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EXHIBIT I
Execution Copy
PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 17, 1997
BETWEEN
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
AND
XXXXXXX X. XXXXX RESIDENTIAL REALTY, INC.
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PURCHASE AGREEMENT
This PURCHASE AGREEMENT (this "Agreement") is made as of the 17th
day of September, 1997 by and between Xxxxxxx X. Xxxxx Residential Realty, Inc.,
a Maryland corporation (the "Company"), and The Prudential Insurance Company of
America (the "Investor" or "Prudential").
W I T N E S S E T H
WHEREAS, the Company wishes to issue and sell to the Investor or one
or more other Prudential Investors (as defined in Section 7.2 hereof) an
aggregate of 1,450,000 shares of common stock of the Company, $0.01 par value
per share (the "Common Stock") and 1,216,666 shares of Series B Cumulative
Convertible Redeemable Preferred Stock, $0.01 par value per share, of the
Company (the "Series B Preferred Shares"), the terms of which shall be as set
forth in the Series B Preferred Articles Supplementary in the form of Exhibit A
(the "Series B Preferred Articles Supplementary"), in accordance with and
subject to the terms and conditions set forth herein (the Common Stock and the
Series B Preferred Shares, collectively, the "Shares"); and
WHEREAS, Investor wishes to purchase, either for its own account or
with one or more other Prudential Investors, the Shares on the terms and subject
to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, agreements and warranties herein contained, the parties hereby agree
as follows:
1. PURCHASE AND SALE OF SHARES.
1.1 Sale and Issuance of the Shares.
(a) The Company shall adopt and file with the State Department of
Assessments and Taxation of Maryland (the "SDAT") on or before the Closing Date
(as defined below) the Series B Preferred Articles Supplementary.
(b) Subject to the terms and conditions of this Agreement, at the
Closing (as defined below), the Company agrees to issue and sell to Investor or
one or more other Prudential Investors, and Investor agrees to purchase, or
cause one or more other Prudential Investors to purchase, from the Company an
aggregate of 1,450,000 shares of Common Stock and 1,216,666 Series B Preferred
Shares, at an aggregate purchase price of $75,999,981.00 (the "Purchase Price").
1.2 Closing.
(a) Upon the terms and subject to the satisfaction or waiver of all
the conditions to closing set forth in this Agreement, the closing (the
"Closing") of the purchase and sale of the Shares shall take place at the
offices of Xxxxx & Xxxxxxx L.L.P., Columbia Square, 000 Xxxxxxxxxx Xxxxxx, X.X.,
Xxxxxxxxxx, X.X. 00000-0000 or at such other location as may be agreed upon by
the Company and the Investor. Such Closing shall take place at 10:00 a.m.,
Eastern time on or before September 26,
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1997 or such other date or time as may be agreed upon by the Company and the
Prudential Investors (the "Closing Date"). At the Closing, the Company agrees to
issue and sell to the Investor (or one or more other Prudential Investors) and
the Investor agrees to purchase (or cause one or more other Prudential Investors
to purchase) from the Company the Shares.
(b) At the Closing, the Company shall issue and deliver to each
Prudential Investor stock certificates in definitive form, registered in the
name of the Prudential Investor, representing the Shares being purchased by the
Prudential Investor and the Prudential Investors shall deliver to the Company,
against delivery of the stock certificates representing the Shares, an amount
equal to the Purchase Price by wire transfer of immediately available funds
payable to the Company's order.
(c) The certificates evidencing the Shares shall bear a legend
substantially in the following form, in addition to any other legend required by
the Company's Articles of Incorporation, unless the Company determines otherwise
in accordance with applicable law:
THIS SECURITY AND ANY COMMON STOCK ISSUED ON CONVERSION HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE
HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES, AND
AGREES FOR THE BENEFIT OF XXXXXXX X. XXXXX RESIDENTIAL REALTY, INC. (THE
"COMPANY") THAT: (I) IT HAS ACQUIRED A "RESTRICTED SECURITY" THAT HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY EXCEPT PURSUANT (A) TO A REGISTRATION STATEMENT THAT HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT OR (B) TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH
CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS SECURITY
OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE. ANY OFFER, SALE OR OTHER
DISPOSITION PURSUANT TO THE FOREGOING CLAUSE (B) IS SUBJECT TO THE RIGHT OF THE
ISSUER OF THIS SECURITY (i) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION OR OTHER INFORMATION REASONABLY SATISFACTORY TO IT IN FORM AND
SUBSTANCE, AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED
UPON THE REQUEST OF A HOLDER AFTER OCTOBER 1, 1999.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants, as of the date of this
Agreement and as of the Closing Date, that:
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2.1 Organization, Good Standing and Qualification.
(a) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Maryland with full
power and authority to own, lease and operate its properties and conduct its
business as now being conducted, and has been duly qualified to transact
business and is in good standing under the laws of each other jurisdiction in
which it owns or leases properties, or conducts any business, so as to require
such qualification, except where the failure to so qualify would not be
reasonably expected to result in a Material Adverse Effect. "Material Adverse
Effect" means any material adverse effect on the operations, assets, business,
affairs, properties, or financial or other condition of the Company and its
subsidiaries taken as a whole.
(b) Xxxxxxx X. Xxxxx Residential Realty, L.P. (the "Operating
Partnership") has been duly formed and is validly existing as a limited
partnership in good standing under the Delaware Revised Uniform Limited
Partnership Act with partnership power and authority to own, lease and operate
its properties and conduct its business as now being conducted and has been duly
qualified to transact business and is in good standing under the laws of each
jurisdiction in which it owns or leases properties, or conducts any business, so
as to require such qualification, except where the failure to so qualify would
not be reasonably expected to result in a Material Adverse Effect.
(c) The subsidiaries of the Company set forth on Schedule 2.1
(individually, a "Subsidiary", collectively the "Subsidiaries") have each been
duly organized and are validly existing and in good standing under the laws of
their respective jurisdictions of incorporation or formation and have full power
and authority to own, lease and operate their properties and to conduct their
businesses as now being conducted, and each Subsidiary has been duly qualified
to transact business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties, or conducts any business, so
as to require such qualification, except where the failure to be in good
standing or to so qualify would not be reasonably expected to result in a
Material Adverse Effect. The Company has no subsidiaries except as set forth on
Schedule 2.1. The Company or the Operating Partnership owns, directly or
indirectly, all of the equity securities of each Subsidiary.
2.2 Power, Authority and Enforceability
(a) The Company has all requisite corporate power and authority, and
has taken all required corporate action necessary, to execute, deliver and
perform this Agreement and to issue and sell the Shares as herein provided.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as may be
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium,
and other laws of general application affecting enforcement of creditors' rights
generally, and (ii) equitable principles of general applicability relating to
the availability of specific performance, injunctive relief, or other equitable
remedies.
2.3 Capitalization.
Upon the Company's adoption of the Series B Preferred Articles
Supplementary, the authorized capital stock of the Company will consist of
95,000,000 shares of Common Stock, par value $0.01 per share, 45,000,000 shares
of excess stock, par value $0.01 per share, 2,640,325 shares of Series A
Preferred Stock, par value $0.01 per share, 1,220,000 shares of Series B
Preferred Stock, par
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value $0.01 share, and 1,139,675 shares which are not classified. All of the
issued and outstanding shares of capital stock of the Company have been duly and
validly authorized and issued and are fully paid and nonassessable. Except as
set forth in the Company's most recent annual report filed on Form 10-K or on
Schedule 2.3, (i) there are no outstanding securities or indebtedness
convertible into, exchangeable for or carrying the right to acquire, Common
Stock or other equity securities of the Company or subscriptions, warrants,
options, rights or other arrangements or commitments obligating the Company to
issue or dispose of any Common Stock or other equity securities or any ownership
therein, (ii) there are no outstanding contractual obligations, commitments,
understandings or arrangements of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire, require or make any payment in respect
of any shares of equity securities of the Company or any such Subsidiary, (iii)
there are no contractual restrictions on the payment of dividends or other
distributions or amounts on or in respect of the Company's Common Stock, (iv)
there are no agreements or arrangements to which any of the Company or its
Subsidiaries is a party pursuant to which the Company is or could be required to
register shares of Common Stock or other securities under the Securities Act on
terms materially more favorable to the holder of such Common Stock or other
securities than the terms of the Registration Rights Agreement attached hereto
as Exhibit C, and (v) there are no agreements or arrangements restricting the
voting or transfer of any equity securities of the Company.
2.4 Valid Issuance of Shares.
The Shares which are being purchased by the Investor hereunder, when
issued, sold and delivered in accordance with the terms hereof for the
consideration expressed herein, will be duly and validly authorized and issued,
fully paid and nonassessable. The shares of Common Stock issuable upon the
conversion of the Series B Preferred Shares (the "Converted Shares") will be
duly and validly reserved for such issuance (based upon the initial conversion
price thereof) and, when issued upon such conversion in accordance with the
Series B Preferred Articles Supplementary, will be duly and validly authorized
and issued, fully paid and nonassessable.
2.5 Compliance with Other Instruments And Applicable Law.
The execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby do not (i) result in a violation of the Company's Amended and Restated
Articles of Incorporation (the "Articles of Incorporation") or the Company's
Amended and Restated Bylaws (the "Bylaws") or (ii) conflict with, or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its Subsidiaries is a party, or result in a violation of
any law, rule, regulation, order, judgment or decree applicable to the Company
or any of its Subsidiaries or by which any property or asset of the Company or
any of its Subsidiaries is bound or affected (except for such conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, be reasonably expected to result
in a Material Adverse Effect or materially impair the Company's ability to
perform its obligations under this Agreement).
2.6 No Registration Under the Securities Act.
Assuming the continuing accuracy of the Investor's representations
set forth in Article III and compliance by the Investor with the transfer
restrictions set forth in the legends on the certificates
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evidencing the Shares and the Converted Shares, it is not necessary in
connection with the offer, sale and delivery of the Shares in the manner
contemplated by this Agreement to register the Shares or the issuance to the
Investor of the Converted Shares under the Securities Act of 1933, as amended
(the "Securities Act").
2.7 No General Solicitation.
Neither the Company nor any affiliate (as defined in Rule 501(b) of
Regulation D under the Securities Act, an "Affiliate") of the Company has
directly, or through any agent, (i) sold, offered for sale, solicited offers to
buy or otherwise negotiated in respect of, any security (as defined in the
Securities Act) which is or will be integrated with the sale of the Shares in a
manner that would require registration under the Securities Act of the Shares or
(ii) engaged in any form of general solicitation or general advertising in
connection with the offering of the Shares (as those terms are used in
Regulation D under the Securities Act) or in any manner involving a public
offering within the meaning of Section 4.2 of the Securities Act.
2.8 Financial Statements.
The audited financial statements and supporting schedules included
in the Company's periodic filings filed pursuant to the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), are complete and correct in all
material respects and present fairly the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates specified and the
consolidated results of their operations for the periods specified, in each
case, in conformity with generally accepted accounting principles applied on a
consistent basis ("GAAP") during the periods involved, except as indicated
therein or in the notes thereto. The unaudited financial statements, supporting
schedules and pro forma financial information included in the Company's periodic
filings filed pursuant to the Exchange Act, comply as to form in all material
respects with the applicable accounting requirements under the Securities Act
and the Exchange Act and the related published rules and regulations.
2.9 Exchange Act Compliance.
The Company has timely filed all documents required to be filed with
the Securities and Exchange Commission (the "Commission") pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act and all documents filed by the
Company with the Commission pursuant to the Securities Act and the Exchange Act,
when so filed, complied in form in all material respects with such acts and did
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
2.10 No Material Adverse Changes.
Since the date that the Company filed its most recent annual report
on Form 10-K pursuant to the Exchange Act, except as otherwise stated in such
annual report or in a subsequent 10-Q filed by the Company with the Commission
or as contemplated by such annual report or by this Agreement: (i) there has
been no change in the business, operations or financial condition, of the
Company and its Subsidiaries considered as one enterprise, or in the earnings or
the ability to continue
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to conduct business in the usual and ordinary course of the Company and its
Subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, which has had a Material Adverse Effect; and (ii)
except for the transactions contemplated by this Agreement, there has been no
transaction entered into by the Company or any of its Subsidiaries other than
(a) transactions in the ordinary course of business or (b) transactions which
would not, individually or in the aggregate, be reasonably expected to result in
a Material Adverse Effect; and (iii) there have not been any changes in the
capital stock (except as set forth in Section 2.3 of this Agreement) or any
increases in the debt of the Company and its Subsidiaries considered as one
enterprise, which would, individually or in the aggregate, be reasonably
expected to result in a Material Adverse Effect.
2.11 Litigation.
Except as set forth in the Company's most recent annual report on
Form 10-K filed pursuant to the Exchange Act or in any subsequent 10-Q filed by
the Company with the Commission, there is no action, suit or proceeding (whether
or not purportedly on behalf of the Company or any of its Subsidiaries) before
or by any court or governmental agency or body, domestic or foreign, now
pending, or to the knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries which, either alone or in the aggregate,
would reasonably be expected to have a Material Adverse Effect or materially
impair the Company's ability to perform its obligations under this Agreement.
2.12 Title to Properties; Leasehold Interests.
(a) Except as disclosed in the Company's most recent annual report
on Form 10-K filed pursuant to the Exchange Act or in any subsequent filing by
the Company with the Commission, or except to the extent that the inaccuracy of
any of the following, either individually or in the aggregate, would not be
reasonably expected to result in a Material Adverse Effect: (i) the Company,
through one or more Subsidiaries, has good and marketable title to all real
properties and all other assets identified as being owned by the Company in its
most recent annual report filed on Form 10-K, in each case, subject only to
Permitted Exceptions (as herein defined); (ii) all leases under which the
Company, or any of its Subsidiaries, leases any property are in full force and
effect, and neither the Company nor any such Subsidiary is in default of any of
the terms or provisions of any of such leases and no claim has been asserted by
anyone adverse to any such entity's rights as lessee under any of such leases,
or affecting or questioning any such entity's right to the continued possession
or use of the properties under any such leases or asserting a default under any
such leases; and (iii) all liens, charges or encumbrances on or affecting any of
the property and assets of the Company and its Subsidiaries which are required
to be disclosed in the Company's periodic reports filed pursuant to the Exchange
Act are disclosed therein;
(b) As used in this Agreement, "Permitted Exceptions" means: (i)
real estate taxes and assessments not yet delinquent; (ii) covenants,
restrictions, easements and other similar agreements, provided that the same are
not violated by existing improvements or the current use and operation of the
Company's or any Subsidiary's property; (iii) zoning laws, ordinances and
regulations, building codes, rules and other governmental laws, regulations,
rules and orders affecting any of the Company's or any Subsidiary's property,
provided that the same are not violated by existing improvements or the current
use and operation of such property; (iv) any imperfection of title which does
not affect in any material adverse respect the current use, operation or
enjoyment of any of the Company's or any Subsidiary's real property and does not
render title to such real property unmarketable or uninsurable and does not
impair the value of such property; and (v) mortgage financing disclosed in the
Company's most recent annual report on Form 10-K filed pursuant to the Exchange
Act.
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2.13 Environmental Compliance.
(a) Except as disclosed in the Company's most recent annual report
on Form 10-K filed pursuant to the Exchange Act or in any subsequent filing by
the Company with the Commission, the Company and each of its Subsidiaries has
complied and is in compliance in all material respects with all Environmental
Statutes (as hereinafter defined), except for such noncompliance as would not be
reasonably expected to result in a Material Adverse Effect.
(b) Neither the Company nor any of its Subsidiaries intends to use
any real property owned or occupied by any such party for the purpose of
handling, burying, storing, retaining, refining, transporting, processing,
manufacturing, generating, producing, spilling, seeping, leaking, escaping,
leaching, pumping, pouring, emitting, emptying, discharging, injecting, dumping,
transferring or otherwise disposing of or dealing with Hazardous Materials.
(c) Except as would not, individually or in the aggregate, have a
Material Adverse Effect, neither the Company nor any of its Subsidiaries is
aware of any seepage, leak, escape, xxxxx, discharge, injection, release,
emission, spill, pumping, pouring, emptying or dumping of Hazardous Materials
(i) on to any real property owned or occupied by any such party, (ii) into
waters on or adjacent to any real property owned or occupied by any such party
or (iii) onto lands from which Hazardous Materials might seep, flow or drain
into such waters.
(d) The Company is not aware of any occurrence or circumstance that,
with notice or passage of time or both, would give rise to a claim under or
pursuant to any Environmental Statute (as hereinafter defined) pertaining to
Hazardous Materials on or originating from any real property owned or occupied
by the Company or any of its Subsidiaries, which claim would be reasonably
expected to result in a Material Adverse Effect.
(e) No land owned by the Company or any of its Subsidiaries is
included or proposed for inclusion on the National Priorities List issued
pursuant to CERCLA (as hereinafter defined) by the United States Environmental
Protection Agency (the "EPA") or on the inventory of other potential "Problem"
sites issued by the EPA and has not otherwise been publicly identified by the
EPA as a potential CERCLA site or included or proposed for inclusion on any list
or inventory issued pursuant to any other Environmental Statute or issued by any
other Governmental Authority (as hereinafter defined).
(f) As used herein, "Hazardous Material" shall include without
limitation any flammable explosives, radioactive materials, hazardous materials,
hazardous wastes, toxic substances or related materials, asbestos or any
hazardous material as defined by any federal, state or local environmental law,
ordinance, rule or regulation, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. xx.xx. 9601 et seq.: ("CERCLA"), the Hazardous Materials Transportation
Act, as amended, 49 U.S.C. xx.xx. 1801 et seq., the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. xx.xx. 9601 et seq., the Emergency Planning
and Community Right-to-Know Act of 1986, 42 U.S.C. xx.xx. 11001 et seq., the
Toxic Substances Control Act, 15 U.S.C. xx.xx. 2601 et seq., the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. xx.xx. 136 et seq., the
Clean Air Act, 42 U.S.C. xx.xx. 7401 et seq., the Clean Water Act (Federal Water
Pollution Control Act), 33 U.S.C. xx.xx. 1251 et seq., the Safe Drinking Water
Act, 42 U.S.C. xx.xx. 300F to 300j-11, and the Occupational Safety and Health
Act, 29 U.S.C. xx.xx. 651 et seq., as any of the above statutes may be amended
from time to time, and in the regulations adopted and publications promulgated
pursuant to each of the foregoing (individually, an "Environmental Statute"
collectively, the "Environmental Statutes") or by any federal, state or local
governmental authority having or claiming jurisdiction over the properties and
assets described in the Company's periodic reports filed pursuant to the
Exchange Act (a "Governmental Authority").
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2.14 Taxes.
(a) The Company and its Subsidiaries have filed all federal, state,
local, foreign and other tax returns, reports, information returns and
statements required to be filed by them (except for returns, reports,
information returns and statements relating to which the failure to file would
not be reasonably expected to result in any Material Adverse Effect). The
Company and its Subsidiaries have paid or caused to be paid all taxes (including
interest and penalties) that are shown as due and payable on such returns or
claimed by any taxing authority to be due and payable with respect to such
returns, except those which are being contested by it in good faith by
appropriate proceedings and in respect of which adequate reserves are being
maintained on its books in accordance with generally accepted accounting
principles consistently applied. The Company and its Subsidiaries do not have
any material liabilities for taxes other than those incurred in the ordinary
course of business and in respect of which adequate reserves are being
maintained by it in accordance with generally accepted accounting principles
consistently applied. Except as set forth on Schedule 2.14 hereto, federal and
state income tax returns for the Company and its Subsidiaries have not been
audited by the Internal Revenue Service or state authorities. No deficiency,
assessment with respect to or proposed adjustment of the Company's or any of its
Subsidiaries' federal, state, local, foreign or other tax returns is pending or,
to the best of the Company's or any of its Subsidiaries' knowledge, threatened.
There is no tax lien, whether imposed by any federal, state, local or other tax
authority, outstanding against the assets, properties or business of the
Company. There are no applicable taxes, fees or other governmental charges
payable by the Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement or the issuance by the Company of the
Shares or the Converted Shares.
(b) The Company has qualified to be taxed as a real estate
investment trust pursuant to Sections 856 through 860 of the Internal Revenue
Code, as amended (the "Code"), for its taxable years ended December 31, 1994
through December 31, 1996, and the Company's present method of operation and its
assets and contemplated income are such that the Company expects under present
law to so qualify for the fiscal year ending December 31, 1997 and in the
future.
2.15 Insurance.
The Company and its Subsidiaries each carry or is entitled to the
benefits of insurance in such amounts and covering such risks as is reasonably
sufficient under the circumstances or is customary in the industry and all such
insurance is in full force and effect.
2.16 Employees; ERISA.
(a) The Company has good relationships with its employees and has
not had any substantial labor problems. The Company does not have any knowledge
as to any intentions of any key employee or any group of employees to leave the
employ of the Company. Other than as disclosed in the Company's most recent
annual report on Form 10-K filed pursuant to the Exchange Act or in any
subsequent filing by the Company with the Commission or with respect to plans
that do not discriminate in scope, terms or operation in favor of executive
officers or directors, are available generally to all salaried employees and are
not required to be disclosed pursuant to the rules and regulations of the
Commission, the Company has not established, sponsored, maintained, made any
contributions to or been
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obligated by law to establish, maintain, sponsor or make any contributions to
any "employee pension benefit plan" or "employee welfare benefit plan" (as such
terms are defined in ERISA), including, without limitation, any "multi-employer
plan." The Company is in compliance with all applicable laws relating to the
employment of labor, including provisions relating to wages, hours, equal
opportunity, collective bargaining and the payment of Social Security and other
taxes, and with ERISA, except where the failure to so comply would not be
reasonably expected to result in a Material Adverse Effect.
(b) In its capacity as general partner of the Operating Partnership,
the Company exercises management rights and responsibilities, directly or
indirectly, through one or more Subsidiaries of the Company or the Operating
Partnership, with respect to the real property owned by the Operating
Partnership and the Subsidiaries, including decisionmaking authority with
respect to future acquisitions and sales of such real property.
(c) The terms of this transaction have been negotiated and
determined at arms'-length and are not less favorable to Investor than the terms
that generally would be available in an arms'-length transaction between
unrelated parties.
2.17 Legal Compliance.
(a) The Company is in compliance with all applicable laws, rules,
regulations, orders, licenses, judgments, writs, injunctions, decrees or
demands, except to the extent that failure to comply would not be reasonably
expected to result in a Material Adverse Effect. The Company has all necessary
permits, licenses and other authorizations required to conduct its business as
currently conducted, and as proposed to be conducted, except where a failure to
have such permit, license or other authorization would not be reasonably
expected to result in a Material Adverse Effect.
(b) Except as disclosed in the Company's most recent annual report
on Form 10-K filed pursuant to the Exchange Act or in any subsequent filing by
the Company with the Commission, there are no adverse orders, judgments, writs,
injunctions, decrees or demands of any court or administrative body, domestic or
foreign, or of any other governmental agency or instrumentality, domestic or
foreign, outstanding against the Company which would reasonably be expected to
result in a Material Adverse Effect.
(c) Neither the Company nor any Subsidiary of the Company is (i) in
default under or in violation of any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any of
its properties is bound, except such defaults or violations as could not
reasonably be expected to have a Material Adverse Effect or (ii) in violation of
any order of any Governmental Authority, except for such violations as could not
reasonably be expected to have a Material Adverse Effect.
2.18 Governmental Consent.
Other than such consents, approvals, authorizations, declarations or
filings as have already been obtained or made or which will be made at or prior
to the Closing Date and as are set forth on Schedule 2.18, no consent, approval
or authorization of, or declaration or filing with, any Governmental Authority
on the part of the Company is required for the valid execution and delivery of
this Agreement or performance hereunder or the valid offer, issue, sale and
delivery of the Shares pursuant to this Agreement and the Series B Preferred
Articles Supplementary.
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2.19 Investment Company.
The Company is not an investment company, as defined in the
Investment Company Act of 1940, as amended, nor controlled by an investment
company.
2.20 No Other Liabilities.
Except as set forth on Schedule 2.20, neither the Company nor any
Subsidiary of the Company has any material liability, whether absolute, accrued,
contingent or otherwise of a kind required to be reflected on a balance sheet
prepared in accordance with generally accepted accounting principles or in the
notes thereto, except liabilities (i) reflected on the consolidated balance
sheet of the Company and its Subsidiaries as at June 30, 1997, or (ii)
liabilities that (a) have been incurred by the Company or any of its
Subsidiaries after June 30, 1997 in the ordinary course of business and (2)
could not reasonably be expected to have a Material Adverse Effect.
2.21 Material Contracts.
The Forms 10-Q filed in 1997, the 1996 Form 10-K, and Schedule 2.21,
collectively, contain a correct and complete list of the following with respect
to the Company and its Subsidiaries: (i) agreements with any person having
beneficial ownership of 5% or more of the outstanding shares of Common Stock of
the Company or any director or officer of the Company or any of its Subsidiaries
and all shareholders' agreements and voting trusts to which the Company is a
party or of which it has knowledge, in each case that are required to be filed
as exhibits to a Form 10-K of the Company pursuant to Regulation S-K, and (ii)
agreements not made in the ordinary course of business that could reasonably be
expected to result in a Material Adverse Effect.
Except for material contracts of the type required to be disclosed
in the Company's most recent annual report on Form 10-K, neither the Company nor
any Subsidiary of the Company has entered into an agreement not made in the
ordinary course of business and which could reasonably be expected to result in
a Material Adverse Effect.
2.22 No Merger Agreements.
As of the date hereof, neither the Company nor any Subsidiary of the
Company has entered into any agreement with any person or entity which has not
been terminated as of the date of this Agreement and under which there remains
any liability or obligation thereof with respect to a merger or consolidation
with the Company or any Subsidiary of the Company or any other acquisition of a
substantial amount of the assets of the Company or any such Subsidiary.
2.23 Certain Actions By The Company.
The Company has not: (i) made a general assignment for the benefit
of creditors; (ii) filed any voluntary petition in bankruptcy or suffered the
filing of an involuntary petition by the Company's creditors; (iii) suffered the
appointment of receiver to take possession of all or substantially all of the
Company's assets; (iv) suffered the attachment or other judicial seizure of all
or substantially all of the Company's assets; (v) admitted in writing the
Company's inability to pay its debts as they become due; or (vi) made an offer
of settlement, extension or composition to its creditors generally.
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3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
The Investor represents and warrants, as of the date of this
Agreement and as of the Closing Date, that:
3.1 Organization, Good Standing and Qualification.
The Investor has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of New Jersey with full
power and authority to own, lease and operate its properties and conduct its
business as now being conducted, and has been duly qualified to transact
business and is in good standing under the laws of each other jurisdiction in
which it owns or leases properties, or conducts any business, so as to require
such qualification, except where the failure to so qualify would not have a
material adverse effect on the Investor.
3.2 Power, Authority and Enforceability.
(a) The Investor has the requisite corporate power and authority,
and has taken all required corporate action necessary, to execute, deliver and
perform this Agreement and to purchase the Shares hereunder.
(b) This Agreement has been duly executed and delivered by the
Investor and constitutes the legal, valid and binding obligation of the Investor
enforceable against the Investor in accordance with its terms, except as may be
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium,
and other laws of general application affecting enforcement of creditors' rights
generally, and (ii) equitable principles of general applicability relating to
the availability of specific performance, injunctive relief, or other equitable
remedies.
3.3 Compliance with Other Instruments.
The execution, delivery and performance of this Agreement by the
Investor and the consummation by the Investor of the transactions contemplated
hereby do not (i) result in a violation of the Investor's Articles of
Incorporation or Bylaws or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Investor is
a party, or result in a violation of any law, rule, regulation, order, judgment
or decree applicable to the Investor or by which any property or asset of the
Investor is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, materially impair the Investor's ability
to perform its obligations under this Agreement).
3.4 Ownership Limitations.
The Investor has received a copy of the Company's Articles of
Incorporation and understands the restrictions on transfer and ownership of the
Company included in Article VIII thereof and shall comply with such restrictions
(after giving effect to the waiver referred to in Section 4.9 hereof).
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3.5 Investment Intent; Sophisticated Investor.
The Investor is an "accredited investor" within the meaning of Rule
501(a) of the Securities Act. The Investor is purchasing the Shares solely for
investment purposes and not with a view toward making a public distribution of
such shares or the Converted Shares except in accordance with the restrictions
on transfer set forth in the legends thereon and in accordance with the
Registration Rights Agreement. In the normal course of its business or its
investing activities, the Investor invests in or purchases securities similar to
the Shares and it has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of purchasing the
Shares. The Investor is aware that it may be required to bear the economic risk
of an investment in the Shares for an indefinite period of time and it is able
to bear such risk for an indefinite period.
3.6 Unregistered Securities.
The Investor understands and acknowledges and agrees that the Shares
and the Common Stock issuable upon conversion of the Series B Preferred Shares
have not been, and that the Series B Preferred Shares will not be, registered
under the Securities Act or any other applicable securities law and, unless so
registered, may not be offered, sold or otherwise transferred except in
compliance with the registration requirements of the Securities Act or any other
applicable securities law, pursuant to an exemption therefrom or in a
transaction not subject thereto. The Investor agrees to comply with the legends
set forth in the certificates representing such shares.
3.7 Access to Information.
The Investor has had access to such financial and other information
concerning the Company or any of its affiliates and the Shares as it deemed
necessary in connection with its decision to purchase any of the Shares,
including an opportunity to ask questions and request information from the
Company, subject to any limitations specified in Section 6.4 of this Agreement.
3.8 REIT Qualification Matters.
To the knowledge of the Investor, no person which would be treated
as an "individual" for purposes of Section 542(a)(2) of the Code (as modified by
Section 856(h) of the Code) owns or would be considered to own (taking into
account the ownership attribution rules under Section 544 of the Code, as
modified by Section 856(h) of the Code) in excess of 20% of the value of the
outstanding equity interest in the Investor.
3.9 Investment Company Matters
The Investor is not, and after giving effect to the purchase of the
Series B Preferred Shares contemplated hereby, will not be (a) required to
register as an "investment company" or (b) an entity controlled by an
"investment company" as such terms are defined in the Investment Company Act of
1940, as amended.
3.10 Governmental Consent.
Other than such consents, approvals, authorizations, declarations or
filings as have already been obtained or made or which will be made at or prior
to the Closing Date, no consent, approval or authorization of, or declaration or
filing with, any Governmental Authority on the part of the Investor is required
for the valid execution and delivery of this Agreement or performance of its
obligations hereunder.
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4. CONDITIONS OF THE INVESTOR'S OBLIGATIONS AT THE CLOSING.
The Investor's obligations at the Closing under Section 1.2 of this
Agreement are subject to the satisfaction or waiver by the Investor on or before
such Closing of each of the following conditions:
4.1 Series B Preferred Articles Supplementary.
At or prior to the Closing, the Series B Preferred Articles
Supplementary shall have been filed with and accepted for recording by the SDAT.
4.2 Representations and Warranties.
The representations and warranties of the Company contained in
Article 2 shall be true on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the date of such
Closing.
4.3 Performance.
The Company shall have performed and complied with all agreements,
obligations and conditions contained in this Agreement that are required to be
performed or complied with by it on or before the date of such Closing.
4.4 No Material Adverse Change.
After the date of this Agreement and through the Closing Date, there
shall not have occurred any change or event that has had or may reasonably be
expected to have a Material Adverse Effect.
4.5 Opinion of Company Counsel.
The Investor shall have received from Xxxxx & Xxxxxxx L.L.P.,
counsel for the Company, and from the general counsel of the Company opinions in
form and scope customary for transactions such as the Purchase of Shares and
other transactions contemplated hereunder and reasonably satisfactory to the
Investor.
4.6 Registration Rights Agreement.
Simultaneous with the Closing, the Company and the Investor shall
have entered into a Registration Rights Agreement in the form attached hereto as
Exhibit B.
4.7 Officer's Certificate.
The Company shall have delivered to the Investor on the Closing Date
a certificate or certificates signed by an authorized officer of the Company to
the effect that the facts required to exist by Sections 4.1, 4.2, 4.3, 4.4, 4.9,
4.10 and 4.11 exist on such Closing Date.
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4.8 Proceedings.
All proceedings to be taken in connection with the transactions
contemplated by this Agreement and all documents incidental thereto, shall be
reasonably satisfactory in form and substance to the Investor; and the Investor
shall have received copies of all documents which the Investor may reasonably
request in connection with said transactions and copies of the records of all
proceedings of the Company in connection therewith in form and substance
satisfactory to the Investor.
4.9 Limited Waiver of Ownership Limitations.
The Board of Directors of the Company shall have adopted a limited
waiver of the ownership limitations in its Articles of Incorporation
substantially in the form attached hereto as Exhibit C.
4.10 No Injunction
There shall not be in effect any order, decree or injunction of a
court or agency of competent jurisdiction which enjoins or prohibits
consummation of the transactions contemplated hereby and there shall be no
actual or threatened action, suit, arbitration, inquiry, proceedings or
investigation by or before any Governmental Authority, court or agency of
competent jurisdiction, which would reasonably be expected to materially impair
the ability of the Company or the Investor to consummate the transactions
contemplated hereby or of the Company to issue the Shares.
4.11 Amendment to Operating Partnership Agreement
The First Amended and Restated Partnership Agreement of the
Operating Partnership, as amended, shall have been amended further to create
preferred partnership interests with economic attributes substantially identical
to those of the Series B Preferred Shares.
4.12 Listing Approval.
On or before the date that the registration statement filed pursuant
to the Registration Rights Agreement becomes effective, the Common Stock
(including shares issuable upon conversion of the Series B Preferred Shares)
shall have been approved for listing on the New York Stock Exchange.
4.13 Consultation Agreement.
The Operating Partnership and certain Subsidiaries specified by the
Investor shall have entered into an agreement with the Investor and the Company
providing information and consultation rights to each of them substantially
similar in scope and duration as those set forth in Section 6.1.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT THE CLOSING.
The obligations of the Company under Section 1.2 of this Agreement
are subject to the fulfillment on or before the Closing of each of the following
conditions:
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5.1 Representations and Warranties.
The representations and warranties of the Investor contained in
Article 3 shall be true on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the date of such
Closing.
5.2 Performance.
The Investor shall have performed and complied with all agreements,
obligations and conditions contained in this Agreement that are required to be
performed or complied with by it on or before the date of such Closing.
5.3 Officer's Certificate.
The Investor shall have delivered to the Company on the Closing Date
a certificate or certificates signed by an authorized officer of the Investor to
the effect that the facts required to exist by Sections 5.1 and 5.2 and exist on
such Closing Date.
5.4 No Injunction.
There shall not be in effect any order, decree or injunction of a
court or agency of competent jurisdiction which enjoins or prohibits
consummation of the transactions contemplated hereby and there shall be no
actual or threatened action, suit, arbitration, inquiry, proceedings or
investigation by or before any Governmental Authority, court or agency of
competent jurisdiction, which would reasonably be expected to materially impair
the ability of the Company or the Investor to consummate the transactions
contemplated hereby.
6. COVENANTS.
6.1 Information Rights.
(a) For the period ending on the earlier of (i) January 1, 2003, and
(ii) the first date on which the number of shares of Common Stock plus the
number of shares of Common Stock issuable upon conversion of Series B Preferred
Stock then held by the Prudential Investor have an aggregate Market Value (as
defined below) of less than $30 million (the "Qualification Period"), the
Company and/or the Operating Partnership shall provide to the Investor copies of
all documents filed by either of them with the Commission pursuant to Sections
13 or 15 of the Exchange Act and any amendments thereto filed with the
Commission promptly after the filing thereof with the Commission. As used
herein, the "Market Value" of the Common Stock as of any date shall equal the
average of the closing prices of the Common Stock reported for the preceding 10
trading days on the New York Stock Exchange.
(b) The Company and the Operating Partnership shall keep proper
books of record and account, in which full and correct entries shall be made of
all financial transactions and the assets and business of the Company and the
Operating Partnership in accordance with generally accepted accounting
principles, and the Company shall cause the Operating Partnership and its other
Subsidiaries to do the same. Subject to the limitations set forth in Section
8.5(C) of the Partnership Agreement, during the Qualification Period, the
Company shall, and shall cause the Operating Partnership to, upon reasonable
notice by Purchaser, provide Purchaser with reasonable access to, all books and
records of the Company and the Operating Partnership during regular business
hours and allow Purchaser to make copies and abstracts thereof and the Company
shall cause its Subsidiaries to do the same. Purchaser shall
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have the right to consult from time to time (but in any event not more
frequently than five times in any calendar year) with management of the Company
at the Company's place of business regarding operating and financial matters of
the Company and its Subsidiaries.
(c) During the Qualification Period, the Company shall provide to
such Prudential Investor non-confidential operating information of the same
general nature as the Company provides to financial analysts, substantially
concurrently with provision of such information to financial analysts. Investor
hereby acknowledges that the Company will not be required to furnish any
information that the Company believes would constitute material nonpublic
information, unless the Investor agrees in writing with the Company not to trade
in the securities of the Company until such time as such material information
becomes public.
6.2 Maintenance of REIT Status.
(a) Until the earlier of (i) the end of the Qualification Period or
(ii) December 31, 2002, the Company will use its reasonable best efforts to
continue to be taxed as a real estate investment trust pursuant to Sections 856
through 860 of the Code, subject to the right of the Company to voluntarily
terminate its status as a real estate investment trust pursuant to Subsection
6.2(b). The Company agrees that it will not voluntarily terminate its status as
a real estate investment trust for a period of 24 months after the date of this
Agreement.
(b) If the Company's Board of Directors shall adopt a resolution or
take other corporate action recommending that the Company terminate its status
as a real estate investment trust, the Company shall, within 10 calendar days of
such resolution, provide each Prudential Investor with notice of the record date
for the annual or special meeting of stockholders called for the approval of
such action. The Company agrees that the record date for determining
stockholders eligible to vote at meeting at which such a vote or resolution
shall occur shall not be earlier than the twentieth calendar day after the date
of the notice provided pursuant to this Subsection 6.2(b).
6.3 Waiver of Ownership Limitations.
So long as the sum of (i) the aggregate number of shares of Common
Stock held by all Prudential Investors and (ii) the aggregate number of shares
of Common Stock into which the Series B Preferred Shares held by all Prudential
Investors are convertible (assuming that all such Series B Preferred Shares are
immediately convertible) is greater than 9.8% of the outstanding Common Stock
and (ii) the Prudential Investors have not breached the covenant set forth in
Subsection 6.5(a)(iii) of this Agreement, the Company shall not reverse or
rescind the waiver required to be granted pursuant to Section 4.9 of this
Agreement. Thereafter, the Company may reverse or rescind such waiver or such
waiver may terminate by its own terms.
6.4 No Public Disclosure.
Neither party to this Agreement nor any affiliate of either party
will make any public disclosure concerning the transactions contemplated by this
Agreement unless such disclosure has been provided to the other party at least
one business day prior to such disclosure. Unless in the reasonable opinion of
counsel to each party such disclosure is required by applicable law, neither
party nor any affiliate of either party will make any such public disclosure
without the other party's prior written consent.
With respect to the initial public disclosure of the transactions
contemplated by this Agreement, the Investor shall have the right to review
(before filing or public announcement) any filing
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or press release that refers to the Investor or the transactions contemplated
hereby. The Investor shall have the right to review (before public announcement)
any subsequent press releases that specifically refer to the transactions
contemplated hereby or to the Investor.
6.5 Standstill Provisions.
(a) During the Standstill Period (as defined below), except as
provided in Subsection 6.5(a)(iii), each Prudential Investor will not, and will
cause each of its controlled Affiliates not to, and will use its reasonable
efforts to cause each of its other Affiliates not to, directly or indirectly:
(i) act in concert with any other person or Group by becoming
a member of a 13D Group (as defined below), other than any 13D Group comprised
exclusively of Investor and one or more of its Affiliates;
(ii) sell, transfer, pledge (other than pledges made to
commercial lending institutions securing indebtedness for borrowings) or
otherwise dispose of (collectively, "Transfer") any Series B Preferred Shares or
Common Stock to any person if the acquisition of such capital stock by such
person would, to the knowledge of the Prudential Investor at the time of such
Transfer, after due inquiry, violate the provisions of Section 8(b)(1) of the
Articles of Incorporation of the Company; provided that this Section shall not
prohibit Transfers (A) between the Investor and an Affiliate of the Investor or
(B) between one or more Affiliates of the Investor;
(iii) so long as the sum of (i) the aggregate number of shares
of Common Stock held by all Prudential Investors and (ii) the aggregate number
of shares of Common Stock into which the Series B Preferred Shares held by all
Prudential Investors are convertible (assuming that all such Series B Preferred
Shares are immediately convertible) is greater than 9.8% of the outstanding
Common Stock, purchase or otherwise acquire any Common Stock or other securities
of the Company if, after giving effect to such purchase or acquisition, the
Prudential Investors and their Affiliates (and any persons that are members of a
13D Group of which any Prudential Investor or any of their Affiliates may be a
member, notwithstanding the provisions of clause (i) above) collectively would
Beneficially Own (as defined below) more than 19.998% of the outstanding shares
of Common Stock of the Company; provided that the Prudential Investors shall not
be deemed to have breached this covenant as a result of a decrease in the
aggregate number of shares of Common Stock outstanding;
(iv) solicit or propose to effect or negotiate any merger,
consolidation, other business combination, liquidation, sale of the Company or
all or substantially all of the assets of the Company and its Subsidiaries or
any other change of control of the Company or similar extraordinary transaction;
(v) solicit, initiate or participate in any "solicitation," of
"proxies" or become a "participant" in an "election contest" (as such terms are
defined or used in Regulation 14A under the 1934 Act, disregarding clause (iv)
of Rule 14a-1(1)(2) and including an exempt solicitation pursuant to Rule
14a-2(b)(i); call, or in any way participate in a call for, any special meeting
of stockholders of the Company (or take any action with respect to acting by
written consent of the stockholders of the Company); request, or take any action
to obtain or retain any list of holders of any securities of the Company; or
initiate or propose any stockholder proposal or participate in the making of, or
solicit stockholders of the Company for the approval of, one or more stockholder
proposals; provided that Investor shall not be prohibited from communicating
with a security holder who is engaged in any "solicitation" of "proxies" or who
is a "a participant" in any "election contest";
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(vi) seek representation on the Board of Directors of the
Company or a change in the size of the Board of Directors; or
(vii) Transfer any capital stock of such Prudential Investor
or of any Affiliate of such Prudential Investor that owns any capital stock of
the Company, or Transfer of any options, warrants, convertible securities, or
other similar rights to acquire any capital stock of such Prudential Investor or
any such Affiliate, such that, after giving effect thereto, the Beneficial Owner
(as defined below) of such shares of capital stock of the Company would, to the
knowledge of the Prudential Investor at the time of such Transfer, after due
inquiry, (A) Beneficially Own more than 19.998% of the outstanding shares of
Common Stock of the Company or (B) violate the provisions of Section 8(b)(l) of
the Articles of Incorporation, or
(viii) act in concert with any person with respect to any of the
foregoing.
The foregoing provisions shall not be construed to prevent the Prudential
Investor from voting, or granting any proxy to vote, any Shares or attending or
participating in any meeting called by the Company or a person other than
Prudential Investor.
(b) As used in this Section, the following terms have the respective
meanings set forth below:
"Affiliate" shall have the meaning ascribed thereto in Rule 12b-2
promulgated under the 1934 Act, as such rule is in effect on the date hereof,
but shall not include any investment company registered under the Investment
Company Act of 1940, as amended, with respect to which Prudential or any of its
Affiliates provides management services.
"Beneficially Own" shall mean, with respect to any security, having
direct or indirect (including through any Affiliate) "beneficial ownership" of
such security, as determined pursuant to Rule 13d-3 under the 1934 Act,
including pursuant to any agreement, arrangement or understanding, whether or
not in writing. "Beneficial Ownership" and "Beneficial Owner" shall have
correlative meanings. As used with respect to the Common Stock of the Company,
the term shall include any shares of Common Stock issuable, without regard to
any requirement of notice or the passage of time or the occurrence of any event,
pursuant to any options, warrants, or other convertible or exchangeable
securities held by the applicable person, its Affiliates, or any member of a 13D
Group of which such person is a member. For purposes of this Agreement, the
Prudential Investor shall not be deemed to Beneficially Own Common Stock held in
customer accounts of any broker-dealer subsidiary of Prudential.
"Covered Transaction" shall mean any merger, consolidation, other
business combination, liquidation, sale of the Company or all or substantially
all of the assets of the Company and its subsidiaries or any other change of
control of the Company or similar extraordinary transaction, other than any
transaction in which the Company is the surviving and acquiring corporation and
in which the business or assets so acquired do not, or would not reasonably be
expected to, have a value greater than 50% of the assets of the Company (on a
consolidated basis) prior to such transaction.
"Group" shall mean a "group" as such term is used in Section
13(d)(3) of the 1934 Act.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended.
"person" shall mean any individual, corporation, partnership,
limited liability company, joint venture, trust, unincorporated organization, or
other form of business or legal entity.
"Prudential Investor" shall have the meaning given such term in
Section 7.2 of this Agreement.
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"Standstill Period" shall mean the period beginning on the date
hereof and ending on the earlier of (i) January 1, 2003, and (ii) the first date
following the date on which the aggregate Beneficial Ownership by the Prudential
Investors and their Affiliates (and any persons that are members of a 13D Group
of such Prudential Investors or any of their Affiliates are members,
notwithstanding the provisions of clause (i) of Section 6.5(a)) of shares of
Common Stock of the Company shall have been less than 9.8% of the number of
outstanding shares of Common Stock of the Company (treating any shares of Common
Stock issuable under options, warrants, or other convertible or exchangeable
securities Beneficially Owned by such Prudential Investors, their Affiliates,
and any member of such a 13D Group as being outstanding for this purpose).
Notwithstanding the foregoing, the Standstill Period also shall be terminated on
the earliest of:
(i) the acquisition by any person or Group other than a
Prudential Investor or any Affiliate thereof of Beneficial Ownership of 25% or
more of the outstanding shares of Common Stock of the Company, on a fully
diluted basis; or
(ii) any breach by the Company of this Agreement that is
neither cured nor desisted from within 30 days of receipt of written notice of
such breach and which would reasonably be expected to materially adversely
affect a Prudential Investor.
"13D Group" shall mean any group of persons acquiring, holding,
voting, or disposing of capital stock of the Company that would be required
under Section 13(d) of the 1934 Act and the rules and regulations thereunder (as
in effect, and based on legal interpretations thereof existing, on the date
hereof) to file a statement on Schedule 13D with the Securities and Exchange
Commission as a "person"
within the meaning of Section 13(d)(3) for the 1934 Act if such group
Beneficially Owned capital stock representing more than 5% of any class of
capital stock of the Company then outstanding.
6.6 Specific Performance.
Each of the Company and each Prudential Investor acknowledges and
agrees that, in view of the uniqueness of the arrangements contemplated by
Sections 6.1 and 6.5 and of this Agreement and the irreparable damage that the
Prudential Investor (with respect to Section 6.1) and the Company (with respect
to Section 6.5) would suffer in the event that any of the provisions of such
Sections are not performed by each Prudential Investor and the Company (or their
respective directors, officers, employees, financial advisors, legal advisors,
accountants, agents or representatives, as the case may be) in accordance with
their specific terms or are otherwise breached, that the parties hereto would
not have an adequate remedy at law for money damages in the event that such
Sections are not performed in accordance with their terms. Accordingly, each
party shall be entitled, without the requirement of posting a bond or other
security, to equitable relief, including injunctive relief and specific
performance, in the event of any breach of the provisions of such Sections by
the other, in addition to all other remedies available at law or in equity.
7. MISCELLANEOUS
7.1 Survival of Warranties and Covenants.
The warranties and representations of the Company and the Investor
contained in or made pursuant to Articles II and III of this Agreement shall
survive the Closing hereunder through and until
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the expiration of the statute of limitations applicable to each such warranty or
representation. The covenants contained in or made pursuant to Article VI hereof
shall survive the Closing hereunder indefinitely, except for any provisions
which expire by their terms. The representations and warranties contained in
this Agreement shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investor or the Company unless, as a
result of such investigation, the Investor or the Company, as the case may be,
acquires actual knowledge that a representation or warranty is untrue.
7.2 Successors and Assigns.
Except as otherwise provided herein, the terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties hereto. Except as specifically provided
hereby, the Investor shall not be permitted to assign any of its rights
hereunder to any third party; provided, however, that the Investor's rights
hereunder may be assigned to another Prudential Investor (either by the Investor
or another Prudential Investor). "Prudential Investor" shall mean (i) the
Investor, (ii) any Person controlled (as such term is defined in Rule 12b-2
under the 1934 Act), directly or indirectly, by The Prudential Insurance Company
of America and (iii) any one or more of Strategic Value Investors, LLC ("SVI"),
Strategic Value Investors International LLC ("SVI International") and the
Prudential Co-Investor and any Redemption Vehicle (as each such term is
described in the offering documentation of SVI and SVI International), to which
any Series B Preferred Shares or shares of Common Stock are transferred or to
which the rights under this Agreement are assigned (either before or after the
Closing), by the Investor or another Prudential Investor, and which agrees to be
bound by the terms of this Agreement. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement.
7.3 Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Maryland, without giving effect to the conflict of law
provisions thereof.
7.4 Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
7.5 Titles and Subtitles.
The title and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
7.6 Notices.
Unless otherwise provided, any notice required or permitted under
this Agreement shall be given in writing and shall be deemed effectively given
(a) upon personal delivery to the party to be notified, (b) on the fifth
business day after deposit with the United States Post Office, by registered or
certified mail, postage prepaid, (c) on the next business day after dispatch via
nationally recognized overnight courier or (d) upon confirmation of transmission
by facsimile, all addressed to the party to be notified at the address indicated
for such party below, or at such other address as such party may designate by
ten (10) days' advance written notice to the other parties. Notices should be
provided in accordance with this Section at the following addresses:
20
22
If to the Investor, to:
Strategic Value Investors
c/o The Prudential Insurance Company of America
c/o Prudential Real Estate Investors Inc.
0 Xxxxxx Xxxxx
Xxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
Attn.: SVI Portfolio Manager
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx, Xxxxxxx & Xxxx LLP
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
If to the Company, to:
Xxxxxxx X. Xxxxx Residential Realty, Inc.
0000 Xxxxxxx Xxxxx
Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn.: Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxx & Xxxxxxx L.L.P.
000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Attn.: J. Xxxxxx Xxxxxxx, Xx.
Facsimile: (000) 000-0000
7.7 Finder's Fees or Broker's Fees.
Each party represents that it neither is nor will be obligated for
any finder's fee or broker's fee or commission in connection with this
transaction. The Investor agrees to indemnify and hold harmless the Company from
any liability for any commission or compensation in the nature of a finder's fee
or broker's fee (and the costs and expenses of defending against such liability
or asserted liability) for which the Investor or any of its officers, employees
or representatives is responsible. The Company agrees to indemnify and hold
harmless the Investor from any liability for any commission or compensation in
the nature of a finder's fee or broker's fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company or
any of its officers, employees or representatives is responsible.
21
23
7.8 Expenses.
Each party shall pay all costs and expenses that it incurs with
respect to the negotiation, execution, delivery and performance of this
Agreement. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement or the Series B Preferred Articles
Supplementary, the prevailing party shall be entitled to reasonable attorneys'
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
7.9 Amendments and Waivers.
Any term of this Agreement may be amended, and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the Investor. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities, and the Company.
7.10 Severability.
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
7.11 Entire Agreement.
This Agreement constitutes the entire agreement among the parties
with respect to the subject matter hereof and no party shall be liable or bound
to any other party in any manner by any warranties, representations or covenants
except as specifically set forth herein.
22
24
IN WITNESS WHEREOF, the parties have executed this Purchase
Agreement as of the date first above written.
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxx
Its: Managing Director
XXXXXXX X. XXXXX RESIDENTIAL REALTY,
INC.
By: /s/ Xxxxxx Xxxxxxx, Xx.
----------------------------------------
Name: Xxxxxx Xxxxxxx, Xx.
Its: President
23
25
Schedule 2.1
SUBSIDIARIES
1. Xxxxxxx X. Xxxxx Residential Realty L.P.
2. First Xxxxxxx Associates Limited Partnership
3. Metropolitan Acquisition Finance LAP.
4. Xxxxx Employment Services L.P.
5. Xxxxx Property Holdings Columbia Road L.P.
6. Xxxxx Property Holdings One L.P.
7. Xxxxx Property Holdings One (D.C.) L.P.
8. Xxxxx Property Holdings Two, L.P.
9. Xxxxx Property Holdings Two (D.C.) L.P.
10. Xxxxx Property Holdings Three L.P.
11. Xxxxx Property Homage Three (D.C.) L.P.
12. Xxxxx Property Holdings Four L.P.
13. Xxxxx Properly Holdings Five L.P.
14. Xxxxx Property Holdings Five (D.C.) L.P.
15. Xxxxx Property Holdings Six LP.
16. Xxxxx Property Holdings Six (D.C.) L.P.
17. Xxxxx Property Holdings Seven L.P.
18. Xxxxx Properly Holding Xxxxxxx Xxxxxx L.P.
19. Xxxxx Property Holdings Kenmore L.P.
20. Xxxxx Property Holdings Van Ness L.P.
21. Xxxxx Property Holdings Crystal Plaza L.L.C.
22. Xxxxx One, Inc.
23. Xxxxx Two, Inc.
24. Xxxxx Three, Inc.
25. Xxxxx Four, Inc.
26. Xxxxx Five, Inc.
27. Xxxxx Six, Inc.
28. Xxxxx Seven, Inc.
24
26
EXHIBIT A
Series B Cumulative Convertible
Redeemable Preferred Stock
ARTICLES SUPPLEMENTARY
XXXXXXX X. XXXXX RESIDENTIAL REALTY, INC.
=====================================
Articles Supplementary of Board of Directors
Classifying and Designating a Series of
Preferred Stock as
Series B Cumulative Convertible Redeemable
Preferred Stock and
Fixing Distribution and Other Preferences
and Rights of Such Series
=====================================
Dated as of September 23, 1997
27
XXXXXXX X. XXXXX RESIDENTIAL REALTY, INC.
=====================================
Articles Supplementary of Board of Directors
Classifying and Designating a Series of
Preferred Stock as
Series B Cumulative Convertible Redeemable
Preferred Stock and
Fixing Distribution and Other Preferences
and Rights of Such Series
=====================================
Xxxxxxx X. Xxxxx Residential Realty, Inc., a Maryland corporation
(the "Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland pursuant to section 8-203(b) of the Annotated Code of
Maryland that:
FIRST: Pursuant to authority granted by the Amended and Restated
Articles of Incorporation of the Corporation, the Board of Directors on
September 10, 1997 adopted a resolution designating and classifying 1,216,666
unissued and unclassified shares of capital stock as Series B Cumulative
Convertible Redeemable Preferred Stock.
SECOND: The following is a description of the Series B Cumulative
Convertible Redeemable Preferred Stock, including the preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption thereof:
Section 1. Number of Shares and Designation. This class of preferred
stock shall be designated as Series B Cumulative Convertible Redeemable
Preferred Stock and the number of shares which shall constitute such series
shall not be more than 1,216,666 shares, par value $0.01 per share, which number
may be decreased (but not below the number thereof then outstanding) from time
to time by the Board of Directors.
Section 2. Definitions. For purposes of the Series B Preferred
Shares, the following terms shall have the meanings indicated:
"Board of Directors" shall mean the Board of Directors of the
Corporation or any committee authorized by such Board of Directors
to perform any of its responsibilities with respect to the Series B
Preferred Shares.
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which state or federally chartered banking
institutions in New York City, New York are not required to be open.
"Call Date" shall mean the date specified in the notice to
holders required under Section 5(d) as the Call Date.
"Common Shares" shall mean the shares of Common Stock, par
value $0.01 per share, of the Corporation.
28
"Constituent Person" shall have the meaning set forth in
Section 6(e).
"Conversion Price" shall mean the conversion price per Common
Share for which the Series B Preferred Shares are convertible, as
such Conversion Price may be adjusted pursuant to Section 6. The
initial conversion price shall be $28.50 (equivalent to a conversion
rate of one Common Share for each Series B Preferred Share).
"Current Market Price" of publicly traded shares of Common
Stock or any other class of shares of capital stock or other
security of the Corporation or any other issuer for any day shall
mean the last reported sales price, regular way on such day, or, if
no sale takes place on such day, the average of the reported closing
bid and asked prices on such day, regular way, in either case as
reported on the New York Stock Exchange ("NYSE") or, if such
security is not listed or admitted for trading on the NYSE, on the
principal national securities exchange on which such security is
listed or admitted for trading or, if not listed or admitted for
trading on any national securities exchange, on the Nasdaq Stock
Market ("NASDAQ") or, if such security is not quoted on such
National Market System, the average of the closing bid and asked
prices on such day in the over-the-counter market as reported by
NASDAQ or, if bid and asked prices for such security on such day
shall not have been reported through NASDAQ, the average of the bid
and asked prices on such day as furnished by any NYSE member firm
regularly making a market in such security selected for such purpose
by the Board of Directors.
"Dividend Payment Date" shall mean (i) for any Dividend Period
with respect to which the Corporation pays a dividend on the Common
Shares, the date on which such dividend is paid, or (ii) for any
Dividend Period with respect to which the Corporation does not pay a
dividend on the Common Shares, a date to be set by the Board of
Directors, which date shall not be later than the forty-fifth
calendar day after the end of the applicable Dividend Period.
"Dividend Periods" shall mean quarterly dividend periods
commencing on January 1, April 1, July 1 and October 1 of each year
and ending on and including the day preceding the first day of the
next succeeding Dividend Period, except that: (i) the initial
Dividend Period shall commence on July 1, 1997 and end on and
include September 30, 1997, and (ii) the Dividend Period during
which any Series B Preferred Shares shall be redeemed pursuant to
Section 5 shall end on and include the Call Date with respect to the
Series B Preferred Shares being redeemed.
"Expiration Time" shall have the meaning set forth in Section
6(d)(iv).
"Fair Market Value" shall mean the average of the daily
Current Market Prices of a Common Share on the five (5) consecutive
Trading Days selected by the Corporation commencing not more than 20
Trading Days before, and ending not later than, the earlier of the
day in question and the day before the "ex date" with respect to the
issuance or distribution requiring such computation. The term "ex
date," when used with respect to any issuance or distribution, means
the first day on which the Common Shares trade regular way, without
the right to receive such issuance or distribution, on the exchange
or in the market, as the case may be, used to determine that day's
Current Market Price.
Exh. A-2
29
"Fully Junior Shares" shall mean the Common Shares and any
other class or series of shares of capital stock of the Corporation
now or hereafter issued and outstanding over which the Series B
Preferred Shares have preference or priority in both (i) the payment
of dividends and (ii) the distribution of assets on any liquidation,
dissolution or winding up of the Corporation.
"Funds from Operations" shall mean net income (loss) (computed
in accordance with generally accepted accounting principles)
excluding gains (or losses) from debt restructuring, and
distributions in excess of earnings allocated to other Operating
Partnership interests or minority interests (as reflected in the
financial statements of the Corporation) plus
depreciation/amortization of assets unique to the real estate
industry, all computed in a manner consistent with the revised
definition of Funds From Operations adopted by the National
Association of Real Estate Investment Trusts (NAREIT), in its White
Paper dated March 1995, as such definitions may be modified from
time to time, as determined by the Corporation in good faith.
"Issue Date" shall mean the date on which the first Series B
Preferred Shares are issued.
"Junior Shares" shall mean the Common Shares and any other
class or series of capital stock of the Corporation now or hereafter
issued and outstanding over which the Series B Preferred Shares have
preference or priority in either (i) the payment of dividends or
(ii) the distribution of assets on any liquidation, dissolution or
winding up of the Corporation.
"Liquidation Preference" shall have the meaning set forth in
Section 4(a).
"Non-Electing Share" shall have the meaning set forth in
Section 6(e).
"Operating Partnership" shall mean the Xxxxxxx X. Xxxxx
Residential Realty, L.P., a Delaware limited partnership.
"Parity Shares" shall have the meaning set forth in Section
8(b).
"Person" shall mean any individual, firm, partnership,
corporation, limited liability company or other entity, and shall
include any successor (by merger or otherwise) of such entity.
"Purchased Shares" shall have the meaning set forth in Section
6(d)(iv).
"Securities" and "Security" shall have the meanings set forth
in Section 6(d)(iii).
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Series B Preferred Shares" shall mean the shares of Series B
Cumulative Convertible Redeemable Preferred Stock.
"Set apart for payment" shall be deemed to include, without
any action other than the following, the recording by the
Corporation in its accounting ledgers of any
Exh. A-3
30
accounting or bookkeeping entry which indicates, pursuant to a
declaration of dividends or other distribution by the Board of
Directors, the allocation of funds to be so paid on any series or
class of shares of capital stock of the Corporation; provided,
however, that if any funds for any class or series of Junior Shares
or any class or series of shares of capital stock ranking on a
parity with the Series B Preferred Shares as to the payment of
dividends are placed in a separate account of the Corporation or
delivered to a disbursing, paying or other similar agent, then "set
apart for payment" with respect to the Series B Preferred Shares
shall mean placing such funds in a separate account or delivering
such funds to a disbursing, paying or other similar agent.
"Trading Day" shall mean any day on which the securities in
question are traded on the NYSE, or if such securities are not
listed or admitted for trading on the NYSE, on the principal
national securities exchange on which such securities are listed or
admitted, or if not listed or admitted for trading on any national
securities exchange, on the National Market System of NASDAQ, or if
such securities are not quoted on such National Market System, in
the securities market in which the securities are traded.
"Transaction" shall have the meaning set forth in Section
6(e).
"Transfer Agent" shall mean First Union National Bank, or such
other agent or agents of the Corporation as may be designated by the
Board of Directors or their designee as the transfer agent,
registrar and dividend disbursing agent for the Series B Preferred
Shares.
"Units" shall mean Partnership Units as that term is defined
in the Amended and Restated Agreement of Limited Partnership of the
Operating Partnership.
"Voting Preferred Shares" shall have the meaning set forth in
Section 9.
"Weighted Average Trading Price" shall mean, for any Trading
Day, the number obtained by dividing (i) the sum of the products,
for each sale of Common Shares on such Trading Day, of (a) the sale
price per Common Share and (b) the number of Common Shares sold by
(ii) the total number of Common Shares sold on such Trading Day.
Section 3. Dividends.
(a) The holders of Series B Preferred Shares shall be entitled
to receive, when, as and if declared by the Board of Directors, out
of funds legally available for the payment of dividends, cumulative
preferential dividends payable in cash in an amount per share equal
to the greater of (i) 7.0877% of the Liquidation Preference per
annum (equivalent to $2.02 per share) or (ii) the ordinary cash
dividends (determined on each Dividend Payment Date) on the Common
Shares, or portion thereof, into which a Series B Preferred Share is
convertible. The dividends referred to in clause (ii) of the
preceding sentence shall equal the number of Common Shares, or
portion thereof, into which a Series B Preferred Share is
convertible, multiplied by the most current quarterly dividend on a
Common Share on or before the applicable Dividend Payment Date. If
the Corporation pays an ordinary cash dividend on the Common Shares
with respect to a Dividend Period after the date on which the
Dividend Payment Date is declared pursuant
Exh. A-4
31
to clause (ii) of the definition of Dividend Payment Date and the
dividend calculated pursuant to clause (ii) of this paragraph (a)
with respect to such Dividend Period is greater than the dividend
previously declared on the Series B Preferred Shares with respect to
such Dividend Period, the Corporation shall pay an additional
dividend to the holders of the Series B Preferred Shares on the date
on which the dividend on the Common Shares is paid, in an amount
equal to the difference between (y) the dividend calculated pursuant
to clause (ii) of this paragraph (a) and (z) the amount of dividends
previously declared on the Series B Preferred Shares with respect to
such Dividend Period. The dividends shall begin to accrue and shall
be fully cumulative from the first day of the applicable Dividend
Period, whether or not in any Dividend Period or Periods there shall
be funds of the Corporation legally available for the payment of
such dividends, and shall be payable quarterly, when, as and if
declared by the Board of Directors, in arrears on Dividend Payment
Dates. Each such dividend shall be payable in arrears to the holders
of record of Series B Preferred Shares as they appear in the records
of the Corporation at the close of business on such record dates,
not less than 10 nor more than 50 days preceding such Dividend
Payment Dates thereof, as shall be fixed by the Board of Directors.
Accrued and unpaid dividends for any past Dividend Periods may be
declared and paid at any time and for such interim periods, without
reference to any regular Dividend Payment Date, to holders of record
on such date, not less than 10 nor more than 50 days preceding the
payment date thereof, as may be fixed by the Board of Directors. Any
dividend payment made on Series B Preferred Shares shall first be
credited against the earliest accrued but unpaid dividend due with
respect to Series B Preferred Shares which remains payable.
(b) The amount of dividends referred to in clause (i) of
Section 3(a) payable for each full Dividend Period on the Series B
Preferred Shares shall be computed by dividing the annual dividend
rate by four. The distribution payable with respect to the initial
Dividend Period will include a full dividend with respect to such
Dividend Period, notwithstanding the fact that the Series B
Preferred Shares were issued after September 30, 1997 (i.e., the
greater of $0.505 per Series B Share or the ordinary cash dividend
paid on the Common Shares with respect to the quarterly period
ending on or about September 30, 1997). The amount of dividends
payable for any period shorter than a full Dividend Period, on the
Series B Preferred Shares shall be computed on the basis of a
360-day year of twelve 30-day months. Holders of Series B Preferred
Shares shall not be entitled to any dividends, whether payable in
cash, property or shares, in excess of cumulative dividends, as
herein provided, on the Series B Preferred Shares. No interest, or
sum of money in lieu of interest, shall be payable in respect of any
dividend payment or payments on the Series B Preferred Shares which
may be in arrears.
(c) So long as any Series B Preferred Shares are outstanding,
no dividends, except as described in the immediately following
sentence, shall be declared or paid or set apart for payment on any
class or series of Parity Shares for any period unless 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 Series B Preferred Shares for all
Dividend Periods terminating on or prior to the dividend payment
date on such class or series of Parity Shares. When dividends are
not paid in full or a sum sufficient for such payment is not set
apart, as aforesaid, all dividends declared upon Series B Preferred
Shares and all dividends declared upon any other class or series of
Parity Shares shall be declared ratably in proportion to the
respective amounts of
Exh. A-5
32
dividends accumulated and unpaid on the Series B Preferred Shares
and accumulated and unpaid on such Parity Shares.
(d) So long as any Series B Preferred Shares are outstanding,
no dividends (other than dividends or distributions paid solely in
shares of, or options, warrants or rights to subscribe for or
purchase shares of, Fully Junior Shares) shall be declared or paid
or set apart for payment or other distribution shall be declared or
made or set apart for payment upon Junior Shares, nor shall any
Junior Shares be redeemed, purchased or otherwise acquired (other
than a redemption, purchase or other acquisition of Common Shares
made for purposes of an employee incentive or benefit plan of the
Corporation or any subsidiary) for any consideration (or any moneys
be paid to or made available for a sinking fund for the redemption
of any Junior Shares) by the Corporation, directly or indirectly
(except by conversion into or exchange for Fully Junior Shares),
unless in each case (i) the full cumulative dividends on all
outstanding Series B Preferred Shares and any other Parity Shares of
the Corporation shall have been or contemporaneously are declared
and paid or declared and set apart for payment for all past Dividend
Periods with respect to the Series B Preferred Shares and all past
dividend periods with respect to such Parity Shares and (ii)
sufficient funds shall have been or contemporaneously are declared
and paid or declared and set apart for the payment of the dividend
for the current Dividend Period with respect to the Series B
Preferred Shares and the current dividend period with respect to
such Parity Shares.
(e) No distributions on Series B Preferred Shares shall be
declared by the Board of Directors or paid or set apart for payment
by the Corporation at such time as the terms and provisions of any
agreement of the Corporation, including any agreement relating to
its indebtedness, prohibits such declaration, payment or setting
apart for payment or provides that such declaration, payment or
setting apart for payment would constitute a breach thereof or a
default thereunder, or if such declaration or payment shall be
restricted or prohibited by law.
Exh. A-6
33
Section 4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, before any
payment or distribution of the assets of the Corporation (whether
capital or surplus) shall be made to or set apart for the holders of
Junior Shares, the holders of the Series B Preferred Shares shall be
entitled to receive Twenty Eight Dollars and Fifty Cents ($28.50)
(the "Liquidation Preference") per Series B Preferred Share plus an
amount equal to all dividends (whether or not earned or declared)
accumulated, accrued and unpaid thereon to the date of final
distribution to such holders; but such holders shall not be entitled
to any further payment; provided, that the dividend payable with
respect to the Dividend Period containing the date of final
distribution shall be equal to the greater of (i) the dividend
provided in Section 3(a)(i) or (ii) the dividend determined pursuant
to Section 3(a)(ii) for the preceding Dividend Period. Until the
holders of the Series B Preferred Shares have been paid the
Liquidation Preference in full, no payment will be made to any
holder of Junior Stock upon the liquidation, dissolution, or winding
up of the Corporation. If, upon any liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation, or
proceeds thereof, distributable among the holders of the Series B
Preferred Shares shall be insufficient to pay in full the
preferential amount aforesaid and liquidating payments on any other
shares of any class or series of Parity Shares, then such assets, or
the proceeds thereof, shall be distributed among the holders of
Series B Preferred Shares and any such other Parity Shares ratably
in accordance with the respective amounts that would be payable on
such Series B Preferred Shares and any such other Parity Shares if
all amounts payable thereon were paid in full. For the purposes of
this Section 4, (i) a consolidation or merger of the Corporation
with one or more corporations, real estate investment trusts or
other entities, (ii) a sale, lease or conveyance of all or
substantially all of the Corporation's property or business or (iii)
a statutory share exchange shall not be deemed to be a liquidation,
dissolution or winding up, voluntary or involuntary, of the
Corporation.
(b) Subject to the rights of the holders of shares of any
Parity Shares upon liquidation, dissolution or winding up, upon any
liquidation, dissolution or winding up of the Corporation, after
payment shall have been made in full to the holders of the Series B
Preferred Shares, as provided in this Section 4, any other series or
class or classes of Junior Shares shall, subject to the respective
terms and provisions (if any) applying thereto, be entitled to
receive any and all assets remaining to be paid or distributed, and
the holders of the Series B Preferred Shares shall not be entitled
to share therein.
Section 5. Redemption at the Option of the Corporation.
(a) The Series B Preferred Shares shall be redeemable by the
Corporation, at its option, in whole at any time or from time to
time in part as set forth herein, subject to the following
provisions. Series B Preferred Shares may be redeemed, in whole or
in part, at the option of the Corporation, at any time by issuing
and delivering to each holder for each Series B Preferred Share to
be redeemed such number of authorized but previously unissued Common
Shares as equals the Liquidation Preference (excluding any
accumulated, accrued and unpaid dividends, if any, to the Call Date,
which are to be paid in cash as provided below, whether or not
earned or declared) per Series B Preferred
Exh. A-7
34
Share divided by the Conversion Price as in effect as of the opening
of business on the Call Date; provided that the Corporation may not
issue to any holder a number of Common Shares that would result in
such holder exceeding the Common Stock Ownership Limit then
applicable to such holder; provided further that the Corporation
shall deliver to each holder, as a condition to the redemption of
Series B Shares pursuant to this paragraph, a certificate of an
officer of the Corporation stating that the Corporation has not then
commenced liquidation or bankruptcy proceedings and does not then
have any intention of commencing any such proceedings.
(b) Series B Preferred Shares shall be redeemed by the
Corporation on the date specified in the notice to holders required
under paragraph (d) of this Section 5 (the "Call Date"). The Call
Date shall be selected by the Corporation, shall be specified in the
notice of redemption, and shall be not less than 30 day nor more
than 60 days after the date notice of redemption is sent by the
Corporation. Upon any redemption of Series B Preferred Shares
pursuant to paragraph (a) of this Section 5, the Corporation shall
pay in cash to the holder of such shares an amount equal to all
accumulated, accrued, and unpaid dividends, if any, to the Call
Date, whether or not earned or declare as provided in this
paragraph. Immediately prior to authorizing any redemption of the
Series B Preferred Shares, and as a condition precedent for such
redemption, the Corporation, by resolution of its Board of
Directors, shall declare a mandatory dividend on the Series B
Preferred Shares, payable in cash on the Call Date in an amount
equal to all accumulated, accrued, and unpaid dividends as of the
Call Date on the Series B Preferred Shares to be redeemed, which
amount shall be added to the redemption price, except to the extent
such dividends are to be paid pursuant to the immediately following
sentence. If the Call Date falls after a dividend payment record
date and prior to the corresponding Dividend Payment Date, then each
holder of Series B Preferred Shares at the close of business on such
dividend payment record date shall be entitled to the dividend
payable on such shares on the corresponding Dividend Payment Date
notwithstanding the redemption of such shares prior to such Dividend
Payment Date. Except as provided above, the Corporation shall make
no payment or allowance for accumulated or accrued dividends on
Series B Preferred Shares called for redemption or on the Common
Shares issued upon such redemption.
(c) If full cumulative dividends on the Series B Preferred
Shares and any other class or series of Parity Shares of the
Corporation have not been declared and paid or declared and set
apart for payment, the Series B Preferred Shares may not be redeemed
under this Section 5 in part and neither the Corporation nor any of
its subsidiaries may purchase or acquire Series B Preferred Shares,
otherwise than pursuant to a purchase or exchange offer made on the
same terms to all holders of Series B Preferred Shares.
(d) Notice of the redemption of any Series B Preferred Shares
under this Section 5 shall be mailed by first-class mail to each
holder of record of Series B Preferred Shares to be redeemed at the
address of each such holder as shown on the Corporation's records,
not less than 30 nor more than 90 days prior to the Call Date.
Neither the failure to mail any notice required by this paragraph
(d), nor any defect therein or in the mailing thereof, to any
particular holder, shall affect the sufficiency of the notice or the
validity of the proceedings for redemption with respect to the other
holders. Any notice which was mailed in the manner herein provided
shall be conclu-
Exh. A-8
35
sively presumed to have been duly given on the date mailed whether
or not the holder receives the notice. Each such mailed notice shall
state, as appropriate: (1) the Call Date; (2) the number of Series B
Preferred Shares to be redeemed and, if fewer than all the shares
held by such holder are to be redeemed, the number of such shares to
be redeemed from such holder; (3) the number of Common Shares to be
issued in redemption of the Series B Preferred Shares to be
redeemed; (4) the place or places at which certificates for such
shares are to be surrendered; (5) the then-current Conversion Price;
and (6) that dividends on the shares to be redeemed shall cease to
accrue on such Call Date except as otherwise provided herein. Notice
having been mailed as aforesaid, from and after the Call Date
(unless the Corporation shall fail to make available an amount of
Common Shares and cash necessary to effect such redemption,
including all accumulated, accrued, and unpaid dividends to the Call
Date, whether or not earned or declared), (i) except as otherwise
provided herein, dividends on the Series B Preferred Shares so
called for redemption shall cease to accumulate or accrue on the
Series B Preferred Shares called for redemption (except that, in the
case of a Call Date after a dividend payment record date and prior
to the corresponding Dividend Payment Date, holders of Series B
Preferred Shares on the dividend payment record date will be
entitled on such Dividend Payment Date to receive the dividend paid
on such shares), (ii) such shares shall no longer be deemed to be
outstanding, and (iii) all rights of the holders thereof as holders
of Series B Preferred Shares of the Corporation shall cease (except
the rights to convert and to receive the Common Shares and/or cash
payable upon such redemption, without interest thereon, upon
surrender and endorsement of their certificates if so required and
to receive any dividends payable thereon). The Corporation's
obligation to provide Common Shares and/or cash in accordance with
the preceding sentence shall be deemed fulfilled if, on or before
the Call Date, the Corporation shall deposit with a bank or trust
company (which may be an affiliate of the Corporation) that has an
office in the Borough of Manhattan, City of New York, and that has,
or is an affiliate of a bank or trust company that has, capital and
surplus of at least $500,000,000, such number of Common Shares and
such amount of cash as is necessary for such redemption, in trust,
with irrevocable instructions that such Common Shares and/or cash be
applied to the redemption of the Series B Preferred Shares so called
for redemption. In the case of any redemption pursuant to paragraph
(a)(i) of this Section 5, at the close of business on the Call Date,
each holder of Series B Preferred Shares to be redeemed (unless the
Corporation defaults in the delivery of the Common Shares or cash
payable on such Call Date) shall be deemed to be the record holder
of the Common Shares into which such Series B Preferred Shares are
to be converted at redemption, regardless of whether such holder has
surrendered the certificates representing the Series B Preferred
Shares to be so redeemed. No interest shall accrue for the benefit
of the holders of Series B Preferred Shares to be redeemed on any
cash so set aside by the Corporation. Subject to applicable escheat
laws, any such cash unclaimed at the end of two years from the Call
Date shall revert to the general funds of the Corporation, after
which reversion the holders of such shares so called for redemption
shall look only to the general funds of the Corporation for the
payment of such cash.
As promptly as practicable after the surrender in accordance
with such notice of the certificates for any such shares so redeemed
(properly endorsed or assigned for transfer, if the Corporation
shall so require and if the notice shall so state), such
certificates shall be exchanged in accordance with such notice for
certificates representing Common Shares and/or any cash (without
interest thereon) for which such shares have
Exh. A-9
36
been redeemed. If fewer than all the outstanding Series B Preferred
Shares are to be redeemed, shares to be redeemed shall be selected
by the Corporation from outstanding Series B Preferred Shares not
previously called for redemption pro rata (as nearly as may be), by
lot or by any other method determined by the Corporation in its sole
discretion to be equitable. If fewer than all the Series B Preferred
Shares represented by any certificate are redeemed, then new
certificates representing the unredeemed shares shall be promptly
issued without cost to the holder thereof.
(e) In the case of any redemption pursuant to paragraph (a)(i)
of this Section 5,
(i) no fractional Common Shares or scrip representing
fractions of Common Shares shall be issued upon redemption of
the Series B Preferred Common Shares. Instead of any
fractional interest in Common Shares that would otherwise be
deliverable upon redemption of Series B Preferred Shares, the
Corporation shall pay to the holder of such share an amount in
cash (rounded to the nearest cent) based upon the Current
Market Price of the Common Shares on the Trading Day
immediately preceding the Call Date. If more than one share
shall be surrendered for redemption at one time by the same
holder, the number of full Common Shares issuable upon
redemption thereof shall be computed on the basis of the
aggregate number of Series B Preferred Shares so surrendered.
(ii) the Corporation covenants that any Common Shares
issued upon redemption of Series B Preferred Shares shall be
validly issued, fully paid and non-assessable. The Corporation
shall use its reasonable best efforts to list the Common
Shares required to be delivered upon any such redemption of
Series B Preferred Shares, prior to such redemption, upon each
national securities exchange, if any, upon which the
outstanding Common Shares are listed at the time of such
delivery.
Section 6. Conversion. Holders of Series B Preferred Shares shall
have the right to convert all or a portion of such shares into Common Shares, as
follows:
(a) Subject to and upon compliance with the provisions of this
Section 6 and the provisions of Article VIII of the Corporation's
Articles of Incorporation, a holder of Series B Preferred Shares
shall have the right, at his or her option, on or after the date 90
days after the Issue Date, to convert such shares into the number of
authorized but previously unissued fully paid and non-assessable
Common Shares obtained by dividing the aggregate Liquidation
Preference of such shares (exclusive of accumulated, accrued, and
unpaid dividends, which are to be paid in cash as provided below) by
the Conversion Price (as in effect at the time and on the date
provided for in the last paragraph of paragraph (b) of this Section
6) by surrendering such shares to be converted, such surrender to be
made in the manner provided in paragraph (b) of this Section 6.
Notwithstanding any provision of Article VIII of the Corporation's
Articles of Incorporation, a holder shall be entitled to convert
shares of Series B Preferred Stock immediately prior to the record
date for payments of distributions to holders of Common Shares upon
any liquidation or winding up of the Company.
(b) In order to exercise the conversion right, the holder of
each Series B Preferred Share to be converted shall surrender the
certificate representing such share,
Exh. A-10
37
duly endorsed or assigned to the Corporation or in blank, at the
office of the Transfer Agent, accompanied by written notice to the
Corporation that the holder thereof elects to convert such Series B
Preferred Shares. Unless the shares issuable on conversion are to be
issued in the same name as the name in which such Series B Preferred
Share is registered, each share surrendered for conversion shall be
accompanied by instruments of transfer, in form satisfactory to the
Corporation, duly executed by the holder or such holder's duly
authorized attorney and an amount sufficient to pay any transfer or
similar tax (or evidence reasonably satisfactory to the Corporation
demonstrating that such taxes have been paid).
Holders of Series B Preferred Shares at the close of business
on a dividend payment record date shall be entitled to receive the
dividend payable on such shares on the corresponding Dividend
Payment Date notwithstanding the conversion thereof following such
dividend payment record date and prior to such Dividend Payment
Date. However, Series B Preferred Shares surrendered for conversion
during the period between the close of business on any dividend
payment record date with respect to the Series B Preferred Shares
and the opening of business on the dividend payment record date with
respect to the Common Shares for the corresponding Dividend Period
(except shares converted after the issuance of notice of redemption
with respect to a Call Date during such period, such Series B
Preferred Shares being entitled to such dividend on the Dividend
Payment Date) must be accompanied by payment of an amount equal to
the dividend payable on such Common Shares on such Dividend Payment
Date. A holder of Series B Preferred Shares on a dividend payment
record date who (or whose transferee) tenders any such shares for
conversion into Common Shares on the corresponding Dividend Payment
Date will receive the dividend payable by the Corporation on such
Series B Preferred Shares on such date, and the converting holder
need not include payment of the amount of such dividend upon
surrender of Series B Preferred Shares for conversion. Except as
provided above, the Corporation shall make no payment or allowance
for unpaid dividends, whether or not in arrears, on converted shares
or for dividends on the Common Shares issued upon such conversion.
As promptly as practicable after the surrender of certificates
for Series B Preferred Shares as aforesaid, the Corporation shall
issue and shall deliver at such office to such holder, or on his or
her written order, a certificate or certificates for the number of
full Common Shares issuable upon the conversion of such shares in
accordance with provisions of this Section 6, and any fractional
interest in respect of a Common Share arising upon such conversion
shall be settled as provided in paragraph (c) of this Section 6.
Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which the
certificates for Series B Preferred Shares shall have been
surrendered and such notice shall have been received by the
Corporation as aforesaid (and if applicable, payment of an amount
equal to the dividend payable on such shares shall have been
received by the Corporation as described above), and the person or
persons in whose name or names any certificate or certificates for
Common Shares shall be issuable upon such conversion shall be deemed
to have become the holder or holders of record of the shares
represented thereby at such time on such date and such conversion
shall be at the Conversion Price in effect at such time on such date
unless the share transfer books of the Corporation shall be closed
on that date, in which event such
Exh. A-11
38
person or persons shall be deemed to have become such holder or
holders of record at the close of business on the next succeeding
day on which such share transfer books are open, but such conversion
shall be at the Conversion Price in effect on the date on which such
shares shall have been surrendered and such notice received by the
Corporation.
(c) No fractional shares or scrip representing fractions of
Common Shares shall be issued upon conversion of the Series B
Preferred Shares. Instead of any fractional interest in a Common
Share that would otherwise be deliverable upon the conversion of a
Series B Preferred Share, the Corporation shall pay to the holder of
such share an amount in cash based upon the Current Market Price of
the Common Shares on the Trading Day immediately preceding the date
of conversion. If more than one share shall be surrendered for
conversion at one time by the same holder, the number of full Common
Shares issuable upon conversion thereof shall be computed on the
basis of the aggregate number of Series B Preferred Shares so
surrendered.
(d) The Conversion Price shall be adjusted from time to time
as follows:
(i) If the Corporation shall after the Issue Date (A)
pay a dividend or make a distribution on its capital shares in
Common Shares, (B) subdivide its outstanding Common Shares
into a greater number of shares, (C) combine its outstanding
Common Shares into a smaller number of shares or (D) issue any
shares of capital stock by reclassification of its Common
Shares, the Conversion Price in effect at the opening of
business on the day following the date fixed for the
determination of stockholders entitled to receive such
dividend or distribution or at the opening of business on the
Business Day next following the day on which such subdivision,
combination or reclassification becomes effective, as the case
may be, shall be adjusted so that the holder of any Series B
Preferred Share thereafter surrendered for conversion shall be
entitled to receive the number of Common Shares that such
holder would have owned or have been entitled to receive after
the happening of any of the events described above as if such
Series B Preferred Shares had been converted immediately prior
to the record date in the case of a dividend or distribution
or the effective date in the case of a subdivision,
combination or reclassification. An adjustment made pursuant
to this subparagraph (i) shall become effective immediately
after the opening of business on the Business Day next
following the record date (except as provided in paragraph (h)
below) in the case of a dividend or distribution and shall
become effective immediately after the opening of business on
the Business Day next following the effective date in the case
of a subdivision, combination or reclassification.
(ii) If the Corporation shall issue after the Issue Date
rights, options or warrants to all holders of Common Shares
entitling them (for a period expiring within 45 days after the
record date described below) to subscribe for or purchase
Common Shares at a price per share less than 94% (100% if a
stand-by underwriter is used and charges the Corporation a
commission) of the Fair Market Value per Common Share on the
record date for the determination of stockholders entitled to
receive such rights, options or warrants, then the Conversion
Price in effect at the opening of business on the Business Day
next following such record date shall be adjusted to equal the
price determined by
Exh. A-12
39
multiplying (A) the Conversion Price in effect immediately
prior to the opening of business on the Business Day next
following the date fixed for such determination by (B) a
fraction, the numerator of which shall be the sum of (x) the
number of Common Shares outstanding on the close of business
on the date fixed for such determination and (y) the number of
shares that the aggregate proceeds to the Corporation from the
exercise of such rights, options or warrants for Common Shares
would purchase at 94% of such Fair Market Value (or 100% in
the case of a stand-by underwriting), and the denominator of
which shall be the sum of (x) the number of Common Shares
outstanding on the close of business on the date fixed for
such determination and (y) the number of additional Common
Shares offered for subscription or purchase pursuant to such
rights, options or warrants. Such adjustment shall become
effective immediately after the opening of business on the day
next following such record date (except as provided in
paragraph (h) below). In determining whether any rights,
options or warrants entitle the holders of Common Shares to
subscribe for or purchase Common Shares at less than 94% of
such Fair Market Value (or 100% in the case of a stand-by
underwriting), there shall be taken into account any
consideration received by the Corporation upon issuance and
upon exercise of such rights, options or warrants, the value
of such consideration, if other than cash, to be determined by
the Board of Directors.
(iii) If the Corporation shall distribute to all holders
of its Common Shares any securities of the Corporation (other
than Common Shares) or evidence of its indebtedness or assets
(including cash other than cumulative cash dividends or cash
distributions paid with respect to the Common Shares after
December 31, 1996 which are not in excess of the following:
the sum of (A) the Corporation's cumulative undistributed
Funds from Operations at December 31, 1996, plus (B) the
cumulative amount of Funds from Operations, as determined by
the Board of Directors, after December 31, 1996, minus (C) the
cumulative amount of dividends accrued or paid in respect of
the Series B Preferred Shares or any other class or series of
preferred stock of the Corporation after the Issue Date) or
rights, options or warrants to subscribe for or purchase any
of its securities (excluding those rights, options and
warrants issued to all holders of Common Shares entitling them
for a period expiring within 45 days after the record date
referred to in subparagraph (ii) above to subscribe for or
purchase Common Shares, which rights and warrants are referred
to in and treated under subparagraph (ii) above) (any of the
foregoing being hereinafter in this subparagraph (iii)
collectively called the "Distribution"), then in each such
case the Conversion Price shall be adjusted so that it shall
equal the price determined by multiplying (x) the Conversion
Price in effect immediately prior to the close of business on
the date fixed for the determination of stockholders entitled
to receive such Distribution by (y) a fraction, the numerator
of which shall be the Fair Market Value per Common Share on
the record date described below less the then fair market
value (as determined by the Board of Directors, whose
determination shall be conclusive and shall be described in a
resolution of the Board of Directors), of the portion of the
Distribution so distributed and applicable to one Common
Share, and the denominator of which shall be the Fair Market
Value per Common Share on the record date mentioned below.
Such adjustment shall become effective immediately at the
opening of business on the
Exh. A-13
40
Business Day next following (except as provided in paragraph
(h) below) the record date for the determination of
stockholders entitled to receive such Distribution. For the
purposes of this subparagraph (iii), a Distribution, which is
distributed not only to the holders of the Common Shares on
the date fixed for the determination of stockholders entitled
to such Distribution, but also is distributed with each Common
Share delivered to a Person converting a Series B Preferred
Share after such determination date, shall not require an
adjustment of the Conversion Price pursuant to this
subparagraph (iii); provided that on the date, if any, on
which a person converting a Series B Preferred Share would no
longer be entitled to receive such Distribution with a Common
Share (other than as a result of the termination of all such
Distribution), such Distribution shall be deemed to have
occurred and the Conversion Price shall be adjusted as
provided in this subparagraph (iii) (and such day shall be
deemed to be "the date fixed for the determination of the
stockholders entitled to receive such Distribution" and "the
record date" within the meaning of the two preceding
sentences).
(iv) In case a tender or exchange offer (which term
shall not include open market repurchases by the Corporation)
made by the Corporation or any subsidiary of the Corporation
for all or any portion of the Common Shares shall expire and
such tender or exchange offer shall involve the payment by the
Corporation or such subsidiary of consideration per Common
Share having a fair market value (as determined in good faith
by the Board of Directors, whose determination shall be
conclusive and described in a resolution of the Board of
Directors), at the last time (the "Expiration Time") tenders
or exchanges may be made pursuant to such tender or exchange
offer, that exceeds the Current Market Price per Common Share
on the Trading Day next succeeding the Expiration Time, the
Conversion Price shall be reduced so that the same shall equal
the price determined by multiplying the Conversion Price in
effect immediately prior to the effectiveness of the
Conversion Price reduction contemplated by this subparagraph,
by a fraction of which the numerator shall be the number of
Common Shares outstanding (including any tendered or exchanged
shares) at the Expiration Time, multiplied by the Current
Market Price per Common Share on the Trading Day next
succeeding the Expiration Time, and the denominator shall be
the sum of (A) the fair market value (determined as aforesaid)
of the aggregate consideration payable to stockholders based
upon the acceptance (up to any maximum specified in the terms
of the tender or exchange offer) of all shares validly
tendered or exchanged and not withdrawn as of the Expiration
Time (the shares deemed so accepted, up to any maximum, being
referred to as the "Purchased Shares") and (B) the product of
the number of Common Shares outstanding (less any Purchased
Shares) at the Expiration Time and the Current Market Price
per Common Share on the Trading Day next succeeding the
Expiration Time, such reduction to become effective
immediately prior to the opening of business on the day
following the Expiration Time.
(v) No adjustment in the Conversion Price shall be
required unless such adjustment would require a cumulative
increase or decrease of at least 1% in such price; provided,
however, that any adjustments that by reason of this
subparagraph (v) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment
until made; and provided, further, that
Exh. A-14
41
any adjustment shall be required and made in accordance with
the provisions of this Section 6 (other than this subparagraph
(v)) not later than such time as may be required in order to
preserve the tax-free nature of a distribution to the holders
of Common Shares. Notwithstanding any other provisions of this
Section 6, the Corporation shall not be required to make any
adjustment of the Conversion Price for the issuance of any
Common Shares pursuant to any plan providing for the
reinvestment of dividends or interest payable on securities of
the Corporation and the investment of additional optional
amounts in Common Shares under such plan. All calculations
under this Section 6 shall be made to the nearest cent (with
$.005 being rounded upward) or to the nearest one-tenth of a
share (with .05 of a share being rounded upward), as the case
may be. Anything in this paragraph (d) to the contrary
notwithstanding, the Corporation shall be entitled, to the
extent permitted by law, to make such reductions in the
Conversion Price, in addition to those required by this
paragraph (d), as it in its discretion shall determine to be
advisable in order that any share dividends, subdivision of
shares, reclassification or combination of shares,
distribution of rights or warrants to purchase shares or
securities, or distribution of other assets (other than cash
dividends) hereafter made by the Corporation to its
stockholders shall not be taxable, or it that is not possible,
to reduce any income taxes otherwise payable as a result of
such event to the maximum extent possible.
(e) If the Corporation shall be a party to any transaction
(including without limitation a merger, consolidation, statutory
share exchange, self tender offer for all or a substantial portion
of its Common Shares, sale of all or substantially all of the
Corporation's assets or recapitalization of the Common Shares and
excluding any transaction as to which subparagraph (d)(i) of this
Section 6 applies) (each of the foregoing being referred to herein
as a "Transaction"), in each case as a result of which Common Shares
are converted into the right to receive shares, securities or other
property (including cash or any combination thereof), each Series B
Preferred Share which is not redeemed or converted into the right to
receive shares, securities or other property in connection with such
Transaction shall thereafter be convertible into the kind and amount
of shares, securities and other property (including cash or any
combination thereof) receivable upon the consummation of such
Transaction by a holder of that number of Common Shares into which
one Series B Preferred Share was convertible immediately prior to
such Transaction, assuming such holder of Common Shares (i) is not a
Person with which the Corporation consolidated or into which the
Corporation merged or which merged into the Corporation or to which
such sale or transfer was made, as the case may be ("Constituent
Person"), or an affiliate of a Constituent Person and (ii) failed to
exercise his rights of election, if any, as to the kind or amount of
shares, securities and other property (including cash) receivable
upon such Transaction (provided that if the kind or amount of
shares, securities and other property (including cash) receivable
upon such Transaction is not the same for each Common Share held
immediately prior to such Transaction by other than a Constituent
Person or an affiliate thereof and in respect of which such rights
of election shall not have been exercised ("Non-Electing Share"),
then for the purpose of this paragraph (e) the kind and amount of
shares, securities and other property (including cash) receivable
upon such Transaction by each Non-Electing Share shall be deemed to
be the kind and amount so receivable per share by a plurality of the
Non-Electing Shares). The Corporation shall not be a party to any
Transaction unless the terms of such Transaction are consistent with
the provisions
Exh. A-15
42
of this paragraph (e), and it shall not consent or agree to the
occurrence of any Transaction until the Corporation has entered into
an agreement with the successor or purchasing entity, as the case
may be, for the benefit of the holders of the Series B Preferred
Shares that will contain provisions enabling the holders of the
Series B Preferred Shares that remain outstanding after such
Transaction to convert into the consideration received by holders of
Common Shares at the Conversion Price in effect immediately prior to
such Transaction. The provisions of this paragraph (e) shall
similarly apply to successive Transactions.
(f) If:
(i) the Corporation shall declare a dividend (or any
other distribution) on its Common Shares (other than cash
dividends or distributions paid with respect to the Common
Shares after December 31, 1996 not in excess of the sum of the
Corporation's cumulative undistributed Funds from Operations
at December 31, 1996, plus the cumulative amount of Funds from
Operations, as determined by the Board of Directors, after
December 31, 1996, minus the cumulative amount of dividends
accrued or paid in respect of the Series B Preferred Shares or
any other class or series of preferred shares of capital stock
of the Corporation after the Issue Date); or
(ii) the Corporation shall authorize the granting to all
holders of Common Shares of rights, options or warrants to
subscribe for or purchase any shares of any class or any other
rights, options or warrants; or
(iii) there shall be any reclassification of the Common
Shares (other than an event to which subparagraph (d)(i) of
this Section 6 applies) or any consolidation or merger to
which the Corporation is a party and for which approval of any
stockholders of the Corporation is required, or a statutory
share exchange, or a self tender offer by the Corporation for
all or a substantial portion of its outstanding Common Shares
(or an amendment thereto changing the maximum number of shares
sought or the amount of type of consideration being offered
therefor) or the sale or transfer of all or substantially all
of the assets of the Corporation as an entirety; or
(iv) there shall occur the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
then the Corporation shall cause to be filed with the Transfer Agent
and shall cause to be mailed to the holders of Series B Preferred
Shares at their addresses as shown on the records of the
Corporation, as promptly as possible, but at least 10 days prior to
the applicable date hereinafter specified, a notice stating (A) the
date on which a record is to be taken for the purpose of such
dividend, distribution or granting of rights, options or warrants,
or, if a record is not to be taken, the date as of which the holders
of Common Shares of record to be entitled to such dividend,
distribution or rights, options or warrants are to be determined or
(B) the date on which such reclassification, consolidation, merger,
statutory share exchange, sale, transfer, liquidation, dissolution
or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Shares of record shall
be entitled to exchange their Common
Xxx. X-00
00
Xxxxxx for securities or other property, if any, deliverable upon
such reclassification, consolidation, merger, statutory share
exchange, sale, transfer, liquidation, dissolution or winding up.
Failure to give or receive such notice or any defect therein shall
not affect the legality or validity of the proceedings described in
this Section 6.
(g) Whenever the Conversion Price is adjusted as herein
provided, the Corporation shall promptly file with the Transfer
Agent an officer's certificate setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the
facts requiring such adjustment which certificate shall be
conclusive evidence of the correctness of such adjustment absent
manifest error. Promptly after delivery of such certificate, the
Corporation shall prepare a notice of such adjustment of the
Conversion Price setting forth the adjusted Conversion Price and the
effective date of such adjustment and shall mail such notice of such
adjustment of the Conversion Price to the holder of each Series B
Preferred Share at such holder's last address as shown on the
records of the Corporation.
(h) In any case in which paragraph (d) of this Section 6
provides that an adjustment shall become effective on the day next
following the record date for an event, the Corporation may defer
until the occurrence of such event (A) issuing to the holder of any
Series B Preferred Share converted after such record date and before
the occurrence of such event the additional Common Shares issuable
upon such conversion by reason of the adjustment required by such
event over and above the Common Shares issuable upon such conversion
before giving effect to such adjustment and (B) paying to such
holder any amount of cash in lieu of any fraction pursuant to
paragraph (c) of this Section 6.
(i) There shall be no adjustment of the Conversion Price in
case of the issuance of any shares of capital stock of the
Corporation in a reorganization, acquisition or other similar
transaction except as specifically set forth in this Section 6. If
any action or transaction would require adjustment of the Conversion
Price pursuant to more than one paragraph of this Section 6, only
one adjustment shall be made and such adjustment shall be the amount
of adjustment that has the highest absolute value.
(j) If the Corporation shall take any action affecting the
Common Shares, other than action described in this Section 6, that
in the opinion of the Board of Directors would materially and
adversely affect the conversion rights of the holders of the Series
B Preferred Shares, the Conversion Price for the Series B Preferred
Shares may be adjusted, to the extent permitted by law, in such
manner, if any, and at such time, as the Board of Directors, in its
sole discretion, may determine to be equitable in the circumstances.
(k) The Corporation covenants that it will at all times
reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Shares, solely for
the purpose of effecting conversion of the Series B Preferred
Shares, the full number of Common Shares deliverable upon the
conversion of all outstanding Series B Preferred Shares not
theretofore converted. For purposes of this paragraph (k), the
number of Common Shares that shall be deliverable upon the
conversion of all outstanding Series B Preferred Shares shall be
computed as if at the time of computation all such outstanding
shares were held by a single holder.
Exh. A-17
44
The Corporation covenants that any Common Shares issued upon
conversion of the Series B Preferred Shares shall be validly issued,
fully paid and non-assessable. Before taking any action that would
cause an adjustment reducing the Conversion Price below the then-par
value of the Common Shares deliverable upon conversion of the Series
B Preferred Shares, the Corporation will take any action that, in
the opinion of its counsel, may be necessary in order that the
Corporation may validly and legally issue fully paid and (subject to
any customary qualification based upon the nature of a real estate
investment trust) non-assessable Common Shares at such adjusted
Conversion Price.
The Corporation shall use reasonable best efforts to list the
Common Shares required to be delivered upon conversion of the Series
B Preferred Shares, prior to such delivery, upon each national
securities exchange, if any, upon which the outstanding Common
Shares are listed at the time of such delivery.
The Corporation shall endeavor to comply with all federal and
state securities laws and regulations thereunder in connection with
the issuance of any securities that the Corporation shall be
obligated to deliver upon conversion of the Series B Preferred
Shares. In addition to any legend required by Article VIII of the
Articles of Incorporation, the certificates evidencing such
securities shall bear such legends restricting transfer thereof in
the absence of registration under applicable securities laws or an
exemption therefrom as the Corporation may in good xxxxx xxxx
appropriate.
(l) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or
delivery of Common Shares or other securities or property on
conversion of the Series B Preferred Shares pursuant hereto;
provided, however, that the Corporation shall not be required to pay
any tax that may be payable in respect of any transfer involved in
the issue or delivery of Common Shares or other securities or
property in a name other than that of the holder of the Series B
Preferred Shares to be converted, and no such issue or delivery
shall be made unless and until the person requesting such issue or
delivery has paid to the Corporation the amount of any such tax or
established, to the reasonable satisfaction of the Corporation, that
such tax has been paid.
Section 7. Shares To Be Retired. All Series B Preferred Shares which
shall have been issued and reacquired in any manner by the Corporation shall be
restored to the status of authorized but unissued shares of capital stock of the
Corporation, without designation as to class or series.
Section 8. Ranking. Any class or series of shares of capital stock
of the Corporation shall be deemed to rank:
(a) prior to the Series B Preferred Shares, as to the payment
of dividends and as to distribution of assets upon liquidation,
dissolution or winding up, if the holders of such class or series
shall be entitled to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the
case may be, in preference or priority to the holders of Series B
Preferred Shares;
(b) on a parity with the Series B Preferred Shares, as to the
payment of dividends and as to distribution of assets upon
liquidation, dissolution or winding up,
Exh. A-18
45
whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share thereof shall be
different from those of the Series B Preferred Shares, if the
holders of such class or series and the Series B Preferred Shares
shall be entitled to the receipt of dividends and of amounts
distributable upon liquidation, dissolution or winding up in
proportion to their respective amounts of accrued and unpaid
dividends per share or liquidation preferences, without preference
or priority one over the other ("Parity Shares"); the Series A
Cumulative Convertible Redeemable Preferred Stock of the Corporation
are Parity Shares;
(c) junior to the Series B Preferred Shares, as to the payment
of dividends or as to the distribution of assets upon liquidation,
dissolution or winding up, if such class or series shall be Junior
Shares; and
(d) junior to the Series B Preferred Shares, as to the payment
of dividends and as to the distribution of assets upon liquidation,
dissolution or winding up, if such class or series shall be Fully
Junior Shares.
Section 9. Voting. So long as any Series B Preferred Shares are
outstanding, in addition to any other vote or consent of stockholders required
by law or by the Corporation's Articles of Incorporation, the affirmative vote
of at least 66-2/3% of the votes entitled to be cast by the holders of the
Series B Preferred Shares given in person or by proxy, either in writing without
a meeting or by vote at any meeting called for the purpose, shall be necessary
for effecting or validating:
(a) Any amendment, alteration or repeal of any of the
provisions of the Corporation's Articles of Incorporation, the
Corporation's By-Laws or these Articles Supplementary that
materially and adversely affects the voting powers, rights or
preferences of the holders of the Series B Preferred Shares;
provided, however, that the amendment of the provisions of the
Corporation's Articles of Incorporation so as to authorize or create
or to increase the authorized amount of, any Fully Junior Shares,
Junior Shares that are not senior in any respect to the Series B
Preferred Shares or any Parity Shares shall not be deemed to
materially adversely affect the voting powers, rights or preferences
of the holders of Series B Preferred Shares; or
(b) A share exchange that affects the Series B Preferred
Shares, a consolidation with or merger of the Corporation into
another entity, or a consolidation with or merger of another entity
into the Corporation, unless in each such case each Series B
Preferred Share (i) shall remain outstanding without a material and
adverse change to its terms and rights or (ii) shall be converted
into or exchanged for convertible preferred shares of the surviving
entity having preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications
and terms or conditions of redemption thereof identical to that of a
Series B Preferred Share (except for changes that do not materially
and adversely affect the holders of the Series B Preferred Shares);
or
(c) The authorization, reclassification or creation of, or the
increase in the authorized amount of, any shares of any class or any
security convertible into shares of any class ranking prior to the
Series B Preferred Shares in the distribution of assets on any
liquidation, dissolution or winding up of the Corporation or in the
payment of dividends;
Exh. A-19
46
provided, however, that no such vote of the holders of Series B Preferred Shares
shall be required if, at or prior to the time when such amendment, alteration or
repeal is to take effect, or when the issuance of any such prior shares or
convertible security is to be made, as the case may be, provision is made for
the redemption of all Series B Preferred Shares at the time outstanding for
Common Stock.
For purposes of the foregoing provisions of this Section 9, each
Series B Preferred Share shall have one (1) vote per share, except that when any
other series of Preferred Shares shall have the right to vote with the Series B
Preferred Shares as a single class on any matter, then the Series B Preferred
Shares and such other series shall have with respect to such matters one (1)
vote per $28.50 of stated liquidation preference. Except as otherwise required
by applicable law or as set forth herein, the Series B Preferred Shares shall
not have any relative, participating, optional or other special voting rights
and powers other than as set forth herein, and the consent of the holders
thereof shall not be required for the taking of any Corporation action.
Section 10. Record Holders. The Corporation and the Transfer Agent
may deem and treat the record holder of any Series B Preferred Shares as the
true and lawful owner thereof for all purposes, and neither the Corporation nor
the Transfer Agent shall be affected by any notice to the contrary.
Exh. A-20
47
IN WITNESS WHEREOF, the Corporation has caused these Articles
Supplementary to be duly executed by its President and attested by its Secretary
this ___ day of September, 1997.
XXXXXXX X. XXXXX RESIDENTIAL REALTY, INC.
By:
----------------------------------
Its: President
I, Xxxxxx Xxxxx, Secretary, hereby acknowledge on behalf of Xxxxxxx
X. Xxxxx Residential Realty, Inc. that the foregoing Articles Supplementary are
the corporate act of said corporation under the penalties of perjury.
Attest:
---------------------------------
Exh. A-21
48
Exhibit B
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of October 3, 1997 (this
"Agreement"), by and between Xxxxxxx X. Xxxxx Residential Realty, Inc., a
Maryland corporation (the "Company"), The Prudential Insurance Company of
America, a New Jersey corporation ("Prudential"), Strategic Value Investors,
LLC, a Delaware limited liability company ("SVI-US") and Strategic Value
Investors International, LLC, a Delaware limited liability company
("SVI-International")(Prudential, SVI-US and SVI-International collectively, the
"Investors").
WHEREAS, pursuant to that certain Series B Cumulative Convertible
Redeemable Preferred Share Purchase Agreement, dated as of the date hereof (the
"Purchase Agreement"), by and between the Company and Prudential, Prudential has
agreed to acquire 1,450,000 shares of the Company's Common Stock, par value $.01
per share (the "Common Stock"), and 1,216,666 shares of Series B Cumulative
Convertible Redeemable Preferred Stock, par value $.01 per share, of the Company
(the "Preferred Stock" and, together with the Common Stock, the "Shares"), all
of which Preferred Stock may be converted into shares of Common Stock, pursuant
to the terms of and subject to certain limitations set forth in the Articles
Supplementary relating to the Preferred Stock; and
WHEREAS, in connection with the Purchase Agreement, the Company has
agreed to register for sale by Prudential and certain transferees, the shares of
Common Stock purchased by Prudential pursuant to the Purchase Agreement (the
"Initial Common Shares") and the shares of Common Stock received by Prudential
upon conversion of shares of Preferred Stock (the "Underlying Common Shares");
WHEREAS, pursuant to that certain Assignment and Assumption of Acquisition
Rights dated as of October 2, 1997, Prudential assigned and SVI-US and
SVI-International assumed certain of Prudential's rights and obligations under
the Purchase Agreement and the Company acknowledged and consented to such
assignment and assumption; and
WHEREAS, the parties hereto desire to enter into this Agreement to
evidence the foregoing agreement of the Company and the mutual covenants of the
parties relating thereto.
NOW, THEREFORE, in consideration of the foregoing and the covenants
of the parties set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, subject to the
terms and conditions set forth herein, the parties hereby agree as follows:
Section 1. Certain Definitions.
In this Agreement the following terms shall have the following
respective meanings:
"Accredited Investor" shall have the meaning set forth in Rule 501
of the General Rules and Regulations promulgated under the Securities Act.
"Affiliates" shall mean, when used with respect to a specified
Person, another Person that directly, or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with the
Person specified.
49
"Articles Supplementary" shall mean the Articles Supplementary
Classifying and Designating the Series B Cumulative Convertible Redeemable
Preferred Stock, as filed with the Department of Assessments and Taxation of the
State of Maryland.
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the relevant time.
"Holder" or "Holders" shall mean (i) the Investors and (ii) each
Person holding Registrable Shares as a result of a transfer or assignment to
that Person of Registrable Shares other than pursuant to an effective
registration statement or Rule 144 (or any successor provision) under the
Securities Act.
"Indemnified Party" shall have the meaning ascribed to it in Section
4(c) of this Agreement.
"Indemnifying Party" shall have the meaning ascribed to it in
Section 4(c) of this Agreement.
"Managing Underwriter" shall mean the investment banker or
investment bankers and manager or managers that shall administer an underwritten
offering, if any, as set forth in Section 3 hereof.
"Market Value" shall mean, with respect to the Common Stock on any
date of determination, the average of the closing prices of the Common Stock on
each of the preceding 10 trading days on the New York Stock Exchange.
"Person" shall mean an individual, corporation, partnership, estate,
trust, association, private foundation, joint stock company or other entity.
"Preferred Stock" shall have the meaning ascribed to it in the
recitals to this Agreement.
"Prospectus" shall mean the prospectus included in any Shelf
Registration Statement (including, without limitation, a prospectus that
discloses information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A under the Securities
Act), as amended or supplemented by any prospectus supplement, with respect to
the terms of the offering of any portion of the Registrable Shares.
The terms "Register," "Registered" and "Registration" refer to a
registration effected by preparing and filing a Shelf Registration Statement
(and Prospectus) in compliance with the Securities Act providing for the sale by
the Holders in accordance with the method or methods of distribution designated
by the Holders, and the declaration or ordering of the effectiveness of such
registration statement by the Commission.
"Registrable Shares" shall mean (i) the Initial Common Shares, (ii)
the Underlying Common Shares, and (iii) the shares of Common Stock issued upon
redemption of shares of Preferred Stock in accordance with Section 5(a) of the
Articles Supplementary classifying and designating the Preferred Stock;
provided, however, that any such shares of Common Stock shall cease to be
Registrable
Exh. B-2
50
Shares when (A) a shelf registration statement with respect to the sale of such
shares shall have become effective under the Securities Act and all such shares
shall have been disposed of in accordance with such shelf registration
statement; (B) such shares shall have been resold by the Holder thereof in
accordance with Rule 144; (C) such shares shall have been otherwise transferred
and new certificates not subject to transfer restrictions under the Securities
Act and not bearing any legend restricting further transfer shall have been
delivered by the Company, and no other applicable and legally binding
restriction on transfer under the federal securities laws shall exist; or (D)
such shares may be sold in accordance with Rule 144(k) under the Securities Act.
"Registration Expenses" shall mean all out-of-pocket expenses
(excluding Selling Expenses) incurred by the Company in complying with Section 2
hereof, including, without limitation, the following: (a) all registration and
filing fees; (b) fees and expenses of compliance with federal and state
securities or real estate syndication laws (including, without limitation,
reasonable fees and disbursements of counsel in connection with state securities
and real estate syndication qualifications of the Registrable Shares under the
laws of such jurisdictions as the Holders may reasonably designate); (c)
printing (including, without limitation, expenses of printing or engraving
certificates representing the Registrable Shares in a form eligible for deposit
with The Depository Trust Company and otherwise meeting the requirements of any
securities exchange on which they are listed and of printing registration
statements and prospectuses), messenger, telephone, shipping and delivery
expenses; (d) fees and disbursements of counsel for the Company; (e) fees and
disbursements of all independent public accountants of the Company; (f)
Securities Act liability insurance if the Company so desires; (g) fees and
expenses of other Persons reasonably necessary in connection with the
registration, including any experts, retained by the Company; and (h) fees and
expenses incurred in connection with the listing of the Registrable Shares on
each securities exchange on which securities of the same class are then listed.
"Rule 144" shall mean Rule 144 promulgated by the Commission under
the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder, all as the same
shall be in effect at the relevant time.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to any sale of Registrable
Shares.
"Shelf Registration" shall mean a registration effected pursuant to
Section 2 hereof.
"Shelf Registration Statement" means a "shelf" registration
statement of the Company pursuant to the provisions of Section 2 hereof filed
with the Commission which covers some or all of the Registrable Shares, as
applicable, on an appropriate form under Rule 415 under the Securities Act, or
any similar rule that may be adopted by the Commission, amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference therein.
Exh. B-3
51
Section 2. Shelf Registration.
(a) The Company shall, within 45 days following the date of initial
issuance (the "Issue Date") of the Shares, file with the Commission a Shelf
Registration Statement relating to the offer and sale of the Registrable Shares
by the Holders from time to time in accordance with the methods of distribution
elected by such Holders and set forth in such Shelf Registration Statement and,
thereafter, shall use its reasonable best efforts to cause such Shelf
Registration Statement to be declared effective under the Securities Act as soon
as practicable and in no event later than 90 days after the Issue Date
(including, without limitation, the execution of an undertaking to file
post-effective amendments and appropriate qualification under applicable state
securities and real estate syndication laws); provided, however that no Holder
shall be entitled to have the Registrable Shares held by it covered by such
Shelf Registration unless such Holder is in compliance with Section 3(k) hereof.
(b) The Company shall (i) use its reasonable best efforts to keep
such Shelf Registration continuously effective in order to permit the Prospectus
forming part thereof to be usable by the Holders for so long as the aggregate
Market Value of the Registrable Shares is at least $10 million or such shorter
period that will terminate upon the earlier of the following: (A) the date when
all the Registrable Shares have been sold pursuant to such shelf registration
statement or Rule 144 and (B) the date on which, in the reasonable, written
opinion of counsel to the Holders and/or to the Company, all outstanding
Registrable Shares held by persons that are not affiliates of the Company may be
resold without registration under the Securities Act in accordance with Rule
144(k) or any successor provision thereto (in any such case, such period being
called the "Effectiveness Period") and (ii) after the effectiveness of the Shelf
Registration Statement, promptly upon the request of any Holder to take any
action reasonably necessary to register the sale of any Registrable Shares of
such Holder and to identify such Holder as a selling securityholder. The Company
shall be deemed not to have used their reasonable best efforts to keep the Shelf
Registration Statement effective during the requisite period if the Company
voluntarily takes any action that would result in Holders covered thereby not
being able to offer and sell any such Registrable Shares during that period,
unless (x) such action is required by applicable law or the rules of any
national securities exchange or other market on which any of the Registrable
Shares are then listed or quoted, or (y) any event contemplated by paragraph
3(c)(2)(iii) below occurs and the Company acts promptly in good faith and for
valid business reasons in suspending use of the Prospectus until the requisite
changes have been made and the Company thereafter promptly (and in no event
longer than 30 days) complies with the requirements of paragraph 3(i) below.
Notwithstanding the foregoing, the Company shall have the right (the
"Suspension Right") to defer such filing (or suspend sales under any filed
registration thereunder) for a period of not more than 90 days during any
12-month period, if the Company shall furnish to the Holders a certificate
signed by the President or any other executive officer of the Company stating
that, either (i) in the good faith judgment of the Company, the continued
effectiveness of the Shelf Registration Statement would require the Company to
disclose a material financing, acquisition or other corporate transaction, and
the Board of Directors shall have determined in good faith that it would be
detrimental to the Company and its shareholders to file such registration
statement or amendment thereto at such time (or continue sales under a filed
registration statement) or (ii) the Company plans to conduct an underwritten
offering of its equity securities during such 90-day period. and, in each case,
therefore, the Company has elected to defer the filing of such registration
statement (or suspend sales under a filed registration statement); provided
that, in the case of clause (ii), the Company shall terminate such deferral or
suspension, prior to the end of such 90-day period and following the thirtieth
day following the initial closing of any such underwritten offering, in the
event that during such period the average of the closing prices of the class of
equity
Exh. B-4
52
securities sold by the Company in such offering during a period of 20
consecutive trading days is at least 110% of the initial public offering price
of such security in such offering.
Section 3. Registration Procedures.
(a) The Company shall furnish to the Holders , prior to the filing
thereof with the Commission, a copy of any Shelf Registration Statement, and
each amendment thereof or supplement, if any, to the Prospectus included therein
and shall use its reasonable efforts to reflect in each such document, when so
filed with the Commission, such comments at the Holders reasonably may propose.
(b) The Company shall take such action as may be necessary so that
(i) any Shelf Registration Statement and any amendment thereto and any
Prospectus forming part thereof and any amendment or supplement thereto (and
each report or other document incorporated therein by reference in each case)
complies in all material respects with the applicable provisions of the
Securities Act and the Exchange Act and the respective rules and regulations
thereunder, (ii) any Shelf Registration Statement and any amendment thereto does
not, when it becomes effective, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (iii) any Prospectus forming part
of any Shelf Registration Statement, and any amendment or supplement to such
Prospectus, does not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements, in the light of
the circumstances under which they were made, not misleading.
(c) (1) The Company shall advise the Holders: (i) when a Shelf
Registration Statement and any amendment thereto has been filed with the
Commission and when the Shelf Registration Statement or any post-effective
amendment thereto has become effective; and (ii) of any request by the
Commission for amendments or supplements to the Shelf Registration Statement or
the Prospectus included therein or for additional information.
(2) The Company shall advise the Holders of: (i) the issuance by the
Commission of any stop order suspending effectiveness of the Shelf Registration
Statement or the initiation of any proceedings for that purpose; (ii) the
receipt by the Company of any notification with respect to the suspension of the
qualification of the securities included therein for sale in any jurisdiction or
the initiation of any proceeding for such purpose; and (iii) the happening of
any event that requires the making of any changes in the Shelf Registration
Statement or the Prospectus so that, as of such date, the Shelf Registration
Statement and the Prospectus do not contain an untrue statement of a material
fact and do not omit to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not misleading (which
advice shall be accompanied by an instruction to suspend the use of the
Prospectus until the requisite changes have been made).
(d) The Company shall use its reasonable best efforts to prevent the
issuance, and if issued to obtain the withdrawal, of any order suspending the
effectiveness of any Shelf Registration Statement at the earliest possible time.
(e) The Company shall furnish to each Holder, without charge, at
least one copy of such Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and, if the
Holder so requests in writing, all reports, other documents and exhibits
(including those incorporated by reference).
Exh. B-5
53
(f) The Company shall, during the Effectiveness Period, deliver to
each Holder, without charge, as many copies of the Prospectus (including each
preliminary Prospectus) included in such Shelf Registration Statement and any
amendment or supplement thereto as such Holder may reasonably request; and the
Company consents (except upon and during the continuance of any event described
in paragraph 3(c)(2)(iii) above) to the use of the Prospectus or any amendment
or supplement thereto by each of the selling Holders in connection with the
offering and sale of the Registrable Shares covered by the Prospectus or any
amendment or supplement thereto during the Shelf Registration Period.
(g) Prior to any offering of Registrable Shares pursuant to any
Shelf Registration Statement, the Company shall register or qualify or cooperate
with the Holders included therein and their respective counsel in connection
with the registration or qualification of such Registrable Shares for offer and
sale under the securities or blue sky laws of such jurisdictions as any such
Holders reasonably request in writing and do any and all other acts or things
necessary or advisable to enable the offer and sale in such United States
jurisdictions of the Registrable Shares covered by such Shelf Registration
Statement; provided, however, that in no event shall the Company be obligated to
(i) qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to so qualify but for this
Section 3(g), (ii) file any general consent to service of process in any
jurisdiction where it is not as of the date hereof then so subject or (iii)
subject itself to taxation in any such jurisdiction if it is not so subject.
(h) Unless any Registrable Shares shall be in book-entry only form,
the Company shall cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Shares to be
sold pursuant to any Shelf Registration Statement free of any restrictive
legends and in such permitted denominations and registered in such names as
Holders may request in connection with the sale of Registrable Shares pursuant
to such Shelf Registration Statement.
(i) Upon the occurrence of any event contemplated by paragraph
3(c)(2)(iii) above, the Company shall promptly, and in any event within 30 days,
prepare a post-effective amendment to any Shelf Registration Statement or an
amendment or supplement to the related Prospectus or file any other required
document so that, as thereafter delivered to purchasers of the Registrable
Shares included therein, the Prospectus will not include an untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. If the Company notifies the Holders of the occurrence of
any event contemplated by paragraph 3(c)(2)(iii) above, the Holders shall
suspend the use of the Prospectus until the requisite changes to the Prospectus
have been made.
(j) The Company shall use its best efforts to comply with all
applicable rules and regulations of the Commission and shall make generally
available to their security holders or otherwise provide in accordance with
Section 11(a) of the Securities Act as soon as practicable after the effective
date of the applicable Shelf Registration Statement an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act.
(k) The Company may require each Holder to be sold pursuant to any
Shelf Registration Statement to furnish to the Company such information
regarding the Holder and the distribution of such Registrable Shares as the
Company may from time to time reasonably request for inclusion in such Shelf
Registration Statement and the Company may exclude from such registration the
Registrable Shares of any Holder that fails to furnish such information within a
reasonable time after receiving such request.
Exh. B-6
54
(l) The Company agrees to use its reasonable best efforts (including
the payment of any listing fees) to obtain the listing of all Registrable Shares
covered by the registration statement on each securities exchange on which
securities of the same class are then listed.
(m) If the Holders of at least 800,000 Registrable Shares (or such
fewer number as remain outstanding) shall propose to sell such Registrable
Shares in an underwritten public offering, such Holders shall be entitled to
select the underwriters for such offering, subject to the approval of the
Company, not to be unreasonably withheld (provided that the Holders shall not
require consent of the Company in order for Prudential Securities Incorporated
to be an underwriter) and the Company shall make available members of the
management of the Company and its Affiliates for reasonable assistance in
selling efforts relating to such offering for a public offering of such size
(including, without limitation, senior management attendance at due diligence
meetings with underwriters and their counsel and road shows) and shall enter
into underwriting agreements containing usual and customary terms and conditions
for such types of offerings [(including "blackout" periods following
consummation of any such offering, to the extent reasonably requested by the
Managing Underwriter in the circumstances and not inconsistent with the needs of
the Company to raise additional equity capital at such time)]; provided that (i)
the Company shall not be required to assist in an underwritten offering more
than once in any 12-month period or more than three times during the term of
this Agreement; (ii) the Company shall pay the Registration Expenses for one
underwritten offering; and (iii) upon request by an underwriter, the Company
shall waive the common stock ownership limitation contained in its Articles of
Incorporation to the extent necessary to permit such underwriter to purchase the
securities for the purpose of the distribution.
Section 4. Expenses of Registration.
The Company shall pay all Registration Expenses incurred in
connection with the registration of the Registrable Shares in accordance with
Sections 2 and 3 hereof. All Selling Expenses incurred in connection with the
offer and sale of Registrable Shares by any of the Holders shall be borne by the
Holder offering or selling such Registrable Shares pursuant to Section 7 of this
Agreement. Each Holder shall pay the expenses of its own counsel.
Section 5. Indemnification.
(a) In connection with any Shelf Registration Statement, the Company
shall indemnify and hold harmless each Holder and each of their respective
directors and officers and each person controlling such Holder within the
meaning of Section 15 of the Securities Act as follows:
(i) from and against any loss, liability, claim, damage and expense
whatsoever, including any amounts paid in settlement of any investigation,
litigation, proceeding or claim, joint or several, as incurred, arising
out of any untrue statement or alleged untrue statement of a material fact
contained in any Shelf Registration Statement (or any amendment thereto)
covering Registrable Shares, including all documents incorporated therein
by reference, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein not misleading, or arising out of any untrue statement or alleged
untrue statement of a material fact contained in any Prospectus (or any
amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, that the Company shall not be liable under this
clause (i) for any settlement of any action effected without its written
consent, which consent shall not be unreasonably
Exh. B-7
55
withheld; and (ii) against any and all expenses (including reasonable fees
and disbursements of counsel chosen by any such Holder (except to the
extent otherwise expressly provided in Section 5(c) hereof)), reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any court or governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, as such expenses are incurred to the extent that any such
expense is not paid under subparagraph (i) of this Section 5(a); provided
further, that the indemnity provided for in this Section 5(a) shall not
apply to any loss, liability, claim, damage or expense to the extent
arising out of an untrue statement or omission or alleged untrue statement
or omission (i) made in reliance upon and in conformity with written
information furnished to the Company by such Holder in writing expressly
stating that such information is being provided by such Holder for use in
the Shelf Registration Statement (or any amendment thereto) or any
Prospectus (or any amendment or supplement thereto) or (ii) contained in
any preliminary prospectus or the Prospectus if such Holder failed to send
or deliver a copy of the Prospectus (or any amendment or supplement
thereto) to the Person asserting such losses, claims, damages or
liabilities on or prior to the delivery of written confirmation of any
sale of securities covered thereby to such Person in any case where such
Prospectus (or any amendment or supplement thereto) corrected such untrue
statement or omission. Any amounts advanced by the Company to an
indemnified party pursuant to this Section 5 as a result of such losses
shall be returned to the Company if it shall be finally determined by such
a court in a judgment not subject to appeal or final review that such
indemnified party was not entitled to indemnification by the Company.
(b) Each Holder, severally and not jointly, shall indemnify and hold
harmless the Company and the other selling Holders and each of their respective
directors and officers (including each officer of the Company who signed the
Shelf Registration Statement) and each Person, if any, who controls the Company
or other selling Holder within the meaning of Section 15 of the Securities Act,
from and against any loss, liability, claim, damage and expense whatsoever
described in the indemnity contained in Section 5(a) hereof, as incurred, but
only with respect to untrue statements or omissions, or alleged untrue
statements or omissions, made in the Shelf Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such selling Holder in writing expressly stating that such
information is being provided by such Holder for use in the Shelf Registration
Statement (or any amendment thereto) or any Prospectus (or any amendment or
supplement thereto); provided, however, that no such Holder shall be liable for
any claims hereunder in excess of the amount of net proceeds received by such
Holder from the sale of Registrable Shares pursuant to the Shelf Registration
Statement.
(c) Each party entitled to indemnification under this Section 5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, but the
omission to so notify the Indemnifying Party shall not relieve it from any
liability which it may have to the Indemnified Party pursuant to the provisions
of this Section 5 except to the extent of the actual damages suffered by such
delay in notification. The Indemnifying Party shall assume the defense of such
action, including the employment of counsel to be chosen by the Indemnifying
Party to be reasonably satisfactory to the Indemnified Party, and payment of
expenses. The Indemnified Party shall have the right to employ its own counsel
in any such case, but the legal fees and expenses of such counsel shall be at
the expense of the Indemnified Party, unless the employment of such counsel
shall have been authorized in writing by the Indemnifying Party in connection
with the defense of such action, or the Indemnifying Party shall not have
employed counsel to take charge of the defense of such action or the Indemnified
Party shall have reasonably concluded that there may be defenses available to it
or
Exh. B-8
56
them which are different from or additional to those available to the
Indemnifying Party (in which case the Indemnifying Party shall not have the
right to direct the defense of such action on behalf of the Indemnified Party),
in any of which events such fees and expenses shall be borne by the Indemnifying
Party. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
(d) If the indemnification provided for in this Section 5 is
unavailable to a party that would have been an Indemnified Party under this
Section 5 in respect of any expenses, claims, losses, damages and liabilities
referred to herein, then each party that would have been an Indemnifying Party
hereunder shall, in lieu of indemnifying such Indemnified Party, contribute to
the amount paid or payable by such Indemnified Party as a result of such
expenses, claims, losses, damages and liabilities in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on the one
hand and such Indemnified Party on the other in connection with the statement or
omission which resulted in such expenses, claims, losses, damages and
liabilities, as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Indemnifying Party or such Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and each Holder agrees that it would not be
just and equitable if contribution pursuant to this Section were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section 5(d).
(e) No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
Section 6. Information to be Furnished by Holders.
Each Holder shall furnish to the Company such information as the
Company may reasonably request and as shall be required in connection with the
Registration and related proceedings referred to in Sections 2 and 3 hereof. If
any Holder fails to provide the Company with such information within 15 business
days of the Company's request, the Company's obligations under Sections 2 and 3
hereof with respect to such Holder or the Registrable Shares owned by such
Holder shall be suspended until such Holder provides such information.
Section 7. Rule 144 Sales.
(a) The Company covenants that it will file the reports required to
be filed by the Company under the Exchange Act, so as to enable any Holder to
sell Registrable Shares pursuant to Rule 144 under the Securities Act.
(b) In connection with any sale, transfer or other disposition by
any Holder of any Registrable Shares pursuant to Rule 144 under the Securities
Act, the Company shall cooperate with such Holder to facilitate the timely
preparation and delivery of certificates representing Registrable Shares to be
sold and not bearing any Securities Act legend, if deemed appropriate, and
enable certificates for such Registrable Shares to be for such number of shares
and registered in such names as the selling Holder
Exh. B-9
57
may reasonably request, provided that such request is made at least two business
days prior to any sale of Registrable Shares.
Section 8. Miscellaneous.
(a) Governing Law. This Agreement shall he governed in all respects
by the laws of the State of Maryland (other than the choice of law rules
thereof).
(b) Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof.
(c) Amendment. No supplement, modification, waiver or termination of
this Agreement shall be binding unless executed in writing by the party to be
bound thereby.
(d) Notices, etc. Each notice, demand, request, request for
approval, consent, approval, disapproval, designation or other communication
(each of the foregoing being referred to herein as a notice) required or desired
to be given or made under this Agreement shall be in writing (except as
otherwise provided in this Agreement), and shall be effective and deemed to have
been received (i) when delivered in person, (ii) when sent by facsimile with
receipt acknowledged, (iii) five (5) days after having been mailed by certified
or registered United States mail, postage prepaid, return receipt requested, or
(iv) the next business day after having been sent by a nationally recognized
overnight mail or courier service, receipt requested. Notices shall be addressed
as follows: (a) if to the Investors, at the Investor's address or fax number set
forth below its signature hereon, or at such other address or fax number as the
Investors shall have furnished to the Company in writing, or (b) if to any
assignee or transferee of the Investors, at such address or fax number as such
assignee or transferee shall have furnished the Company in writing, or (c) if to
the Company, at the address or fax number of its principal executive offices set
forth below its signature hereon or at such other address or fax number as the
Company shall have furnished to the Investors or any assignee or transferee. Any
notice or other communication required to be given hereunder to a Holder in
connection with a registration may instead be given to the designated
representative of such Holder.
(e) Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by fewer than all of the parties
hereto (provided that each party executes one or more counterparts), each of
which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
(f) Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
(g) Section Titles. Section titles are for descriptive purposes only
and shall not control or alter the meaning of this Agreement as set forth in the
text.
(h) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns including, without the need for an express assignment or
any consent by the Company thereto, subsequent Holders. The Company hereby
agrees to extend the benefits of this Agreement to any Holder and any such
Holder may specifically enforce the provisions of this Agreement as if an
original party hereto.
Exh. B-10
58
(i) Remedies. The Company and the Investors acknowledge that there
would be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that the Company and each Holder,
in addition to any other remedy to which it may be entitled at law or in equity,
shall be entitled to compel specific performance of the obligations of another
party under this Agreement in accordance with the terms and conditions of this
Agreement in any court of the United States or any State thereof having
jurisdiction.
(j) Attorneys' Fees. If the Company or any Holder brings an action
to enforce its rights under this Agreement, the prevailing party in the action
shall be entitled to recover its costs and expenses, including, without
limitation, reasonable attorneys' fees, incurred in connection with such action,
including any appeal of such action.
[Page Break Intentionally Inserted]
Exh. B-11
59
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date first above written.
XXXXXXX X. XXXXX RESIDENTIAL
REALTY, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
0000 Xxxxxxx Xxxxx
Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
0 Xxxxxx Xxxxx
Xxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
Exh. B-12
60
STRATEGIC VALUE INVESTORS, LLC
By: The Prudential Investment
Corporation, Its Attorney-In-Fact
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
0 Xxxxxx Xxxxx
Xxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
Attention: SVI Portfolio Manager
Facsimile: (000) 000-0000
STRATEGIC VALUE INVESTORS
INTERNATIONAL, LLC
By: Strategic Value Investors
International Ltd., Its Manager
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
0 Xxxxxx Xxxxx
Xxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
Attention: SVI Portfolio Manager
Facsimile: (000) 000-0000
Exh. B-13
61
Exhibit C
WAIVER OF OWNERSHIP LIMITATIONS
RESOLVED, that, pursuant to Section 8(j) of the Company's Articles of
Incorporation, as amended, the Common Stock Ownership Limit and the Aggregate
Stock Ownership Limit (as such terms are defined in the Articles of
Incorporation) set forth in Section 8(b)(1)(i) of the Articles of Incorporation
are hereby waived with respect to the Acquisition and Beneficial Ownership (as
such terms are defined in the Articles of Incorporation) of Series B Preferred
Shares and shares of Common Stock of the Company by each Prudential Investor (as
that term is defined in the Purchase Agreement to be entered into between the
Company and The Prudential Insurance Company of America) and any other Person
(as such term is defined in the Articles of Incorporation) that Beneficially
Owns (as such term is defined in the Articles of Incorporation) Series B
Preferred Shares and Common Stock solely by reason of a Prudential Investor's
(as defined in the Purchase Agreement) Beneficial Ownership of Series B
Preferred Shares or Common Stock ("a Prudential Related Person"); provided that
(i) this waiver shall not be effective to exempt any Person
that would be treated as an "individual" for purposes of Section 542(a)(2)
of the Internal Revenue Code of 1986, as amended (the "Code") (as modified
by Section 856(h) of the Code) from either the Common Stock Ownership Limit
or the Aggregate Stock Ownership Limit; and
(ii) this waiver shall not be effective to exempt any Person from
either the Common Stock Ownership Limit or the Aggregate Stock Ownership
Limit (whether or not such Person would be treated as an "individual"
under the provisions of the Code cited above) if (and to the extent that),
by reason of such Person's Beneficial Ownership of Capital Stock (as such
term is defined in the Articles of Incorporation), any Person that would
be treated as an "individual" under the provisions of the Code cited above
would be considered to own Capital Stock in excess of either the Common
Stock Ownership Limit or the Aggregate Stock Ownership Limit; and
(iii) this waiver shall not be effective to exempt any Prudential
Investor or Prudential Related Person from either the Common Stock
Ownership Limit or the Aggregate Stock Ownership Limit if (and to the
extent that) the Prudential Investors, their respective affiliates (as
such term is defined in Rule 12b-2 under the Securities Exchange Act of
1934, as amended), and any member of a group (as such term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended)
relating to the capital stock of the Company, of which any Prudential
Investor or any of its affiliates is a member, collectively Beneficially
Own shares of Common Stock of the Company (including for such purpose any
shares of Common Stock issuable upon exercise of any Acquisition Rights
(as such term is defined in the Articles of Incorporation) held by any of
them) in excess of the Special Ownership Limit (as defined below);
provided further that this waiver shall terminate in the event that
(x) the Prudential Investors, their respective affiliates (as such
term is defined in Rule 12b-2 under the Securities Exchange Act of 1934,
as amended), and any member of a group (as such term is used in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended) relating to
the capital stock of the Company, of which any Prudential Investor or any
of its affiliates is a member, collectively Beneficially Own shares of
Common Stock of the Company (including for such purpose any shares of
Common Stock issuable upon exercise of any Acquisition Rights (as such
term is defined in the Articles of Incorporation) held by any of them) in
excess of the Special Ownership Limit; or
62
(y) the Prudential Investors, their respective affiliates, and any
member of a group relating to the capital stock of the Company, of which
any Prudential Investor or any of its affiliates is a member, collectively
Beneficially Own in excess of 9.8% of the outstanding shares of Common
Stock of the Company (excluding for such purpose any shares of Common
Stock issuable upon conversion of any Series B Preferred Stock
Beneficially Owned by any of them); provided that the waiver shall not
terminate under this paragraph solely by reason of the issuance of Common
Stock by the Company in redemption of Series B Preferred Stock or by
reason of a conversion of Series B Preferred Stock into Common Stock
immediately prior to liquidation of the Company;
provided that this waiver shall not terminate solely as a result of a decrease
in the aggregate number of outstanding shares of Common Stock.
As used herein, the term "Special Ownership Limit" shall mean a number of
shares of Common Stock equal to the lesser of (A) 19.998% of the outstanding
Common Stock of the Company (the shares of Common Stock issuable upon conversion
of Series B Preferred Shares being deemed to be outstanding for this purpose) or
(B) the sum of (i) 1,450,000 shares of Common Stock (the "Initial Shares"), plus
(ii) the number of shares of Common Stock held by any Prudential Investor that
was acquired by any Prudential Investor upon conversion of any Series B
Preferred Stock ("Conversion Shares"), plus (iii) the number of shares of Common
Stock Beneficially Owned by a Prudential Investor by reason of the ownership by
a Prudential Investor of any shares of Series B Preferred Stock (excluding any
shares of Series B Preferred Stock acquired after the original issuance thereof
from any Person other than a Prudential Investor) ("Underlying Shares"), plus
(iv) the number of shares of Common Stock issuable upon conversion of any shares
of Series B Preferred Stock that have not yet been purchased under the Stock
Purchase Agreement, less (v) the number of Initial Shares transferred after
October 3, 1997 to any Person other than a Prudential Investor or an affiliate
thereof, less (vi) the number of Conversion Shares or Underlying Shares
transferred after October 3, 1997 to any Person other than a Prudential
Investor, in each case as such number of shares of Common Stock may be adjusted
to reflect stock splits, stock combinations, stock dividends, or similar
transactions. In the event that the number of outstanding shares of Common Stock
decreases, other than by reason of a stock combination affecting all shares of
Common Stock, the percentage referred to in clause (A) above shall be increased
by multiplying the percentage in effect immediately preceding such decrease by a
fraction, the numerator of which equals the number of shares of Common Stock
outstanding immediately prior to such decrease and the denominator of which
equals the number of shares of Common Stock outstanding immediately after such
decrease (the shares of Common Stock issuable upon conversion of Series B
Preferred Shares being deemed to be outstanding for purpose of this
calculation).
Exh. C-2
