%
and to mature six months from the date of closing. Parkway also has the Working
Capital Facility with a maximum principal amount of $15 million. In connection
with the proposed restructuring of the Acquisition Facility, the interest rate
on the Working Capital Facility will also be reduced to LIBOR plus 1.75% to
LIBOR plus 1.40%. The Working Capital Facility matures on June 30, 1998. As of
January 31, 1998, there was $12 million outstanding under the Acquisition
Facility and $3.7 million outstanding under the Working Capital Facility. There
can be no assurance that Parkway will be able to amend the Acquisition Facility
and Working Capital Facility or that it will be able to obtain the February
Facility, nor can there be any assurance regarding the final terms and
conditions upon which such credit facilities will be amended or granted.
UPREIT Structure. In January 1998, Parkway completed its
reorganization into an umbrella partnership REIT ("UPREIT") structure under
which all of Parkway's office building real estate assets are owned by an
operating partnership, Parkway Properties LP (the "Partnership"). The Company
anticipates that the UPREIT structure will enable it to pursue new investment
opportunities by having the ability to offer units in the Partnership to
property owners in exchange for office properties in transactions that may have
preferable tax characteristics. Presently, all interests in the Partnership are
owned by wholly-owned subsidiaries of Parkway.
1997 Year-End Results. Parkway reported total revenue of $48.1
million for the year ended
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December 31, 1997, compared to $24.1 million for the year ended December 31,
1996. The Company reported net income and funds from operations ("FFO") for the
year ended December 31, 1997, of $14.5 million and $17.6 million, respectively,
compared to $14.4 million and $6.4 million, respectively, for the year ended
December 31, 1996. Parkway defines FFO, consistent with NAREIT's definition, as
net income (loss) (computed in accordance with generally accepted accounting
principles ("GAAP")), excluding gains (or losses) from debt restructuring and
sales of property, plus real estate related depreciation and amortization and
after adjustments for unconsolidated partnerships and joint ventures. The
Company believes FFO is helpful to investors as a measure of the performance of
an equity REIT because, along with cash flows from operating activities,
financing activities and investing activities, it provides investors with an
understanding of the ability of the Company to incur and service debt and make
capital expenditures. The Company computes FFO in accordance with standards
established by Parkway, which may differ from the methodology for calculating
FFO utilized by other equity REITs, and, accordingly, may not be comparable to
such other REITs. Further, FFO does not represent amounts available for
management's discretionary use because of needed capital replacement or
expansion, debt service obligations, or other commitments and uncertainties. FFO
should not be considered as an alternative to net income (determined in
accordance with GAAP) as an indication of the Company's financial performance or
to cash flows from operating activities (determined in accordance with GAAP) as
a measure of the Company's liquidity, nor is it indicative of funds available to
fund the Company's cash needs, including its ability to make distributions.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
For a discussion of certain material federal income tax consequences
of the current taxation of Parkway, the current impact on Parkway of its
election to be treated as a REIT, and the current taxation of prospective
stockholders of Parkway, see "Federal Income Tax Considerations" in the
accompanying Prospectus.
Prospective purchasers should be aware that on August 5, 1997,
President Clinton signed into law the Taxpayer Relief Act of 1997 (the "Taxpayer
Relief Act"). The Taxpayer Relief Act made certain changes to the Code,
including changes with respect to the treatment of REITs and stockholders of
REITs. These changes generally became effective with respect to Parkway and
stockholders of Parkway on January 1, 1998. In addition, the Taxpayer Relief
Act reduced the maximum tax on net capital gains from the sale of assets held
for more than 18 months by individuals, trusts and estates.
In an effort to simplify the taxation of REITs, the Taxpayer Relief
Act changed certain requirements for a corporation electing to be taxed as a
REIT and the taxation of REIT stockholders. First, Parkway is required to
maintain certain records and request on an annual basis certain information from
its stockholders concerning the ownership of its outstanding shares in
accordance with applicable Treasury Regulations.
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Under prior law, this requirement was a condition to being taxed as a REIT. For
taxable years beginning after December 31, 1997, the Taxpayer Relief Act
provides that the record maintenance and ownership informationrequest
requirements are no longer conditions to taxation as a REIT. Instead, a monetary
penalty will be imposed for failure to comply with such requirements. Second,
the Taxpayer Relief Act repealed the 30% gross income test for taxable years
beginning after December 31, 1997. Third, the Taxpayer Relief Act changed the
definition of "rents from real property." Under prior law, rents received with
respect to a property generally did not qualify as "rents from real property" if
Parkway directly provided services to tenants other than those that were
"usually or customarily rendered" in connection with the rental of space for
occupancy only and which were not otherwise considered "rendered to the
occupant." For taxable years beginning after December 31, 1997, rental income
received by Parkway will not cease to qualify as "rents from real property"
merely because Parkway performs non-customary services for a tenant if the
amount that Parkway receives as a result of performing such services does not
exceed one percent of all amounts received directly or indirectly by Parkway
with respect to such property. In applying this limitation, the amount that
Parkway is treated as having received for performing such services will not be
less than 150% of the direct cost to Parkway of providing those services.
Fourth, the Taxpayer Relief Act simplified the requirement for qualification of
a corporation as a "qualified REIT subsidiary."
Fifth, for taxable years beginning after December 31, 1997, the
Taxpayer Relief Act allows Parkway to elect to retain and pay tax on long-term
capital gains and require its stockholders to include their proportionate share
of such undistributed net capital gains in their income. If Parkway makes such
election, stockholders would receive a tax credit attributable to their share of
the capital gains tax paid by Parkway, and would receive an increase in the
basis of their shares in Parkway in an amount equal to the stockholder's share
of the undistributed long-term capital gain reduced by the amount of the credit.
Further, any undistributed long-term capital gains that are included in the
income of Parkway stockholders pursuant to this rule, will be treated as
distributed for purposed of the 4% excise tax which Parkway must pay should
Parkway fail to distribute at least 95% of Parkway's capital gain for such
taxable year.
The Taxpayer Relief Act reduced the top tax rate for individuals,
estates and trusts on certain long-term capital gains. Generally, long-term
capital gains on property held for more than 18 months will not be taxed at a
rate greater than 20% and the maximum rate is reduced to 18% for assets acquired
after December 31, 2000 and held for more than five years. For taxpayers
subject to the 15% regular tax bracket, long-term capital gains on property held
for more than 18 months will not be taxed at a rate greater than 10%, and,
effective for taxable years beginning after December 31, 2000, the rate is
reduced to 8% for assets held more than five years. Long-term capital gain from
the sale or exchange of certain depreciable real property held for more than 18
months which would be treated as ordinary income if the real property was
depreciable personal property is subject to a maximum tax rate of 25% rather
than 20%. Long-term capital gain allocated to a stockholder by Parkway will be
subject to the 25% rate to the extent that the gain does not
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<PAGE>
exceed depreciation on real property sold by Parkway. The maximum rate of
capital gains tax for capital assets held for more than one year but less than
18 months remains at 28%. The taxation of capital gains by corporations was not
changed by the Taxpayer Relief Act.
THE OFFERING
Securities Offered............... 451,128 shares of Common Stock
Trading.......................... The Common Stock is, and the shares of Common
Stock offered hereby will be, approved for
listing on the NYSE under the symbol "PKY."
USE OF PROCEEDS
The net proceeds to Parkway from the sale of the shares of Common
Stock pursuant to this Prospectus Supplement are estimated to be approximately
$14.2 million. Parkway intends to use (i) approximately $12 million of the net
proceeds from the Offering to repay the entire outstanding principal balance on
the Acquisition Facility and (ii) approximately $2.2 million of the net proceeds
from the Offering to reduce the outstanding principal balance of the Working
Capital Facility. Both the Acquisition Facility and the Working Capital Facility
have interest rates of 7.5625% as of February 18, 1998 and mature on June 30,
1998.
UNDERWRITING
Pursuant to the terms and subject to the conditions of the
Underwriting Agreement (the "Underwriting Agreement") between the Company and
the Underwriter, the Underwriter has agreed to purchase from the Company, and
the Company has agreed to sell to the Underwriter, 451,128 shares of Common
Stock.
The Underwriter intends to sell the shares of Common Stock to Nike
Securities L.P., which intends to deposit such shares, together with shares of
common stock of other entities also acquired from the Underwriter, into a newly-
formed unit investment trust (the "Trust") registered under the Investment
Company Act of 1940, as amended, in exchange for units in the Trust. The
Underwriter is not an affiliate of Nike Securities L.P. or the Trust. The
Underwriter intends to sell the shares of Common Stock to Nike Securities L.P.
at an aggregate purchase price of $14,401,133.58. It is anticipated that the
Underwriter
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<PAGE>
will also participate in the distribution of units in the Trust and
will receive compensation therefor.
Pursuant to the Underwriting Agreement, the Company has agreed to
indemnify the Underwriter against certain liabilities, including liabilities
under the Securities Act, or to contribute to payments the Underwriter may be
required to make in respect thereof.
Until the distribution of the shares of Common Stock is completed,
rules of the Commission may limit the ability of the Underwriter to bid for and
purchase shares of Common Stock. As an exception to these rules, the
Underwriter is permitted to engage in certain transactions that stabilize the
price of the Common Stock. Such transactions consist of bids or purchases for
the purpose of pegging, fixing or maintaining the price of the Common Stock. It
is not currently anticipated that the Underwriter will engage in any such
transactions in connection with this Offering.
If the Underwriter creates a short position in the Common Stock in
connection with this Offering, i.e., if it sells more shares of Common Stock
than are set forth on the cover page of this Prospectus Supplement, the
Underwriter may reduce that short position by purchasing shares in the open
market.
In general, purchases of a security for the purpose of stabilization
or to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases.
Neither the Company nor the Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above might have on the price of the shares. In addition, neither the
Company nor the Underwriter makes any representation that the Underwriter will
engage in such transactions or that such transactions, once commenced, will not
be discontinued without notice.
In the ordinary course of business, the Underwriter and its affiliates
have engaged, and may in the future engage, in investment banking transactions
with the Company.
S-17
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LEGAL MATTERS
The validity of the Common Stock offered hereby, as well as certain
legal matters relating to the Company, will be passed upon for the Company by
Jaeckle Fleischmann & Mugel, LLP, Buffalo, New York. Certain legal matters
related to the Offering will be passed upon for the Underwriter by Chapman and
Cutler, Chicago, Illinois. Jaeckle Fleischmann & Mugel, LLP and Chapman and
Cutler will rely on the opinion of Piper & Marbury L.L.P, Baltimore, Maryland,
as to certain matters of Maryland law.
S-18
<PAGE>
PROSPECTUS
$150,000,000
PARKWAY PROPERTIES, INC.
COMMON STOCK
PREFERRED STOCK
DEPOSITARY SHARES
DEBT SECURITIES
-----------
Parkway Properties, Inc. ("Parkway") may from time to time offer in one or
more series or classes (i) shares of its common stock, par value $0.001 per
share (the "Common Stock"); (ii) shares of its preferred stock, par value
$0.001 per share (the "Preferred Stock"); (iii) Preferred Stock represented by
depositary shares (the "Depositary Shares"); and (iv) unsecured debt securities
("Debt Securities"), with an aggregate public offering price of up to
$150,000,000 in amounts, at prices and on terms to be determined at the time of
offering. The Common Stock, Preferred Stock, Depositary Shares and Debt
Securities (collectively, the "Securities") may be offered, separately or
together, in one or more supplements to this Prospectus (each, a "Prospectus
Supplement").
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and
will include, where applicable (i) in the case of Common Stock, any initial
public offering price; (ii) in the case of Preferred Stock, the specific
designation and stated value per share, any dividend, liquidation, redemption,
conversion, voting and other rights, and any initial public offering price;
(iii) in the case of Depositary Shares, the fractional share of Preferred Stock
represented by each such Depository Share; and (iv) in the case of Debt
Securities, the specific title, aggregate principal amount, currency, form
(which may be registered or bearer, or certificated or global), authorized
denominations, maturity, rate (or manner of calculation thereof) and time of
payment of interest, terms for redemption at the option of Parkway or repayment
at the option of the holder, terms for sinking fund payments, covenants and any
initial public offering price. In addition, such specific terms may include
limitations on direct or beneficial ownership and restrictions on transfer of
the Securities, in each case as may be consistent with Parkway's Articles of
Incorporation, as amended (the "Charter"), or as otherwise appropriate to
preserve the status of Parkway as a real estate investment trust ("REIT") for
federal income tax purposes.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities
covered by such Prospectus Supplement.
The Securities may be offered directly, through agents designated from time
to time by Parkway, or to or through underwriters or dealers. If any agents or
underwriters are involved in the sale of any of the Securities, their names,
and any applicable purchase price, fee, commission or discount arrangement
between or among them, will be set forth, or will be calculable from the
information set forth, in the applicable Prospectus Supplement. See "Plan of
Distribution." No Securities may be sold without delivery of the applicable
Prospectus Supplement describing the method and terms of the offering of such
series of Securities.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------
THE DATE OF THIS PROSPECTUS IS JUNE 30, 1997.
<PAGE>
AVAILABLE INFORMATION
Parkway is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by Parkway may be inspected at, and,
upon payment of the Commission's customary charges, copies obtained from, the
Public Reference Section maintained by the Commission, 450 Fifth Street, N.W.,
Washington, DC 20549. Such reports, proxy statements and other information are
also available for inspection and copying at prescribed rates at the
Commission's regional offices in New York, New York (7 World Trade Center,
13th Floor, New York, New York 10048) and in Chicago, Illinois (Suite 1400,
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661-2511). The
Commission maintains a Web site (http:www.sec.gov) that also contains reports,
proxy statements and other information concerning Parkway. In addition, the
Common Stock is traded on the New York Stock Exchange, Inc. ("NYSE") under the
symbol "PKY" and can be inspected and copied at the offices of the NYSE, 20
Broad Street, New York, New York 10005.
Parkway has filed with the Commission a Registration Statement on Form S-3
(the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), and the rules and regulations promulgated thereunder,
with respect to the Securities. This Prospectus constitutes the Prospectus of
Parkway, filed as part of the Registration Statement. As permitted by the
rules and regulations of the Commission, this Prospectus omits certain
information contained in the Registration Statement, and reference is made to
the Registration Statement and the exhibits listed therein, which can be
inspected at the public reference facilities of the Commission noted above,
and copies of which can be obtained from the Commission at prescribed rates as
indicated above. Statements contained in this Prospectus as to the contents of
any contract or other documents are not necessarily complete, and in each
instance, reference is made to the copy of such contract or documents filed as
an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference.
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<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Incorporated into this Prospectus by reference are the documents listed
below filed by Parkway under the Exchange Act. Copies of any such documents,
other than exhibits to such documents, are available without charge to each
person to whom a copy of this Prospectus has been delivered upon written or
oral request of such person from Parkway, One Jackson Place Suite 1000, 188
East Capitol Street, Jackson, Mississippi 39201-2195, Attention: Chief
Financial Officer, telephone number (601) 948-4091.
The following documents are hereby incorporated into this Prospectus by
reference and are made a part hereof:
1. Parkway Properties, Inc.'s Annual Report on Form 10-KSB for the year
ended December 31, 1996 (Commission File No. 1-11533).
2. Parkway Properties, Inc.'s Proxy Material for its Annual Meeting of
Stockholders to be held on June 6, 1997 (Commission File No. 1-11533).
3. Parkway Properties, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997 (Commission File No. 1-11533).
4. Parkway Properties, Inc.'s Current Report on Form 8-KA dated May 14,
1997 (Commission File No. 1-11533).
5. Parkway Properties, Inc.'s Current Report on Form 8-K dated June 27,
1997 (Commission File No. 1-11533).
Each document filed by Parkway subsequent to the date of this Prospectus
pursuant to Sections 13(a), 14 or 15(d) of the Exchange Act and prior to the
termination of the offering of all Securities to which this Prospectus relates
shall be deemed to be incorporated by reference in this Prospectus and shall
be part hereof from the date of filing of such document. Any statement
contained herein or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained in this Prospectus
(in the case of a previously filed document incorporated or deemed to be
incorporated by reference herein) in any accompanying Prospectus Supplement
relating to a specific offering of Securities or in any other subsequently
filed document that is also incorporated or deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus or any accompanying
Prospectus Supplement. Subject to the foregoing, all information appearing in
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.
3
<PAGE>
THE COMPANY
Parkway is a self-managed real estate investment company specializing in the
ownership, management and leasing of office properties in the Southeastern
United States (primarily the states of Georgia, Mississippi, North Carolina,
Tennessee and Virginia) and Texas. Parkway will elect to qualify as a real
estate investment trust ("REIT") under the Internal Revenue Code of 1986, as
amended (the "Code") for the taxable year beginning January 1, 1997. At June
12, 1997, Parkway owned or had an interest in 23 office buildings in nine
states with an aggregate of approximately 2,873,000 square feet of leasable
space.
Parkway was incorporated under the laws of the State of Maryland on May 17,
1996. Formed as a wholly-owned subsidiary of The Parkway Company, a Texas
corporation, Parkway merged with The Parkway Company on August 2, 1996 (the
"Merger") pursuant to the Agreement and Plan of Merger dated July 17, 1996 by
and between Parkway and The Parkway Company. The Parkway Company and its
predecessors have been engaged in the real estate business since 1971. As a
result of the Merger, Parkway succeeded to the business and operations of The
Parkway Company. Additionally, on August 22, 1996 the shares of common stock,
par value $0.001 per share, of Parkway (the "Common Stock") became listed on
the New York Stock Exchange, Inc. ("NYSE") under the symbol "PKY." Prior to
this date, the Common Stock had been quoted on the NASDAQ National Market
under the symbol "PKWY."
Through its wholly-owned subsidiary, Parkway Realty Services, Inc. ("Parkway
Realty"), Parkway is also involved in the management of commercial properties
for which it receives management fees. Parkway Realty currently manages and
leases a portfolio of approximately 984,000 square feet of office space.
Parkway Realty also performs brokerage services to third parties on a
commission and fee basis. Parkway Realty manages Parkway's office buildings in
Jackson, Mississippi.
Parkway's principal executive offices are located at One Jackson Place Suite
1000, 188 East Capitol Street, Jackson, Mississippi 39201-2195. Its telephone
number is (601) 948-4091.
RATIO OF EARNINGS TO FIXED CHARGES
Parkway's ratio of earnings to fixed charges for the three months ended
March 31, 1997 was 2.5, for the year ended December 31, 1996 was 1.9, for the
year ended December 31, 1995 was 1.4, for the six months ended December 31,
1994 was 1.4, for the year ended June 30, 1994 was 1.4, for the year ended
June 30, 1993 was 1.1 and for the year ended June 30, 1992 was 0.61. There was
Preferred Stock outstanding only for a portion of the three months ended
September 30, 1996. Accordingly, the ratio of earnings to fixed charges and
Preferred Stock dividends are identical to the ratio of earnings to fixed
charges for all periods other than that ending September 30, 1996. For the
three months ended September 30, 1996, the ratio of earnings to combined fixed
charges and Preferred Stock dividends was 1.8.
For purposes of computing these ratios, earnings have been calculated by
adding fixed charges, excluding capitalized interest, to pre-tax income from
continuing operations (net income or loss). Fixed charges consist of interest
costs, whether expensed or capitalized, the interest component of rental
expense and amortization of debt issuance costs.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, Parkway
intends to use the net proceeds from the offering for general corporate
purposes including, without limitation, the acquisition of real estate
properties, whether by acquisition of properties directly or through potential
business combination transactions, development of new real estate properties,
the repayment of debt and to fund working capital requirements.
4
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The unsecured debt securities ("Debt Securities") will be issued in one or
more series under an Indenture (the "Indenture"), which may be supplemented by
supplemental indentures (each, an "Indenture Supplement"), between Parkway and
a trustee (the "Trustee") to be chosen by Parkway and qualified to act as
Trustee under the Trust Indenture Act of 1939, as amended (the "TIA"). A copy
of the form of the Indenture will be filed as an exhibit to the Registration
Statement of which this Prospectus is a part and will be available for
inspection at the corporate trust office of the Trustee or as described above
under "Available Information." The Indenture is subject to, and governed by,
the TIA. The statements made hereunder relating to the Indenture and the Debt
Securities to be issued thereunder are summaries of certain provisions thereof
and do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all provisions of the Indenture and such Debt
Securities. All section references appearing herein are to sections of the
Indenture, and capitalized terms used but not defined herein shall have the
respective meanings set forth in the Indenture.
GENERAL
The Debt Securities will be direct, unsecured obligations of Parkway and
will rank equally with all other unsecured and unsubordinated indebtedness of
Parkway. At March 31, 1997, the total outstanding debt of Parkway was
approximately $62,260,000, all of which was secured debt. Except as may be set
forth in an applicable Prospectus Supplement, the Debt Securities may be
issued without limit as to aggregate principal amount, in one or more series,
in each case as established from time to time in or pursuant to authority
granted by a resolution of the Board of Directors of Parkway or as established
in one or more Indenture Supplements. All Debt Securities of one series need
not be issued at the same time and, unless otherwise provided, a series may be
reopened, without the consent of the holders of the Debt Securities of such
series, for issuance of additional Debt Securities of such series.
The Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
the Indenture may resign or be removed with respect to one or more series of
Debt Securities, and a successor Trustee may be appointed to act with respect
to such series. In the event that two or more persons are acting as Trustee
with respect to different series of Debt Securities, each such Trustee shall
be a trustee of a trust under the Indenture separate and apart from the trust
administered by any other Trustee, and, except as otherwise indicated herein,
any action described herein to be taken by a Trustee may be taken by each such
Trustee with respect to, and only with respect to, the one or more series of
Debt Securities for which it is Trustee under the Indenture.
Reference is made to the Prospectus Supplement relating to the series of
Debt Securities offered thereby for the specific terms thereof, including:
(i) the title of such Debt Securities;
(ii) the aggregate principal amount of such Debt Securities and any limit
on such aggregate principal amount;
(iii) the percentage of the principal amount at which such Debt
Securities will be issued and, if other than the principal amount thereof,
the portion of the principal amount thereof payable upon declaration of
acceleration of the maturity thereof;
(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
5
<PAGE>
payable, and the basis upon which interest shall be calculated if other
than that of a 360-day year of twelve 30-day months;
(vii) the place or places where the principal of (and premium, if any)
and interest, if any, on such Debt Securities will be payable, such Debt
Securities may be surrendered for registration of transfer or exchange and
notices or demands to or upon Parkway in respect of such Debt Securities
and the Indenture may be served;
(viii) the period or periods within which, the price or prices at which
and the terms and conditions upon which such Debt Securities may be
redeemed, in whole or in part, at the option of Parkway, if Parkway is to
have such an option;
(ix) the obligation, if any, of Parkway to redeem, repay or purchase such
Debt Securities pursuant to any sinking fund or analogous provision or at
the option of a holder thereof, and the period or periods within which, the
price or prices at which and the terms and conditions upon which such Debt
Securities will be redeemed, repaid or purchased, in whole or in part,
pursuant to such obligation;
(x) if other than U.S. dollars, the currency or currencies in which such
Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite currency
or currencies, and the terms and conditions relating thereto;
(xi) whether the amount of payments of principal of (and premium, if any)
or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or
method may be, but need not be, based on a currency, currencies, currency
unit or units of composite currency or currencies) and the manner in which
such amounts shall be determined;
(xii) the events of default or covenants of such Debt Securities, to the
extent different from or in addition to those described herein;
(xiii) whether such Debt Securities will be issued in certificated andor
book-entry form;
(xiv) whether such Debt Securities will be in registered or bearer form
and, if in registered form, the denominations thereof if other than $1,000
and any integral multiple thereof and, if in bearer form, the denominations
thereof if other than $5,000 and terms and conditions relating thereto;
(xv) the applicability, if any, of the defeasance and covenant defeasance
provisions described herein, or any modification thereof;
(xvi) if such Debt Securities are to be issued upon the exercise of debt
warrants, the time, manner and place of such Debt Securities to be
authenticated and delivered;
(xvii) whether and under what circumstances Parkway will pay additional
amounts on such Debt Securities in respect of any tax, assessment or
governmental charge and, if so, whether Parkway will have the option to
redeem such Debt Securities in lieu of making such payment;
(xviii) with respect to any Debt Securities that provide for optional
redemption or prepayment upon the occurrence of certain events (such as a
change of control of Parkway), (a) the possible effects of such provisions
on the market price of Parkway's securities or in deterring certain
mergers, tender offers or other takeover attempts, and the intention of
Parkway to comply with the requirements of Rule 14e-1 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and any other
applicable securities laws in connection with such provisions; (b) whether
the occurrence of the specified events may give rise to cross-defaults on
other indebtedness such that payment on such Debt Securities may be
effectively subordinated; and (c) the existence of any limitations on
Parkway's financial or legal ability to repurchase such Debt Securities
upon the occurrence of such an event (including, if true, the lack of
assurance that such a repurchase can be effected) and the impact, if any,
under the Indenture of such a failure, including whether and under what
circumstances such a failure may constitute an Event of Default; and
(xix) any other terms of such Debt Securities not inconsistent with the
terms of the Indenture.
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). If material or
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<PAGE>
applicable, special U.S. federal income tax, accounting and other
considerations applicable to Original Issue Discount Securities will be
described in the applicable Prospectus Supplement.
Except as described under "--Merger, Consolidation or Sale" below or as may
be set forth in any Prospectus Supplement, the Indenture does not contain any
other provisions that would limit the ability of Parkway to incur indebtedness
or that would afford holders of the Debt Securities protection in the event of
(i) a highly leveraged or similar transaction involving Parkway or any
affiliate of Parkway; (ii) a change of control; or (iii) a reorganization,
restructuring, merger or similar transaction involving Parkway that may
adversely affect the holders of the Debt Securities. In addition, subject to
the limitations set forth under "--Merger, Consolidation or Sale" below,
Parkway may, in the future, enter into certain transactions, such as the sale
of all or substantially all of its assets or the merger or consolidation of
Parkway, that would increase the amount of Parkway's indebtedness or
substantially reduce or eliminate Parkway's assets, which may have an adverse
effect on Parkway's ability to service its indebtedness, including the Debt
Securities. In addition, restrictions on ownership and transfers of Common
Stock and Preferred Stock are designed to preserve its status as a REIT and,
therefore, may act to prevent or hinder a change of control. See "Description
of Common Stock--Restrictions on Transfer" and "Description of Preferred
Stock--Restrictions on Ownership." Reference is made to the applicable
Prospectus Supplement for information with respect to any deletions from,
modifications of or additions to the events of default or covenants that are
described below, including any addition of a covenant or other provision
providing event risk or similar protection.
Reference is made to "--Certain Covenants" below and to the description of
any additional covenants with respect to a series of Debt Securities in the
applicable Prospectus Supplement. Except as otherwise described in the
applicable Prospectus Supplement, compliance with such covenants generally may
not be waived with respect to a series of Debt Securities by the Board of
Directors of Parkway or by the Trustee unless the Holders of at least a
majority in principal amount of all outstanding Debt Securities of such series
consent to such waiver, except to the extent that the defeasance and covenant
defeasance provisions of the Indenture described under "--Discharge,
Defeasance and Covenant Defeasance" below apply to such series of Debt
Securities. See "--Modification of the Indenture."
Debt Securities may be denominated and payable in a foreign currency or
units of two or more foreign currencies or a composite currency or currencies.
As more fully described in the applicable Prospectus Supplement, awards or
judgments by a court in the United States in connection with a claim with
respect to any Debt Securities denominated other than in United States dollars
(or a judgment denominated other than in United States dollars in respect of
such claims) may be converted into United States dollars at a rate of exchange
prevailing on a date determined pursuant to applicable law.
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
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Person in whose name such Debt Security is registered at the close of business
on a special record date (the "Special Record Date") for the payment of such
Defaulted Interest to be fixed by the Trustee, notice whereof shall be given
to the Holder of such Debt Security not less than 10 days prior to such
Special Record Date, or may be paid at any time in any other lawful manner,
all as more completely described in the Indenture.
Subject to certain limitations imposed upon Debt Securities issued in book
entry form, the Debt Securities of any series will be exchangeable for other
Debt Securities of the same series and of a like aggregate principal amount
and tenor of different authorized denominations upon surrender of such Debt
Securities at the corporate trust office of the Trustee referred to above. In
addition, subject to certain limitations imposed upon Debt Securities issued
in book entry form, the Debt Securities of any series may be surrendered for
registration of transfer thereof at the corporate trust office of the Trustee
referred to above. Every Debt Security surrendered for registration of
transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer. No service charge will be made for any registration of
transfer or exchange of any Debt Securities, but the Trustee or Parkway may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. If the applicable Prospectus
Supplement refers to any transfer agent (in addition to the Trustee) initially
designated by Parkway with respect to any series of Debt Securities, Parkway
may at any time rescind the designation of any such transfer agent or approve
a change in the location through which any such transfer agent acts, except
that Parkway will be required to maintain a transfer agent in each place of
payment for such series.
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
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franchises; provided, however, that Parkway shall not be required to preserve
any right or franchise if it determines that the preservation thereof is no
longer desirable in the conduct of its business and that the loss thereof is
not disadvantageous in any material respect to the Holders of the Debt
Securities.
Maintenance of Properties. Parkway is required to cause all of its material
properties used or useful in the conduct of its business or the business of
any Subsidiary to be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment and to cause to be made all
necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of Parkway may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that Parkway and its Subsidiaries
shall not be prevented from selling or otherwise disposing for value their
respective properties in the ordinary course of business.
Insurance. Parkway is required to, and is required to cause each of its
Subsidiaries to, keep all of its insurable properties insured against loss or
damage at least equal to their then full insurable value with financially
sound and reputable insurance companies.
Payment of Taxes and Other Claims. Parkway is required to pay or discharge
or cause to be paid or discharged, before the same shall become delinquent,
(i) all taxes, assessments and governmental charges levied or imposed upon it
or any Subsidiary or upon its income, profits or property or that of any
Subsidiary; and (ii) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a lien upon the property of Parkway or
any Subsidiary; provided, however, that Parkway shall not be required to pay
or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings.
Provision of Financial Information. The Holders of Debt Securities will be
provided with copies of the annual reports and quarterly reports of Parkway.
Whether or not Parkway is subject to Sections 13 or 15(d) of the Exchange Act
and for so long as any Debt Securities are outstanding, Parkway will, to the
extent permitted under the Exchange Act, be required to file with the
Commission the annual reports, quarterly reports and other documents which
Parkway would have been required to file with the Commission pursuant to such
Sections 13 or 15(d) (the "Financial Statements") if Parkway were so subject,
such documents to be filed with the Commission on or prior to the respective
dates (the "Required Filing Dates") by which Parkway would have been required
so to file such documents if Parkway were so subject. Parkway will also in any
event (i) within 15 days of each Required Filing Date (a) transmit by 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
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other than such series), such default having continued for 60 days after
written notice as provided in the Indenture; (v) default in the payment of an
aggregate principal amount exceeding $1,000,000 of any evidence of recourse
indebtedness of Parkway or any mortgage, indenture or other instrument under
which such indebtedness is issued or by which such indebtedness is secured,
such default having occurred after the expiration of any applicable grace
period and having resulted in the acceleration of the maturity of such
indebtedness, but only if such indebtedness is not discharged or such
acceleration is not rescinded or annulled; (vi) certain events of bankruptcy,
insolvency or reorganization, or court appointment of a receiver, liquidator
or trustee of Parkway or any Significant Subsidiary, as defined below, or any
of their respective property; and (vii) any other Event of Default provided
with respect to a particular series of Debt Securities. The term "Significant
Subsidiary" means each significant subsidiary (as defined in Regulation S-X
promulgated under the Securities Act of 1933, as amended (the "Securities
Act")) of Parkway.
If an Event of Default under the Indenture with respect to Debt Securities
of any series at the time outstanding occurs and is continuing, then in every
such case the Trustee or the Holders of not less than 25% in principal amount
of the Outstanding Debt Securities of that 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.
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Subject to provisions in the Indenture relating to its duties in case of
default, the Trustee is under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any Holders of any
series of Debt Securities then outstanding under the Indenture, unless such
Holders shall have offered to the Trustee thereunder reasonable security or
indemnity. The Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series (or of all Debt Securities then
outstanding under the Indenture, as the case may be) shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or of exercising any trust or power conferred upon
the Trustee. However, the Trustee may refuse to follow any direction which is
in conflict with any law or the Indenture, which may involve the Trustee in
personal liability or which may be unduly prejudicial to the holders of Debt
Securities of such series not joining therein.
Within 120 days after the close of each fiscal year, Parkway must deliver to
the Trustee a certificate, signed by one of several specified officers of
Parkway, stating whether or not such officer has knowledge of any default
under the Indenture and, if so, specifying each such default and the nature
and status thereof.
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture will be permitted to be made
only with the consent of the Holders of not less than a majority in principal
amount of all Outstanding Debt Securities or series of Outstanding Debt
Securities which are affected by such modification or amendment (voting as one
class); provided, however, that no such modification or amendment may, without
the consent of the Holders of each such Debt Security affected thereby, (i)
change the Stated Maturity of the principal of, or premium (if any) or any
installment of interest on, any such Debt Security; (ii) reduce the principal
amount of, or the rate or amount of interest on, or any premium payable on
redemption of, any such Debt Security, or reduce the amount of principal of an
Original Issue Discount Security that would be due and payable upon
declaration of acceleration of the maturity thereof or would be provable in
bankruptcy, or adversely affect any right of repayment of the holder of any
such Debt Security; (iii) change the place of payment, or the coin or
currency, for payment of principal of, premium, if any, or interest on any
such Debt Security; (iv) impair the right to institute suit for the
enforcement of any payment on or with respect to any such Debt Security; (v)
reduce the above stated percentage of outstanding Debt Securities of any
series necessary to modify or amend the Indenture, to waive compliance with
certain provisions thereof or certain defaults and consequences thereunder or
to reduce the quorum or voting requirements set forth in the Indenture; or
(vi) modify any of the foregoing provisions or any of the provisions relating
to the waiver of certain past defaults 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
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acceptance of appointment by a successor Trustee or facilitate the
administration of the trusts under the Indenture by more than one Trustee;
(ix) to cure any ambiguity, defect or inconsistency in the Indenture, provided
that such action shall not adversely affect the interests of Holders of Debt
Securities of any series in any material respect; or (x) to supplement any of
the provisions of the Indenture to the extent necessary to permit or
facilitate defeasance and discharge of any series of such Debt Securities,
provided that such action shall not adversely affect the interests of the
Holders of the Debt Securities of any series in any material respect.
The Indenture provides that in determining whether the Holders of the
requisite principal amount of Outstanding Debt Securities of a series have
given any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of Holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security
that shall be deemed to be outstanding shall be the amount of the principal
thereof that would be due and payable as of the date of such determination
upon declaration of acceleration of the maturity thereof; (ii) the principal
amount of a Debt Security denominated in a foreign currency that shall be
deemed outstanding shall be the U.S. dollar equivalent, determined on the
issue date for such Debt Security, of the principal amount (or, in the case of
an Original Issue Discount Security, the U.S. dollar equivalent on the issue
date of such Debt Security of the amount determined as provided in (i) above);
(iii) the principal amount of an Indexed Security that shall be deemed
outstanding shall be the principal face amount of such Indexed Security at
original issuance, unless otherwise provided with respect to such Indexed
Security pursuant to the Indenture; and (iv) Debt Securities owned by Parkway
or any other obligor upon the Debt Securities or any affiliate to Parkway or
of such other obligor shall be disregarded.
The Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series. A meeting will be permitted to be called at any
time by the Trustee, and also, upon request, by Parkway or the holders of at
least 25% in principal amount of the Outstanding Debt Securities of such
series, in any such case upon notice given as provided in the Indenture.
Except for any consent that must be given by the Holder of each Debt Security
affected by certain modifications and amendments of the Indenture, any
resolution presented at a meeting or adjourned meeting duly reconvened at
which a quorum is present will be permitted to be adopted by the affirmative
vote of the Holders of a majority in principal amount of the Outstanding Debt
Securities of that series; provided, however, that, except as referred to
above, any resolution with respect to any request, demand, authorization,
direction, notice, consent, waiver or other action that may be made, given or
taken by the Holders of a specified percentage, which is less than a majority,
in principal amount of the Outstanding Debt Securities of a series may be
adopted at a meeting or adjourned meeting duly reconvened at which a quorum is
present by the affirmative vote of the Holders of such specified percentage in
principal amount of the Outstanding Debt Securities of that series. Any
resolution passed or decision taken at any meeting of Holders of Debt
Securities of any series duly held in accordance with the Indenture will be
binding on all Holders of Debt Securities of that series. The quorum at any
meeting called to adopt a resolution, and at any reconvened meeting, will be
Persons holding or representing a majority in principal amount of the
Outstanding Debt Securities of a series; provided, however, that if any action
is to be taken at such meeting with respect to a consent or wavier which may
be given by the Holders of not less than a specified percentage in principal
amount of the Outstanding Debt Securities of a series, the Persons holding or
representing such specified percentage in principal amount of the Outstanding
Debt Securities of such series will constitute a quorum.
Notwithstanding the foregoing provisions, if any action is to be taken at a
meeting of Holders of Debt Securities of any series with respect to any
request, demand, authorization, direction, notice, consent, waiver or other
action that the Indenture expressly provides may be made, given or taken by
the Holders of a specified percentage in principal amount of all Outstanding
Debt Securities affected thereby, or of the Holders of such series and one or
more additional series: (i) there shall be no minimum quorum requirement for
such meeting and (ii) the principal amount of the Outstanding Debt Securities
of such series that vote in favor of such request, demand, authorization,
direction, notice, consent, waiver or other action shall be taken into account
in determining whether such request, demand, authorization, direction, notice,
consent, waiver or other action has been made, given or taken under the
Indenture.
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DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Parkway may discharge certain obligations to Holders of any series of Debt
Securities that have not already been delivered to the Trustee for
cancellation and that either have become due and payable or will become due
and payable within one year (or scheduled for redemption within one year) by
irrevocably depositing with the Trustee, in trust, funds in such currency or
currencies, currency unit or units or composite currency or currencies in
which such Debt Securities are payable in an amount sufficient to pay the
entire indebtedness on such Debt Securities in respect of principal (and
premium, if any) and interest to the date of such deposit (if such Debt
Securities have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be.
The Indenture provides that, if the provisions of Article Fourteen are made
applicable to the Debt Securities of or within any series pursuant to the
Indenture, Parkway may elect either (i) to defease and be discharged from any
and all obligations with respect to such Debt Securities (except for the
obligation to pay additional amounts, if any, upon the occurrence of certain
events of tax, assessment or governmental charge with respect to payments on
such Debt Securities and the obligations to register the transfer or exchange
of such Debt Securities, to replace temporary or mutilated, destroyed, lost or
stolen Debt Securities, to maintain an office or agency in respect of such
Debt Securities and to hold moneys for payment in trust) ("defeasance") or
(ii) to be released from its obligations with respect to such Debt Securities
under the Indenture (including the restrictions described under "--Certain
Covenants" above) and its obligations with respect to any other covenant, and
any omission to comply with such obligations shall not constitute a default or
an Event of Default with respect to such Debt Securities ("covenant
defeasance"), in either case upon the irrevocable deposit by Parkway with the
Trustee, in trust, of an amount, in such currency or currencies, currency unit
or units or composite currency or currencies in which such Debt Securities are
payable at Stated Maturity, or Government Obligations (as defined below), or
both, applicable to such Debt Securities which through the scheduled payment
of principal and interest in accordance with their terms will provide money in
an amount sufficient to pay the principal of (and premium, if any) and
interest on such Debt Securities, and any mandatory sinking fund or analogous
payments thereon, on the scheduled due dates therefor.
Such a trust will only be permitted to be established if, among other
things, Parkway has delivered to the Trustee an Opinion of Counsel (as
specified in the Indenture) to the effect that the Holders of such Debt
Securities will not recognize income, gain or loss for U.S. federal income tax
purposes as a result of such defeasance or covenant defeasance and will be
subject to U.S. federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance or covenant
defeasance had not occurred, and such Opinion of Counsel, in the case of
defeasance, must refer to and be based upon a ruling of the Internal Revenue
Service (the "Service") or a change in applicable United States Federal income
tax law occurring after the date of the Indenture.
"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
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any series: (i) the Holder of a Debt Security of such series is entitled to,
and does, elect pursuant to the Indenture or the terms of such Debt Security
to receive payment in a currency, currency unit or composite currency other
than that in which such deposit has been made in respect of such Debt
Security; or (ii) a Conversion Event (as defined below) occurs in respect of
the currency, currency unit or composite currency in which such deposit has
been made, the indebtedness represented by such Debt Security shall be deemed
to have been, and will be, fully discharged and satisfied through the payment
of the principal of (and premium, if any) and interest on such Debt Security
as they become due out of the proceeds yielded by converting the amount so
deposited in respect of such Debt Security into the currency, currency unit or
composite currency in which such Debt Security becomes payable as a result of
such election or such Conversion Event based on the applicable market exchange
rate. "Conversion Event" means the cessation of use of (i) a currency,
currency unit or composite currency both by the government of the country
which issued such currency and for the settlement of transactions by a central
bank or other public institutions of or within the international banking
community; (ii) the European Currency Unit as defined and revised from time to
time by the Council of the European Community ("ECU"), both within the
European Monetary System and for the settlement of transactions by public
institutions of or within the European Community; or (iii) any currency unit
or composite currency other than the ECU for the purposes for which it was
established.
Unless otherwise provided in the applicable Prospectus Supplement, all
payments of principal of (and premium, if any) and interest on any Debt
Security that is payable in a foreign currency that ceases to be used by its
government of issuance shall be made in U.S. dollars.
In the event Parkway effects covenant defeasance with respect to any Debt
Securities and such Debt Securities are declared due and payable because of
the occurrence of any Event of Default other than the Event of Default
described in clause (iv) under "--Events of Default, Notice and Waiver" or
described in clause (vii) under "--Events of Default, Notice and Waiver" with
respect to any other covenant as to which there has been covenant defeasance,
the amount in such currency, currency unit or composite currency in which such
Debt Securities are payable, and Government Obligations on deposit with the
Trustee, will be sufficient to pay amounts due on such Debt Securities at the
time of their Stated Maturity but may not be sufficient to pay amounts due on
such Debt Securities at the time of the acceleration resulting from such event
of Default. However, Parkway would remain liable to make payment of such
amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modification to the provisions described above, with respect to the Debt
Securities of or within a particular series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any of the Debt Securities are
convertible into capital stock of or equity interest in Parkway will be set
forth in the applicable Prospectus Supplement relating thereto. Such terms
will include the amount of capital stock of or equity interest in Parkway into
which the Debt Securities are convertible, the conversion price (or manner of
calculation thereof), the conversion period, provisions as to whether
conversions will be at the option of the holders of the Debt Securities or
Parkway, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of such Debt
Securities and any restrictions on conversion, including restrictions directed
at maintaining Parkway's REIT status.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depositary (the "Depositary") identified in
the applicable Prospectus Supplement relating to such series. Global
Securities may be issued in either registered or bearer form and in either
temporary or permanent form. The specific terms of the depositary arrangement
with respect to a series of Debt Securities will be described in the
applicable Prospectus Supplement relating to such series.
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DESCRIPTION OF PREFERRED STOCK
GENERAL
Parkway is authorized to issue Preferred Stock. The Board of Directors of
Parkway may classify or reclassify any unissued shares of its capital stock
from time to time by setting, altering or voiding the preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends or
distributions, qualifications, or terms or conditions of redemption of such
shares. As of June 12, 1997 there was no Preferred Stock outstanding.
The following description of the Preferred Stock sets forth certain general
terms and provisions of the Preferred Stock to which any Prospectus Supplement
may relate. The statements below describing the Preferred Stock are in all
respects subject to and qualified in their entirety by reference to the
applicable provisions of the Charter and Bylaws and any applicable articles
supplementing the Charter designating terms of a series of Preferred Stock (a
"Designating Amendment").
TERMS
Subject to the limitations prescribed by the Charter, the Board of Directors
is authorized to fix the number of shares constituting each series of
Preferred Stock and the preference, conversion or other rights, voting powers,
restrictions, limitation as to dividends, qualifications, or terms or
conditions of redemption of the Preferred Stock. The Preferred Stock will,
when issued, be fully paid and nonassessable by Parkway (except as described
under "--Stockholder Liability" below) and will have no preemptive rights.
Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms thereof, including:
(i) The title and stated value of such Preferred Stock;
(ii) The number of such shares of Preferred Stock offered, the
liquidation preference per share and the offering price of such Preferred
Stock;
(iii) The dividend rate(s), period(s) and/or payment date(s) or method(s)
of calculation thereof applicable to such Preferred Stock;
(iv) The date from which dividends on such Preferred Stock shall
accumulate, if applicable;
(v) The procedures for any auction or remarketing, if any, for such
Preferred Stock;
(vi) The provision for a sinking fund, if any, for such Preferred Stock;
(vii) The provision for redemption, if applicable, of such Preferred
Stock;
(viii) Any listing of such Preferred Stock on any securities exchange;
(ix) The terms and conditions, if applicable, upon which such Preferred
Stock will be convertible into Common Stock, including the conversion price
(or manner of calculation thereof);
(x) Whether interests in such Preferred Stock will be represented by
Depositary Shares;
(xi) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock;
(xii) A discussion of U.S. federal income tax considerations applicable
to such Preferred Stock;
(xiii) The relative ranking of preferences of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of Parkway;
(xiv) Any limitations on issuance of any series of Preferred Stock
ranking senior to or on a parity with such series of Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of Parkway; and
(xv) Any limitations on direct or beneficial ownership and restrictions
on transfer, in each case as may be appropriate to preserve the status of
Parkway as a REIT.
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RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred
Stock, will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of Parkway, rank (i) senior to all classes or series
of Common Stock of Parkway, and to all equity securities ranking junior to
such Preferred Stock; (ii) on a parity with all equity securities issued by
Parkway the terms of which specifically provide that such equity securities
rank on a parity with the Preferred Stock; and (iii) junior to all equity
securities issued by Parkway the terms of which specifically provide that such
equity securities rank senior to the Preferred Stock. The term "equity
securities" does not include debt securities.
DIVIDENDS
Holders of Preferred Stock of each series will be entitled to receive, when,
as and if declared by the Board of Directors of Parkway, out of assets of
Parkway legally available for payment, cash dividends at such rates and on
such dates as will be set forth in the applicable Prospectus Supplement. Each
such dividend shall be payable to holders of record as they appear on the
share transfer books of Parkway on such record dates as shall be fixed by the
Board of Directors of Parkway.
Dividends on any series of Preferred Stock may be cumulative or non-
cumulative, as provided in the applicable Prospectus Supplement. Dividends, if
cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Directors of Parkway fails
to declare a dividend payable on a dividend payment date on any series of the
Preferred Stock for which dividends are non-cumulative, then the holders of
such series of the Preferred Stock will have no right to receive a dividend in
respect of the dividend period ending on such dividend payment date, and
Parkway will have no obligation to pay the dividend accrued for such period,
whether or not dividends on such series are declared payable on any future
dividend payment date.
If Preferred Stock of any series are outstanding, no dividends will be
declared or paid or set apart for payment on any capital stock of Parkway of
any other series ranking, as to dividends, on a parity with or junior to the
Preferred Stock of such series for any period unless (i) if such series of
Preferred Stock has a cumulative dividend, full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for such payment on the Preferred Stock of
such series for all past dividend periods and the then current dividend period
or (ii) if such series of Preferred Stock does not have a cumulative dividend,
full dividends for the then current dividend period have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on the Preferred Stock of such
series. When dividends are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon Preferred Stock of any series and the shares
of any other series of Preferred Stock ranking on a parity as to dividends
with the Preferred Stock of such series, all dividends declared upon Preferred
Stock of such series and any other series of Preferred Stock ranking on a
parity as to dividends with such Preferred Stock shall be declared pro rata so
that the amount of dividends declared per share of Preferred Stock of such
series and such other series of Preferred Stock shall in all cases bear to
each other the same ratio that accrued dividends per share on the Preferred
Stock of such series (which shall not include any accumulation in respect of
unpaid dividends for prior dividend periods if such Preferred Stock do not
have a cumulative dividend) and such other series of Preferred Stock bear to
each other. No interest, or sum of money in lieu of interest, shall be payable
in respect of any dividend payment or payments on Preferred Stock of such
series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Stock has a cumulative dividend, full cumulative
dividends on the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for all past dividend periods and the then current
dividend period; and (ii) if such series of Preferred Stock does not have a
cumulative dividend, full dividends on the Preferred Stock of such series have
been or
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contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for the then current dividend
period, no dividends (other than in shares of Common Stock or other capital
shares ranking junior to the Preferred Stock of such series as to dividends
and upon liquidation) shall be declared or paid or set aside for payment or
other distribution shall be declared or made upon the Common Stock, or any
other capital shares of Parkway ranking junior to or on a parity with the
Preferred Stock of such series as to dividends or upon liquidation, nor shall
any shares of Common Stock, or any other capital shares of Parkway ranking
junior to or on a parity with the Preferred Stock of such series as to
dividends or upon liquidation be redeemed, purchased or otherwise acquired for
any consideration (or any moneys be paid to or made available for a sinking
fund for the redemption of any such shares) by Parkway (except by conversion
into or exchange for other capital shares of Parkway ranking junior to the
Preferred Stock of such series as to dividends and upon liquidation). Any
dividend payment made on a series of Preferred Stock shall first be credited
against the earliest accrued but unpaid dividend due with respect to shares of
such series which remain payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Stock
will be subject to mandatory redemption or redemption at the option of
Parkway, as a whole or in part, in each case upon the terms, at the times and
at the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of such shares of
Preferred Stock that shall be redeemed by Parkway in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon
(which shall not, if such shares of Preferred Stock do not have a cumulative
dividend, include any accumulation in respect of unpaid dividends for prior
dividend periods) to the date of redemption. The redemption price may be
payable in cash or other property, as specified in the applicable Prospectus
Supplement. If the redemption price for Preferred Stock of any series is
payable only from the net proceeds of the issuance of capital shares of
Parkway, the terms of such Preferred Stock may provide that, if no such
capital shares have been issued or to the extent the net proceeds from any
issuance are insufficient to pay in full the aggregate redemption price then
due, such Preferred Stock shall automatically and mandatorily be converted
into the applicable capital shares of Parkway pursuant to conversion
provisions specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if such series of Preferred Stock
has a cumulative dividend, full cumulative dividends on all shares of any
series of Preferred Stock have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set apart for payment
for all past dividend periods and the then current dividend period; and (ii)
if such series of Preferred Stock does not have a cumulative dividend, full
dividends of the Preferred Stock of any series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for the then current dividend period, no shares of any
series of Preferred Stock shall be redeemed unless all outstanding Preferred
Stock of such series is simultaneously redeemed; provided, however, that the
foregoing shall not prevent the purchase or acquisition of Preferred Stock of
such series to preserve the REIT status of Parkway or pursuant to a purchase
or exchange offer made on the same terms to holders of all outstanding
Preferred Stock of such series. In addition, unless (i) if such series of
Preferred Stock has a cumulative dividend, full cumulative dividends on all
outstanding shares of any series of Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for all past dividend periods and
the then current dividend period; and (ii) if such series of Preferred Stock
does not have a cumulative dividend, full dividends on the Preferred Stock of
any series have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for payment for the
then current dividend period, Parkway shall not purchase or otherwise acquire
directly or indirectly any Preferred Stock of such series (except by
conversion into or exchange for capital stock of Parkway ranking junior to the
Preferred Stock of such series as to dividends and upon liquidation);
provided, however, that the foregoing shall not prevent the purchase or
acquisition of Preferred Stock of such series to preserve the REIT status of
Parkway or pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding Preferred Stock of such series.
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If fewer than all of the outstanding Preferred Stock of any series are to be
redeemed, the number of shares to be redeemed will be determined by Parkway
and such shares may be redeemed pro rata from the holders of record of such
shares in proportion to the number of such shares held or for which redemption
is requested by such holder (with adjustments to avoid redemption of
fractional shares) or by lot in a manner determined by Parkway.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Stock of
any series to be redeemed at the address shown on the share transfer books of
Parkway. Each notice shall state:
(i) the redemption date; (ii) the number of shares and series of the
Preferred Stock to be redeemed; (iii) the redemption price; (iv) the place
or places where certificates for such Preferred Stock are to be surrendered
for payment of the redemption price; (v) that dividends on the shares to be
redeemed will cease to accrue on such redemption date; and (vi) the date
upon which the holder's conversion rights, if any, as to such shares shall
terminate. If fewer than all the Preferred Stock of any series are to be
redeemed, the notice mailed to each such holder thereof shall also specify
the number of Preferred Stock to be redeemed from each such holder. If
notice of redemption of any Preferred Stock has been given and if the funds
necessary for such redemption have been set aside by Parkway in trust for
the benefit of the holders of any Preferred Stock so called for redemption,
then from and after the redemption date dividends will cease to accrue on
such Preferred Stock, and all rights of the holders of such shares will
terminate, except the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of Parkway, then, before any distribution or payment shall be made
to the holders of any shares of Common Stock or any other class or series of
capital shares of Parkway ranking junior to the Preferred Stock in the
distribution of assets upon any liquidation, dissolution or winding up of
Parkway, the holders of each series of Preferred Stock shall be entitled to
receive out of assets of Parkway legally available for distribution to
stockholders liquidating distributions in the amount of the liquidation
preference per share (set forth in the applicable Prospectus Supplement), plus
an amount equal to all dividends accrued and unpaid thereon (which shall not
include any accumulation in respect of unpaid dividends for prior dividend
periods if such Preferred Stock do not have a cumulative dividend). After
payment of the full amount of the liquidating distributions to which they are
entitled, the holders of Preferred Stock will have no right or claim to any of
the remaining assets of Parkway. In the event that, upon any such voluntary or
involuntary liquidation, dissolution or winding up, the available assets of
Parkway are insufficient to pay the amount of the liquidating distributions on
all outstanding shares of Preferred Stock and the corresponding amounts
payable on all shares of other classes or series of capital shares of Parkway
ranking on a parity with the Preferred Stock in the distribution of assets,
then the holders of the Preferred Stock and all other such classes or series
of capital shares shall share ratably in any such distribution of assets in
proportion to the full liquidating distributions to which they would otherwise
be respectively entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Stock, the remaining assets of Parkway shall be distributed among
the holders of any other classes or series of capital shares ranking junior to
the Preferred Stock upon liquidation, dissolution or winding up, according to
their respective rights and preferences and in each case according to their
respective number of shares. For such purposes, the consolidation or merger of
Parkway with or into any other corporation, trust or entity, or the sale,
lease or conveyance of all or substantially all of the property or business of
Parkway, shall not be deemed to constitute a liquidation, dissolution or
winding up of Parkway.
VOTING RIGHTS
Holders of Preferred Stock will not have any voting rights, except as set
forth below or as otherwise from time to time required by law or as indicated
in the applicable Prospectus Supplement.
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Whenever dividends on any Preferred Stock shall be in arrears for six or
more consecutive quarterly periods, the holders of such Preferred Stock
(voting separately as a class with all other series of Preferred Stock upon
which like voting rights have been conferred and are exercisable) will be
entitled to vote for the election of two additional trustees of Parkway at a
special meeting called by the holders of record of at least ten percent (10%)
of any series of Preferred Stock so in arrears (unless such request is
received less than 90 days before the date fixed for the next annual or
special meeting of the stockholders) or at the next annual meeting of
stockholders, and at each subsequent annual meeting until (i) if such series
of Preferred Stock has a cumulative dividend, all dividends accumulated on
such Preferred Stock for the past dividend periods and the then current
dividend period shall have been fully paid or declared and a sum sufficient
for the payment thereof set aside for payment or (ii) if such series of
Preferred Stock does not have a cumulative dividend, four consecutive
quarterly dividends shall have been fully paid or declared and a sum
sufficient for the payment thereof set aside for payment. In such case, the
entire Board of Directors of Parkway will be increased by two directors.
Unless provided otherwise for any series of Preferred Stock, so long as any
shares of Preferred Stock remain outstanding, Parkway will not, without the
affirmative vote or consent of the holders of at least two-thirds of the
shares of each series of Preferred Stock outstanding at the time, given in
person or by proxy, either in writing or at a meeting (such series voting
separately as a class), (i) authorize or create, or increase the authorized or
issued amount of, any class or series of capital stock ranking prior to such
series of Preferred Stock with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up or
reclassify any authorized capital stock of Parkway into such shares, or
create, authorize or issue any obligation or security convertible into or
evidencing the right to purchase any such shares; or (ii) amend, alter or
repeal the provisions of the Charter or the Designating Amendment for such
series of Preferred Stock, whether by merger, consolidation or otherwise (an
"Event"), so as to materially and adversely affect any right, preference,
privilege or voting power of such series of Preferred Stock or the holder
thereof; provided, however, as to the occurrence of any of the Events set
forth in (ii) above, so long as the Preferred Stock remains outstanding with
the terms thereof materially unchanged, taking into account that upon the
occurrence of an Event, Parkway may not be the surviving entity, the
occurrence of any such Event shall not be deemed to materially and adversely
affect such rights, preferences, privileges or voting power of holders of
Preferred Stock and provided further that (a) any increase in the amount of
the authorized Preferred Stock or the creation or issuance of any other series
of Preferred Stock; or (b) any increase in the amount of authorized shares of
such series or any other series of Preferred Stock, in each case ranking on a
parity with or junior to the Preferred Stock of such series with respect to
payment of dividends or the distribution of assets upon liquidation,
dissolution or winding up, shall not be deemed to materially and adversely
affect such rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected all outstanding shares of such series of Preferred Stock shall
have been redeemed or called for redemption and sufficient funds shall have
been deposited in trust to effect such redemption.
Under Maryland law, notwithstanding anything to the contrary set forth
above, holders of each series of Preferred Stock will be entitled to vote upon
any proposed amendment to the Charter if the amendment would change the
contract rights of such shares as expressly set forth in the Charter.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred Stock
are convertible into Common Stock will be set forth in the applicable
Prospectus Supplement relating thereto. Such terms will include the number of
shares of Common Stock into which the shares of Preferred Stock are
convertible, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversions will be at the option
of the holders of the Preferred Stock or Parkway, the events requiring an
adjustment of the conversion price and provisions affecting conversion in the
event of the redemption of such series of Preferred Stock.
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STOCKHOLDER LIABILITY
As discussed below under "Description of Common Stock--General," applicable
Maryland law provides that no stockholder, including holders of Preferred
Stock, will be personally liable for the acts and obligations of 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 Stock--Restrictions on
Transfer," for Parkway to qualify as a REIT under the Code, not more than 50%
in value of its outstanding capital shares may be owned, directly or
indirectly, by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of a taxable year. To assist Parkway in
meeting this requirement, Parkway may take certain actions to limit the
beneficial ownership, directly or indirectly, by a single person of Parkway's
outstanding equity securities, including any Preferred Stock of Parkway.
Therefore, the Designating Amendment for each series of Preferred Stock may
contain provisions restricting the ownership and transfer of the Preferred
Stock. The applicable Prospectus Supplement will specify any additional
ownership limitation relating to a series of Preferred Stock.
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Preferred Stock will be set forth
in the applicable Prospectus Supplement.
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
Parkway may issue receipts ("Depositary Receipts") for Depositary Shares,
each of which will represent a fractional interest of a share of a particular
series of Preferred Stock, as specified in the applicable Prospectus
Supplement. Preferred Stock of each series represented by Depositary Shares
will be deposited under a separate deposit agreement (each, a "Deposit
Agreement") among Parkway, the depositary named therein (a "Preferred Stock
Depositary"), and the holders from time to time of the Depositary Receipts.
Subject to the terms of the applicable Deposit Agreement, each owner of a
Depositary Receipt will be entitled, in proportion to the fractional interest
of a share of a particular series of Preferred Stock represented by the
Depositary Shares evidenced by such Depositary Receipt, to all the rights and
preferences of the Preferred Stock represented by such Depositary Shares
(including dividend, voting, conversion, redemption and liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the
issuance and delivery of the Preferred Stock by Parkway to a Preferred Stock
Depositary, Parkway will cause such Preferred Stock Depositary to issue, on
behalf of Parkway, the Depositary Receipts. Copies of the applicable form of
Deposit Agreement and Depositary Receipt may be obtained from Parkway upon
request, and the statements made hereunder relating to Deposit Agreements and
the Depositary Receipts to be issued thereunder are summaries of certain
anticipated provisions thereof and do not purport to be complete and are
subject to, and qualified in their entirety by reference to, all of the
provisions of the applicable Deposit Agreement and related Depositary
Receipts.
DIVIDENDS AND OTHER DISTRIBUTIONS
A Preferred Stock Depositary will be required to distribute all cash
dividends or other cash distributions received in respect of the applicable
Preferred Stock to the record holders of Depositary Receipts evidencing the
related Depositary Shares in proportion to the number of such Depositary
Receipts owned by such holders, subject to certain obligations of holders to
file proofs, certificates and other information and to pay certain charges and
expenses to such Preferred Stock Depositary.
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In the event of a distribution other than in cash, a Preferred Stock
Depositary will be required to distribute property received by it to the
record holders of Depositary Receipts entitled thereto, subject to certain
obligations of holders to file proofs, certificates and other information and
to pay certain charges and expenses to such Preferred Stock Depositary, unless
such Preferred Stock Depositary determines that it is not feasible to make
such distribution, in which case such Preferred Stock Depositary may, with the
approval of Parkway, sell such property and distribute the net proceeds from
such sale to such holders.
No distribution will be made in respect of any Depositary Share to the
extent that it represents any Preferred Stock which have been converted or
exchanged.
WITHDRAWAL OF SHARES
Upon surrender of the Depositary Receipts at the corporate trust office of
the applicable Preferred Stock Depositary (unless the related Depositary
Shares have previously been called for redemption or converted), the holders
thereof will be entitled to delivery at such office, to or upon each such
holder's order, of the number of whole or fractional shares of the applicable
Preferred Stock and any money or other property represented by the Depositary
Shares evidenced by such Depositary Receipts. Holders of Depositary Receipts
will be entitled to receive whole or fractional shares of the related
Preferred Stock on the basis of the proportion of Preferred Stock represented
by each Depositary Share as specified in the applicable Prospectus Supplement,
but holders of such Preferred Stock will not thereafter be entitled to receive
Depositary Shares therefor. If the Depositary Receipts delivered by the holder
evidence a number of Depositary Shares in excess of the number of Depositary
Shares representing the number of Preferred Stock to be withdrawn, the
applicable Preferred Stock Depositary will be required to deliver to such
holder at the same time a new Depositary Receipt evidencing such excess number
of Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES
Whenever Parkway redeems Preferred Stock held by a Preferred Stock
Depositary, such Preferred Stock Depositary will be required to redeem as of
the same redemption date the number of Depositary Shares representing the
Preferred Stock so redeemed, provided Parkway shall have paid in full to such
Preferred Stock Depositary the redemption price of the Preferred Stock to be
redeemed plus an amount equal to any accrued and unpaid dividends thereon to
the date fixed for redemption. The redemption price per Depositary Share will
be equal to the redemption price and any other amounts per share payable with
respect to the Preferred Stock. If fewer than all the Depositary Shares are to
be redeemed, the Depositary Shares to be redeemed will be selected pro rata
(as nearly as may be practicable without creating fractional Depositary
Shares) or by any other equitable method determined by Parkway that preserves
the REIT status of Parkway.
From and after the date fixed for redemption, all dividends in respect of
the Preferred Stock so called for redemption will cease to accrue, the
Depositary Shares so called for redemption will no longer be deemed to be
outstanding and all rights of the holders of the Depositary Receipts
evidencing the Depositary Shares so called for redemption will cease, except
the right to receive any moneys payable upon such redemption and any money or
other property to which the holders of such Depositary Receipts were entitled
upon such redemption upon surrender thereof to the applicable Preferred Stock
Depositary.
VOTING OF THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the applicable
Preferred Stock are entitled to vote, a Preferred Stock Depositary will be
required to mail the information contained in such notice of meeting to the
record holders of the Depositary Receipts evidencing the Depositary Shares
which represent such Preferred Stock. Each record holder of Depositary
Receipts evidencing Depositary Shares on the record date (which will be the
same date as the record date for the Preferred Stock) will be entitled to
instruct such Preferred Stock Depositary as to the exercise of the voting
rights pertaining to the amount of Preferred Stock represented by such
holder's Depositary Shares. Such Preferred Stock Depositary will be required
to vote the amount of
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Preferred Stock represented by such Depositary Shares in accordance with such
instructions, and Parkway will agree to take all reasonable action which may
be deemed necessary by such Preferred Stock Depositary in order to enable such
Preferred Stock Depositary to do so. Such Preferred Stock Depositary will be
required to abstain from voting the amount of Preferred Stock represented by
such Depositary Shares to the extent it does not receive specific instructions
from the holders of Depositary Receipts evidencing such Depositary Shares. A
Preferred Stock Depositary will not be responsible for any failure to carry
out any instruction to vote, or for the manner or effect of any such vote
made, as long as any such action or non-action is in good faith and does not
result from negligence or willful misconduct of such Preferred Stock
Depositary.
LIQUIDATION PREFERENCE
In the event of the liquidation, dissolution or winding up of Parkway,
whether voluntary or involuntary, the holders of each Depositary Receipt will
be entitled to the fraction of the liquidation preference accorded each
Preferred Share represented by the Depositary Share evidenced by such
Depositary Receipt, as set forth in the applicable Prospectus Supplement.
CONVERSION OF PREFERRED STOCK
The Depositary Shares, as such, will not be convertible into Common Stock or
any other securities or property of Parkway. Nevertheless, if so specified in
the applicable Prospectus Supplement relating to an offering of Depositary
Shares, the Depositary Receipts may be surrendered by holders thereof to the
applicable Preferred Stock Depositary with written instructions to such
Preferred Stock Depositary to instruct Parkway to cause conversion of the
Preferred Stock represented by the Depositary Shares evidenced by such
Depositary Receipts into whole shares of Common Stock, other Preferred Stock
or other shares of stock, and Parkway will agree that upon receipt of such
instructions and any amounts payable in respect thereof, it will cause the
conversion thereof utilizing the same procedures as those provided for
delivery of Preferred Stock to effect such conversion. If the Depositary
Shares evidenced by a Depositary Receipt are to be converted in part only, a
new Depositary Receipt or Receipts will be issued for any Depositary Shares
not to be converted. No fractional shares of Common Stock will be issued upon
conversion, and if such conversion will result in a fractional share being
issued, an amount will be paid in cash by Parkway equal to the value of the
fractional interest based upon the closing price of the Common Stock on the
last business day prior to the conversion.
AMENDMENT AND TERMINATION OF A DEPOSIT AGREEMENT
Any form of Depositary Receipt evidencing Depositary Shares which will
represent Preferred Stock and any provision of a Deposit Agreement will be
permitted at any time to be amended by agreement between Parkway and the
applicable Preferred Stock Depositary. However, any amendment that materially
and adversely alters the rights of the holders of Depositary Receipts or that
would be materially and adversely inconsistent with the rights granted to the
holders of the related Preferred Stock will not be effective unless such
amendment has been approved by the existing holders of at least two-thirds of
the applicable Depositary Shares evidenced by the applicable Depositary
Receipts then outstanding. No amendment shall impair the right, subject to
certain anticipated exceptions in the Deposit Agreements, of any holders of
Depositary Receipts to surrender any Depositary Receipt with instructions to
deliver to the holder the related Preferred Stock and all money and other
property, if any, represented thereby, except in order to comply with law.
Every holder of an outstanding Depositary Receipt at the time any such
amendment becomes effective shall be deemed, by continuing to hold such
Depositary Receipt, to consent and agree to such amendment and to be bound by
the applicable Deposit Agreement as amended thereby.
A Deposit Agreement will be permitted to be terminated by Parkway upon not
less than 30 days' prior written notice to the applicable Preferred Stock
Depositary if (i) such termination is necessary to preserve Parkway's status
as a REIT or (ii) a majority of each series of Preferred Stock affected by
such termination consents to such termination, whereupon such Preferred Stock
Depositary will be required to deliver or make available to each holder of
Depositary Receipts, upon surrender of the Depositary Receipts held by such
holder,
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such number of whole or fractional Preferred Stock as are represented by the
Depositary Shares evidenced by such Depositary Receipts together with any
other property held by such Preferred Stock Depositary with respect to such
Depositary Receipts. Parkway will agree that if a Deposit Agreement is
terminated to preserve Parkway's status as a REIT, then Parkway will use its
best efforts to list the Preferred Stock issued upon surrender of the related
Depositary Shares on a national securities exchange. In addition, a Deposit
Agreement will automatically terminate if (i) all outstanding Depositary
Shares thereunder shall have been redeemed; (ii) there shall have been a final
distribution in respect of the related Preferred Stock in connection with any
liquidation, dissolution or winding up of Parkway and such distribution shall
have been distributed to the holders of Depositary Receipts evidencing the
Depositary Shares representing such Preferred Stock; or (iii) each share of
the related Preferred Stock shall have been converted into stock of Parkway
not so represented by Depositary Shares.
CHARGES OF A PREFERRED STOCK DEPOSITARY
Parkway will pay all transfer and other taxes and governmental charges
arising solely from the existence of a Deposit Agreement. In addition, Parkway
will pay the fees and expenses of a Preferred Stock Depositary in connection
with the performance of its duties under a Deposit Agreement. However, holders
of Depositary Receipts will pay the fees and expenses of a Preferred Stock
Depositary for any duties requested by such holders to be performed which are
outside of those expressly provided for in the applicable Deposit Agreement.
RESIGNATION AND REMOVAL OF DEPOSITARY
A Preferred Stock Depositary will be permitted to resign at any time by
delivering to Parkway notice of its election to do so, and Parkway will be
permitted at any time to remove a Preferred Stock Depositary, any such
resignation or removal to take effect upon the appointment of a successor
Preferred Stock Depositary. A successor Preferred Stock Depositary will be
required to be appointed within 60 days after delivery of the notice of
resignation or removal and will be required to be a bank or trust company
having its principal office in the United States and having a combined capital
and surplus of at least $50,000,000.
MISCELLANEOUS
A Preferred Stock Depositary will be required to forward to holders of
Depositary Receipts any reports and communications from Parkway which are
received by such Preferred Stock Depositary with respect to the related
Preferred Stock.
Neither a Preferred Stock Depositary nor Parkway will be liable if it is
prevented from or delayed in, by law or any circumstances beyond its control,
performing its obligations under a Deposit Agreement. The obligations of
Parkway and Preferred Stock Depositary under a Deposit Agreement will be
limited to performing their duties thereunder in good faith and without
negligence (in the case of any action or inaction in the voting of Preferred
Stock represented by the applicable Depositary Shares), gross negligence or
willful misconduct, and neither Parkway nor any applicable Preferred Stock
Depositary will be obligated to prosecute or defend any legal proceeding in
respect of any Depositary Receipts, Depositary Shares or Preferred Stock
represented thereby unless satisfactory indemnity is furnished. Parkway and
any Preferred Stock Depositary will be permitted to rely on written advice of
counsel or accountants, or information provided by persons presenting
Preferred Stock represented thereby for deposit, holders of Depositary
Receipts or other persons believed in good faith to be competent to give such
information, and on documents believed in good faith to be genuine and signed
by a proper party.
In the event a Preferred Stock Depositary shall receive conflicting claims,
requests or instructions from any holders of Depositary Receipts, on the one
hand, and Parkway on the other hand, such Preferred Stock Depositary shall be
entitled to act on such claims, requests or instructions received from
Parkway.
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DESCRIPTION OF COMMON STOCK
GENERAL
Parkway is authorized to issue up to 70,000,000 shares of Common Stock. As
of June 12, 1997, there were 6,287,130 shares of Common Stock outstanding and
254,644 shares of Common Stock reserved for issuance upon the exercise of
options granted under Parkway's 1991 Directors Stock Option Plan and Parkway's
1994 Stock Option Plan. All of the issued and outstanding shares of Common
Stock are fully paid and non-assessable and have equal voting, distribution
and liquidation rights. Shares of Common Stock are not subject to call or
redemption; provided, however, if the Parkway Board of Directors determines
that the direct or indirect ownership of Common Stock has or may become
concentrated to an extent which threatens Parkway's status as a REIT, the
Board of Directors may call for the redemption of a number of shares of Common
Stock.
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. The holders of Common Stock have
no cumulative voting rights. Additionally, subject to the rights of holders of
Preferred Stock, holders of Common Stock are entitled to receive such
dividends as may be declared from time to time by the directors out of funds
legally available therefor.
The shares of Common Stock currently outstanding are listed for trading on
the NYSE under the symbol "PKY." Parkway will apply to the NYSE to list the
additional shares of Common Stock to be sold pursuant to any Prospectus
Supplement, and Parkway anticipates that such shares will be so listed.
Under Maryland law, stockholders are generally not liable for Parkway's
debts or obligations. If Parkway is liquidated, subject to the right of any
holders of Preferred Stock, if any, to receive preferential distributions,
each outstanding share of Common Stock will be entitled to participate pro
rata in the assets remaining after payment of, or adequate provision for, all
known debts and liabilities of Parkway.
PROVISIONS OF PARKWAY'S CHARTER AND BYLAWS
Parkway's Charter provide that the number of directors will be ten, which
number may be increased or decreased pursuant to Parkway's Bylaws. Currently,
the number of directors is nine and all nine positions on the Board of
Directors are filled by the vote of the stockholders at the annual meeting.
Stockholders do not have cumulative voting rights in the election of
directors. Stockholders are entitled to one vote for each share of Common
Stock held by them.
OTHER MATTERS
The transfer agent and registrar for the Common Stock is Harris Trust and
Savings Bank, Chicago, Illinois.
RESTRICTIONS ON TRANSFER
Ownership Limits. For Parkway to qualify as a REIT under the Code, no more
than 50% in value of its outstanding Common Stock may be owned, actually and
constructively under the applicable attribution provisions of the Code, by
five or fewer individuals (as defined in the Code to include certain entities)
during the last half of a taxable year (other than the first year) or during a
proportionate part of a shorter taxable year. The Common Stock must also be
beneficially owned by 100 or more persons during at least 335 days of a
taxable year (other than the first year) or during a proportionate part of a
shorter taxable year. Because Parkway intends to elect to be treated as a
REIT, the Charter contains restrictions on the acquisition of Common Stock
intended to ensure compliance with these requirements.
Pursuant to the provisions of the Charter, if a transfer of stock occurs
whereby any person would own, beneficially or constructively, in excess of 9.8
percent (in value or in number, whichever is more restrictive) of the
outstanding capital stock of Parkway (excluding Excess Shares, as defined
below), then such amount in excess of the 9.8 percent limit shall
automatically be converted into shares of a separate class of stock, the
excess
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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.
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
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request for a meeting is made, the corporation may itself present the question
at any stockholders meeting. If voting rights are not approved at the meeting
or if the acquiring person does not deliver an acquiring person statement as
permitted by the statute, then, subject to certain conditions and limitations,
the corporation may redeem any or all of the control shares (except those for
which voting rights have previously been approved) for fair value determined,
without regard to voting rights, as of the date of the last control share
acquisition or as of the date of any meeting of stockholders at which the
voting rights of such shares are considered and not approved.
If voting rights for control shares are approved at a stockholders meeting
and the acquirer becomes entitled to vote a majority of the shares entitled to
vote, all other stockholders may exercise appraisal rights. The fair value of
the stock as determined for purposes of such appraisal rights may not be less
than the highest price per share paid in the control share acquisition, and
certain limitations and restrictions otherwise applicable to the exercise of
dissenters' rights do not apply in the context of a control share acquisition.
The control share acquisition statute does not apply to stock acquired in a
merger, consolidation or stock exchange if the corporation is a party to the
transaction.
Supermajority Votes. The Charter provides that (i) no term or provision of
the Charter may be added, amended or repealed in any respect which, in the
determination of the Board of Directors, cause Parkway not to qualify as a
REIT under the Code; (ii) the sections of the Charter concerning the removal
of directors, amendment of the Bylaws, the indemnification of agents and
limitation of liability of directors and officers and the section concerning
special stockholder vote requirements shall not be amended or repealed; and
(iii) no provision imposing cumulative voting in the election of directors may
be added to the Charter, except, in addition to any vote required by the terms
of then outstanding Preferred Stock, upon the affirmative vote of the holders
of not less than eighty percent of all votes entitled to be cast on the
matter.
Stockholders Rights Agreement. Stockholders, pursuant to a Rights Agreement,
have the right to purchase Common Stock at a price of $40.00 per share,
subject to adjustment, on a Distribution Date which will occur on the earliest
of (i) the date of Parkway's public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired, or
obtained the right to acquire, beneficial ownership of 20% or more of the
outstanding Common Stock (the "Stock Acquisition Date"); (ii) 10 days
following the commencement of a tender offer or exchange offer that would
result in a person or group beneficially owning 30% or more of the outstanding
Common Stock; or (iii) 10 days after the Board of Directors shall declare any
person to be an "Adverse Person," as defined in the Rights Agreement. The
Rights are not exercisable until the Distribution Date and expire at the close
of business on September 6, 2005, unless earlier redeemed by Parkway.
In the event any person becomes an Acquiring Person, each holder of a Right
will have the right to receive, upon exercise of the Right and payment of the
purchase price, Common Stock (or, if sufficient Common Stock is unavailable
and subject to certain limitations, cash, property or other securities of
Parkway) having a value equal to two times the purchase price of the Right
(referred to as the "Subscription Right"). The Subscription Right is
exercisable during the 60-day period following the later of the Stock
Acquisition Date or the effective date of a registration statement covering
the Common Stock (or other securities, if applicable) subject to the
Subscription Right (referred to as the "Subscription Period"). Notwithstanding
any of the foregoing, all Rights that are, or (under certain circumstances
specified in the Rights Agreement) were, beneficially owned by any Acquiring
Person will be null and void.
In the event that, at any time following the Stock Acquisition Date, (i)
Parkway engages in a merger or other business combination transaction or (ii)
50% or more of Parkway's assets or earning power is sold or transferred, each
holder of a Right (except Rights which previously have been voided pursuant to
the Rights Agreement) shall thereafter have the right to receive, upon
exercise, common stock of the acquiring company having a value equal to two
times the purchase price of the Right.
The purchase price payable, and the number of shares of Common Stock (or the
number and kind of other securities or property, as the case may be) issuable
upon exercise of the Rights are subject to adjustment from time to time to
prevent dilution.
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FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTORY NOTES
The following discussion summarizes certain Federal income tax
considerations that may be relevant to a prospective 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 will elect to be taxed as a REIT under Sections 856 through
860 of the Code effective January 1, 1997. Parkway's qualification and
taxation as a REIT depends upon its ability to meet on a continuing basis,
through actual annual operating results, distribution levels and diversity of
stock ownership, the various qualification tests and organizational
requirements imposed under the Code, as discussed below. Although management
of Parkway believes that Parkway is organized and operating in a manner that
permits it to qualify as a REIT, and intends to operate in such a manner in
the future, no assurance can be given that Parkway will be able to continue to
operate in a manner so as to qualify or remain qualified as a REIT. See "--
Failure to Qualify" below.
Jaeckle Fleischmann & Mugel, LLP has acted as counsel to Parkway in
connection with the offering and Parkway's election to be taxed as a REIT. In
the opinion of Jaeckle, Fleischmann & Mugel, LLP, assuming that the elections
and other procedural steps described in the following discussion of
"Requirements for Qualification" are completed by Parkway in a timely fashion,
Parkway's organization and proposed method of operation will enable it to
qualify to be taxed as a REIT under the Code commencing with Parkway's taxable
year beginning January 1, 1997, and for its future taxable years. Investors
should be aware, however, that opinions of counsel are not binding upon the
Service or any court. It must be emphasized that the opinion is based on
various assumptions and is conditioned upon certain representations made by
Parkway as to factual matters, including representations regarding the nature
of Parkway's properties and the future conduct of its business. Such factual
assumptions and representations are described below in this discussion of
"Federal Income Tax Considerations" and are set out in the federal income tax
opinion that will be delivered by Jaeckle Fleischmann & Mugel, LLP at the
closing of the offering. Moreover, such qualification and taxation as a REIT
depends upon Parkway's ability to meet on a continuing basis, through actual
annual operating results, distribution levels and share ownership, the various
qualification tests imposed under the Code discussed below. Jaeckle
Fleischmann & Mugel, LLP will not review Parkway's compliance with those tests
on a continuing basis. Accordingly, no assurance can be given that the actual
results of Parkway's operations for any particular taxable year will satisfy
such requirements. For a discussion of the tax consequences of the failure to
qualify as a REIT, see "Failure to Qualify" below.
The following is a general summary of the Code provisions that govern the
Federal income tax treatment of a REIT and its stockholders. These provisions
of the Code are 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.
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If Parkway qualifies for taxation as a REIT and distributes to its
stockholders at least 95% of its REIT taxable income, it generally will not be
subject to Federal corporate income taxes on the portion of its ordinary or
capital gain income that it currently distributes to stockholders. This
treatment substantially eliminates the "double taxation" (at the corporate and
stockholder levels) that generally results from investment in a corporation.
Even if Parkway qualifies as a REIT, it will be subject to Federal income tax
in the following circumstances. First, Parkway will be taxed at regular
corporate rates on any undistributed taxable income, including undistributed
net capital gains. Second, under certain circumstances, the company may be
subject to the "alternative minimum tax" on its items of tax preference.
Third, if Parkway has (i) net income from the sale or other disposition of
"foreclosure property" (which is, in general, property acquired by foreclosure
or otherwise on default of a loan secured by the property) that is held
primarily for sale to customers in the ordinary course of business or (ii)
other non-qualifying income from foreclosure property, it will be subject to
tax at the highest corporate rate on such income. Fourth, if Parkway has net
income from prohibited transactions (which are, in general, certain sales or
other dispositions of property (other than foreclosure property) held
primarily for sale to customers in the ordinary course of business), such
income will be subject to a 100% tax. Fifth, if Parkway should fail to satisfy
the 75% gross income test or the 95% gross income test (as discussed below),
and has nonetheless maintained its qualification as a REIT because certain
other requirements have been met, it will be subject to a 100% tax on the net
income attributable to the greater of the amount by which it fails the 75% or
95% test, multiplied by a fraction intended to reflect its profitability.
Sixth, if Parkway should fail to distribute during each calendar year at least
the sum of (i) 85% of its REIT ordinary income for such year; (ii) 95% of its
REIT capital gain net income for such year; and (iii) any undistributed
taxable income from prior years, Parkway would be subject to a 4% excise tax
on the excess of such required distribution over the amounts actually
distributed. Seventh, Parkway will be subject to tax at the highest corporate
rates on built-in gains recognized within a 10 year period of its election to
be taxable as a REIT on assets it formerly held while it was a C corporation
(i.e., a corporation generally subject to full corporate level tax). In
addition, if Parkway acquires any additional asset from a C corporation in a
transaction in which the basis of the asset in Parkway's hands is determined
by reference to the basis of the asset (or any other property) in the hands of
the C corporation, and Parkway recognizes gain on the disposition of such
asset during the 10-year period beginning on the date on which such asset was
acquired by it, then, to the extent of such asset's built-in gain (the excess
of the fair market value of such property at the time of acquisition by
Parkway over the adjusted basis of such property at such time), such gain will
be subject to tax at the highest regular corporate rate applicable (as
provided in Service regulations that have not yet been promulgated).
Requirements for Qualification. The Code defines a REIT as a corporation,
trust or association (i) which is managed by one or more trustees or
directors; (ii) the beneficial ownership of which is evidenced by transferable
shares or by transferable certificates of beneficial interest; (iii) which
would be taxable as a domestic corporation, but for Sections 856 through 860
of the Code; (iv) which is neither a financial institution nor an insurance
company subject to certain provisions of the Code; (v) the beneficial
ownership of which is held by 100 or more persons; (vi) during the last half
of each taxable year not more than 50% in value of the outstanding stock of
which is owned, directly or indirectly, by five or fewer individuals (as
defined in the Code to include certain entities); and (vii) which meets
certain other tests, described below, regarding the nature of its income and
assets. The Code provides that conditions (i) through (iv), inclusive, must be
met during the entire taxable year and that condition (v) must be met during
at least 335 days of a taxable year of 12 months, or during a proportionate
part of a taxable year of less than 12 months. Conditions (v) and (vi) will
not apply until after the first taxable year for which an election is made to
be taxed as a REIT. Parkway satisfies the requirements (i) through (iv) as of
January 1, 1997. Parkway's Charter contains restrictions regarding the
transfer of its shares that are intended to assist it in satisfying the share
ownership requirements described in (v) and (vi) above.
Parkway currently has 12 subsidiaries and may have additional subsidiaries
in the future. Code Section 856(i) provides that a corporation that is a
"qualified REIT subsidiary" shall not be treated as a separate corporation,
and all assets, liabilities and items of income, deduction and credit of a
"qualified REIT subsidiary" shall be treated as assets, liabilities and items
of income, deduction and credit of the REIT. A "qualified REIT subsidiary" is
a corporation, all of the capital stock of which has been held by the REIT at
all times during the
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period such corporation was in existence. The Service has ruled in numerous
private letter rulings that a 100% owned subsidiary of an entity electing REIT
status will be classified as a "qualified REIT subsidiary" even though the
parent entity did not own 100% of the subsidiary's outstanding stock
throughout the subsidiary's existence. In these rulings, the Service treats
the subsidiary as liquidated immediately prior to the date of REIT election
and subsequently incorporated by the REIT. Thus, in applying the requirements
described herein, any "qualified REIT subsidiaries" of Parkway will be
ignored, and all assets, liabilities and items of income, deduction and credit
of such subsidiaries will be treated as assets, liabilities and items of
income, deduction and credit of Parkway. The qualified REIT subsidiaries,
therefore, will not be subject to federal corporate income taxation, although
they may be subject to state and local taxation.
In the case of a REIT that is a partner in a partnership, Treasury
Regulations provide that the REIT will be deemed to own its proportionate
share of the assets of the partnership and will be deemed to be entitled to
the gross income of the partnership attributable to such share. In addition,
the assets and gross income of the partnership will retain the same character
in the hands of the REIT for purposes of Section 856 of the Code, including
satisfying the gross income and asset tests described below. Thus, Parkway's
proportionate share of the assets, liabilities and items of income of the
partnership owned and the noncorporate subsidiaries of any such partnership
will be treated as assets, liabilities and items of income of Parkway for
purposes of applying the requirements described herein.
A corporation may not elect to become a REIT unless its taxable year is the
calendar year. Parkway's taxable year is the calendar year. In addition,
pursuant to applicable Treasury Regulations, to be able to elect to be taxed
as a REIT, Parkway must maintain certain records and request on an annual
basis certain information from its stockholders designed to disclose the
actual ownership of its outstanding shares. Parkway intends to comply with
such requirements.
Earnings and Profits Calculation. In order to elect REIT status, Parkway
cannot have earnings and profits which have been generated during years in
which Parkway was not qualified as a REIT. For this purpose, under the Code,
earnings and profits of companies which have been acquired by Parkway, and the
earnings and profits of any of Parkway's subsidiaries, are included in
calculating Parkway's earnings and profits account. The determination of the
earnings and profits account of a company is a highly technical and complex
undertaking. Parkway's predecessor, The Parkway Company, was organized in 1971
and over the years has acquired several companies. In calculating the earnings
and profits account, studies have been undertaken of not only Parkway's
earnings and profits history, but also the history of all acquired companies.
Based on these studies Parkway believes that it did not have any positive
accumulated earnings and profits on January 1, 1997, the effective date of its
REIT election. In the event its earnings and profits account was positive,
Parkway will be required to distribute dividends sufficient to reduce that
account to zero prior to the end of calendar year 1997. Any determination made
by Parkway with respect to its earnings and profits account is not binding on
the Service. In the event the Service were to successfully challenge Parkway's
calculation of its earnings and profits, a possible outcome of such challenge
could be the termination of Parkway's status as a REIT and the payment of
corporate level income tax on its taxable income.
Income Tests. In order for Parkway to maintain qualification as a REIT,
three separate percentage tests relating to the source of its gross income
must be satisfied annually. First, at least 75% of the REIT's gross income
(excluding gross income from prohibited transactions) for each taxable year
must be derived directly or indirectly from investments relating to real
property or mortgages on real property (including "rents from real property"
and, in certain circumstances, interest) or from certain types of temporary
investments. Second, at least 95% of the REIT's gross income (excluding gross
income from prohibited transactions) for each taxable year must be derived
from such real property investments described above, and from dividends,
interest and gain from the sale or disposition of stock or securities, or from
any combination of the foregoing. Third, gain from the sale or other
disposition of (i) stock or securities held for less than one year; (ii)
prohibited transactions; and (iii) certain real property held for less than
four years (apart from involuntary conversions and sales of foreclosure
property) must represent less than 30% of the REIT's gross income (including
gross income from prohibited transactions) for each taxable year.
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Rents received by Parkway will qualify as "rents from real property" in
satisfying the above gross income tests only if several conditions are met.
First, the amount of rent must not be based in whole or in part on the income
or profits of any person. However, amounts received or accrued generally will
not be excluded from "rents from real property" solely by reason of being
based on a fixed percentage or percentages of receipts or sales. Second, rents
received from a tenant will not qualify as "rents from real property" if
Parkway, or a direct or indirect owner of 10% or more of Parkway, directly or
constructively owns 10% or more of such tenant (a "Related Party Tenant").
Third, if rent attributable to personal property that is leased in connection
with a lease of real property is greater than 15% of the total rent received
under the lease, then the portion of rent attributable to such personal
property will not qualify as "rents from real property." Finally, for rents
received to qualify as "rents from real property," Parkway generally must not
operate or manage the property, or furnish or render services to tenants,
other than through an "independent contractor" who is adequately compensated
and from whom Parkway derives no revenue. The "independent contractor"
requirement, however, does not apply to the extent the services provided by
Parkway are "usually or customarily rendered" in connection with the rental of
space for occupancy only and are not otherwise considered "rendered to the
occupant." Parkway believes that all services that are provided to its tenants
will be considered "usually or customarily" rendered in connection with the
rental of comparable properties. Further, any noncustomary services will be
provided only through qualifying independent contractors. Parkway believes
that the income generated from its assets owned on January 1, 1997 and its
proposed method of operations will permit it to meet the income tests outlined
above.
If Parkway fails to satisfy one or both of the 75% or 95% gross income tests
for any taxable year, it may nevertheless qualify as a REIT for such year if
it is entitled to relief under certain provisions of the Code. These relief
provisions generally will be available if its failure to meet such tests was
due to reasonable cause and not due to willful neglect, Parkway attaches a
schedule of the sources of its income to its federal income tax return for
such years, and any incorrect information on the schedules was not due to
fraud with intent to evade tax. It is not possible, however, to state whether
in all circumstances Parkway would be entitled to the benefit of these relief
provisions. As discussed above in "General," even if these relief provisions
were to apply, a tax would be imposed with respect to the excess net income.
Asset Tests. At the close of each quarter of its taxable year, Parkway must
also satisfy three tests relating to the nature of its assets. First, at least
75% of the value of Parkway's total assets must be represented by certain real
estate assets (including temporary investments in stock or debt instruments
purchased with the proceeds of a stock or debt offering of Parkway and held
during the one year period from Parkway's receipt of capital in connection
with said offering), cash, cash items and government securities. Second, not
more than 25% of Parkway's total assets may be represented by securities other
than those in the 75% asset class. Third, of the investments included in the
25% asset class, the value of any one issuer's securities owned by Parkway may
not exceed 5% of the value of Parkway's total assets, and Parkway may not own
more than 10% of any one issuer's outstanding voting securities (excluding
securities of a qualified REIT subsidiary or another REIT). Parkway believes
that the assets that it owned on January 1, 1997 will permit it to meet the
asset tests outlined above.
If Parkway should fail to satisfy the asset tests at the end of a calendar
quarter, such a failure would not cause it to lose its REIT status if (i) it
satisfied the asset tests at the close of the preceding calendar quarter, and
(ii) the discrepancy between the value of Parkway's assets and the asset tests
either did not exist immediately after the acquisition of any particular asset
or was not wholly or partly caused by such an acquisition (e.g., the
discrepancy arose from changes in the market values of its assets). If the
conditions described in clause (ii) of the preceding sentence were not
satisfied, Parkway still could avoid disqualification by eliminating any
discrepancy within 30 days after the close of the calendar quarter in which it
arose.
Annual Distribution Requirements. Parkway, in order to qualify as a REIT, is
required to distribute dividends (other than capital gain dividends) to its
stockholders in an amount at least equal to (i) the sum of (a) 95% of its
"REIT taxable income" (computed without regard to the dividends paid deduction
and its net capital gain) and (b) 95% of the net income (after tax), if any,
from foreclosure property, minus (ii) the sum of certain items of noncash
income. Such distributions must be paid in the taxable year to which they
relate, or in the
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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.
Failure to Qualify. If Parkway fails to qualify for taxation as a REIT in
any taxable year and no relief provisions apply, Parkway will be subject to
tax (including any applicable alternative minimum tax) on its taxable income
at regular corporate rates. Distributions to stockholders in any year in which
Parkway fails to qualify will not be deductible by it, nor will such
distributions be required to be made. In such event, to the extent of current
and accumulated earnings and profits, all distributions to stockholders will
be taxable as ordinary income, and, subject to certain limitations in the
Code, corporate distributees may be eligible for the dividends received
deduction. Unless entitled to relief under specific statutory provisions,
Parkway also will be disqualified from taxation as a REIT for the four taxable
years following the year during which qualification was lost. It is not
possible to state whether in all circumstances Parkway would be entitled to
such statutory relief.
TAXATION OF STOCKHOLDERS
Taxation of Taxable Domestic Stockholders. As long as Parkway qualifies as a
REIT, distributions made to its taxable domestic stockholders out of current
or accumulated earnings and profits (and not designated as capital gain
dividends) will be taken into account by them as ordinary income, and
corporate stockholders will not be eligible for the dividends received
deduction as to such amounts. Domestic stockholders generally are stockholders
who are (i) citizens or residents of the United States; (ii) corporations,
partnerships or other entities created or organized in or under the laws of
the United States or any political subdivision thereof; or (iii) estates or
trusts the income of which is subject to United States federal income taxation
regardless of its source. Distributions that are designated as capital gain
dividends will be taxed as long-term capital gains (to the extent they do not
exceed Parkway's actual net capital gain for the taxable year) without regard
to the period for which the stockholder has held his or her shares. However,
corporate stockholders may be required to treat up to 20% of certain capital
gain dividends as ordinary income. Distributions in excess of current and
accumulated earnings and profits will not be taxable to a stockholder to the
extent that they do not exceed the adjusted basis of such stockholder's
shares, but rather will reduce the adjusted basis of such shares. To the
extent that such distributions exceed the adjusted basis of a stockholder's
shares, they will be included in income as long-term capital gain (or short-
term capital gain if the shares have been held for one year or less), assuming
the shares are a capital asset
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in the hands of the stockholder. In addition, any dividend declared by Parkway
in October, November or December of any year payable to a stockholder of
record on a specific date in any such month shall be treated as both paid by
Parkway and received by the stockholder on December 31 of such year, provided
that the dividend is actually paid by Parkway during January of the following
calendar year. Stockholders may not include in their individual income tax
returns any net operating losses or capital losses of Parkway.
In general, any gain or loss realized upon a taxable disposition of shares
by a stockholder who is not a dealer in securities will be treated as a long
term capital gain or loss if the shares have been held for more than one year
and otherwise a short term capital gain or loss. However, any loss upon a sale
or exchange of shares by a stockholder who has held such shares for six months
or less (after applying certain holding period rules) will be treated as long-
term capital loss to the extent of distributions from Parkway required to be
treated by such stockholder as long-term capital gain.
Backup Withholding. Parkway will report to its domestic stockholders and the
Service the amount of dividends paid during each calendar year, and the amount
of tax withheld, if any, with respect thereto. Under the backup withholding
rules, a stockholder may be subject to backup withholding at the rate of 31%
with respect to dividends paid unless such holder (i) is a corporation or
comes within certain other exempt categories and, when required, demonstrates
this fact, or (ii) provides a taxpayer identification number, certifies as to
no loss of exemption from backup withholding, and otherwise complies with
applicable requirements of the backup withholding rules. A stockholder who
does not provide Parkway with its correct taxpayer identification number may
also be subject to penalties imposed by the Service. Any amount paid as backup
withholding will be creditable against the stockholder's income tax liability.
In addition, Parkway may be required to withhold a portion of capital gain
distributions made to any stockholders who fail to certify their non-foreign
status to Parkway. See "Taxation of Non-U.S. Stockholders" below.
Taxation of Tax-Exempt Stockholders. Most tax-exempt entities, including
employees' pension trusts, are not subject to Federal income tax except to the
extent of "unrelated business taxable income" ("UBTI"). The Service has ruled
that amounts distributed by a REIT to a tax-exempt employees' pension trust do
not constitute UBTI. Based upon this ruling and the analysis therein, and
subject to the discussion below regarding qualified pension trust investors,
distributions by Parkway to a stockholder that is a tax-exempt entity
generally should not constitute UBTI, provided that the tax-exempt entity has
not financed the acquisition of its shares with "acquisition indebtedness"
within the meaning of the Code and the shares of Common Stock are not
otherwise used in an unrelated trade or business of the tax-exempt entity.
Revenue rulings, however, are interpretative in nature and subject to
revocation or modification by the Service.
A "qualified trust" (defined to be any trust described in section 401(a) of
the Code and exempt from tax under section 501(a) of the Code) that holds more
than 10% of the value of the shares of a REIT may be required, under certain
circumstances, to treat a portion of distributions from the REIT as UBTI. This
requirement will apply for a taxable year only if (i) the REIT satisfies the
requirement that not more than 50% of the value of its shares be held by five
or fewer individuals (the "five or fewer requirement") only by relying on a
special "look-through" rule under which shares held by qualified trust
stockholders are treated as held by the beneficiaries of such trusts in
proportion to their actuarial interests therein; and (ii) the REIT is
"predominantly held" by qualified trusts. A REIT is "predominantly held" by
qualified trusts if either (i) a single qualified trust holds more than 25% of
the value of the REIT shares, or (ii) one or more qualified trusts, each
owning more than 10% of the value of the REIT shares, hold in the aggregate
more than 50% of the value of the REIT shares. If the foregoing requirements
are met, the percentage of any REIT dividend treated as UBTI to a qualified
trust that owns more than 10% of the value of the REIT shares is equal to the
ratio of (i) the UBTI earned by the REIT (computed as if the REIT were a
qualified trust and therefore subject to tax on its UBTI) to (ii) the total
gross income (less certain associated expenses) of the REIT for the year in
which the dividends are paid. A de minimis exception applies where the ratio
set forth in the preceding sentence is less than 5% for any year.
The provisions requiring qualified trusts to treat a portion of REIT
distributions as UBTI will not apply if the REIT is able to satisfy the five
or fewer requirement without relying on the "look-through" rule. The
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restrictions on ownership of Common Stock in Parkway's Charter should prevent
application of the foregoing provisions to qualified trusts purchasing Common
Stock of Parkway pursuant to the offering, absent a waiver of the restrictions
by the Board of Directors.
Taxation of Non-U.S. Stockholders. The rules governing U.S. Federal income
taxation of nonresident alien individuals, foreign corporations, foreign
partnerships and other foreign stockholders (collectively, "Non-U.S.
Stockholders") are complex, and no attempt will be made herein to provide more
than a limited summary of such rules. The discussion does not consider any
specific facts or circumstances that may apply to a particular Non-U.S.
Stockholder. Prospective Non-U.S. Stockholders should consult with their own
tax advisors to determine the impact of U.S. Federal, state and local income
tax laws with regard to an investment in the Common Stock, including any
reporting requirements.
Distributions that are not attributable to gain from sales or exchanges by
Parkway of U.S. real property interests and not designated by Parkway as
capital gain dividends will be treated as dividends of ordinary income to the
extent that they are made out of current or accumulated earnings and profits
of Parkway. Such distributions, ordinarily, will be subject to a withholding
tax equal to 30% of the gross amount of the distribution unless an applicable
tax treaty reduces such rate. However, if income from the investment in Common
Stock is treated as effectively connected with the Non-U.S. Stockholder's
conduct of a U.S. trade or business, the Non-U.S. Stockholder generally will
be subject to a tax at graduated rates, in the same manner as U.S.
stockholders are taxed with respect to such dividends (and may also be subject
to a branch profits tax of up to 30% if the stockholder is a foreign
corporation). Parkway expects to withhold U.S. income tax at the rate of 30%
on the gross amount of any dividends paid to a Non-U.S. Stockholder that are
not designated as capital gain dividends unless (i) a lower treaty rate
applies and the required form evidencing eligibility for that reduced rate is
filed with Parkway or (ii) the Non-U.S. Stockholder files IRS Form 4224 with
Parkway claiming that the distribution is income treated as effectively
connected to a U.S. trade or business.
Distributions in excess of current and accumulated earnings and profits of
Parkway will not be taxable to a stockholder to the extent that they do not
exceed the adjusted basis of the stockholder's Common Stock, but rather will
reduce the adjusted basis of such shares. To the extent that such
distributions exceed the adjusted basis of a Non-U.S. Stockholder's shares,
they will give rise to tax liability if the Non-U.S. Stockholder would
otherwise be subject to tax on any gain from the sale or disposition of his or
her Common Stock as described below. If at any time Parkway is not a
"domestically controlled REIT," as defined below, Parkway must withhold U.S.
income tax at the rate of 10% on distributions to Non-U.S. Stockholders that
are not paid out of current or accumulated earnings and profits unless the
Non-U.S. Stockholders provide Parkway with withholding certificates evidencing
their exemption from withholding tax. If it cannot be determined at the time
that such a distribution is made whether or not such distribution will be in
excess of current and accumulated earnings and profits, the distribution will
be subject to withholding at the rate applicable to dividends. However, the
Non-U.S. Stockholder may seek a refund of such amounts from the Service if it
is subsequently determined that such distribution was, in fact, in excess of
current and accumulated earnings and profits of Parkway.
For any year in which Parkway qualifies as a REIT, distributions that are
attributable to gain from sales or exchanges by Parkway of U.S. real property
interests will be taxed to a Non-U.S. Stockholder under the provisions of the
Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"). Under FIRPTA,
these distributions are taxed to a Non-U.S. Stockholder as if such gain were
effectively connected with a U.S. business. Thus, Non-U.S. Stockholders will
be taxed on such distributions at the normal capital gain rates applicable to
U.S. stockholders (subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien individuals). Also,
distributions subject to FIRPTA may be subject to a 30% branch profits tax in
the hands of a corporate Non-U.S. Stockholder not entitled to treaty relief or
exemption. Parkway is required by applicable Treasury Regulations to withhold
35% of any distribution that could be designated by Parkway as a capital gain
dividend. This amount is creditable against the Non-U.S. Stockholder's FIRPTA
tax liability.
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Gain recognized by a Non-U.S. Stockholder upon a sale of Common Stock
generally will not be taxed under FIRPTA if Parkway is a "domestically
controlled REIT," defined generally as a REIT in which at all times during a
specified testing period less than 50% in value of its shares was held
directly or indirectly by Non-U.S. Stockholders. Parkway believes that it
currently qualifies as a "domestically controlled REIT," and that the sale of
Common Stock will not therefore be subject to tax under FIRPTA. Because
Parkway is publicly traded, however, no assurance can be given that Parkway
will continue to be a domestically controlled REIT. Even if Parkway is not a
"domestically controlled REIT," a Non-U.S. Stockholder's sale of Common Stock
generally will not be subject to tax under FIRPTA as a sale of U.S. real
property interests provided that (i) Parkway's Common Stock is "regularly
traded" on an established securities market, and (ii) the selling Non-U.S.
Stockholder held 5% or less of Parkway's Common Stock at all times during the
specified testing period. In addition, gain not subject to FIRPTA will be
taxable to a Non-U.S. Stockholder if (i) the investment in Common Stock is
treated as effectively connected with the Non-U.S. Stockholder's trade or
business, in which case the Non-U.S. Stockholder will be subject to the same
treatment as the U.S. stockholders with respect to such gain; or (ii) the Non-
U.S. Stockholder is a nonresident alien individual who was present in the
United States for 183 days or more during the taxable year and has a "tax
home" in the United States, in which case the nonresident alien individual
will be subject to a 30% withholding tax on the individual's capital gains. If
the gain on the sale of Common Stock were to be subject to tax under FIRPTA,
the Non-U.S. Stockholder would be subject to the same treatment as U.S.
stockholders with respect to such gain (subject to applicable alternative
minimum tax and a special alterative minimum tax in the case of nonresident
alien individuals).
State and Local Taxes. Parkway and its stockholders may be subject to state
or local taxation in various state or local jurisdictions, including those in
which it or they transact business or reside (although stockholders who are
individuals generally should not be required to file state income tax returns
outside of their state of residence with respect to Parkway's operations and
distributions). The state and local tax treatment of Parkway and its
stockholders may not conform to the Federal income tax consequences discussed
above. Consequently, prospective stockholders should consult their own tax
advisors regarding the effect of state and local tax laws on an investment in
the Securities.
PLAN OF DISTRIBUTION
Parkway may sell Securities to or through underwriters or dealers for public
offering and sale by or through them, and also may sell Securities directly to
other purchasers or agents or through any combination of these methods of
sale.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices 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 shares of Common Stock which are listed on the NYSE. Any shares of
Common Stock sold pursuant to a Prospectus Supplement will be listed on such
exchange, subject to official notice of issuance. Parkway may elect to list
any series of Debt Securities, Preferred Stock or
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Depositary Shares on an exchange, but is not obligated to do so. It is
possible that one or more underwriters may make a market in a series of
Securities, but will not be obligated to do so and may discontinue any market
making at any time without notice. Therefore, no assurance can be given as to
the liquidity of the trading market for the Securities.
Under agreements Parkway may enter into, underwriters, dealers and agents
who participate in the distribution of Securities may be entitled to
indemnification by Parkway against certain liabilities, including liabilities
under the Securities Act.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, or be customers of, Parkway in the ordinary course of business.
If so indicated in the applicable Prospectus Supplement, Parkway will
authorize underwriters or other persons acting as Parkway's agents to solicit
offers by certain institutions to purchase Securities from Parkway pursuant to
contracts providing for payment and delivery on a future date. Institutions
with which such contracts may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions and others, but in all cases such institutions must be
approved by Parkway. The obligations of any purchaser under any such contract
will be subject to the condition that the purchase of the Securities shall not
at the time of delivery be prohibited under the laws of the jurisdiction to
which such purchaser is subject. The underwriters and such other agents will
not have any responsibility in respect of the validity or performance of such
contracts.
EXPERTS
The consolidated financial statements of Parkway appearing in Parkway's
Annual Report on Form 10-KSB for the year ended December 31, 1996, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
LEGAL MATTERS
The legality of the Securities will be passed upon for Parkway by Jaeckle
Fleischmann & Mugel, LLP, Buffalo, New York.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY PARKWAY OR THE UNDERWRITER. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF PARKWAY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
REGISTERED SECURITIES TO WHICH THEY RELATE. THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
_______________
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
Risk Factors ........................................................ S-3
Recent Developments.................................................. S-13
Certain Federal Income Tax
Considerations .................................................... S-14
The Offering ........................................................ S-16
Use of Proceeds ..................................................... S-16
Underwriting ........................................................ S-16
Legal Matters........................................................ S-18
PROSPECTUS
Available Information ............................................... 2
Incorporation of Certain Documents by Reference ..................... 3
The Company ......................................................... 4
Ratio of Earnings to Fixed Charges .................................. 4
Use of Proceeds ..................................................... 4
Description of Debt Securities....................................... 5
Description of Preferred Stock ...................................... 15
Description of Depositary Shares .................................... 20
Description of Common Stock ......................................... 24
Federal Income Tax Considerations ................................... 27
Plan of Distribution ................................................ 34
Experts ............................................................. 35
Legal Matters ....................................................... 35
451,128 SHARES
PARKWAY PROPERTIES, INC.
COMMON STOCK
________________________
PROSPECTUS SUPPLEMENT
________________________
A.G. EDWARDS & SONS, INC.
FEBRUARY 18, 1998
