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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
(AS AMENDED AND RESTATED)
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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MERIDIAN POINT REALTY TRUST VIII CO.
(NAME OF SUBJECT COMPANY)
MERIDIAN POINT REALTY TRUST VIII CO.
(NAME OF PERSON(S) FILING STATEMENT)
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COMMON STOCK, PAR VALUE $0.001
PREFERRED STOCK, PAR VALUE $0.001
(TITLE OF CLASS OF SECURITIES)
589954-10-6
589954-20-5
(CUSIP NUMBER OF CLASSES OF SECURITIES)
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ROBERT H. GIDEL
CHIEF EXECUTIVE OFFICER
MERIDIAN POINT REALTY TRUST VIII CO.
655 MONTGOMERY STREET, 8TH FLOOR
SAN FRANCISCO, CA 94111
(415) 274-1808
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
-----------------------------
WITH A COPY TO:
DENIS F. SHANAGHER, ESQ.
PREUSS WALKER & SHANAGHER LLP
595 MARKET STREET, 16TH FLOOR
SAN FRANCISCO, CA 94104
(415) 978-2600
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This Amended and Restated Schedule 14D-9 amends and restates the Company's
schedule 14D-9 filed February 23, 1998.
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Meridian Point Realty Trust VIII Co., a
Missouri corporation (the "Company"), and the address of its principal executive
office is 655 Montgomery Street, 8th Floor, San Francisco, CA, 94111. The titles
of the class of equity securities to which this Statement relates is the Common
Stock, par value $0.001 ("Common Shares") and the Preferred Stock, par value
$0.001 ("Preferred Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to a tender offer by EastGroup Properties, Inc., a
Maryland corporation ("EastGroup"), and EastGroup-Meridian Inc., a Missouri
corporation (the "Purchaser"), a wholly-owned subsidiary of EastGroup, disclosed
in a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") dated
February 23, 1998, to purchase all outstanding shares of the Company at a price
of $8.50 per Common Share, net to the seller in cash (the "Common Share Offer
Price"), and $10.00 per Preferred Share, net to the seller in cash (the
"Preferred Share Offer Price"), upon the terms and subject to the conditions set
forth in the Offer to Purchase and in the related Letter of Transmittal (which
together constitute the "Offer") and pursuant to the Agreement and Plan of
Merger dated as of February 18, 1998 (the "Merger Agreement"), among EastGroup,
Purchaser, and the Company.
The bidders in the Offer are EastGroup and Purchaser (the "Bidders"). The
principal executive offices of the Bidders are located at 300 One Jackson Place,
188 East Capitol Street, Jackson, Mississippi 39201-2195.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above.
(b) Except for the Merger Agreement and the Stock Appreciation Rights
Agreement described below, there are no material contracts, agreements,
arrangements or understandings or actual or potential conflicts of interest
between the Company or its affiliates and its executive officers, directors,
consultants and affiliates or the Bidders, their executive officers, directors
or affiliates.
Merger Agreement
The Merger. The Merger Agreement provides that, following the consummation of
the Offer and subject to the terms and conditions thereof, at the effective time
of the Merger (as hereinafter defined the "Effective Time") the Purchaser shall
be merged with and into the Company (the "Merger") and, as a result of the
Merger, the separate corporate existence of the Purchaser shall cease, and the
Company shall continue as the surviving corporation (the "Surviving
Corporation") and a wholly-owned subsidiary of EastGroup.
The respective obligations of EastGroup and the Purchaser, on the one hand,
and the Company, on the other hand, to effect the Merger are subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions: (i) the Merger Agreement shall have been approved by the requisite
vote of the shareholders, if required by applicable law, in order to consummate
the Merger, (ii) no temporary restraining order, preliminary or permanent
injunction or other order by any United States federal or state court or
governmental body which prohibits the consummation of the transactions
contemplated by the Merger Agreement shall have been issued; provided, however,
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that the Purchaser, EastGroup and the Company shall have used all reasonable
efforts to have such order or injunction vacated or reversed; and (iii) if
applicable, the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") shall have expired or shall
have been terminated.
At the Effective Time of the Merger, each Preferred Share issued and
outstanding (other than Dissenting Shares (as defined in the Merger Agreement)
representing Preferred Shares and those Preferred Shares held by the Company,
any subsidiary of the Company, EastGroup or the Purchaser which are to be
canceled pursuant to the Merger Agreement) shall be converted into the right to
receive in cash, without interest, the price per Preferred Share paid pursuant
to the Offer (the "Preferred Merger Price").
At the Effective Time of the Merger, each Common Share issued and outstanding
(other than Dissenting Shares representing Common Shares and those Common Shares
held by the Company, any subsidiary of the Company, EastGroup or the Purchaser
which are to be canceled pursuant to the Merger Agreement) shall be converted
into the right to receive in cash, without interest, the price per Common Share
paid pursuant to the Offer (the "Common Merger Price").
Also as of the Effective Time, each issued and outstanding share of the
capital stock of the Purchaser shall be converted into and become one fully paid
and nonassessable common share, $0.001 par value per share, of the Surviving
Corporation.
The Company's Board of Trustees. The Merger Agreement provides that promptly
upon the purchase by the Purchaser or EastGroup of Preferred Shares and Common
Shares pursuant to the Offer, EastGroup shall be entitled to designate three
persons to serve as trustees on the Company's Board of Trustees, subject to
compliance with Section 14(f) of the Exchange Act of 1934, as amended, if
applicable. At such time, if requested by EastGroup, the Company will also cause
each committee of the Board of Trustees of the Company to include persons
designated by EastGroup constituting the same percentage of each such committee
as EastGroup's designees are of the Board of Trustees of the Company. The
Company shall, upon request by EastGroup, promptly exercise reasonable best
efforts to secure the resignations of such number of trustees as is necessary to
enable EastGroup's designees to be elected to the Board of Trustees of the
Company in accordance with the terms of the Merger Agreement and to cause
EastGroup's designees so to be elected. In no event shall the Company expand the
Board of Trustees so that the total number of trustees shall exceed seven
persons. The Company shall promptly take all action necessary pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order
to fulfill its obligations under the Merger Agreement and shall include in the
Schedule 14D-9 mailed to shareholders promptly after the commencement of the
Offer (or in an amendment thereof or the information statement to be filed by
the Company in connection with the Offer pursuant to Rule 14f-1 promulgated
under the Exchange Act (the "Information Statement") if EastGroup has not
theretofore designated trustees) such information with respect to the Company
and its officers and trustees as is required under Section 14(f) and Rule 14f-1
in order to fulfill its obligations under the Merger Agreement.
Shareholders' Meeting. Pursuant to the Merger Agreement, the Company will,
at EastGroup's request, duly call, give notice of, convene and hold a meeting of
its shareholders if such meeting is required by applicable law for the purpose
of approving the Merger Agreement and the transactions contemplated thereby. The
Merger Agreement provides that the Company will, at EastGroup's request, prepare
and file with the Securities and Exchange Commission (the "Commission") and,
when cleared by the Commission, will mail to shareholders, a proxy statement
with respect to the Company's shareholders' meeting to vote upon the Merger
Agreement and Merger transactions, or the Information Statement, as appropriate,
satisfying all requirements of the Exchange Act.
If the Purchaser acquires at least 3,186,354 Shares as a result of the Offer,
EastGroup will beneficially own two-thirds of the outstanding Shares. In such
event, EastGroup would have sufficient voting power to approve the Merger, even
if no other shareholder votes in favor of the Merger.
The Merger Agreement provides that in the event that EastGroup or the
Purchaser acquires at least 90% of the Common Shares outstanding and 90% of the
Preferred Shares outstanding, pursuant to the Offer or otherwise,
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EastGroup, the Purchaser and the Company will take all necessary and appropriate
action to cause the Merger to become effective as soon as practicable after such
acquisition, without a meeting of shareholders of the Company, in accordance
with the Missouri General and Business Corporate Law ("GBCL"). For a discussion
of certain terms of the Merger Agreement that increase the likelihood that the
Purchaser could acquire at least 90% of the outstanding Common Shares and 90% of
the outstanding Preferred Shares, see the discussion of the Contingent Options
in the immediately following paragraph.
Contingent Options of the Purchaser. Pursuant to the Merger Agreement, the
Company has granted the Purchaser irrevocable options (the "Contingent Options")
to (i) purchase for a price of $8.50 per Common Share (the "Per Common Share
Price") in cash a number of Common Shares (the "Optioned Common Shares") equal
to the Applicable Common Share Amount (as defined below) and (ii) purchase for a
price of $10.00 per Preferred Share (the "Per Preferred Share Price") in cash a
number of Preferred Shares (the "Optioned Preferred Shares") equal to the
Applicable Preferred Share Amount (as defined below). The "Applicable Common
Share Amount" is the number of Common Shares which, when added to the number of
Common Shares owned by EastGroup and the Purchaser immediately prior to the
exercise of the option, would result in the Purchaser owning immediately after
the exercise of the option 90% of the then outstanding Common Shares. The
"Applicable Preferred Share Amount" is the number of Preferred Shares owned by
EastGroup and the Purchaser which, when added to the number of Preferred Shares
owned by EastGroup and the Purchaser immediately prior to the exercise of the
option, would result in the Purchaser owning immediately after the exercise of
the option 90% of the then outstanding Preferred Shares. The Purchaser may
exercise the Contingent Options only if at the time of exercise, it (i) shall
have accepted Common Shares or Preferred Shares, as appropriate, for payment
pursuant to the Offer, and (ii) the Minimum Condition (as defined herein) has
been satisfied.
Interim Operations; Covenants. Prior to the Effective Time, except as
specifically permitted by the Merger Agreement, unless the other party has
consented in writing thereto, EastGroup and the Company: (i) shall use their
reasonable best efforts, and shall cause each of their respective subsidiaries
to use their reasonable best efforts, to preserve intact their business
organizations and goodwill and keep available the services of their respective
officers and employees; (ii) shall confer on a regular basis with one or more
representatives of the other to report operational matters of materiality and,
subject to the Merger Agreement, any proposals to engage in material
transactions; (iii) shall promptly notify the other of any material emergency or
other material change in the condition (financial or otherwise), business,
properties, assets, liabilities, prospects or in the normal course of their
businesses or in the operation of their properties, any material governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated), or the breach in any material respect of any
representation or warranty contained herein; and (iv) shall promptly deliver to
the other true and correct copies of any report, statement or schedule filed
with the Commission subsequent to the date of the Merger Agreement.
Pursuant to the Merger Agreement, the Company has agreed that, unless agreed
to by EastGroup, after the date of the Merger Agreement and prior to the
Effective Time, the Company (i) shall conduct, and it shall cause the Company
subsidiaries to conduct, its or their operations according to their usual,
regular and ordinary course in substantially the same manner as conducted prior
to the date of the Merger Agreement; (ii) shall not, and shall cause each
Company subsidiary not to, acquire, enter into an option to acquire or exercise
an option or contract to acquire additional real property, incur additional
indebtedness, encumber assets or commence construction of, or enter into any
agreement or commitment to develop or construct, any other type of real estate
projects except for the transactions contemplated in the Disclosure Schedule;
(iii) shall not amend the Certificate of Incorporation or the Bylaws of the
Company, and shall cause each Company subsidiary not to amend its charter,
bylaws, joint venture documents, partnership agreements or equivalent documents
except as contemplated by the Merger Agreement; (iv) shall not (A) issue any
shares of its capital stock, effect any stock split, reverse stock split, stock
dividend, recapitalization or other similar transaction, (B) grant, confer or
award any option, warrant, conversion right or other right not existing on the
date hereof to acquire any shares of its capital stock, (C) increase any
compensation or enter into or amend any employment agreement with any of its
present or future officers or trustees, or (D) adopt any new employee benefit
plan (including any stock option, stock benefit or stock purchase plan) or amend
any existing employee benefit plan in any material respect, except for changes
which are less favorable to participants in such
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plans; (v) shall not, and shall not permit any of the Company subsidiaries to,
except in accordance with and as permitted under the Merger Agreement, sell,
lease or otherwise dispose of (A) any of the Company Properties (as defined in
the Merger Agreement) or any portion thereof or any of the capital stock of or
partnership or other interests in any of the Company subsidiaries or (B) except
in the ordinary course of business, any of its other assets which are material,
individually or in the aggregate; (vi) shall not, and shall not permit any of
the Company subsidiaries to, make any loans, advances or capital contributions
to, or investments in, any other person; (vii) shall not and shall not permit
any of the Company subsidiaries to, pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction, in
the ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the notes
thereto) of the Company included in the Company Public Reports (as defined in
the Merger Agreement) or incurred in the ordinary course of business consistent
with past practice; (viii) shall not, and shall not permit any of the Company
subsidiaries to, enter into any material commitment, contractual obligation,
borrowing, capital expenditure or transaction (each, a "Commitment") which may
result in total payments or liability by or to it in excess of $50,000 other
than Commitments for expenses of attorneys, accountants and investment bankers
incurred in connection with the Merger, and (ix) shall not, and shall not permit
any of the Company subsidiaries to, enter into any Commitment with any officer,
trustee, director, consultant or affiliate of the Company or any of the Company
subsidiaries.
In addition, the Company shall not, without the written consent of EastGroup,
which consent may not be unreasonably withheld, (i) effect any material change
in any lease or occupancy agreement currently in effect which affects the
Company Properties (together with such additional leases approved or permitted
pursuant to the Merger Agreement, the "Leases" (ii) renew or extend the term of
any Lease, unless the same is an extension or expansion permitted pursuant to
the terms of an existing Lease; or (iii) enter into any new Lease or cancel or
terminate any Lease. Notwithstanding anything in the Merger Agreement to the
contrary, the Company may cancel or terminate any Lease or commence collection,
unlawful detainer or other remedial action against any tenant without
EastGroup's consent upon the occurrence of a default by the tenant under said
Lease.
No Solicitation. The Merger Agreement provides that unless and until the
Merger Agreement shall have been terminated in accordance with its terms, the
Company agrees and covenants that (i) neither it nor any Company subsidiary
shall, and each of them shall direct and use its best efforts to cause its
respective officers, trustees, directors, employees, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it or any of the Company subsidiaries) not to, directly or
indirectly, initiate, solicit or knowingly encourage any inquiries or the making
or implementation of any proposal or offer (including, without limitation, any
proposal or offer to its shareholders) with respect to a merger, acquisition,
tender offer, exchange offer, consolidation or similar transaction involving, or
any purchase, sale, lease, issuance or other disposition (except as permitted
under the Merger Agreement) of (a) 10% or more of the assets; (b) any equity
securities (or options, rights or warrants to purchase, or securities
convertible into, such securities) representing 10% or more of the voting power;
(c) partnership interests; or (d) any transaction in which any person shall
acquire beneficial ownership (as such term is defined in Rule 13d-3 under the
Exchange Act), or the right to acquire beneficial ownership, of 10% or more of
the equity securities, of the Company or of the Company's subsidiary, other than
the transactions contemplated by this Agreement (any such proposal or offer
being hereinafter referred to as an "Acquisition Proposal") or engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal; (ii) the Company will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing and will take the necessary
steps to inform the individuals or entities referred to above of the obligations
undertaken in the Merger Agreement; and (iii) the Company will notify EastGroup
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, the Company and such notification will
include the specific details with respect to any such inquiries, proposals,
requests, negotiations or discussions.
<PAGE>
Notwithstanding anything set forth in the Merger Agreement to the contrary (i)
the Board of Trustees of the Company may furnish information to or enter into
discussions or negotiations with any person or entity that makes an unsolicited
bona fide Acquisition Proposal, if, and only to the extent that, the Board of
Trustees of the Company, after consultation with and based upon the advice of
Preuss Walker & Shanagher LLP or another nationally recognized law firm selected
by the Board of Trustees of the Company, determines in good faith that such
action is required for the Board of Trustees to comply with its fiduciary duties
to shareholders under applicable law, provided that prior to furnishing such
information to, or entering into discussions or negotiations with, such person
or entity, the Company provides written notice to EastGroup to the effect that
it is furnishing information to, or entering into discussions or negotiations
with, such person or entity, and the Company keeps EastGroup regularly informed
of the status of any such discussions or negotiations; and (ii) the Board of
Trustees of the Company may, to the extent applicable, comply with Rules 14d-9
and 14e-2 promulgated under the Exchange Act with regard to an Acquisition
Proposal.
Indemnification and Insurance. The Merger Agreement provides that in the event
of any threatened or actual claim, action, suit, proceeding or investigation,
whether civil, criminal or administrative, including, without limitation, any
such claim, action, suit, proceeding or investigation in which any person who is
now, or has been at any time prior to the date hereof, or who becomes prior to
the Effective Time, a director, trustee, officer, employee, fiduciary or agent
of the Company or any of its subsidiaries (the "Indemnified Parties") is, or is
threatened to be, made a party based in whole or in part on, or arising in whole
or in part out of, or pertaining to (i) the fact that he, she or it is or was a
director, trustee, officer, employee or agent of the Company or any of its
subsidiaries, or is or was serving at the request of the Company or any of its
subsidiaries as a director, trustee, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise; or (ii) the
Merger Agreement or any of the transactions contemplated hereby, whether in any
case asserted or arising before or after the Effective Time, the parties hereto
agree to cooperate and use their reasonable best efforts to defend against and
respond thereto. The Company shall indemnify and hold harmless, and after the
Effective Time EastGroup shall indemnify and hold harmless, as and to the full
extent permitted by applicable law, each Indemnified Party against any losses,
claims, damages, liabilities, costs, expenses (including attorneys' fees and
expenses), judgments, fines and amounts paid in settlement in connection with
any such threatened or actual claim, action, suit, proceeding or investigation,
and in the event of any such threatened or actual claim, action, suit,
proceeding or investigation (whether asserted or arising before or after the
Effective Time), (i) the Company, and EastGroup after the Effective Time, shall
promptly pay expenses in advance of the final disposition of any claim, suit,
proceeding or investigation to each Indemnified Party to the full extent
permitted by law; (ii) the Indemnified Parties may retain counsel satisfactory
to them, and the Company, and EastGroup after the Effective Time, shall pay all
fees and expenses of such counsel for the Indemnified Parties within thirty days
after statements therefor are received; and (iii) the Company and EastGroup will
use their respective reasonable best efforts to assist in the vigorous defense
of any such matter, provided, that neither the Company nor EastGroup shall be
liable for any settlement effected without its prior written consent (which
consent shall not be unreasonably withheld); and provided further that EastGroup
shall have no obligation hereunder to any Indemnified Party when and if a court
of competent jurisdiction shall ultimately determine, and such determination
shall have become final and non-appealable, that indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law. Any Indemnified Party wishing to claim indemnification under the Merger
Agreement, upon learning of any such claim, action, suit, proceeding or
investigation, shall notify the Company and, after the Effective Time,
EastGroup, thereof, provided that the failure to so notify shall not affect the
obligations of the Company or EastGroup except to the extent such failure to
notify materially prejudices such party.
EastGroup agreed that all rights to indemnification existing in favor, and all
limitations on the personal liability, of the Indemnified Parties provided for
in the Company's Charter or the Company's Bylaws or the charter or bylaws or
similar organizational documents of any of its subsidiaries as in effect as of
the date hereof with respect to matters occurring prior to the Effective Time
shall survive the Merger and shall continue in full force and effect for a
period of not less than three years from the Effective Time; provided, however,
that all rights to indemnification in respect of any claim (a "Claim") asserted
or made within such period shall continue until the disposition of such Claim.
At or prior to the Effective Time, EastGroup shall purchase directors' and
officers' liability insurance coverage for the
<PAGE>
Company's trustees and officers in a form acceptable to the Company which shall
provide such trustees and officers with $10,000,000 of aggregate coverage for
three years following the Effective Date and which shall have a retention of no
more than $250,000. EastGroup may satisfy these obligations under the Merger
Agreement by maintaining in force the Company's present directors' and officers'
liability insurance coverage.
Representations and Warranties. Pursuant to the Merger Agreement, the
Company has made representations and warranties to EastGroup and the Purchaser
with respect to, among other things, its organization, capitalization, authority
relative to the Merger, financial statements, public filings, conduct of
business, employee benefit plans, employment matters, compliance with laws, tax
matters, litigation, environmental matters, material contracts, brokers' fees
and other matters.
Termination; Fees. The Merger Agreement provides that it may be terminated
at any time prior to the Effective Time, whether before or after approval of the
shareholders of the Company:
(i) by mutual consent of the Board of Directors of EastGroup and the Board
of Trustees of the Company;
(ii) by either EastGroup or the Company if the Merger shall not have been
consummated on or before August 31, 1998 (provided the terminating party is not
otherwise in material breach of its representations, warranties or obligations
under the Merger Agreement);
(iii) by the Company if any of the conditions precedent specified in the
Merger Agreement have not been met or waived by the Company at such time as such
condition is no longer capable of satisfaction as long as the Company is not in
breach of the Merger Agreement;
(iv) by EastGroup or the Purchaser if (a) any of the conditions precedent
specified in the Merger Agreement have not been met or waived by EastGroup at
such time as such condition is no longer capable of satisfaction or (b) there
shall not have been a sufficient number of Common Shares and Preferred Shares
tendered pursuant to the Offer in order to satisfy the Minimum Condition on or
before April 30, 1998, as long as EastGroup is not in breach of the Merger
Agreement;
(v) by EastGroup or the Purchaser if either EastGroup or the Purchaser is
entitled to terminate the Offer as a result of the occurrence of (a) the Board
of Trustees of the Company or any committee thereof shall have withdrawn or
modified in a manner adverse to EastGroup or the Purchaser its approval or
recommendation of the Offer, the Merger or the Merger Agreement, or approved or
recommended any takeover proposal or (b) the Company shall have entered into any
agreement with respect to any Acquisition Proposal in accordance with the Merger
Agreement;
(vi) by the Company, if the Board of Trustees of the Company recommends to
the Company's shareholders approval or acceptance of an Acquisition Proposal in
accordance with the Merger Agreement; and
(vii) by the Company, if either EastGroup or the Purchaser is in material
breach of its obligations under the Merger Agreement and such material breach
shall not have been cured by EastGroup or the Purchaser within five days after
EastGroup or the Purchaser receives notice thereof.
If (A) EastGroup terminates the Merger Agreement pursuant to section (v)
above, or pursuant to (ii) above as a result of a willful breach by the Company;
or
(B) the Company terminates the Merger Agreement pursuant to section (vi)
above; or
(C) during the pendency of the Offer a third party announces or proposes an
Acquisition Proposal and EastGroup terminates the Merger Agreement under (iv)(b)
above and the Company thereafter consummates or enters into an agreement to
consummate an Acquisition Proposal (with such third party or otherwise) within
the one year period after such termination of the Merger Agreement;
<PAGE>
then the Company shall pay to EastGroup an amount (the "Termination Amount")
in cash equal to the sum of (i) $2,500,000, plus (ii) EastGroup's reasonable
out-of-pocket costs and expenses in connection with the Merger Agreement and
the transactions contemplated hereby, evidenced by documentation reasonably
acceptable to the Company, in accordance with the provisions of the Merger
Agreement.
In the event that (i) EastGroup or the Purchaser are in material breach of the
Merger Agreement and the Offer or the Merger are not consummated; or (ii) the
Company terminates the Merger Agreement under (vii) above, EastGroup shall pay
to the Company an amount in cash equal to $2,500,000 (the "Damage Amount"). The
parties to the Merger Agreement agreed that in the event EastGroup or the
Purchaser breaches the Merger Agreement, actual damages would be difficult to
determine and that the Damage Amount is a liquidated damage payment in lieu of
such actual damages. Payment of the Damage Amount shall be the Company's sole
and exclusive remedy for any material breach of the Merger Agreement by
EastGroup or the Purchaser; provided, however, that the Company may elect to
seek the remedies described in the next paragraph in which case the Company's
sole and exclusive remedy for any material breach of the Merger Agreement will
be as described below and the Company will waive any and all rights to
collection of the Damage Amount.
The parties to the Merger Agreement agreed that irreparable damage could occur
to the Company in the event that any of the provisions of the Merger Agreement
were not performed in accordance with their specific terms or were otherwise
breached. The parties therefore agreed that the Company shall be entitled to an
injunction or injunctions to prevent breaches of the Merger Agreement and to
enforce specifically the terms and provisions of the Merger Agreement in any
court of the United States or any state having jurisdiction; provided, however,
that in the event the Company elects to collect or attempts to collect the
Damage Amount from EastGroup or the Purchaser, payment of the Damage Amount
shall be the Company's sole and exclusive remedy for any material breach of the
Merger Agreement by EastGroup or the Purchaser.
Funding. EastGroup has agreed, subject to the terms and conditions of the
Offer, to provide or cause to be provided to the Purchaser on a timely basis the
funds necessary to accept for payment, and pay for, Common Shares and Preferred
Shares that the Purchaser becomes obligated to accept for payment, and pay for,
pursuant to the Offer.
Dividends and Distributions. The Merger Agreement provides that without the
prior written consent of EastGroup, which consent may be withheld for any
reason, between the date of the Merger Agreement and the Effective Time, the
Company shall not declare, set aside or pay any dividends or distributions
whether in cash or property. Notwithstanding anything to the contrary set forth
in the Merger Agreement, nothing in the Merger Agreement shall prohibit the
Company or any Company subsidiary from taking any action at any time or from
time to time that in the reasonable judgment of the Company is necessary for the
Company to maintain its qualification as a REIT (as defined herein) within the
meaning of Sections 856-860 of the Internal Revenue Code for any period or
portion thereof ending on or prior to the Effective Time including making
dividend or distribution payments to shareholders; provided, however, that no
dividends or distributions required to avoid the excise tax on undistributed
REIT income under Section 4981 of the Code shall be deemed to be necessary for
the Company to maintain its qualification as a REIT within the meaning of
Sections 856-860 of the Code. In addition, the Company may declare, set aside
and pay distributions to its shareholders (i) in an amount not to exceed $0.08
per Common Share and $0.08 per Preferred Share per calendar quarter which
distributions will have record dates and payment dates substantially similar to
such dates in 1997; or (ii) as required by the Company's Charter. To the extent
any dividends or distributions in excess of $0.08 per Common Share and $0.08 per
Preferred Share per quarter are paid, the Common Share Offer Price, the
Preferred Share Offer Price, the Common Merger Price and the Preferred Merger
Price shall be reduced by the cumulative per share amount of such excess.
Prior to the Effective Time, unless EastGroup has consented to the contrary,
the Company shall take any such actions as may be necessary to maintain the
Company's status as a REIT for any period or portions thereof ending on or prior
to the Effective Time. Following the Effective Time, EastGroup shall use its
best efforts to take any such actions as may be necessary to maintain the
Company's status as a REIT for any period or portion thereof ending on or prior
to the Effective Time.
<PAGE>
In addition, prior to the Effective Time, unless EastGroup has consented, the
Company shall not (i) issue any shares of its capital stock, effect any stock
split, reverse stock split, stock dividend, recapitalization or other similar
transaction or (ii) grant, confer or award any option, warrant, conversion right
or other right not existing on the date hereof to acquire any shares of its
capital stock.
In the event of any change in the number of outstanding Common Shares or
Preferred Shares by reason of any stock dividend, stock split, recapitalization,
combination, exchange of shares, merger, consolidation, reorganization or the
like or any other change in the corporate or capital structure of the Company
that would have the effect of diluting EastGroup's rights hereunder, the number
of Optioned Common Shares or the number of Optioned Preferred Shares and the Per
Common Share Price or the Per Preferred Share Price, respectively, shall be
adjusted appropriately so as to restore EastGroup to its rights hereunder with
respect to such option; provided, however, that nothing in this paragraph shall
be construed as permitting the Company to take any action or enter into any
transaction prohibited by this Merger Agreement.
Certain Conditions of the Offer. Notwithstanding any other term of the Offer
or the Merger Agreement, the Purchaser shall not be required to accept for
payment or, subject to any applicable rules and regulations of the Commission,
including Rule 14e-l(c) under the Exchange Act (relating to the Purchaser's
obligation to pay for or return tendered Common Shares or Preferred Shares after
the termination or withdrawal of the Offer), to pay for any Common Shares or
Preferred Shares tendered pursuant to the Offer unless, (i) there shall have
been validly tendered and not withdrawn prior to the expiration of the Offer
such number of Common Shares and Preferred Shares that, when added to Preferred
Shares beneficially owned by EastGroup on the date of the Merger Agreement, will
constitute two-thirds of the total number of shares of the capital stock of the
Company entitled to vote on a merger under the Company's Certificate of
Incorporation, as amended, and the GBCL (the "Minimum Condition"); and (ii) any
waiting period under the HSR Act applicable to the purchase of Common Shares and
Preferred Shares pursuant to the Offer shall have expired or been terminated
(the "HSR Condition"). Furthermore, notwithstanding any other term of the Offer
or the Merger Agreement, the Purchaser shall not be required to accept for
payment or, subject as aforesaid, to pay for any Common Shares and Preferred
Shares not theretofore accepted for payment or paid for, and may terminate the
Offer if, at any time on or after the date of the Merger Agreement and before
the acceptance of such shares for payment or the payment therefor, any of the
following conditions exist (other than as a result of any action or inaction of
EastGroup or any of its subsidiaries which constitutes a breach of the Merger
Agreement):
(i) there shall be threatened or pending by any governmental entity any suit,
action or proceeding, (a) challenging the acquisition by EastGroup or the
Purchaser of any Common Shares or Preferred Shares under the Offer, seeking to
restrain or prohibit the making or consummation of the Offer or the Merger or
the performance of any of the other transactions contemplated by the Merger
Agreement, or seeking to obtain from the Company, EastGroup or the Purchaser any
damages that are material in relation to the Company and its subsidiaries taken
as a whole; (b) seeking to prohibit or limit the ownership or operation by the
Company, EastGroup or any of their respective subsidiaries of a material portion
of the business or assets of the Company and its subsidiaries, taken as a whole,
or EastGroup and its subsidiaries, taken as a whole, or to compel the Company or
EastGroup to dispose of or hold separate any material portion of the business or
assets of the Company and its subsidiaries, taken as a whole, or EastGroup and
its subsidiaries, taken as a whole, as a result of the Offer or any of the other
transactions contemplated by the Merger Agreement; (c) seeking to impose
material limitations on the ability of EastGroup or the Purchaser to acquire or
hold, or exercise full rights of ownership of, any Common Shares or Preferred
Shares accepted for payment pursuant to the Offer including, without limitation,
the right to vote such Common Shares and Preferred Shares on all matters
properly presented to the shareholders of the Company; (d) seeking to prohibit
EastGroup or any of its subsidiaries from effectively controlling in any
material respect the business or operations of the Company and its subsidiaries,
taken as a whole; or (e) which otherwise is reasonably likely to have a material
adverse effect on the business. financial condition or results of operations of
the Company and its subsidiaries, taken as a whole;
(ii) there shall be any statute, rules, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to the
Offer or the Merger, or any other action shall be taken by any governmental
<PAGE>
entity or court, other than the application to the Offer or the Merger of
applicable waiting periods under the HSR Act, that is reasonably likely to
result, directly or indirectly, in any of the consequences referred to in
clauses (a) through (e) of paragraph (i) above;
(iii) (a) the Board of Trustees of the Company or any committee thereof shall
have withdrawn or modified in a manner adverse to EastGroup or the Purchaser its
approval or recommendation of the Offer, the Merger or the Merger Agreement, or
approved or recommended any takeover proposal or (b) the Company shall have
entered into any agreement with respect to any Acquisition Proposal in
accordance with the Merger Agreement;
(iv) there shall have occurred (a) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange or in
the over-the-counter market in the United States (excluding any coordinated
trading halt triggered solely as a result of a specified decrease in a market
index); (b) any extraordinary or material adverse change in the financial market
or major stock exchange indices in the United States; (c) any material adverse
change in United States currency exchange rates or a suspension of, or
limitation on, the markets therefor; (d) a declaration of a banking moratorium
or any suspension of payments in respect of banks in the United States; (e) any
limitation (whether or not mandatory) by any governmental entity on, or other
event that might materially affect, the extension of credit by banks or other
lending institutions; or (f) in the case of any of the foregoing existing on the
date of the Merger Agreement, a material acceleration or worsening thereof;
(v) any of the representations and warranties of the Company set forth in
the Merger Agreement that are qualified as to materiality shall not be true and
correct and any such representations and warranties that are not so qualified
shall not be true and correct in any material respect, in each case as of the
date of the Merger Agreement and as of the scheduled Expiration Date of the
Offer;
(vi) the Company shall have failed to perform in any material respect any
material obligation or to comply in any material respect with any material
agreement or covenant of the Company to be performed or complied with by it
under the Merger Agreement;
(vii) the Merger Agreement shall have been terminated in accordance with its
terms.
Stock Appreciation Rights Agreement
On September 21, 1997, the Company entered into a Stock Appreciation Rights
Agreement (the "SAR Agreement") with Robert H. Gidel, Chief Executive Officer of
the Company. Under the terms of the SAR Agreement, Mr. Gidel was granted stock
appreciation rights ("SARs") of 150,000 common stock SARs at a price of $5.50
per common share, and 75,000 preferred stock SARs at a price of $8.50 per
preferred share.
Under the SAR Agreement, the SARs vest on the first anniversary of the date of
grant, or immediately upon a change in control, whichever occurs first. A change
in control under the SAR Agreement shall be deemed to occur if any person, as
defined therein, becomes the "beneficial owner," as defined in Rule 13d-3 under
the Exchange Act, of securities of the Company representing fifty percent (50%)
or more of the then combined voting power of the Company's then outstanding
securities.
Upon vesting of the SARs, the SAR Agreement provides that Mr. Gidel shall
receive from the Company in cash an amount equal to the difference between the
fair market value of the shares of stock on the exercise date and the Exercise
Price, as defined therein, multiplied by the number of SARs being exercised.
In the event Purchaser consummates the offer described above, the Company
anticipates Mr. Gidel will exercise all of his SARs, in which event he will be
entitled to a cash payment from the Company of up to $562,500.00.
<PAGE>
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) At a special meeting held on February 17, 1998, the Board of Trustees of
the Company (the "Board of Trustees") unanimously determined that each of the
Offer and the Merger is fair to, and in the best interests of, the Company's
stockholders and approved the Merger Agreement and the transactions contemplated
thereby. The Board hereby recommends that the Company's stockholders accept the
Offer and tender all their Common Shares and Preferred Shares pursuant to the
Offer. Copies of a letter to stockholders is attached hereto as Exhibit 4 and is
incorporated herein by reference.
(b) The reasons for the position stated in paragraph (a) of this Item 4 are
presented in the information furnished below in this Item 4(b).
Background of the Offer
The Company was incorporated in December 1987 and commenced operations in
early 1988 as a REIT, with the anticipated intention to begin to liquidate
within five to eight years from inception, although not required by the Articles
of Incorporation or By-Laws. However, a precipitous decline in real estate
values beginning in 1991 created a situation in which liquidation within this
time frame would not provide sufficient proceeds for the holders of Common
Shares to receive any liquidation proceeds, as a result of the Company's $10 per
Preferred Share liquidation preference. Further, a liquidation in that time
frame was believed to be inadequate to meet the $10 per share preference of the
holders of Preferred Shares.
In March, 1995, the Company engaged CS First Boston as its financial advisor
to review various strategic alternatives and opportunities available to the
Company. The review included the possibility of liquidation or the sale of the
Company's assets. The liquidation alternative did not appear feasible at the
time for the reasons discussed above. In late 1995 and early 1996, the Company
received several preliminary proposals for the sale or merger of all or a
portion of the Company's assets. Included in the proposals received and reviewed
by the Company were three proposals from EastGroup, under the last of which the
Company would have received approximately $41 million in cash and EastGroup
stock. As part of the process resulting in the EastGroup proposals, the Company
had requested, and EastGroup executed, a Confidentiality and Standstill
Agreement which included provisions restricting EastGroup's ability for a period
of two years to acquire securities of the Company, make or participate in the
solicitation of proxies with respect to the Company, make any offer or proposal
with respect to the Company's securities or join with others to accomplish any
of the above (the "Standstill Agreement").
In December of 1995, the Company retained TIS Financial Services Inc. as
manager of the Company's assets. The Board of Trustees of the Company then
requested that the new management team perform a review of the Company's assets
to develop a strategic plan to increase the value of the Company so that any
future transaction would accurately reflect the value of the Company and result
in a reasonable and fair return for all shareholders.
In April, 1996, the Company determined that the preliminary proposals,
including the proposals from EastGroup, were not sufficiently in a range to
adequately reflect the current or future value of the Company, and if
consummated, would not result in an acceptable return for either the preferred
or common shareholders.
As a result, in April, 1996, the Company terminated its engagement of CS First
Boston and adopted a new business plan whereby the Company would stabilize its
property portfolio to reflect its status as a "Sun Belt" REIT through selected
expansions, dispositions and refinancing of its portfolio over the course of the
following three years. This would include the expansion of several properties
owned by the Company, the sale of certain properties outside the Company's
target geographical market area, the purchase of properties within the Company's
target area, and the refinancing of the Company's debt, all while attempting to
maintain or improve the Company's dividend payments. Under this plan, management
believed the Company could improve its value over the course of the next three
years so as to result in a significantly greater return to all shareholders than
could be achieved by a transaction at that time.
<PAGE>
In order to allow for the implementation of its business plan, at the annual
meeting held on June 16, 1996, the Company's shareholders approved an amendment
to the Company's By-Laws relating to investment policy which allowed the Company
to reinvest proceeds from the sale of property into the purchase of new
property, providing the Company with the flexibility to achieve the goals of its
business plan described above.
In accordance with the business plan, in 1997 the Company proceeded with the
sales of its Richland, Mississippi and Bedford, Illinois properties. (The
Richland, Mississippi, property was sold to EastGroup in an arms-length
transaction.) The Company constructed a 187,500 square foot addition to its
Waldenbooks distribution facility in Nashville, Tennessee, and purchased three
buildings, totaling approximately 71,000 square feet, in Palm Beach, Florida. In
addition, on July 30, 1997, the Company retired and paid in full its principal
debt facility, and subsequently entered into new loans totaling $25.5 million
secured by certain of its properties in Arizona, California and Tennessee.
On or about March 21, 1997, Meredith Partners, Inc. ("Meredith") filed a
Schedule 13D and disclosed its letter agreement with the Massachusetts Bay
Transportation Authority Retirement Fund ("MBTA") to purchase 1,183,556
Preferred Shares. Meredith further disclosed that upon the purchase, it intended
to try to influence the management of the Company.
In late April, 1997, the Company released EastGroup from the Standstill
Agreement for the sole purpose of contacting and negotiating with MBTA regarding
the purchase of the Preferred Shares held by MBTA.
On May 21, 1997, Meredith entered into an Assignment Agreement with Turkey
Vulture Fund XIII, whereby Meredith assigned all its rights, title and interest
in the MBTA agreement to Turkey Vulture, which similarly indicated its intention
to influence management of the Company.
On May 30, 1997, the Company similarly released EastGroup from the Standstill
Agreement for the sole purpose of contacting and negotiating with the
Massachusetts State Teachers & Employee Retirement Systems Trust ("MASTERS")
regarding the purchase of 1,560,754 Preferred Shares owned by MASTERS. On June
2, 1997, the Company also released EastGroup from the Standstill Agreement for
the purpose of contacting and negotiating with the Chicago Truck Drivers,
Helpers and Warehouse Workers Union (independent) Pension Fund ("Chicago")
regarding the purchase of the 521,164 Preferred Shares owned by Chicago.
On June 3, 1997, Turkey Vulture purchased the Preferred Shares held by MBTA
and thereafter instituted a proxy solicitation to elect five of their nominees
to the Company's Board of Trustees.
At the June 13, 1997 Annual Meeting of Shareholders, the Company invoked the
excess share provisions contained in Section 6.5 of the Company's By-Laws (which
prohibit any person from owning, directly or indirectly, more than 9.8% of the
outstanding shares) to deny Turkey Vulture voting rights with respect to
Preferred Shares owned in excess of the 9.8% limit. As a result of this
limitation on voting rights, only one of Turkey Vulture's nominees was elected
to the Board of Trustees. (In the absence of the limitation, two of the Turkey
Vulture nominees would have been elected.) On the same date, the Company
instituted litigation against Turkey Vulture and related parties seeking to
confirm its application of the voting limitation.
On July 1, 1997, the Company appointed Robert H. Gidel as Chief Executive
Officer and entered into a Personal Services Agreement in that regard.
The Company's Standstill Agreement with EastGroup expired by its terms on
August 15, 1997.
On August 27, 1997, Turkey Vulture and related parties sold 1,411,756
Preferred Shares to EastGroup in a privately negotiated transaction, resulting
in Turkey Vulture and related parties reducing the number of shares held
<PAGE>
in the Company to less than the 9.8% restriction. Subsequently, the Company and
Turkey Vulture settled and dismissed the litigation.
In its statement on Schedule 13D filed on August 27, 1997 with respect to the
purchase of the Preferred Shares (the "Schedule 13D"), EastGroup indicated that
it anticipated proposing to the Board of Trustees of the Company a negotiated
business combination transaction between the Company and EastGroup in which
EastGroup would be the surviving entity. EastGroup also indicated that it might
pursue a tender offer or similar transaction involving the Company and that it
had not yet formulated a definitive proposal with respect to any possible
business combination or offer. Shortly after the filing of the Schedule 13D,
representatives of EastGroup contacted representatives of the Company and
counsel to EastGroup contacted counsel to the Company to inform them that
EastGroup was in the process of making a number of large real estate
acquisitions and planning financing for such acquisitions and that it would be
several weeks before it would be possible for EastGroup to focus on its plans
with respect to the Company.
On or about October 30, 1997, the Company engaged Prudential Securities
Incorporated ("Prudential Securities") as the Company's exclusive financial
advisor with respect to the Company's implementing a strategic plan for
enhancing shareholder value.
On November 14, 1997, with the advice of Prudential Securities, the Company
adopted a Shareholder Rights Plan, which was intended to protect the Company's
shareholders in the event of coercive or unfair takeover tactics, or an
unsolicited attempt to acquire control of the Company in a transaction the Board
of Trustees believed was not in the best interests of the shareholders.
On December 2, 1997, representatives of the Company met with representatives
of EastGroup. At that meeting, the EastGroup representatives stated EastGroup's
desire to promptly enter into negotiations with the Company with respect to a
business combination transaction between EastGroup and the Company. The
representatives of the Company advised EastGroup that the Company was in the
process of evaluating the Company's strategic alternatives and that the Company
had retained Prudential Securities to help the Company in such evaluation.
Representatives of the Company requested that EastGroup sign a confidentiality
agreement containing a limited standstill provision with respect to receiving
updated non-public information of the Company so that EastGroup could
participate in the process to be implemented by Prudential Securities. The
EastGroup representatives informed the Company representatives that EastGroup
believed that a merger between EastGroup and the Company was in the best
interest of all parties, and that it was EastGroup's present intention to oppose
and vote its Preferred Shares against any strategic alternative of the Company
that would delay or frustrate such a transaction. Further, in light of
EastGroup's position and EastGroup's significant holdings in the Company, the
EastGroup representatives indicated their view that it was impractical and
unnecessary for the Company to explore such strategic alternatives.
Representatives of the Company at the meeting indicated that they would discuss
EastGroup's proposal with the Board of Trustees of the Company at a regularly
scheduled meeting later in December.
In mid-December, following a meeting of the Company's Board of Trustees,
counsel to the Company informed counsel to EastGroup that the Company would be
interested in holding discussions with EastGroup with respect to a negotiated
business combination transaction which might include an offer of EastGroup stock
to the Company's shareholders. EastGroup then offered the Company the
opportunity to perform a due diligence investigation with respect to EastGroup
prior to the beginning of discussions with respect to such a business
combination transaction. On January 8, 1998 representatives of the Company
visited EastGroup's offices in Jackson, Mississippi to perform a preliminary due
diligence investigation with respect to EastGroup's business, assets and
prospects. In connection with this investigation, the Company executed a
confidentiality agreement with respect to the receipt of non-public information
from EastGroup.
On January 16, 1998, the Company received an unsolicited offer to merge from
EastGroup. In the offer to merge, each Preferred Share would be converted into
EastGroup shares with a value of $9.75, and each Common Share would be converted
into EastGroup shares with a value of $6.75. Company shareholders would have the
option
<PAGE>
to exchange their Preferred Shares or Common Shares for $9.75 and $6.75 in cash,
respectively, provided that the total number of Preferred Shares and Common
Shares surrendered for cash, including shares surrendered pursuant to the
exercise of dissenter's rights, would not exceed 30 percent of all issued and
outstanding Preferred Shares (excluding Preferred Shares currently held by
EastGroup) and 30 percent of all issued and outstanding Common Shares.
After receipt of the offer to merge, conversations occurred between
representatives of EastGroup and representatives of the Company, representatives
of PaineWebber Incorporated ("PaineWebber"), financial advisor to EastGroup, and
representatives of Prudential Securities, and counsel to EastGroup and counsel
to the Company. Counsel to EastGroup sent counsel to the Company a draft of a
proposed Agreement and Plan of Merger pursuant to which the proposed offer to
merge would be effected.
Following receipt of the offer to merge from EastGroup, the Company, in
conjunction with Prudential Securities, continued to explore its strategic
alternatives with other potential merger partners, purchasers or companies
interested in an equity infusion.
On January 29, 1998, the Company's Board of Trustees met to consider the
pending EastGroup offer to merge. Prudential Securities advised at that time of
several preliminary indications of interest from other parties at values and
terms in excess of and more favorable than the EastGroup offer.
As a result, on January 29, 1998, the Company advised EastGroup by letter and
telephone that the Company was not prepared to accept the offer at that time.
The Company advised EastGroup of its belief that the value of the Company was in
excess of the offer. In addition, the cash component of the offer was expressed
to be problematic for the Company's shareholders, particularly in view of the
absence of proposed board representation. In addition, the price protection
mechanism was believed to be inadequate. Finally, there were certain due
diligence contingencies in the proposed agreement that were not acceptable.
During the period from January 30, 1998 through February 18, 1998, discussions
continued between and among representatives of EastGroup and PaineWebber and
counsel to EastGroup and representatives of the Company and Prudential
Securities and counsel to the Company. These discussions included the amount and
kind of consideration to be paid to holders of Common Shares and Preferred
Shares, the conditions of a proposed Agreement and Plan of Merger, and whether
EastGroup would execute a confidentiality agreement with respect to the receipt
of non-public information. On February 10, 1998, EastGroup did execute a limited
confidentiality agreement with no standstill provision and was given access to
certain of the Company's non-public information (relating primarily to the
structural and environmental conditions of the Company's properties) on February
10 and 11, 1998.
During this period, counsel to EastGroup and counsel to the Company continued
to discuss and negotiate the non-economic terms of a potential merger agreement.
On February 17, 1998, EastGroup presented the Company with a new offer to
merge, containing the terms now set forth in the Merger Agreement. The Company's
Board of Trustees met on the same date to consider the offer. The Company's
trustees were advised that several interested parties had determined to drop out
of the process. The Trustees were also advised that certain other interested
parties were continuing negotiations, and one party had expressed an interest at
a potential value slightly higher than the EastGroup offer. However, it was
noted that this party had a variety of contingencies in its indication of
interest, and was several weeks away from being able to present a definitive
proposal. Moreover, EastGroup's position as a stockholder in the Company, and
its stated intention to oppose and vote Preferred Shares against any alternative
strategic transaction, created a significant execution risk with respect to any
alternative proposal. After extensive discussion, the Trustees then approved the
EastGroup proposal. The Trustees also voted to render the Shareholder Rights
Plan inapplicable to the EastGroup offer. The factors taken into account by the
Board of Trustees in making its decision are described below under
"Recommendation of the Board of Trustees; Fairness of the Offer and the
Merger."
<PAGE>
On the morning of February 18, 1998, the Company, Purchaser and EastGroup
entered into the Merger Agreement, and the terms of the Agreement and the Merger
were publicly announced.
Recommendation of the Board of Trustees; Fairness of the Offer and the Merger
In approving the Merger Agreement and recommending acceptance of the Offer and
adoption of the Merger Agreement, the Board of Trustees considered a number of
factors, including, but not limited to, the following:
(i) The opinion of Prudential Securities that, based upon certain
considerations and assumptions, as of February 17, 1998, the $8.50 per Common
Share in cash to be received by the holders of Common Shares and the $10.00 per
Preferred Share in cash to be received by holders of Preferred Shares in the
Offer and the Merger was fair to such holders in the aggregate. A copy of the
written opinion dated February 17, 1998 of Prudential Securities delivered to
the Board of Trustees, which sets forth the assumptions made, procedures
followed, matters considered and limits of their review, including the absence
of an opinion as to the fairness of the allocation of the consideration to the
different classes of Company Shareholders, is filed as Exhibit 3 to this
Schedule 14D-9 and is incorporated herein by reference. THE FULL TEXT OF SUCH
OPINION SHOULD BE READ IN CONJUNCTION WITH THIS STATEMENT;
(ii) With regard to the fairness of the relative allocation of the
consideration between the holders of the Preferred Shares and Common Shares,
Article 6.04 of the Company's Articles of Incorporation provides for a
preference of $10.00 per share to the holders of the outstanding Preferred
Shares upon liquidation of the Company, which preference was asserted by certain
of the holders of the Company's Preferred Shares to be applicable in the event
of a merger or reorganization, which preference had historically resulted in the
Preferred Shares trading at a premium to the Common Shares, and which was viewed
to provide a premium to the value of the Preferred Shares relative to the Common
Shares.
(iii) The process conducted by the Company and Prudential Securities that
involved, among other things, contacting twenty-nine entities that the Company
and Prudential Securities reasonably believed would be interested in entering
into a business combination transaction with the Company and providing certain
of those entities with information and access to Company officials and
representatives and inviting proposals. Approximately ten entities expressed
interest in a business combination transaction and presented bids or indications
of interest to the Company. The bid of the Purchaser was the highest non-
contingent bid received;
(iv) a review of the possible alternatives to the Offer and the Merger,
including the possibility of continuing to operate the Company as an independent
entity or of the Company engaging in a strategic alliance with another REIT and
the timing and feasibility of those alternatives, including that the smaller
relative size of the Company, and its unique capital structure of
preferred/common stock, were viewed as impediments to continuing to operate the
Company as an independent entity. Moreover, the Board believed that EastGroup's
publicly disclosed intention to vote its shares against any other strategic
combination transaction could delay or hinder any such proposed transaction. As
a result, the possible value to the Company's stockholders of such alternatives
was viewed as less than the proposed Offer and Merger;
(v) the terms and conditions of the Merger Agreement, including the fact
that the Offer is subject to a minimum tender condition;
(vi) the fact that the Offer was not subject to a financing condition;
(vii) the historical and recent market prices for the Preferred Shares and
Common Shares, including that between January 1, 1993 and January 1, 1997, the
market price of the Common Shares and Preferred Shares was below $4 per Common
Share and $7 per Preferred Share, respectively, and that the highest market
price of the Common Shares prior to the public announcement of the Offer and the
Merger was $7.75 per Common Share on January 16, 1998, and the highest market
price of the Preferred Shares prior to the public announcement of the Offer and
the Merger
<PAGE>
was $9.63 per Preferred Share on February 10, 1998;
(viii) the provisions of the Merger Agreement described above which restrict
the Company's ability to withdraw their recommendation of the Offer in the event
of a superior proposal;
(ix) the capital structure of the Company which created impediments to the
Company's ability to raise additional capital;
(x) EastGroup's position as a holder of approximately 21% of the outstanding
Shares of the Company and 27.6% of the outstanding preferred shares, and the
Board's belief that EastGroup's publicly stated intention to vote its shares
against other strategic alternative could delay or hinder consummation of such
an alternative;
(xi) the provisions of the Merger Agreement that require either the Company
or EastGroup to pay the other a termination fee of $2.5 million in the event the
Merger Agreement is terminated as described above under "Merger Agreement"; and
(xii) the recognition by the Board of Trustees that, if the Offer and the
Merger were consummated, current stockholders of the Company would no longer be
able to participate in any future growth prospects of the combined companies;
however, the Board of Trustees determined that the premium being effected in the
Offer and the Merger fairly compensated such holders for that loss of
opportunity.
In view of the wide variety of factors considered in connection with its
evaluation of the Offer and the Merger, the Board of Trustees found it
impracticable to, and did not, quantify or otherwise attempt to assign relative
weights to the specific factors considered in reaching its determination, except
that the Board of Trustees placed special emphasis on the Offer price and on the
matters set forth in Items (i), (ii) and (iii) above. The Board of Trustees
discussed in detail the matters referenced in Items (viii)-(xi), and the fact
that they constitute impediments to third parties interested in making
alternative proposals regarding the Company. On balance, however, and in light
of the matters described in Items (i)-(iii), the Board of Trustees determined
that these factors were more than outweighed by the other factors, all of
which supported the fairness of the transaction.
It is expected that, if Shares are not accepted for payment by the Purchaser
in the Offer and if the Merger is not consummated, the Company's current
management, under the general direction of the Board of Trustees, will continue
to manage the Company as an ongoing business. However, the Board of Trustees
may, under such circumstances, explore other possible methods of maximizing
stockholder values.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Prudential Securities has been retained by the Company to act as exclusive
financial advisor to the Company for a two-year period and as exclusive
financial advisor in connection with, among other matters, the potential sale of
all or a portion of the stock or assets of the Company. Pursuant to a letter
agreement dated October 30, 1997, between the Company and Prudential Securities,
the Company is required to pay Prudential Securities (a) a fee of $300,000 upon
delivery of a Fairness Opinion to the Company and (b) an additional fee of one
percent (1%) of the consideration paid (defined as the total value of all cash,
securities, the repurchase or buy-out of any options or warrants, any agreements
or other property and any other consideration, including, without limitation,
any contingent, earned or other consideration paid or payable, directly or
indirectly), in connection with a Transaction as defined therein, subject to a
minimum fee of $800,000 in connection with the sale of the Company, subject
further to a credit for fees paid pursuant to clause (a). Assuming a
consummation of the Offer and the Merger on the terms contemplated by the Merger
Agreement, the Company currently estimates that the amount of such additional
fee due to Prudential Securities (after credits) would be approximately
$710,000.
In addition, the Company has agreed to reimburse Prudential Securities for
reasonable out-of-pocket and
<PAGE>
incidental expenses, including the fees and disbursements of its legal counsel
and those of any advisor retained by Prudential Securities, whether or not any
transaction is consummated, such reimbursable expenses not to exceed $50,000
without the prior written approval of the Company, and to indemnify Prudential
Securities and certain related persons against certain liabilities in connection
with their engagement, including certain liabilities under the federal
securities laws.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) During the past sixty days, no transaction in the Shares has been effected
by the Company or, to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company, except for the
purchase by Christopher J. Doherty, Chairman of the Board of Trustees, as
follows:
<TABLE>
<CAPTION>
NUMBER OF PRICE
DATE OF TRANSACTION ---------- -----
- ------------------- SHARES PER SHARE
------ ---------
<S> <C> <C>
January 5, 1998 Preferred.. 1,000 8 1/2
January 5, 1998 Common..... 500 5
</TABLE>
(b) Pursuant to the Merger Agreement, the Company believes that all Directors
and Officers of the Company who own Common or Preferred Shares will tender their
Shares pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Other than the Offer and the Merger, the Company is not engaged in any
negotiation in response to the Offer which relates to or would result in (1) an
extra ordinary transaction, such as a merger or reorganization, involving the
Company or any subsidiary of the Company; (2) a purchase, sale or transfer of a
material amount of assets of the Company or any subsidiary of the Company; (3) a
tender offer for or other acquisition of securities by or of the Company; or (4)
any material change in the present capitalization or dividend policy of the
Company.
(b) Other than the Offer and the Merger, there are no transactions, Board of
Trustees resolutions, agreements in principle or signed contracts in response to
the Offer which relate to or would result in one or more of the matters referred
to in this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT
-------
NO.
---
1. Agreement and Plan of Merger dated as of February 18, 1998, among
the Company, the Purchaser and EastGroup. (Previously Filed.)
2. Joint press release of the Company and EastGroup dated February
18, 1998. (Previously Filed.)
3. Opinion of Prudential Securities Incorporated dated February 17,
1998. (Previously Filed.)
<PAGE>
4. Letter to stockholders of the Company dated February 23, 1998.
(Previously Filed.)
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Meridian Point Realty Trust VIII Co.
/s/ Robert H. Gidel
By: _______________________
ROBERT H. GIDEL
Chief Executive Officer
