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Exhibit 99(b) EXECUTION
OPERATING AGREEMENT
OPERATING AGREEMENT, dated as of October 6, 2000, between Parkway
Properties, Inc., a Maryland corporation (the "Company"), and Five Arrows Realty
Securities III L.L.C., a limited liability company organized under the laws of
the State of Delaware (the "Investor"), for the benefit of the Investor.
This Agreement is executed pursuant to the Investment Agreement, dated
as of October 6, 2000, between the Company and the Investor (the "Investment
Agreement"). In order to induce the Investor to enter into the Investment
Agreement, the Company has agreed to provide the registration rights set forth
in this Agreement.
The parties hereby agree as follows:
1. DEFINITIONS. The following terms shall have the meanings set forth below.
Capitalized terms used herein and not otherwise defined herein have the meanings
given to such terms in the Investment Agreement.
"Affiliate" means, with respect to any Person, (a) any member
of the Immediate Family of such Person or a trust established for the
benefit of such member, (b) any beneficiary of a trust described in
(a), (c) any Entity which, directly or indirectly though one or more
intermediaries, is deemed to be the beneficial owner of 10% or more of
the voting equity of the Person for the purposes of Section 13(d) of
the Exchange Act, (d) any officer of the Person or any member of the
Board of Directors of the Company, or (e) any Entity which, directly or
indirectly through one or more intermediaries, controls, is controlled
by, or is under common control with, such Person, including such Person
or Persons referred to in the preceding clauses (a) or (d); provided,
however, that none of the Investor, Rothschild Realty Inc. or their
respective Affiliates, nor any of their respective officers, directors,
partners or members nor a Preferred Director (as such term is defined
in the Articles Supplementary) shall be considered an Affiliate of the
Company or any of its Subsidiaries for the purposes of this Agreement.
"Business Day" means any Monday, Tuesday, Wednesday, Thursday
or Friday which is not a day on which banking institutions in New York
City are authorized or obligated by law or executive order to close.
"Articles Supplementary" means the Articles Supplementary
classifying 2,142,857 shares of preferred stock as Series B Convertible
Cumulative Preferred Stock of the Company.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Common Stock, par value $.001 per
share, of the Company.
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"Demand Requesting Holders" means any Holder or Holders
holding an aggregate of not less than 30% of the Registrable Securities
then outstanding. For purposes of calculating such percentage, shares
of Common Stock constituting Registrable Securities shall be deemed to
equal the number of shares of converted Preferred Stock in respect of
which such shares of Common Stock were issued.
"Entity" means any general partnership, limited partnership,
corporation, joint venture, trust, business trust, real estate
investment trust, limited liability company, cooperative or
association.
"Equity Security" includes common stock, preferred stock and
any other security that is treated as an equity security either under
the Exchange Act or under generally accepted accounting principles by
the issuer thereof or any other security convertible into, or
exchangeable for any equity security and any other instrument, such as
an equity swap, the value of which is based, at least in part, on the
value of such equity security.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Governmental Body" means any foreign, federal, state,
municipal or other government, or any department, commission,
investigative body, board, bureau, agency, public authority or
instrumentality thereof or any court, mediator, arbitrator or other
tribunal.
"Holder" means any person that owns or has the right to
acquire Registrable Securities or Piggyback Registrable Securities, as
applicable, constituting more than 3% of the outstanding shares of such
class of Registrable Securities or Piggyback Registrable Securities, as
applicable.
"Immediate Family" means, with respect to any Person, such
Person's spouse, parents, parents-in-law, descendants, nephews, nieces,
brothers, sisters, brothers-in-law, sisters-in-law, stepchildren,
sons-in-law and daughters-in-law.
"Majority Holders" means (a) the Investor, so long as (i) the
Investor holds at least 25% of the outstanding Registrable Securities
and (ii) no underwritten Demand Registration or Piggyback Registration
has been consummated by the Company pursuant to Section 3 of this
Agreement, or (b) otherwise, the holder or holders at the relevant time
(excluding the Company or any of its Subsidiaries) of more than 50% of
the Preferred Shares or Registrable Securities then outstanding. For
purposes of calculating such percentage, shares of Common Stock
constituting Registrable Securities shall be deemed to equal the number
of Preferred Shares in respect of which such shares of Common Stock
were issued.
"Person" means any individual or Entity.
"Piggyback Registrable Securities" means Registrable
Securities of the same class and series as the securities the Company
proposes to register under the Securities Act in a transaction giving
rise to Piggyback Registration rights under Section 4 hereof, except
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that in the case of a shelf registration statement, all Registrable
Securities shall be deemed to be Piggyback Registrable Securities.
"Preferred Shares" means the Series B Convertible Cumulative
Preferred Stock issued by the Company to the Investor, pursuant to the
Investment Agreement.
"Prospectus" means the Prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference in such
Prospectus.
"Registrable Securities" means (i) all Preferred Shares and
all shares of Common Stock that have been issued, or are issuable on
conversion, in respect of the Preferred Shares pursuant to the
provisions of Section 7 of the Articles Supplementary of the Company,
dated the date hereof, or upon exercise of the Warrant, (ii) any other
securities that are received by the Holders pursuant to Section 7 of
the Articles Supplementary or the Warrant, (iii) any other capital
stock of the Company, the holders of which shall have the right,
without limitation as to amount, either to all or to a share of the
balance of current dividends and liquidating dividends after the
payment of dividends and distributions on any shares entitled to
preference, and (iv) any other securities into which or for which any
of the securities described in clauses (i) through (iii) above may be
or have been converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise,
until such time as (a) they have been effectively registered under the
Securities Act for resale and sold thereunder, (b) they are distributed
to the public pursuant to Rule 144 (or any similar provisions then in
force) under the Securities Act, (c) they shall have been otherwise
transferred, new certificates therefor not bearing a legend restricting
further transfer shall have been issued by the Company and subsequent
disposition thereof shall not require registration under the Securities
Act, or (d) they shall have ceased to be outstanding.
"Registration Statement" means any registration statement of
the Company which covers any of the Registrable Securities pursuant to
the provisions of this Agreement, including the Prospectus, amendments
and supplements to such Registration Statement, including
post-effective amendments, all exhibits and all material incorporated
by reference in such Registration Statement.
"Securities Act" means the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Shareholder Approval" means the affirmative vote of holders
of a majority of the shares of Voting Capital Stock of the Company
represented in person or by proxy at a duly held meeting of such
shareholders at which a quorum was present or the written consent of
holders of a majority of all outstanding shares of Voting Capital Stock
of the Company; provided, however, that if the outstanding shares of
Voting Capital Stock
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having varying votes per share, the foregoing references in this
sentence to holders of a majority of shares shall be deemed to mean
holders of shares entitled to cast a majority of votes.
"Subsidiary" of any Person or Entity means an Entity in which
such Person or Entity has the ability, whether by the direct or
indirect ownership of shares or other equity interests, by contract or
otherwise, to elect a majority of the directors of a corporation or the
trustees of a real estate investment trust, to select the managing
partner of a partnership, or otherwise to select, or have the power to
remove and then select, a majority of those persons exercising
governing authority over such Entity. A limited partnership shall be
deemed to be a Subsidiary of a Person or Entity if such Person or
Entity or a Subsidiary of such Person or Entity serves as a general
partner thereof. A trust shall be deemed to be a Subsidiary of a Person
or Entity if such Person or Entity or a Subsidiary of such Person or
Entity serves as any trustee thereof or any Person having the right to
select any such trustee.
"Underwriters Maximum Number" means for any underwritten
registration, that number of shares of securities to which such
registration should, in the written opinion of the managing underwriter
or underwriters of such registration in light of market factors, be
limited.
"Underwritten Registration" or "Underwritten Offering" means a
registration in which securities of the Company are sold to an
underwriter for reoffering to the public.
"Voting Capital Stock" means equity securities of the Company
entitled to vote generally in the election of directors of the Company.
"Warrant" means the warrant for the purchase of Common Stock
of the Company issued to the Investor pursuant to the Investment
Agreement.
2. COVENANTS AND UNDERTAKINGS
2.1 Reservation of Shares. The Company will maintain as reserved those
shares of Common Stock reserved in accordance with Section 4.6 of the Investment
Agreement and shall take all such action as may be required from time to time in
order that it may validly and legally issue fully paid and non-assessable shares
of Common Stock in accordance herewith and therewith.
2.2 No Partial Redemption. Notwithstanding its ability to effect
partial redemptions of the Preferred Shares pursuant to Section 5 of the
Articles Supplementary, if the Company shall elect to redeem any Preferred
Shares held by the Investor, Rothschild Realty Inc., an Affiliate of either of
them or one of their respective members or partners, the Company shall redeem
all of such Preferred Shares simultaneously and on the same terms.
2.3 Affiliate Transactions. So long as the Investor or an Affiliate of
the Investor, or one of their respective members or partners, is the beneficial
owner of either (A) all of the outstanding Preferred Shares, or (B) an amount of
the Company's Voting Capital Stock
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which if converted into shares of Common Stock would exceed 10% of the
outstanding Common Stock on a fully diluted basis (determined on the basis of
then convertible, exercisable or exchangeable securities, warrants or options
issued by the Company), the Company will not, and will not permit any of their
respective Subsidiaries to, directly or indirectly, consummate any transaction
or series of transactions (including, without limitation, the sale, purchase,
exchange or lease of any assets or properties or the rendering of any services)
with any Affiliate (other than among the Company or its Subsidiaries) (an
"Affiliate Transaction") unless (i) such transaction or series of related
transactions is on terms that are no less favorable to the Company or its
Subsidiaries, as the case may be, than would be available in a comparable
transaction in arm's-length dealings with an unrelated third party and (ii) with
respect to any one transaction or series of related transactions involving
aggregate payments in excess of $1,000,000, the Company delivers a certificate,
certified by an officer of the Company, to the Investor certifying that such
transaction or series of related transaction complies with clause (i) above and
such transaction or series of related transactions has received the approval of
a majority of the disinterested members of the Board of Directors of the
Company; provided, however, that this Section 2.3 shall not apply to any
transaction (i) arising out of any agreement existing on the date hereof or any
transaction in which all holders of any class or series of outstanding capital
stock of the Company have the right to participate on a pro rata basis or (ii)
that has received Shareholder Approval.
2.4 Inspection Rights. So long as the Investor or an Affiliate of the
Investor, or one of their respective members or partners, is the beneficial
owner of either (A) all of the Preferred Shares outstanding or (B) an amount of
the Company's Voting Capital Stock which if converted into shares of Common
Stock would exceed 10% of the Common Stock on a fully diluted basis (determined
on the basis of then convertible, exercisable or exchangeable securities,
warrants or options issued by the Company), the Company shall permit, and cause
its Subsidiaries to permit, the Investor or any agents or representatives
thereof to examine and inspect the books and records of the Company and take
copies and extracts therefrom on reasonable prior notice and at reasonable times
and during normal business hours; provided, however, that the Investor continues
to be subject to Section 10.5 of the Investment Agreement.
2.5 Insurance for Directors. So long as the Investor or an Affiliate of
the Investor, or one of their respective members or partners, is represented on
the Board of Directors of the Company or is entitled to obtain such
representation or is the beneficial owner of either (A) all of the Preferred
Shares outstanding or (B) an amount of the Company's Voting Capital Stock which
if converted into shares of Common Stock would exceed 10% of the Common Stock on
a fully diluted basis (determined on the basis of then convertible, exercisable
or exchangeable securities, warrants or options issued by the Company), the
Company shall obtain and maintain directors' and officers' reimbursement and
liability insurance in form reasonably acceptable to the Investor and with such
carrier as shall be reasonably acceptable to the Investor in the name of each
director, including each Preferred Director (as such terms is defined in the
Articles Supplementary), in an amount not less than $10,000,000.
2.6 Accrued and Unpaid Dividends. Notwithstanding anything in the
Articles Supplementary to the contrary, on the date of conversion of any
Preferred Shares pursuant to Section 7 of the Articles Supplementary by the
Investor, Rothschild Realty Inc., an Affiliate of either of them or one of their
respective members or partners, the Company shall pay such holder
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of such Preferred Shares all accrued and unpaid dividends in respect of such
Preferred Shares as provided for in Section 2 of the Articles Supplementary.
2.7 Fees and Expenses. In the event that the Company shall request that
the Investor consent to any action by the Company that is otherwise prohibited
by, or amend any of, the Operative Instruments, the Company shall pay all
reasonable legal fees and expenses reasonably incurred by the Investor in
connection with the Investor's review of such request.
3. DEMAND REGISTRATION
3.1 Right to Demand Registration. (a) Subject to Section 3.6, at any
time following the earlier of (i) the expiration of the ninety day period
commencing from the date of the last Closing and (ii) the day that is 270 days
after the date hereof and as long as the Investor and its Affiliates continue to
hold beneficially at least one-half of the Registrable Securities that had been
issued pursuant to the Investment Agreement, Demand Requesting Holders may make
written requests to the Company for registration with the Commission (a "Demand
Registration") under and in accordance with the provisions of the Securities Act
of all or part of its Registrable Securities to the effect that the Shelf
Registration then in effect may not be used with respect to the offering
contemplated by the Demand Registration; provided, however, that the Company (i)
shall be required to effect no more than two such Demand Registrations pursuant
to this Section 3 (other than the "shelf" registration provided for under
Section 3.2) and (ii) shall not be required to effect a Demand Registration if
less than $10 million in market value of Registrable Securities would be
registered.
(b) The Demand Registration shall be in the form of a firmly
underwritten offering managed by an underwriter or underwriters selected by the
Company pursuant to Section 3.5.
(c) Within ten days after receipt of any request by the Demand
Requesting Holders under Section 3.1(a), the Company will give written notice
(the "Other Holders Notice") of such registration request to all other Holders,
if any, and, subject to Section 3.4, shall include in such registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein from the Holders thereof within 15 days after
such notice by the Company.
3.2 Shelf Registration. The Company shall have used its best efforts to
have caused a "shelf" registration statement with respect to all of the
Registrable Shares (which registration statement shall also provide for the
issuance of the Warrant), on an appropriate Form, pursuant to Rule 415 under the
Securities Act or any similar rule that may be adopted by the Commission (the
"Shelf Registration"), to be declared effective by the Commission prior to the
earlier of (i) the expiration of the ninety day period commencing from the date
of the last Closing, (ii) the date which is 270 days after the date hereof and
(iii) prior to any further registration of equity or debt securities by the
Company. The Company shall use best efforts to keep the Shelf Registration
continuously effective until the earlier of (i) the third anniversary (plus the
term of any Blackout Period, as defined in Section 3.6) of the date such Shelf
Registration is declared effective and (ii) the date on which all shares
registered on such "shelf"
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registration statement have been sold; provided, however, that, except to the
extent of any Shelf Registration providing underwritten offerings (whether on a
continuous basis or otherwise) the Company shall not be required to provide any
such Shelf Registration if the Investor shall have received a favorable opinion
letter from counsel to the Company, in form and substance satisfactory in the
reasonable judgment of counsel to the Investor that (x) subject to the
restrictions on transfer set forth in the Articles Supplementary, the Preferred
Shares were, when issued to the Investor, fully registered under the Securities
Act and shall be freely transferable by the Investor without the requirement
that such Preferred Shares be registered or qualified pursuant to any federal
securities law or the Investor comply with the prospectus delivery requirements
of the Securities Act and without relying on any exemption under the Securities
Act other than Rule 144(k) and (y) subject to the restrictions on transfer set
forth in the Charter, any Common Stock held by the Investor as a result of the
conversion of any Preferred Shares pursuant to the provisions of the Articles
Supplementary were, when the Preferred Shares were issued to the Investor,
registered under the Securities Act and shall be freely transferable by the
Investor without the requirement that such Common Stock be registered or
qualified pursuant to any federal securities law or that the Investor comply
with the prospectus delivery requirements of the Securities Act and without
relying on any exemption under the Securities Act other than Rule 144(k). Such
"shelf" registration shall provide for distributions under all lawful means and
shall not qualify as the Demand Registration to which the Holders are entitled.
Any Holder shall be required to comply with the rules of the New York Stock
Exchange or any other stock exchange on which the Common Stock is then listed.
3.3 Effective Registration and Expenses. A registration will qualify as
a Demand Registration or a Shelf Registration when it has become effective;
provided, however, that (i) if the Demand Requesting Holders with regard to a
Demand Registration, or the Majority Holders with regard to a Shelf
Registration, withdraw their Registrable Securities after the filing with the
Commission of the initial Registration Statement related thereto, such demand
will count as a Demand Registration or a Shelf Registration unless such Demand
Requesting Holders or Majority Holders, as the case may be, agree severally to
pay all of the Registration Expenses of the Company and all other out of pocket
expenses of the Company contemplated by Section 7 hereof, incurred through the
date that notice of such withdrawal is given and (ii) an effective Demand
Registration will not count as the sole Demand Registration if the Demand
Requesting Holders have not been permitted to register and sell all of the
Registrable Securities requested to be included in such registration by such
Demand Requesting Holders.
3.4 Priority on Underwritten Demand Registrations. Subject to the
rights granted pursuant to the agreements set forth on Schedule 12.2, if the
managing underwriter or underwriters of any underwritten Demand Registration
advise the Company and the Holders in writing of an Underwriters Maximum Number,
the Company will be obligated and required to include in such registration (i)
first, the Registrable Securities requested to be included in such Demand
Registration by the Holders, pro rata in proportion to the number of Registrable
Securities requested to be included in such registration by each of them until
all such Registrable Securities have been so included, (ii) second, the
securities requested to be included in such Demand Registration by the Company
and other Persons having contractual rights thereto, in accordance with the
priorities that exist among them, and (iii) third, any other securities of the
Company to be registered on behalf of any other Person, including the Company.
Neither the
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Company nor any of its securityholders (other than Holders of Registrable
Securities) shall be entitled to include any securities in any Demand
Registration unless the Company or such securityholders (as the case may be)
shall have irrevocably agreed in writing to sell such securities on the same
terms and conditions as shall apply to the Registrable Securities to be included
in such Demand Registration.
3.5 Selection of Underwriters. The managing underwriter and any
additional investment bankers and managers for use in connection with any
underwritten Demand Registration will be selected by the Company with the
consent of the Majority Holders, with such consent not to be unreasonably
withheld.
3.6 Limitations Regarding Registration at the Request of Holders. (a)
The Company shall not be required to effect a Demand Registration or a Shelf
Registration under Section 3 and the Holders of Registrable Securities will
discontinue the disposition of their securities covered by a Shelf Registration
during any Blackout Period (as defined below) (i) if the Board of Directors of
the Company determines in good faith that effecting such a registration or
continuing such disposition at such time would have a material adverse effect
upon a proposed sale of all (or substantially all) of the assets of the Company
or a merger, reorganization, recapitalization or similar current transaction
materially affecting the capital structure or equity ownership of the Company,
(ii) if the Company is in possession of material information which the Board of
Directors of the Company determines in good faith is not in the best interests
of the Company to disclose in a registration statement at such time, or (iii) if
the Company has delivered a notice pursuant to Section 4.1 that it is
undertaking an underwritten offering in which the Holders will be entitled to
exercise their Piggyback Registration rights; provided, however, that the
Company may (i) only delay a Demand Registration pursuant to this Section 3.6 by
delivery of a Blackout Notice (as defined below) within thirty (30) days of
delivery of the notice requesting a Demand Registration and only for a period
not exceeding three (3) months (or until such earlier time as such transaction
is consummated or no longer proposed or the material information has been made
public); and (ii) require, by delivery of a Blackout Notice, that the Holders of
Registrable Securities discontinue from time to time, the disposition of their
securities covered by a Shelf Registration for an aggregate period not to exceed
six (6) months (each period as described in (i) and (ii) above, a "Blackout
Period").
(b) The Company shall promptly notify the Holders in writing (a
"Blackout Notice") of any decision not to effect a Demand Registration or a
Shelf Registration or to discontinue sales of Registrable Securities pursuant to
this Section 3.6, which notice shall set forth the reason for such decision (but
not disclosing any nonpublic material information unless expressly requested by
Holders) and shall include an undertaking by the Company promptly to notify the
Holders as soon as a Demand Registration or a Shelf Registration may be effected
or sales may resume.
(c) The Company shall not be required to effect a Demand
Registration or Shelf Registration under Section 3 during any period the Company
is restricted from filing a registration statement or from making any public
sale or distribution of its equity securities pursuant to any agreement on
Schedule 12.2.
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4. PIGGYBACK REGISTRATION
4.1 Right to Include Registrable Securities. Subject to Section 4.3, if
the Company or any other issuer of Registrable Securities at any time or from
time to time proposes to register shares of its equity securities or Registrable
Securities under the Securities Act (other than in a registration on Form S-4 or
S-8 or any successor form to such forms or in connection with an exchange offer
or an offering of securities solely to the existing stockholders or employees of
the Company), whether or not for sale for its own account, the Company shall
deliver prompt written notice to all Holders of Registrable Securities of its
intention to undertake such registration and of such Holders' rights to
participate in such registration to the extent of their holdings of Piggyback
Registrable Securities under this Section 4 as hereinafter provided. The Company
shall use its reasonable best efforts to effect the registration under the
Securities Act of all Piggyback Registrable Securities with respect to which the
Company receives a request for registration from the Holders thereof by written
notice to the Company within 15 Business Days after the date of the Company's
notice to such Holders of its intended registration (which notice by Holders
shall specify the amount of such Piggyback Registrable Securities to be
registered, which amount for each Holder must equal or exceed the lesser of (i)
half of all Piggyback Registrable Securities that such Holder either owns or has
the right to acquire or (ii) 10,000 shares), to the extent necessary to permit
their disposition in accordance with the Company's intended methods thereof of
all such Piggyback Registrable Securities by including such Piggyback
Registrable Securities in the registration statement pursuant to which the
Company proposes to register the securities (a "Piggyback Registration");
provided, however, that if such registration involves an underwritten offering,
all Holders requesting inclusion in the registration shall be required to sell
such Piggyback Registrable Securities to the underwriters selected by the
Company at the same price and on the same terms of underwriting applicable to
the Company and any other Persons selling securities. Holders desiring to
participate in a Piggyback Registration shall be bound by the Company's intended
method of disposition of shares thereunder. The Holders requesting inclusion in
a registration pursuant to this Section 4 may, at any time prior to the
effective date of the registration statement relating to such registration,
revoke such request by delivering written notice to the Company revoking such
requested inclusion. All requests for Piggyback Registration under this Section
4 shall be without prejudice to the rights of the Holders to request, and shall
not be counted as, the sole Demand Registration or Shelf Registration under
Section 3 above.
4.2 Priority in Piggyback Registration. If any of the Piggyback
Registrable Securities registered pursuant to any Piggyback Registration are to
be sold in one or more firm commitment underwritten offerings, and the managing
underwriters advise in writing the Company and the Holders of such Piggyback
Registrable Securities of an Underwriters Maximum Number, or, in the case of a
Piggyback Registration not being underwritten, the Company shall reasonably
determine (and notify the Holders of Piggyback Registrable Securities of such
determination), after consultation with an investment banker of nationally
recognized standing, that the number of shares of securities proposed to be sold
in such offering exceeds the number of shares which can be sold in such offering
within a price range acceptable to the Company, the Company shall include in
such registration only such number of shares (including Piggyback Registrable
Securities) which in the opinion of such underwriter or underwriters or the
Company, as the case may be, can be sold within such price range, selected in
the following order of priority: (i) first,
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all of the shares that the Company proposes to register (but solely to the
extent that the proceeds thereof shall not be used to purchase Common Stock or
other securities of the Company), and the shares requested by any other Person
having demand registration rights and having made demand for the subject
registration, and (ii) second, the Piggyback Registrable Securities requested to
be included in such registration by Holders that have requested their Piggyback
Registrable Securities to be included therein, pro rata in proportion to the
number of Piggyback Registrable Securities requested to be included in such
registration by each of them.
4.3 Limitations Regarding Piggyback Registrations. If the Company, at
any time after giving written notice under Section 4.1 of its intention to
register Common Stock and prior to the effectiveness of the registration
statement filed in connection with such registration, determines for any reason
either not to effect such registration or to delay such registration, the
Company may, at its election, by the delivery of written notice to each Holder,
(i) in the case of a determination not to effect registration, relieve itself of
its obligation to register the Piggyback Registrable Securities in connection
with such registration, or (ii) in the case of a determination to delay the
registration, delay the registration of such Piggyback Registrable Securities
for the same period as the delay in the registration of such other shares of
Common Stock.
4.4 Agreement of Holders. As a condition precedent to permitting any
Holder to participate in a Piggyback Registration, the Company shall have the
right to require such Holder to execute an agreement in form and substance
satisfactory to the Company to the effect that such Holder agrees to be bound
by, and to comply with, all of the obligations of a Holder under this Agreement.
5. HOLD-BACK AGREEMENTS
5.1 Restrictions on Public Sale by Holder of Registrable Securities.
(a) Each Holder of Registrable Securities agrees, if requested by the managing
underwriter or underwriters in an underwritten offering of any Registrable
Securities, not to effect any public sale or distribution or any other sale
pursuant to the exemption from the registration requirements of the Securities
Act available for private placements, of its remaining equity securities of the
Company, including a sale pursuant to Rule 144 (or any similar provision then in
force) under the Securities Act (except as part of such underwritten
registration), during the 13-day period prior to, and during the 90-day period
(or such shorter period as may be agreed to by the parties hereto) beginning on,
the effective date of such Registration Statement, to the extent timely notified
in writing by the Company or the managing underwriter or underwriters, unless
the underwriters managing the registered offering and the Company otherwise
agree.
(b) Each Holder of Registrable Securities agrees by acquisition of
such Registrable Securities not to effect any public sale or distribution or any
other sale pursuant to the exemption from the registration requirements of the
Securities Act available for private placements, of its remaining equity
securities of the Company, including a sale pursuant to Rule 144 (or any similar
provision then in force) under the Securities Act (except as part of such
underwritten registration), during the period that a holder of securities
registrable under any of the agreements set forth on Schedule 12.2 is prohibited
from making any such sale or distribution as a result of a underwritten public
offering pursuant to such agreement.
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5.2 Restriction on Public Sale by the Company and Others. The Company
agrees (i) not to effect any public sale or distribution of any of its equity
securities during the 14-day period prior to, and during the 90-day period
beginning on, the effective date of a Demand Registration Statement filed
pursuant to Section 3 or such longer periods as may be required in the
reasonable judgment of the managing underwriter or underwriters (except as part
of such underwritten registration or pursuant to registrations on Forms S-4 or
S-8 or any successor form to such forms or in connection with an exchange offer
or an offering of securities solely to the existing stockholders or employees of
the Company), and (ii) that it will cause each holder of equity securities of
the Company purchased from the Company at any time after the date of this
Agreement (other than in a registered public offering) who as a result of such
purchase, owns more than 5% of the Common Stock on a fully diluted basis, to
agree not to effect any public sale or distribution or any other sale pursuant
to the exemption from the registration requirements of the Securities Act
available for private placements, of any such securities during such period,
including a sale pursuant to Rule 144 under the Securities Act (except as part
of such underwritten registration, if permitted).
6. REGISTRATION PROCEDURES
Upon the Company incurring registration obligations under Section 3
or Section 4 and subject thereto (including, without limitation, the Company's
unfettered right to terminate or withdraw a registration under Section 4 for any
or no reason), the Company will use its reasonable best efforts to effect such
registrations to permit the sale of such Registrable Securities in accordance
with the intended method or methods of distribution thereof, and pursuant
thereto the Company will, at its expense, as expeditiously as reasonably
possible:
(a) prepare and file with the Commission a Registration Statement
relating to such registration on any appropriate form under the Securities Act,
which form shall be available for the sale of the Registrable Securities by the
Holders thereof in accordance with the intended method or methods of
distribution thereof, and use its reasonable best efforts to cause such
Registration Statement to become effective; provided, however, that before
filing a Registration Statement or Prospectus or any amendments or supplements
thereto, including documents incorporated by reference after the initial filing
of any Registration Statement, the Company will furnish to the Holders of the
Registrable Securities covered by such Registration Statement, their counsel and
the underwriters, if any, copies of all such documents proposed to be filed
sufficiently in advance of filing to provide them with a reasonable opportunity
to review such documents and comment thereon;
(b) prepare and file with the Commission such amendments and
post-effective amendments to a Registration Statement as may be necessary to
keep such Registration Statement effective for a period of not less than 180
days (or such shorter period which shall terminate when all Registrable
Securities covered by such Registration Statement have been sold or withdrawn,
but not prior to the expiration of the 90-day period referred to in Section 4(3)
of the Securities Act and Rule 174 thereunder, if applicable); cause the related
Prospectus to be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Securities Act; and
comply with the provisions of the Securities Act applicable to it with respect
to the disposition of all securities covered by such Registration
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Operating Agreement
12
Statement during the applicable Period in accordance with the intended methods
of disposition by the sellers thereof set forth in such Registration Statement
or supplement to such Prospectus;
(c) notify each Holder of Registrable Securities included in the
Registration Statement, their counsel and the managing underwriters, if any, at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, promptly, and (if requested by any such Person) confirm such
notice in writing, (1) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective,
(2) of any request by the Commission for amendments or supplements to a
Registration Statement or related Prospectus or for additional information, (3)
of the issuance by the Commission of any stop order suspending the effectiveness
of a Registration Statement or the initiation of any proceedings for that
purpose, (4) if at any time the representations and warranties of the Company
contained in agreements contemplated by Section 6(n) cease to be true and
correct, (5) of the receipt by the Company of any notification with respect to
the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose, (6) of the happening of any event as a result of which the
Prospectus included in the Registration Statement (as then in effect) contains
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein (in
the case of the Prospectus or any preliminary Prospectus, in light of the
circumstances under which they were made) not misleading and (7) of the
Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate or that there exist circumstances
not yet disclosed to the public which make further sales under such Registration
Statement inadvisable pending such disclosure and post-effective amendment;
(d) at any time when a prospectus relating thereto is required to
be delivered under the Securities Act, upon the occurrence of any event
contemplated by Section 6(c)(2)-(7), prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Securities being
sold thereunder, which Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(e) use reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement, or the lifting
of any suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction required pursuant to Section 6(i), as soon as
reasonably possible;
(f) if requested by a managing underwriter or any Holder of
Registrable Securities, immediately incorporate in a prospectus supplement or
post-effective amendment such information concerning such Holder of Registrable
Securities, the managing underwriter or underwriters or the intended method of
distribution as the managing underwriter or underwriters or the Holder of
Registrable Securities reasonably requests to be included therein and as is
appropriate in the reasonable judgment of the Company, including, without
limitation, information with respect to the number of shares of the Registrable
Securities being sold to such
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Operating Agreement
13
underwriter or underwriters, the purchase price being paid therefor by such
underwriter or underwriters and with respect to any other terms of the
underwritten (or best efforts underwritten) offering of the Registrable
Securities to be sold in such offering; make all required filings of such
Prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment; and supplement or make amendments to any Registration Statement if
requested by a managing underwriter of such Registrable Securities;
(g) furnish to each Holder of Registrable Securities included in
such Registration Statement and each managing underwriter, if any, without
charge, one manually-signed copy of the Registration Statement and any
post-effective amendments thereto, including financial statements and schedules,
and, upon request, all documents incorporated therein by reference and all
exhibits (including those incorporated by reference);
(h) deliver to each Holder of Registrable Securities included in
such Registration Statement, their counsel and the underwriters, if any, without
charge, as many copies of the Prospectus or Prospectuses (including each
preliminary Prospectus) and any amendment or supplement thereto as such Persons
may reasonably request; the Company consents to the use of such Prospectus or
any amendment or supplement thereto by each Holder of Registrable Securities
included in the Registration Statement and the underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus or any amendment or supplement thereto;
(i) prior to any public offering of Registrable Securities use its
reasonable best efforts to register or qualify, or cooperate with the Holders of
Registrable Securities included in the Registration Statement, the underwriters,
if any, and their respective counsel in connection with the registration or
qualification of, such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions as any Holder or underwriter
reasonably requests in writing; use its reasonable best efforts to keep each
such registration or qualification effective, including through new filings or
amendments or renewals, during the period such Registration Statement is
required to be kept effective and do any and all other acts or things necessary
or advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by the applicable Registration Statement; provided, however,
that the Company will not be required to qualify to do business or take any
action that would subject it to taxation or general service of process in any
jurisdiction where it is not then so qualified or subject;
(j) cooperate with the Holders of Registrable Securities included
in the Registration Statement and the managing underwriter or underwriters, if
any, to facilitate (x) the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing Registrable Securities to be sold
under the Registration Statement or (y) the timely transfer of beneficial
ownership of such Registrable Securities in machine book-entry fashion under the
auspices of The Depository Trust Company or other similar organization; and
cause such Registrable Securities to be in such denominations and registered in
such names as the managing underwriter or underwriters, if any, or such Holders
may request at least two business days prior to any sale of Registrable
Securities;
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Operating Agreement
14
(k) use its reasonable best efforts to cause the Registrable
Securities covered by the Registration Statement to be registered with or
approved by such Governmental Bodies consistent with the provisions of Section
6(i) as may be necessary to enable the seller or sellers thereof or the managing
underwriter or underwriters, if any, to consummate the disposition of such
Registrable Securities;
(l) cause all Registrable Securities included in such Registration
Statement to be (1) listed, by the date of first sale of Registrable Securities
pursuant to such Registration Statement, on each securities exchange on which
shares of the same class and series have previously been, or are concurrently to
be, listed, if any, or (2) if the Registrable Securities to be included in such
Registration Statement are to be distributed in an underwritten offering, quoted
on the National Association of Securities Dealers Automated Quotation System
("NASDAQ") or the National Market System of NASDAQ if the Common Stock is then
quoted thereon and such Registrable Securities qualify for inclusion thereon;
(m) provide a transfer agent and registrar for the Registrable
Securities not later than the effective date of such Registration Statement;
(n) enter into such agreements and take all such other reasonable
actions in connection therewith in order to expedite or facilitate the
disposition of such Registrable Securities and in such connection, in the case
of an underwritten offering, enter into an underwriting agreement in form, scope
and substance as is customary in underwritten offerings and use its best efforts
to comply with and satisfy the covenants and conditions of such underwriting
agreement, including, without limitation, providing opinions of counsel to the
Company, indemnifications, and "comfort" letters from the Company's independent
certified public accountants;
(o) make available for inspection by a representative of the
Holders of Registrable Securities included in the Registration Statement, any
underwriter participating in any disposition pursuant to such Registration
Statement and any lawyer, accountant or other advisors retained by such selling
Holders or underwriter, all pertinent financial and other records, pertinent
corporate documents and properties of the Company as they may reasonably
request, and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such representative, underwriter,
lawyer, accountant or other advisors in connection with such Registration
Statement, provided, however, that any records, information or documents that
are furnished by the Company and that are non-public shall be used only in
connection with such registration and shall be kept confidential by such Persons
except to the extent disclosure of such records, information or documents is
required by law; and
(p) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission and make generally available to its
security holders earnings statements satisfying the provisions of Section 11(a)
of the Securities Act, no later than 90 days after the end of any 12-month
period commencing at the end of any fiscal quarter in which Registrable
Securities are sold to underwriters in a firmly underwritten offering.
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Operating Agreement
15
Each Holder of Registrable Securities as to which any registration
is being effected shall furnish promptly to the Company such information
regarding the distribution of such securities as the Company may from time to
time reasonably request in writing.
Each Holder of Registrable Securities (i) shall sell its securities
covered by any Registration Statement in accordance with the plan of
distribution provided for therein and (ii) upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
6(c)(2)-(7), shall forthwith discontinue disposition of Registrable Securities
covered by such Registration Statement or Prospectus until such Holder's receipt
of the copies of the supplemented or amended Prospectus contemplated by Section
6(d), or until it is advised in writing by the Company that the use of the
applicable Prospectus may be resumed, and has received copies of any additional
or supplemental filings which are incorporated by reference in such Prospectus,
and, if so directed by the Company, such Holder will, or will request the
managing underwriter or underwriters, if any, to, deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such securities current at the
time of receipt of such notice. In the event the Company shall give any such
notice, the time period mentioned in Section 6(b) during which a Registration
Statement is required to be kept effective shall be extended by the number of
days during the time period from and including the date of the giving of such
notice pursuant to Section 6(c) to and including the earlier of (x) the date
when each seller of Registrable Securities covered by such Registration
Statement shall have received the copies of the supplemented or amended
Prospectus contemplated by Section 6(d), or (y) the date when each such seller
is notified by the Company that it may resume use of the Prospectus as then in
effect. The Company shall be obligated to use its best efforts to cause such
Registration Statement and Prospectus to conform to all legal requirements and
to notify the Holders that the use of the applicable Prospectus may be resumed.
Nothing in this paragraph shall limit the obligations of the Company under
Section 3.6 of this Agreement.
7. REGISTRATION EXPENSES
All expenses incident to the Company's performance of or compliance
with this Agreement, including, without limitation, all registration and filing
fees, fees and expense of compliance with state securities or blue sky laws,
including reasonable fees and disbursements of counsel for the underwriters in
connection with blue sky qualifications of the Registrable Securities under the
laws of such jurisdictions as the managing underwriter or underwriters may
reasonably designate, printing expenses, messenger, telephone and delivery
expenses, and fees and disbursements of counsel for the Company and of all
independent certified public accountants of the Company (including the expenses
of any special audit and "cold comfort" letters required by or incident to such
performance), and of underwriters, any liability insurance and fees and expenses
of other Persons retained by the Company (all such expenses being herein called
"Registration Expenses") will be borne by the Company whether or not the
Registration Statement becomes effective. The Company will also pay its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the fees and expenses incurred in connection with the listing
of the securities to be registered on any securities exchange on which similar
securities issued by the Company are then listed and the fees and expenses of
any Person,
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Operating Agreement
16
including special experts, retained by the Company. None of the following
expenses shall be paid by the Company: transfer taxes, discounts, commissions or
fees of underwriters, selling brokers, dealer managers or similar securities
industry professionals relating to the distribution of the Registrable
Securities and the legal fees and disbursements of counsel to the Holders.
8. INDEMNIFICATION
8.1 Indemnification by the Company. The Company agrees to indemnify,
defend, exonerate and hold harmless, to the full extent permitted by law, each
Holder of Registrable Securities registered pursuant to any registration
hereunder and each of its Affiliates or partners, each of their respective
members, officers, directors, employees, agents, representatives, successors and
assigns and each Person who controls such Holder, Affiliate or partner (within
the meaning of the Securities Act) against any and all actions, causes of
action, suits, losses, liabilities, obligations, damages, deficiencies, demands,
claims, judgments, taxes, assessments, settlement costs, court costs and other
costs and expenses, including, without limitation, interest, penalties, fines,
costs of investigation, discovery, case preparation, defense or appeal, expert
witness fees and expenses and reasonable attorneys' and paralegal fees and
disbursements (collectively, "Losses") incurred by any such Person in any
capacity and caused by any untrue statement of a material fact contained in any
Registration Statement, Prospectus or preliminary Prospectus or any omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein (in the case of a Prospectus or any preliminary
Prospectus, in the light of the circumstances under which they were made) not
misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such Holder or its
representative expressly for use therein; provided, however, that such
indemnification with respect to any preliminary prospectus shall not be
applicable if a copy of the Prospectus was not sent or given by or on behalf of
such Holder on the initial sale, if such is required by law, at or prior to the
written confirmation of the sale and if the Prospectus (as amended or
supplemented) would have cured the defect giving rise to such Losses.
8.2 Indemnification by Holders. In connection with any registration
hereunder, each Holder participating in such registration will promptly furnish
to the Company in writing such information and affidavits with respect to such
Holder as the Company reasonably requests for use in connection with any
Registration Statement or Prospectus and agrees to indemnify, defend, exonerate
and hold harmless, to the full extent permitted by law, the Company, its
directors, officers, agents and representatives and each Person who controls the
Company (within the meaning of the Securities Act) against any Losses incurred
by any such Person in any capacity and caused by any untrue statement of a
material fact or any omission of a material fact required to be stated in any
Registration Statement or Prospectus or preliminary Prospectus or necessary to
make the statements therein (in the case of a Prospectus, in the light of the
circumstances under which they were made) not misleading, to the extent, but
only to the extent, that such untrue statement or omission is contained in any
information or affidavit with respect to such Holder so furnished in writing by
such Holder or its representatives to the Company specifically for inclusion in
such Registration Statement or Prospectus; provided, however, that such
indemnification with respect to any preliminary prospectus shall not be
applicable if a copy of the Prospectus was not sent or given by or on behalf of
the Company on the initial sale, if such is required by law, at or prior to the
written confirmation of the sale and if the Prospectus (as amended
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Operating Agreement
17
or supplemented) would have cured the defect giving rise to such Losses. In no
event shall the liability of any selling Holder hereunder be greater in amount
than the net dollar amount of the proceeds received by such Holder upon the sale
of the Registrable Securities giving rise to such indemnification obligation.
The Company shall be entitled to receive indemnities from underwriters to the
same extent as provided above with respect to information so furnished in
writing by such persons or their representatives to the Company specifically for
inclusion in any Prospectus or Registration Statement.
8.3 Conduct of Indemnification Proceedings. Any Person entitled to
indemnification hereunder will (i) give prompt written notice to the
indemnifying party of any claim with respect to which it seeks indemnification
and (ii) permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party. Notwithstanding the
foregoing, any Person entitled to indemnification hereunder shall have the right
to employ separate counsel and to participate in the defense of such claim, but
the reasonable fees and expenses of such counsel shall be at the expense of such
Person unless (a) the indemnifying party has agreed in writing to pay such fees
or expenses, (b) the indemnifying party shall have failed to assume the defense
of such claim and employ counsel reasonably satisfactory to such Person or (c) a
conflict of interest may exist between such Person and the indemnifying party
(it being understood that (x) in the case of each of (a), (b) and (c) above, the
reasonable fees and expenses of such separate counsel to such Person shall be
paid by the indemnifying party and (y) in the case of (c) above, if the Person
notifies the indemnifying party in writing that such Person elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such claim on behalf of
such Person). If such defense is not assumed by the indemnifying party, the
indemnifying party will not be subject to any liability for any settlement made
without its consent (but such consent will not be unreasonably withheld or
delayed). No indemnifying party will be required to 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 the indemnified party of
a release from all liability in respect to such claim or litigation. An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the reasonable fees and expenses of more
than one counsel for all parties indemnified by such indemnifying party with
respect to such claim, unless in the reasonable judgment of any indemnified
party a conflict of interest may exist between such indemnified party and any
other of such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels. The Company may not enter into any settlement of
any claim relating to the offer and sale of Registrable Securities that does not
provide for the complete and unconditional release of such Person.
8.4 Contribution. If the indemnification provided for in this Section 8
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expense referred to
therein, then the indemnifying party in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such
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Operating Agreement
18
indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action; provided, however, that in no event shall the liability of any
selling Holder hereunder be greater in amount than the difference between the
dollar amount of the proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such contribution obligation and all
amounts previously contributed by such Holder with respect to such losses,
claims, damages, liabilities and expenses. The amount paid or payable by a party
as a result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8.4 were determined by pro rata allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to in the immediately paragraph. 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.
9. RULE 144
The Company agrees that it will file the reports required to be filed
by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder, to the extent required from
time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any Holder of Registrable Securities, the
Company will deliver to such Holder a written statement as to whether it has
complied with such information and requirements.
10. RIGHT OF FIRST REFUSAL.
The Investor and the Company acknowledge that a Transfer (as defined
below) by the Investor of the Preferred Shares or shares of Common Stock into
which the Preferred Shares have been converted (such Preferred Shares or shares
of Common Stock, hereinafter, the "Subject Shares") could, depending on the
transferee, cause the Company to fail to qualify as a real estate investment
trust to the extent that the proposed transferee's ownership of Subject Shares,
of record or Beneficially, would result in the Company being "closely-held"
within the meaning of Section 856(h) of the Code (a "REIT Failure"). The
incremental number of Subject Shares that would cause a REIT Failure upon
transfer by the Investor to the proposed transferee shall be referred to herein
as the Extra Subject Shares.
For purposes of this Section 10, the term "Transfer" shall mean any
direct or indirect disposition of an interest whether by sale, exchange, merger,
consolidation, transfer,
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Operating Agreement
19
assignment, conveyance, distribution, pledge, inheritance, gift, mortgage, the
creation of any security interest in, or lien or encumbrance upon, any other
disposition of any kind and in any manner, by operation of law or otherwise, of
Subject Shares or any other transfer or agreement which would result in a change
in the percentage of the Subject Shares actually or Beneficially Owned by the
Investor. For purposes of this Section 10 "Beneficially" or Beneficially Owned"
shall have the meaning given to such terms in Rule 13d-3 promulgated under the
Exchange Act.
(a) Restrictions. The Investor agrees that it will not Transfer any
Extra Subject Shares (or any direct or indirect interest therein) or any stock
certificate representing the same, now or hereafter at any time owned by it,
except to current members of the Investor and as required or permitted by this
Section 10.
(b) Bona Fide Offers. (a) If the Investor desires to Transfer any
Extra Subject Shares and such Investor shall have received a bona fide written
offer (a "Bona Fide Offer") that it intends to accept from a Person (the
"Outside Party") for the Transfer of such Extra Subject Shares, the Investor
shall give written notice (the "Option Notice") to the Company setting forth
such desire, which notice shall set forth at least the name and address of the
Outside Party and the price and terms of the Bona Fide Offer and shall be
accompanied by a copy of the Bona Fide Offer, a statement executed by the
Outside Party setting forth the number of shares and type of Voting Capital
Stock Beneficially Owned by such Outside Party and any Affiliate thereof, and
evidence reasonably demonstrating the Outside Party's ability to consummate such
offer. Upon the giving of such Option Notice, the Company shall have the option
to purchase for cash, at the price offered by the Outside Party in the Bona Fide
Offer, all, but not less than all, of the Extra Subject Shares specified in the
Option Notice, said option to be exercised within ten (10) business days
following the giving of such Option Notice, by giving a counter-notice (a
"Counter-Notice") to the Investor. In the event that the Bona Fide Offer
provides, in whole or in part, for non-cash consideration, the "price" offered
by the Outside Party shall be deemed to be the amount of cash, if any, provided
in the Bona Fide Offer plus the fair market value of the non-cash consideration
as initially determined in good faith by the majority of the disinterested
members of the Board, which determination may be challenged by the Investor.
(c) If the Company elects to purchase Extra Subject Shares pursuant
to Section 10(b), the Company will be obligated to purchase, and the Investor
shall be obligated to sell, such Extra Subject Shares at a closing (which shall
be the closing for all Extra Subject Shares being purchased in connection with
such Option Notice) to be held on the thirtieth business day after the delivery
of the Company's Counter-Notice to such Investor at the principal executive
offices of the Company, or at such other time and place as may be mutually
acceptable to the Company and the Investor.
(d) If the Company elects not to purchase all of the Extra Subject
Shares subject to the Bona Fide Offer within the time limits specified above,
then the offer to sell any of the Extra Subject Shares to the Company shall be
deemed revoked and the Investor, at any time within a period of sixty-five (65)
business days following the expiration of such time limits, may Transfer all
(but not less than all) of such Extra Subject Shares to the Outside Party at no
lower price than set forth in the Bona Fide Offer and on substantially the same
economic terms contained in the Bona Fide Offer; provided, however, that in the
event the Investor has not so
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Operating Agreement
20
Transferred said Extra Subject Shares to the Outside Party within said
sixty-five (65) day period, then said Extra Subject Shares thereafter shall
continue to be subject to all of the restrictions contained in this Section 10
as though no Option Notice had ever been given.
(e) At the closing of any purchase of Extra Subject Shares pursuant
to this Section 10, the Investor shall deliver certificates representing such
Extra Subject Shares duly endorsed for transfer and accompanied by all requisite
stock transfer taxes to the extent required by the Bona Fide Offer to be paid by
the Investor. Any Extra Subject Shares purchased pursuant to this Section 10
shall be free and clear of any and all liens, claims, options, charges,
encumbrances, voting trusts, irrevocable proxies or other rights of any kind or
nature and at the closing of the purchase the Investor shall represent and
warrant to such effect and to the effect that the Investor is the beneficial
owner of such Extra Subject Shares.
11. EFFECTIVENESS. This Agreement shall be effective upon the execution and
delivery of a counterpart by each of the parties hereto.
12. MISCELLANEOUS
12.1 No Adequate Remedy at Law. In the event of a breach by the Company
of its obligations under this Agreement, each Holder, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate. The failure to file a
Registration Statement within 60 days of a written request delivered under
Section 3.1 shall constitute, in the absence of an injunction or a Blackout
Period having been imposed, a breach thereof entitling the Holders to remedies
hereunder.
12.2 No Inconsistent Agreement. (a) Except for the registration rights
contained in the agreements set forth on Schedule 12.2 hereto, the Company has
not previously entered into any agreement with respect to its capital stock
granting any registration rights to any Person.
(b) The Company will not on or after the date of this Agreement
enter into any agreement with respect to its securities, (i) which grants
registration rights to anyone on a preferred or pari passu position to the
Holders or (ii) which is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof.
12.3 Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of the
Majority Holders. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter which relates exclusively to
the rights of Holders of Registrable Securities whose securities are being sold
pursuant to a Registration Statement and which does not directly or indirectly
affect the rights of other Holders
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21
may be given by Holders owning a majority of the shares of the Registrable
Securities being sold by such Holders, provided that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence.
12.4 Notices. Any notice or other communication required or permitted
hereunder shall be deemed to be delivered if in writing (or in the form of a
telecopy) addressed as provided below and if either (a) actually delivered or
telecopied to said address, (b) in the case of overnight delivery of a notice,
the next business day after properly posted with postage prepaid, or (c) in the
case of a letter, 3 business days shall have elapsed after the same shall have
been deposited in the United States mails, postage prepaid and registered or
certified:
If to the Company, then to Parkway Properties, Inc., One
Xxxxxxx Place Suite 1000, 000 Xxxx Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxxx
00000-0000, Attention: President, or such other address or addresses of
which the Investor shall have been given notice, with concurrent copies
to Xxxxxxx Xxxxxxxxxxx & Mugel, LLP, Twelve Xxxxxxxx Xxxxx, Xxxxxxx,
Xxx Xxxx 00000, Attention: Xxxxxx X. Xxxxxxx, Esq., or such other
address of which the Investor shall have been given notice.
If to any Holder of Registrable Securities, to it at its
address set forth on the books and records of the Company.
12.5 Counterparts. This Agreement and any amendments, waivers, consents
or supplements may be executed in two or more counterparts and by the parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and the
same instrument. This Agreement shall become effective upon the execution of a
counterpart by each of the parties hereto.
12.6 Headings. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
12.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to agreements
made and to be performed entirely within such State.
12.8 Consent to Jurisdiction; Waiver of Jury Trial. (a) Any action,
suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby may be instituted in any federal court of the
Southern District of New York or any state court located in New York County,
State of New York, and each party agrees not to assert, by way of motion, as a
defense or otherwise, in any such action, suit or proceeding, any claim that it
is not subject personally to the jurisdiction of such court, that the action,
suit or proceeding is brought in an inconvenient forum, that the venue of the
action, suit or proceeding is improper or that this Agreement or the subject
matter hereof may not be enforced in or by such court. The parties irrevocably
submit to the exclusive jurisdiction of such court in any such action, suit or
proceeding. Any and all service of process and any other notice in any such
action, suit or proceeding shall be effective against any party if given
personally or by registered or certified
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22
mail, return receipt requested, or by any other means of mail that requires a
signed receipt, postage prepaid, mailed to such party as herein provided.
Nothing herein contained shall be deemed to affect the right of any party to
serve process in any manner permitted by law or to commence legal proceedings or
otherwise proceed against any other party in any other jurisdiction to enforce
judgments obtained in any action, suit or proceeding brought pursuant to this
Section 12.8.
(b) Each of the parties hereby irrevocably waives trial by jury in
any action, suit, proceeding or counterclaim, whether at law or equity, brought
by either of them in connection with this Agreement or the transactions
contemplated hereby.
12.9 Severability. The invalidity, illegality or unenforceability in
any jurisdiction of any provision in or obligation under this Agreement shall
not affect or impair the validity, legality and enforceability of the remaining
provisions or obligations under this Agreement or of such provision or
obligation in any other jurisdiction.
12.10 Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein, other than the provisions of any other
documents specifically referred to herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by the Company with respect to
the Registrable Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
12.11 Attorneys' Fees. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees in addition to its reasonable costs and expenses and
any other available remedy.
12.12 Construction. The Company and the Investor acknowledge that each
of them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement with its legal counsel and that
this Agreement shall be construed as if jointly drafted by the Company and the
Investor.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PARKWAY PROPERTIES, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President and Chief Executive Officer
By: /s/ Xxxxx X. Xxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Financial Officer and Secretary
FIVE ARROWS REALTY SECURITIES III L.L.C.
By: /s/ X. Xxxx Xxxxxx
--------------------------------------------
Name: X. Xxxx Aloian
Title: Manager
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