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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(AMENDMENT No. 1)
Regency Realty Corporation
(Name of Issuer)
Common Stock, $0.01 Par Value
(Title of Class of Securities)
758939 10 2
(CUSIP Number)
Paul E. Szurek
SECURITY CAPITAL U.S. REALTY
69, route d'Esch
L-1470 Luxembourg
(352) 48 78 78
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
July 10, 1996
(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Sche-
dule 13G to report the acquisition which is the subject of this
Schedule 13D, and is filing this schedule because of Rule 13d--
1(b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with this state-
ment / /. (A fee is not required only if the reporting per-
son: (1) has a previous statement on file reporting beneficial
ownership of more than five percent of the class of securities
described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less
of such class.) (See Rule 13d-7.)
Note: Six copies of this statement, including all
exhibits, should be filed with the Commission. See Rule
13d-1(a) for other parties to whom copies are to be sent.
(Continued on following pages)
Page 1 of 8 Pages
CUSIP No. 758939 10 2 13D Page 2 of 8 Pages
1 NAME OF PERSON
Security Capital U.S. Realty
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) / /
(b) /x/
3 SEC USE ONLY
4 SOURCE OF FUNDS*
BK, OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Luxembourg
7 SOLE VOTING POWER
NUMBER OF 7,618,500 (See Item 5)
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY -0-
EACH
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 7,618,500
WITH
10 SHARED DISPOSITIVE POWER
-0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7,618,500 (See Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
53.1% (See Item 5)
14 TYPE OF PERSON REPORTING*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT
CUSIP No. 758939 10 2 13D Page 3 of 8 Pages
1 NAME OF PERSON
Security Capital Holdings S.A.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) / /
(b) /x/
3 SEC USE ONLY
4 SOURCE OF FUNDS*
BK, OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Luxembourg
7 SOLE VOTING POWER
NUMBER OF 7,618,500 (See Item 5)
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY -0-
EACH
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 7,618,500
WITH
10 SHARED DISPOSITIVE POWER
-0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7,618,500 (See Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
53.1% (See Item 5)
14 TYPE OF PERSON REPORTING*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT
This Amendment is filed by Security Capital U.S. Re-
alty ("Security Capital U.S. Realty"), a corporation organized
and existing under the laws of Luxembourg, and by Security
Capital Holdings S.A. ("Holdings"), a corporation organized and
existing under the laws of Luxembourg and a wholly owned sub-
sidiary of Security Capital U.S. Realty (together with Security
Capital U.S. Realty, "USRealty"). Capitalized terms used
herein without definition shall have the meanings ascribed
thereto in Schedule 13D.
As previously reported, pursuant to a Stock Purchase
Agreement, dated as of June 11, 1996, by and among Regency Re-
alty Corporation, a Florida corporation ("Regency"), Security
Capital U.S. Realty and Holdings (the "Stock Purchase Agree-
ment"), subject to the terms and conditions thereof, Regency
has agreed to sell and USRealty has agreed to purchase up to
7,499,400 shares of common stock, par value $0.01 per share, of
Regency (the "Common Stock"). USRealty previously filed a
Schedule 13D with respect to its investment in Regency, in
which it disclosed that USRealty may be deemed to beneficially
own up to 7,618,500 shares of Common Stock because of its right
to acquire such shares of Common Stock and because of its own-
ership of an additional 119,100 shares of Common Stock.
On July 10, 1996 pursuant to the Stock Purchase Agree-
ment, USRealty purchased 934,400 shares of Common Stock (such
shares, the "Initial Shares") at a price of $17.625 per share
at an initial closing. The aggregate purchase price paid to
Regency for the Initial Shares was $16,468,800. Security Capi-
tal U.S. Realty advanced to Holdings the funds necessary to
purchase the Initial Shares as required by the Stock Purchase
Agreement. These funds were obtained by USRealty from cash on
hand and from draw downs under the Facility Agreement.
In addition to the purchase of additional shares as
contemplated by the Stock Purchase Agreement, USRealty intends
to review on a continuing basis its investment in Regency and
may increase such investment to up to 45.0% of the outstanding
Common Stock of Regency, on a fully diluted basis (including
all of the shares to be acquired pursuant to the Stock Purchase
Agreement). Such increase in USRealty's investment in Regency
could be accomplished by USRealty's acquisition of securities
of Regency in the open market or otherwise. The extent of any
such increase would depend upon the price and availability of
Regency's securities, subsequent developments affecting Re-
gency, Regency's business and prospects, other investment and
business opportunities available to USRealty, general stock
market and economic conditions, tax considerations, and other
factors, including the obtaining of any necessary regulatory
approvals. In addition, USRealty may decide to decrease its
Page 4 of 8 Pages
investment in Regency, depending upon its continuing review of
such investment and various other factors including those men-
tioned above.
Item 1. Security and Issuer.
No material change.
Item 2. Identity and Background.
No material change.
Item 3. Source and Amount of Funds or Other Consideration.
No material change except as described above.
Item 4. Purpose of Transaction.
No material change except as described above.
Item 5. Interest in Securities of the Issuer.
No material change except as describe above and below.
As of July 10, 1996 USRealty may be deemed to benefi-
cially own up to 7,618,500 shares of Common Stock because of
USRealty's acquisition of 934,400 of such shares on July 10,
1996, because of its right to acquire an additional 6,565,000
of such shares pursuant to and subject to the terms and condi-
tions of the Stock Purchase Agreement and because of USRealty's
ownership of an additional 119,100 shares of Common Stock.
Except as set forth in this Item 5, to the best knowl-
edge and belief of USRealty, no transactions involving Common
Stock have been effected during the past 60 days by USRealty or
by its directors, executive officers or controlling persons.
Item 6. Contracts, Arrangements, Understanding or Relation-
ships with Respect to Securities of the Issuer.
No material change.
Page 5 of 8 Pages
Item 7. Material to be filed as Exhibits.
The following Exhibit is filed as part of this Amend-
ment No. 1 to Schedule 13D:
Exhibit 2.1 Stockholders Agreement, dated July 10, 1996, by
and among Regency Realty Corporation, Security
Capital Holdings S.A., Security Capital U.S. Re-
alty and The Regency Group, Inc.
Exhibit 2.2 Registration Rights Agreement, dated July 10,
1996, by and among Regency Realty Corporation,
Security Capital Holdings S.A. and Security Capi-
tal U.S. Realty
Page 6 of 8 Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge
and belief, I certify that the information set forth in this
statement is true, complete, and correct.
SECURITY CAPITAL U.S. REALTY
By: /s/ Paul E. Szurek
Name: Paul E. Szurek
Title: Managing Director
SECURITY CAPITAL HOLDINGS S.A.
By: /s/ Paul E. Szurek
Name: Paul E. Szurek
Title: Managing Director
July 15, 1996
EXHIBIT INDEX
Sequential
Exhibit Description Page No.
2.1 Stockholders Agreement, dated July 10,1996,
by and among Regency Realty Corporation,
Security Capital Holdings S.A., Security
Capital U.S. Realty and The Regency
Group, Inc.
2.2 Registration Rights Agreement, dated
July 10, 1996, by and among Regency
Realty Corporation, Security Capital
Holdings S.A. and Security Capital U.S.
Realty
EXHIBIT 2.1
STOCKHOLDERS AGREEMENT
by and among
REGENCY REALTY CORPORATION
SECURITY CAPITAL HOLDINGS S.A.
SECURITY CAPITAL U.S. REALTY
and
THE REGENCY GROUP, INC.
dated as of
July 10, 1996
TABLE OF CONTENTS
Page
ARTICLE 1
Definitions
Section 1.1 "Affiliate"............................... 1
Section 1.2 "Affiliate Arrangements".................. 2
Section 1.3 "Agreement"............................... 2
Section 1.4 "Beneficially Own"........................ 2
Section 1.5 "Board"................................... 2
Section 1.6 "Buyer"................................... 2
Section 1.7 "Code".................................... 2
Section 1.8 "Company"................................. 2
Section 1.9 "Company Common Stock".................... 2
Section 1.10 "Conflict of Interest Policies"........... 2
Section 1.11 "Corporate Action Covenants".............. 2
Section 1.12 "Covered Transaction"..................... 2
Section 1.13 "Director"................................ 2
Section 1.14 "Early Termination Event"................. 2
Section 1.15 "Excess Shares"........................... 2
Section 1.16 "Exercise Notice"......................... 2
Section 1.17 "Extraordinary Transaction"............... 2
Section 1.18 "15% Termination Date".................... 3
Section 1.19 "fully diluted"........................... 3
Section 1.20 "Geographic Region"....................... 3
Section 1.21 "Government Authority".................... 3
Section 1.22 "Group"................................... 3
Section 1.23 "Investor"................................ 4
Section 1.24 "Investor Nominees"....................... 4
Section 1.25 "Investor Restricted Person".............. 4
Section 1.26 "Key Committees".......................... 4
Section 1.27 "1933 Act"................................ 4
Section 1.28 "1934 Act"................................ 4
Section 1.29 "Participation Notice".................... 4
Section 1.30 "person".................................. 4
Section 1.31 "SCGI".................................... 4
Section 1.32 "SCGI Restricted Person".................. 4
Section 1.33 "Securities Filings"...................... 4
Section 1.34 "Shareholder Approval".................... 4
Section 1.35 "Shareholder Approval Date"............... 4
Section 1.36 "Shopping Center Company"................. 5
Section 1.37 "Shopping Center Property"................ 5
Section 1.38 "Standstill Extension Term"............... 5
Section 1.39 "Standstill Period"....................... 5
Section 1.40 "Stock Purchase Agreement"................ 5
Section 1.41 "13D Group"............................... 5
Section 1.42 "Transfer"................................ 5
Section 1.43 "TRG"..................................... 5
Section 1.44 "TRG Restricted Person"................... 5
Section 1.45 "20% Termination Date".................... 5
Section 1.46 "USREALTY"................................ 6
Section 1.47 "Voting Securities"....................... 6
ARTICLE 2
Board of Directors
Section 2.1 Investor Nominees......................... 6
Section 2.2 Committee Representation;
Subsidiary Boards....................... 7
Section 2.3 Vacancies................................. 8
ARTICLE 3
Information Rights
Section 3.1 Strategic Advice; Operating
Statements; Public Company Status....... 8
Section 3.2 Advice of Actions......................... 9
ARTICLE 4
Voting and Participation Rights
Section 4.1 Voting Rights............................. 10
Section 4.2 Participation Rights...................... 11
ARTICLE 5
Standstill Provisions
Section 5.1 Standstill Periods........................ 14
Section 5.2 Restrictions During Standstill
Period and Standstill Extension
Term.................................... 16
Section 5.3 Investments in Shopping Center
Properties and Purchases of
Interests in Shopping Center
Companies............................... 17
Section 5.4 Notice to Company......................... 19
-ii-
Section 5.5 Compliance with Insider Trading Policy.... 20
Section 5.6 Compliance with Section 5.2 of the
Company Charter......................... 20
Section 5.7 Investment Company Matters................ 20
Section 5.8 Waiver of Restrictions and Limits......... 20
Section 5.9 REIT Qualification........................ 21
ARTICLE 6
Limitations on Corporate Actions, Etc.
Section 6.1 Limitations on Corporate Actions.......... 21
Section 6.2 Provision of Information.................. 23
Section 6.3 Compliance with Conflicts of Interest
Policy.................................. 23
Section 6.4 Maintenance of Affiliate and
Joint Venture Arrangements.............. 24
Section 6.5 Sales of Assets........................... 24
Section 6.6 Investments in Shopping Center
Properties and Purchases of
Interests in Shopping Center
Companies............................... 24
ARTICLE 7
Miscellaneous
Section 7.1 Counterparts.............................. 26
Section 7.2 Governing Law............................. 26
Section 7.3 Entire Agreement.......................... 26
Section 7.4 Expenses.................................. 26
Section 7.5 Notices................................... 26
Section 7.6 Successors and Assigns.................... 27
Section 7.7 Headings.................................. 27
Section 7.8 Amendments and Waivers.................... 27
Section 7.9 Interpretation; Absence of Presumption.... 28
Section 7.10 Severability.............................. 28
Section 7.11 Further Assurances........................ 28
Section 7.12 Specific Performance...................... 28
Section 7.13 Investor Breach........................... 28
Section 7.14 Confidentiality........................... 28
Section 7.15 Public Releases and Announcements......... 29
-iii-
THIS STOCKHOLDERS AGREEMENT (the "Agreement"), dated
as of July 10, 1996, is made by and among Regency Realty
Corporation, a Florida corporation (the "Company"), Security
Capital U.S. Realty, a Luxembourg corporation ("USREALTY"),
Security Capital Holdings S.A., a Luxembourg corporation and a
wholly owned subsidiary of USREALTY ("Buyer"), and The Regency
Group, Inc., a Florida corporation ("TRG"). Capitalized terms
not otherwise defined herein have the meaning ascribed to them
in the Stock Purchase Agreement (as hereinafter defined).
RECITALS:
WHEREAS, the Company, USREALTY and Buyer have entered
into a Stock Purchase Agreement, dated as of June 11, 1996 (the
"Stock Purchase Agreement"), pursuant to which the Company is
selling, conveying, assigning and transferring, and Buyer is
purchasing, certain shares of the common stock, par value $.01
per share, of the Company (the "Company Common Stock") on the
date hereof, and pursuant to which the Company has agreed to
sell, and Buyer has agreed to purchase, certain additional
shares of Company Common Stock, upon the terms and subject to
the conditions set forth therein; and
WHEREAS, it is a condition to the transactions con-
templated by the Stock Purchase Agreement and the parties be-
lieve it to be in their best interests that they enter into
this Agreement and provide for certain rights and restrictions
with respect to the investment by Investor (as hereinafter de-
fined) in the Company and the corporate governance of the Com-
pany; and
WHEREAS, the Company and Buyer believe that the com-
bination in a strategic partnership of the leadership, exper-
tise and experience in the retail shopping center industry of
the Company and the unique market knowledge, operating experi-
ence, research capabilities and access to capital of Buyer and
its Affiliates will significantly enhance the Company's ability
to pursue its growth and operating strategies;
NOW, THEREFORE, in consideration of the premises and
the covenants and agreements contained herein and for good and
valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE 1
Definitions
As used in this Agreement, the following terms shall
have the following respective meanings:
Section 1.1 "Affiliate" shall have the meaning as-
cribed thereto in Rule 12b-2 promulgated under the 1934 Act,
and as in effect on the date hereof.
Section 1.2 "Affiliate Arrangements" shall mean the
agreements and arrangements described in Schedule 3.9(f) of the
Stock Purchase Agreement or which are disclosed in public fil-
ings of the Company.
Section 1.3 "Agreement" shall have the meaning set
forth in the first paragraph hereof.
Section 1.4 "Beneficially Own" shall mean, with re-
spect to any security, having direct or indirect (including
through any Subsidiary or 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.
Section 1.5 "Board" shall mean the board of direc-
tors of the Company.
Section 1.6 "Buyer" shall have the meaning set forth
in the first paragraph hereof.
Section 1.7 "Code" shall mean the Internal Revenue
Code of 1986, as amended, and any successor thereto, including
all of the rules and regulations promulgated thereunder.
Section 1.8 "Company" shall have the meaning set
forth in the first paragraph hereof.
Section 1.9 "Company Common Stock" shall have the
meaning set forth in the second paragraph hereof.
Section 1.10 "Conflict of Interest Policies" shall
have the meaning set forth in Section 6.3.
Section 1.11 "Corporate Action Covenants" shall have
the meaning set forth in Section 6.1.
Section 1.12 "Covered Transaction" shall have the
meaning set forth in Section 5.1(a)(iv).
-2-
Section 1.13 "Director" shall mean a member of the
Board.
Section 1.14 "Early Termination Event" shall have
the meaning set forth in Section 5.1(a).
Section 1.15 "Excess Shares" shall have the meaning
set forth in Section 5.1(a)(ii).
Section 1.16 "Exercise Notice" shall have the mean-
ing set forth in Section 4.2(b).
Section 1.17 "Extraordinary Transaction" shall mean
(a) any merger, consolidation, sale of a material portion of
the Company's assets, recapitalization, other business combina-
tion, liquidation, or other similar action out of the ordinary
course of business of the Company, or (b) any issuance of secu-
rities to any person or Group requiring shareholder approval in
accordance with the guidelines of the New York Stock Exchange
as to such matters, as in effect as of the date of the Stock
Purchase Agreement.
Section 1.18 "15% Termination Date" shall mean the
first date, if any, following the date on which the Remaining
Equity Commitment shall have been reduced to zero on which In-
vestor's ownership of Company Common Stock, on a fully diluted
basis, shall have been below 15% of the outstanding shares of
Company Common Stock for a continuous period of 180 days; pro-
vided, that, if Investor's ownership of Company Common Stock
shall, following the date on which the Remaining Equity Commit-
ment shall have been reduced to zero, have fallen below 15% by
number of the outstanding shares of Company Stock, on a fully
diluted basis, as a result of the redemption of limited part-
nership or other interests in partnerships or other entities
for shares of Company Common Stock, then the 15% Termination
Date shall mean the first date, if any, following the date on
which Investor's ownership of Company Common Stock shall have
been below 15% by number of the outstanding shares of Company
Stock, on a fully diluted basis, for a continuous period of 450
days; provided, however, that if Investor's ownership of Com-
pany Common Stock shall, following the date on which the Re-
maining Equity Commitment shall have been reduced to zero, have
fallen below 15% of the outstanding shares of Company Common
Stock as a result of a Transfer by Investor of Company Common
Stock or a failure of Investor to exercise its rights under
Section 4.2 during the 60 days immediately prior to the expira-
tion of such 180-day period, if any such rights are exercisable
during such period, to the extent necessary to (and provided
that it shall be possible by such exercise to) raise its owner-
ship of the outstanding Company Common Stock above such 15%
-3-
threshold, then the 15% Termination Date shall occur immedi-
ately upon such Transfer or failure to exercise its rights un-
der Section 4.2, as the case may be.
Section 1.19 "fully diluted" shall mean, with re-
spect to the Company Stock, the total number of outstanding
shares of Company Stock (for such purposes, treating as Company
Stock all shares of Company Preferred Stock and Class B Common
Stock and all options or warrants to purchase and securities
convertible into (or exchangeable or redeemable for) Company
Common Stock, in each case outstanding as of the date of the
Stock Purchase Agreement and that remain outstanding as of the
relevant measurement date, assuming conversion of all such
shares of Company Preferred Stock and Class B Common Stock and
assuming exercise, conversion, exchange or redemption of such
other securities).
Section 1.20 "Geographic Region" shall mean the
states of Florida, Alabama, Mississippi, Georgia, North Caro-
lina, South Carolina, Tennessee, Kentucky, Virginia, West Vir-
ginia, Maryland and the District of Columbia, and the southern
regions of the states of Indiana and Ohio (including the cities
of Indianapolis and Columbus, respectively).
Section 1.21 "Government Authority" shall mean any
government or state (or any subdivision thereof) of or in the
United States, or any agency, authority, bureau, commission,
department or similar body or instrumentality thereof, or any
governmental court or tribunal.
Section 1.22 "Group" shall mean a "group" as such
term is used in Section 13(d)(3) of the 1934 Act.
Section 1.23 "Investor" shall mean, collectively, as
the context may require, USREALTY and Buyer, and shall also in-
clude any Affiliate of USREALTY or Buyer of which USREALTY and/
or Buyer collectively, directly or indirectly, Beneficially Own
98% or more of the voting power and economic interests, or, for
purposes only of (i) Section 5.8 with regard to ownership of
shares of Company Common Stock by such Person and (ii) the pro-
visions of the Registration Rights Agreement, any bona fide
financial institution to which any Investor has Transferred
(including upon foreclosure of a pledge) shares of Company
Stock for the purpose of securing bona fide indebtedness of any
Investor and which has agreed to be bound by this Agreement.
Section 1.24 "Investor Nominees" shall have the mea-
ning set forth in Section 2.1(a).
-4-
Section 1.25 "Investor Restricted Person" shall have
the meaning set forth in Section 5.3(a).
Section 1.26 "Key Committees" shall have the meaning
set forth in Section 2.2(a).
Section 1.27 "1933 Act" shall mean the Securities
Act of 1933, as amended.
Section 1.28 "1934 Act" shall mean the Securities
Exchange Act of 1934, as amended.
Section 1.29 "Participation Notice" shall have the
meaning set forth in Section 4.2(b).
Section 1.30 "person" shall mean any individual,
corporation, partnership, limited liability company, joint ven-
ture, trust, unincorporated organization, other form of busi-
ness or legal entity or Government Authority.
Section 1.31 "SCGI" shall have the meaning set forth
in Section 5.3(a).
Section 1.32 "SCGI Restricted Person" shall have the
meaning set forth in Section 5.3(a).
Section 1.33 "Securities Filings" shall have the
meaning set forth in Section 3.1(b)(iii).
Section 1.34 "Shareholder Approval" shall have the
meaning set forth in Section 5.3(d).
Section 1.35 "Shareholder Approval Date" shall mean
the date on which a duly called and held meeting of sharehold-
ers of the Company is held at which meeting (i) a quorum is
present and (ii) the transactions (including the issuance of
the Company Common Stock and the amendments to the Company
Charter) contemplated by the Stock Purchase Agreement are ap-
proved by the affirmative vote of the holders of the requisite
number of shares of Company Stock.
Section 1.36 "Shopping Center Company" shall have
the meaning set forth in Section 5.3(b).
Section 1.37 "Shopping Center Property" shall have
the meaning set forth in Section 5.3(a).
Section 1.38 "Standstill Extension Term" shall have
the meaning set forth in Section 5.1(b).
-5-
Section 1.39 "Standstill Period" shall have the
meaning set forth in Section 5.1(a).
Section 1.40 "Stock Purchase Agreement" shall have
the meaning set forth in the second paragraph hereof.
Section 1.41 "13D Group" shall mean any group of
persons acquiring, holding, voting or disposing of Voting Secu-
rities which 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) of the 1934 Act if such group beneficially
owned Voting Securities representing more than 5% of any class
of Voting Securities then outstanding.
Section 1.42 "Transfer" shall have the meaning set
forth in Section 5.2(a)(ii).
Section 1.43 "TRG" shall have the meaning set forth
in the first paragraph hereof.
Section 1.44 "TRG Restricted Person" shall have the
meaning set forth in Section 6.6.
Section 1.45 "20% Termination Date" shall mean the
first date, if any, following the date on which the Remaining
Equity Commitment shall have been reduced to zero on which In-
vestor's ownership of Company Common Stock, on a fully diluted
basis, shall have been below 20% of the outstanding shares of
Company Common Stock for a continuous period of 180 days; pro-
vided, that, if Investor's ownership of Company Common Stock
shall, following the date on which the Remaining Equity Commit-
ment shall have been reduced to zero, have fallen below 20% by
number of the outstanding shares of Company Stock, on a fully
diluted basis, as a result of the redemption of limited part-
nership or other interests in partnerships or other entities
for shares of Company Common Stock, then the 20% Termination
Date shall mean the first date, if any, following the date on
which Investor's ownership of Company Common Stock shall have
been below 20% by number of the outstanding shares of Company
Stock, on a fully diluted basis, for a continuous period of 450
days; provided, however, that if Investor's ownership of Com-
pany Common Stock shall, following the date on which the Re-
maining Equity Commitment shall have been reduced to zero, have
fallen below 20% of the outstanding shares of Company Common
Stock as a result of a Transfer by Investor of Company Common
Stock or a failure of Investor to exercise its rights under
-6-
Section 4.2 during the 60 days immediately prior to the expira-
tion of such 180-day period, if any such rights are exercisable
during such period, to the extent necessary to (and provided
that it shall be possible by such exercise to) raise its owner-
ship of the outstanding Company Common Stock above such 20%
threshold, then the 20% Termination Date shall occur immedi-
ately upon such Transfer or failure to exercise its rights un-
der Section 4.2, as the case may be.
Section 1.46 "USREALTY" shall have the meaning set
forth in the first paragraph hereof.
Section 1.47 "Voting Securities" shall mean at any
time shares of any class of capital stock of the Company which
are then entitled to vote generally in the election of Direc-
tors.
ARTICLE 2
Board of Directors
Section 2.1 Investor Nominees. (a) From and after
the Shareholder Approval Date, if any, and until the next an-
nual or special meeting of shareholders of the Company at, or
the next taking of action by written consent of shareholders of
the Company with respect to, which any Directors are to be
elected, the Investor shall have the right (but not the obliga-
tion) to have on the Board two Directors (such Directors, the
"Investor Nominees"), and the Company shall cause such Investor
Nominees to become members of the Board. If necessary to ef-
fectuate the placement of such Investor Nominees on the Board,
the Company shall, at its sole option, (i) expand the size of
the Board or (ii) solicit the resignations of the appropriate
number of Directors, in either case, to the extent necessary to
permit the Investor Nominees to serve. Thereafter and until
the earlier of the 20% Termination Date, if any, and the expi-
ration of the Standstill Period or any Standstill Extension
Term (other, in either case, as a result of an Early Termina-
tion Event), at each annual or special meeting of shareholders
of the Company at, or the taking of action by written consent
of shareholders of the Company with respect to, which any Di-
rectors are to be elected, Investor shall have the right (but
not the obligation) pursuant to this Agreement (i) to nominate
for election to the Board that number of Directors which, when
added to the number of Directors (such Directors also, "Inves-
tor Nominees") who are then Investor Nominees and who will con-
tinue to serve as Directors without regard to the outcome of
the election at such meeting or by such consent, represent the
greater of (x) two and (y) the same proportion of the total
-7-
number of Directors as is represented by the number of shares
of Company Common Stock which Investor then owns relative to
the outstanding Company Common Stock (but in no event more than
49% of the Board), and (ii) to be entitled to the benefits of
the agreements of the Company contained in Subsection 2.1(c)
with respect to the Investor Nominees described in clause (i)
of this sentence. Following the expiration of the Standstill
Period or any Standstill Extension Term (other, in either case,
as a result of an Early Termination Event), if such expiration
of the Standstill Period or any Standstill Extension Term shall
be prior to the 20% Termination Date, and until the 20% Ter-
mination Date, at each annual or special meeting of sharehold-
ers of the Company at, or the taking of action by written con-
sent of shareholders of the Company with respect to, which any
Directors are to be elected, Investor shall have the right (but
not the obligation) pursuant to this Agreement (i) to nominate
for election to the Board that number of Directors which, when
added to the number of Directors who are then Investor Nominees
and who will continue to serve as Directors without regard to
the outcome of the election at such meeting or by such consent,
represent the lesser of (x) two and (y) the same proportion of
the total number of Directors as is represented by the number
of shares of Company Common Stock which Investor then owns
relative to the outstanding Company Common Stock (such Direc-
tors also, "Investor Nominees") and (ii) to be entitled to the
benefits of the agreements of the Company contained in Subsec-
tion 2.1(c) with respect to the Investor Nominees described in
clause (i) of this sentence. In computing the number of In-
vestor Nominees, any fraction is to be rounded down to the
nearest whole number. At the time of the expiration of the
Standstill Period or any Standstill Extension Term, if the Com-
pany shall so request, Investor shall use its reasonable ef-
forts to cause one or more then-serving Investor Nominees to
resign from the Board such that there shall be no more Investor
Nominees on the Board than the lesser of (x) two and (y) the
same proportion of the total number of Directors as is repre-
sented by the number of shares of Company Common Stock which
Investor then owns relative to the outstanding Company Common
Stock.
(b) Investor will not name any person as an Investor
Nominee if (i) such person is not reasonably experienced in
business, financial or real estate matters, (ii) such person
has been convicted of, or has pled nolo contendere to, a fel-
ony, (iii) the election of such person would violate any law,
or (iv) any event required to be disclosed pursuant to Item
-8-
401(f) of Regulation S-K of the 1934 Act has occurred with re-
spect to such person. Investor shall use its reasonable ef-
forts to afford the independent directors of the Company a rea-
sonable opportunity to meet any individual that Investor is
considering naming as an Investor Nominee.
(c) The Company will support the nomination of, and
the Company's nominating committee (or any other committee ex-
ercising a similar function) shall recommend to the Board, the
election of each Investor Nominee to the Board, and the Company
will exercise all authority under applicable law to cause each
Investor Nominee to be elected to the Board. Without limiting
the generality of the foregoing, with respect to each meeting
of shareholders of the Company at which Directors are to be
elected, the Company shall use its reasonable efforts to so-
licit from the shareholders of the Company eligible to vote in
the election of Directors proxies in favor of any Investor Nom-
inees.
(d) From and after the Shareholder Approval Date, if
any, until the earlier of the 20% Termination Date, if any, and
the expiration of the Standstill Period or any Standstill Ex-
tension Term (other, in either case, as a result of an Early
Termination Event), the total number of members of the Board
shall not be less than eleven without the prior written consent
of Investor, in its sole discretion.
Section 2.2 Committee Representation; Subsidiary
Boards. (a) During such time as Investor is entitled pursuant
to Section 2.1(a) to have at least one Investor Nominee on the
Board, unless Investor chooses not to exercise its rights under
this Section 2.2(a), at least one Director who is an Investor
Nominee shall serve on each of the audit committee, the nomi-
nating committee, the compensation committee, the executive
committee, any special committee(s) of the Board, and any other
committees which shall be charged with exercising substantial
authority on behalf of the Board (the foregoing, the "Key Com-
mittees"). Notwithstanding the foregoing, if none of the Di-
rectors who are Investor Nominees would be considered "inde-
pendent" of the Company or "disinterested" (i) for purposes of
any applicable rule of the New York Stock Exchange or any other
securities exchange or other self-regulating organization (such
as the National Association of Securities Dealers) requiring
that members of the audit committee of the Board be independent
of the Company, (ii) for purposes of any law or regulation that
requires, in order to obtain or maintain favorable tax, securi-
ties, corporate law or other material legal benefits with re-
spect to any plan or arrangement for employee compensation or
benefits, that the members of the committee of the Board
charged with responsibility for such plan or arrangement be
-9-
"independent" of the Company or "disinterested", or (iii) for
purposes of any special committee formed in connection with any
transaction or potential transaction involving the Company and
any of Investor, its Affiliates or any Group of which Investor
is a member or such other transaction or potential transaction
which would involve an actual or potential conflict of interest
on the part of the Directors who are Investor Nominees, then a
Director who is an Investor Nominee shall not be required to be
appointed to any such committee; provided, however, that the
committees of the Board shall be organized such that, to the
extent practicable, the only items to be considered by a Key
Committee on which no Director who is an Investor Nominee may
serve will be those items which prevent the Director who is an
Investor Nominee from serving on such Key Committee. Any mem-
bers of any Key Committee who are Investor Nominees shall, in
the event of any vacancy in such membership, be replaced by a
Director who is an Investor Nominee elected by a majority of
the Directors who are Investor Nominees.
(b) During such time as Investor is entitled pursu-
ant to Section 2.1(a) to have at least one Investor Nominee on
the Board, unless Investor chooses not to exercise its rights
under this Section 2.2(b), one individual designated by Inves-
tor shall serve as a member of the board of directors or com-
parable governing body of each Subsidiary of the Company, if
any, that is a corporation or other person with a board of di-
rectors or board of trustees.
Section 2.3 Vacancies. In the event that any Inves-
tor Nominee shall cease to serve as a Director for any reason
other than the fact that Investor no longer has a right to nom-
inate a Director, as provided in Section 2.1(a), the vacancy
resulting thereby shall be filled by an Investor Nominee desig-
nated by Investor; provided, however, that any Investor Nominee
so designated shall satisfy the qualification requirements set
forth in Section 2.1(b).
ARTICLE 3
Information Rights
Section 3.1 Strategic Advice; Operating Statements;
Public Company Status. (a) From and after the Shareholder
Approval Date, if any, until the 20% Termination Date, Buyer
will from time to time, as reasonably requested by the Company,
use reasonable efforts to make reasonably available to the Com-
pany the benefit of Buyer's market expertise, operating experi-
ence and research capabilities and will from time to time, as
-10-
reasonably requested by the Company, consult with and advise
the Company on matters concerning:
(i) business and operating strategy;
(ii) financing and capital formation (including
advice regarding capital markets and structure,
method and timing of capital-rasing efforts);
(iii) property acquisition strategy and acquisi-
tion opportunities with respect to Shopping Center
Properties in the Geographic Region of which Buyer
becomes aware; and
(iv) investor relations;
provided, however, that nothing herein shall require Buyer to
provide the Company with any information that may be subject to
any obligation of confidentiality on Buyer's part. Upon the
reasonable request of the Company, Buyer further will provide
to the Company any relevant market or economic research in its
possession which is not readily available from third parties
and which is not subject to any obligation of confidentiality
on Buyer's part. Buyer will be entitled to receive customary
fees and expense reimbursement for its undertaking of any ac-
tions contemplated by this Section 3.1(a), which fees and ex-
penses will be agreed upon by Buyer and the Company in each
instance.
(b) From and after the Shareholder Approval Date, if
any, until the 20% Termination Date, if any, the Company will:
(i) deliver to Investor, as soon as practicable
after the end of each month or other reporting pe-
riod, any operating and financial statements and man-
agement reports (x) of the Company, and (y) of each
Subsidiary not consolidated with the Company, which
are regularly provided to the senior management of
the Company, each as, at and for the end of such
month or other reporting period, and such other
statements or reports as are reasonably requested by
Investor, all in such form as are prepared by the
Company for internal use by management (including, as
applicable, by e-mail);
(ii) deliver to Investor copies of all other
information distributed by the Company to the Board;
-11-
(iii) deliver to Investor, as promptly as practi-
cable following filing, a copy of each report, sched-
ule or other document filed by the Company pursuant
to the requirements of any federal or state securi-
ties laws (collectively, the "Securities Filings");
and
(iv) continue to comply in all material respects
with the reporting requirements of Section 13 or
15(d) of the 1934 Act.
(c) The Company and Investor will afford one another
a reasonable opportunity to review any Securities Filing, any
other filing with a Government Authority and any press release
or similar public announcement which refers to, describes or
mentions such other party or any Affiliate of such other party
prior to the time that such filing is filed with or sent to the
applicable Government Authority or such announcement is dis-
seminated.
Section 3.2 Advice of Actions. From and after the
Shareholder Approval Date, if any, until the 20% Termination
Date, if any, without first having consulted with the represen-
tative of Investor designated by Investor pursuant to this Sec-
tion 3.2, the Company will not seek approval by the Board of
any proposal, or enter into any definitive agreement, relating
to:
(a) the acquisition in a single transaction or group
of related transactions, whether by merger, consolidation,
purchase of stock or assets or other business combination,
of any business or assets having a value in excess of
$10,000,000;
(b) the sale or disposal in a single transaction or
group of related transactions of any assets, whether by
merger, consolidation, sale of stock or assets or other
business combination having a value in excess of
$20,000,000;
(c) the incurrence or issuance of indebtedness in a
single transaction or group of related transactions, the
entering into a guaranty, or the engagement in any other
financing arrangement in excess of $20,000,000;
(d) the annual operating budget for the Company;
(e) a material change in the executive management of
the Company;
-12-
(f) any new material agreements or arrangements with
any members of the executive management of the Company; or
(g) the issuance by the Company of capital stock of
the Company or of options, rights or warrants or other
commitments to purchase or securities convertible into (or
exchangeable or redeemable for) shares of capital stock of
the Company, or the issuance by a Subsidiary of any equity
interests, other than, (i) to the Company or a wholly
owned Subsidiary thereof, and (ii) to directors or employ-
ees of the Company or a Subsidiary in connection with any
employee benefit plan approved by the shareholders of the
Company.
Notwithstanding the foregoing, the Company shall have no obli-
gation to accept or comply with any advice offered by Investor
or its designated representative in any consultation referred
to in this Section 3.2. The designated representative of In-
vestor, for purposes of this Section 3.2, initially shall be
Paul E. Szurek. Investor shall provide the company with ten
days prior written notice of any replacement of the designated
representative.
ARTICLE 4
Voting and Participation Rights
Section 4.1 Voting Rights. Subject to the provi-
sions of this Section 4.1, Investor may vote the shares of Com-
pany Stock which it owns in its sole and absolute discretion.
During the Standstill Period, if any, and any Standstill Exten-
sion Term, Investor will vote all shares of Company Common
Stock which it owns in one of the following two manners, at its
option: (a) in accordance with the recommendation of the Board
or (b) proportionally, in accordance with the votes of the
other holders of Company Common Stock; provided, however, that
Investor may vote all of the shares of Company Common Stock
that it owns, in its sole and absolute discretion, with regard
to (x) the election of the Investor Nominee(s) to the Board,
(y) any amendment to the Company Charter or the By-laws of the
Company which would reasonably be expected to materially ad-
versely affect Investor, and (z) any Extraordinary Transaction
submitted to a vote of the shareholders of the Company. With
regard to (i) any amendment to the Company Charter or the By-
laws of the Company which would reasonably be expected to mate-
rially adversely affect Investor, and (ii) any Extraordinary
Transaction submitted to a vote of the stockholders of the Com-
pany, Investor will vote all shares of Company Common Stock
owned by it that represent ownership of in excess of 40% of the
-13-
outstanding shares of Company Common Stock, in one of the fol-
lowing two manners, at its option: (x) in accordance with the
recommendation of the Board, or (y) proportionally in ac-
cordance with the votes of the other holders of Company Common
Stock. With regard to any Extraordinary Transaction submitted
to a vote of the stockholders of the Company which requires the
affirmative vote of holders of two-thirds of the shares of Com-
pany Common Stock, Investor will vote all shares of Company
Common Stock owned by it that represent ownership of in excess
of 28% of the outstanding shares of Company Common Stock, in
one of the following two manners, at its option: (x) in ac-
cordance with the recommendation of the Board, or (y) propor-
tionally in accordance with the votes of the other holders of
Company Common Stock.
Section 4.2 Participation Rights. (a) Right to
Participate. From and after the date hereof until the 15% Ter-
mination Date, if any, Investor shall be entitled to a par-
ticipation right to purchase or subscribe for up to that number
of additional shares of capital stock (including as "capital
stock" for purposes of this Section 4.2, any security, option,
warrant, call, commitment, subscription, right to purchase or
other agreement of any character that is convertible into or
exchangeable or redeemable for shares of capital stock of the
Company or any Subsidiary (and all references in this Section
4.2 to capital stock shall, as appropriate, be deemed to be
references to any such securities), and also including addi-
tional shares of capital stock to be issued pursuant to the
conversion, exchange or redemption of any security, option,
warrant, call, commitment, subscription, right to purchase or
other agreement of any character that is convertible into or
exchangeable or redeemable for shares of capital stock, as if
the price at which such additional shares of capital stock is
issued pursuant to any such conversion, exchange or redemption
were the market price on the date of such issuance) to be is-
sued or sold by the Company which represents the same propor-
tion of the total number of shares of capital stock to be is-
sued or sold by the Company (including the shares of capital
stock to be issued to Investor upon exercise of its participa-
tion rights hereunder; it being understood and agreed that the
Company will accordingly be required to either increase the
number of shares of capital stock to be issued or sold so that
Investor may purchase additional shares to maintain its propor-
tionate interest, or to reduce the number of shares of capital
stock to be issued or sold to Persons other than Investor) as
is represented by the number of shares of Company Common Stock
owned by Investor prior to such sale or issuance (and including
for this purpose any shares of Company Common Stock to be ac-
quired pursuant to the Stock Purchase Agreement, but not yet
issued) relative to the number of shares of Company Common
-14-
Stock outstanding prior to such sale or issuance (and including
for this purpose any shares of Company Common Stock to be ac-
quired pursuant to the Stock Purchase Agreement, but not yet
issued) (but in no event, (i) more than 42.5% of the total num-
ber of shares of capital stock to be issued or sold by the Com-
pany at the first offering of shares of capital stock by the
Company following the date on which the Remaining Equity Com-
mitment (as such term is defined in the Stock Purchase Agree-
ment) shall be zero, or, (ii) more than 37.5% of the total num-
ber of shares of capital stock to be issued or sold by the Com-
pany at all subsequent offerings); provided, however, that the
provisions of this Section 4.2 shall not apply to (i) the issu-
ance or sale by the Company of any of its capital stock issued
to the Company or any of its Subsidiaries or pursuant to op-
tions, rights or warrants or other commitments or securities in
effect or outstanding on the date of the Stock Purchase Agree-
ment, or (ii) the issuance of capital stock pursuant to the
conversion, exchange or redemption of any other capital stock,
and with respect to the original issuance of which other capi-
tal stock Investor had and fully exercised participation rights
pursuant to this Section 4.2, but shall, without limitation,
apply to the issuance by the Company of any of its capital
stock pursuant to benefit, option, stock purchase, or other
similar plans or arrangements, including pursuant to or upon
the exercise of options, rights, warrants, or other securities
or agreements (including those issued pursuant to the Company's
benefit plans), as if the price at which such capital stock is
issued were the market price on the date of such issuance.
(b) Notice. In the event the Company proposes to
issue or sell any shares of capital stock in a transaction giv-
ing rise to the participation rights provided for in this Sec-
tion, the Company shall send a written notice (the "Participa-
tion Notice") to Investor setting forth the number of shares of
such capital stock of the Company that the Company proposes to
sell or issue, the price (before any commission or discount) at
which such shares are proposed to be issued (or, in the case of
an underwritten or privately placed offering in which the price
is not known at the time the Participation Notice is given, the
method of determining such price and an estimate thereof), and
all other relevant information as to such proposed transaction
as may be necessary for Investor to determine whether or not to
exercise the rights granted in this Section. At any time with-
in 20 days after its receipt of the Participation Notice, In-
vestor may exercise its participation rights to purchase or
subscribe for shares of such shares of capital stock, as pro-
vided for in this Section, by so informing the Company in writ-
ing (an "Exercise Notice"). Each Exercise Notice shall state
-15-
the percentage of the proposed sale or issuance that the Inves-
tor elects to purchase. Each Exercise Notice shall be irre-
vocable, subject to the conditions to the closing of the trans-
action giving rise to the participation right provided for in
this Section.
(c) Abandonment of Sale or Issuance. The Company
shall have the right, in its sole discretion, at all times
prior to consummation of any proposed sale or issuance giving
rise to the participation right granted by this Section, to
abandon, rescind, annul, withdraw or otherwise terminate such
sale or issuance, whereupon all participation rights in respect
of such proposed sale or issuance pursuant to this Section
shall become null and void, and the Company shall have no li-
ability or obligation to Investor or any Affiliate thereof who
has acquired shares of Company Stock pursuant to the Stock Pur-
chase Agreement or from Investor with respect thereto by virtue
of such abandonment, rescission, annulment, withdrawal or ter-
mination.
(d) Terms of Sale. The purchase or subscription by
Investor or an Affiliate thereof, as the case may be, pursuant
to this Section shall be on the same price and other terms and
conditions, including the date of sale or issuance, as are ap-
plicable to the purchasers or subscribers of the additional
shares of capital stock of the Company whose purchases or sub-
scriptions give rise to the participation rights, which price
and other terms and conditions shall be substantially as stated
in the relevant Participation Notice (which standard shall be
satisfied if the price, in the case of a negotiated transac-
tion, is not greater than 110% of the estimated price set forth
in the relevant Participation Notice or, in the case of an un-
derwritten or privately placed offering, is not greater than
the greater of (i) 110% of the estimated price set forth in the
relevant Participation Notice, and (ii) the most recent closing
price on or prior to the date of the pricing of the offering);
provided, however, that in the event the consideration to be
received by the Company in connection with the issuance of
shares of capital stock giving rise to participation rights
hereunder is other than cash or cash equivalents, the price per
share at which the participation rights may be exercised shall
be the price per share set forth in the Participation Notice or
determined in the manner set forth in the Participation Notice
(which shall in either event be the price as set forth in the
agreement pursuant to which such shares are to be issued, pro-
vided that the consideration to be received therefor is valued
based upon the fair market value thereof, as determined in good
faith by the Company's independent directors, after consulta-
tion with appropriate financial and legal advisors, or the
-16-
price determined in accordance with paragraph (a) of this Sec-
tion 4.2); provided, further, however, that in the event the
consideration to be received by the Company in connection with
the issuance of shares of capital stock giving rise to partici-
pation rights hereunder is other than cash or cash equivalents,
and the fair market value of the consideration to be received
is not determinable, the price per share at which the partici-
pation rights may be exercised shall, (i) in the event that
shares of capital stock with an established trading market are
being issued or sold, be the average ten-day trailing market
price of such shares as of the date of receipt of the Partici-
pation Notice, and (ii) in the event any other shares of cap-
ital stock are being issued or sold, be determined by reference
to the amount set forth above, adjusted as may be appropriate
to reflect the relationship between those shares of capital
stock with an established trading market and those shares of
capital stock to be issued in the relevant transaction; pro-
vided, however, that if the consideration otherwise covered by
the second proviso of this Section 4.2(d) is received in con-
nection with a merger or consolidation by the Company, the
price per share at which the participation rights may be exer-
cised shall be the market value per share of Company Common
Stock issued in respect of such merger or consolidation as of
the date of the merger or consolidation agreement; and pro-
vided, finally, that in the event the purchases or subscrip-
tions giving rise to the participation rights are effected by
an offering of securities registered under the 1933 Act and in
which offering it is not legally permissible for the securities
to be purchased by Investor to be included, such securities to
be purchased by Investor will be purchased in a concurrent pri-
vate placement.
(e) Timing of Sale. If, with respect to any Par-
ticipation Notice, Investor fails to deliver an Exercise Notice
within the requisite time period, the Company shall have 120
days after the expiration of the time in which the Exercise
Notice is required to be delivered in which to sell not more
than 110% of the number of shares of capital stock of the Com-
pany described in the Participation Notice (plus, in the event
such shares are to be sold in an underwritten public offering,
an additional number of shares of capital stock of the Company,
not in excess of 15% of 110% of the number of shares of capital
stock of the Company described in the Participation Notice, in
respect of any underwriters overallotment option) and not less
than 90% of the number of shares of capital stock of the Com-
pany described in the Participation Notice on terms not more
favorable to the purchaser than were set forth in the Partici-
pation Notice. If, at the end of 120 days following the expi-
ration of the time in which the Exercise Notice is required to
-17-
be delivered, the Company has not completed the sale or is-
suance of capital stock of the Company in accordance with the
terms described in the Participation Notice (or at a price
which is at least 90% of the estimated price set forth in the
Participation Notice), or in the event of any contemplated sale
or issuance within such 120-day period but outside such price
parameters, the Company shall again be obligated to comply with
the provisions of this Section with respect to, and provide the
opportunity to participate in, any proposed sale or issuance of
shares of capital stock of the Company; provided, however, that
notwithstanding the foregoing, if the price at which such capi-
tal stock is to be sold in an underwritten offering (or a pri-
vately placed offering in which the price is not less than 97%
of the most recent closing price at the time of the pricing of
the offering) is not at least 90% of the estimated price set
forth in the Participation Notice, the Company may inform In-
vestor of such fact and Investor shall be entitled to elect, by
written notice delivered within two Business Days following
such notice from the Company, to participate in such offering
in accordance with the provisions of this Section 4.2.
ARTICLE 5
Standstill Provisions
Section 5.1 Standstill Periods. (a) Subject to the
provisions of the following sentence, the "Standstill Period"
shall be the period commencing on the Shareholder Approval
Date, if any, and ending on the earlier of (x) the fifth an-
niversary of the date thereof, and (y) the earliest of:
(i) the occurrence of any event of default on the
part of the Company or any Subsidiary under any debt
agreements, instruments, or arrangements which event of
default would reasonably be expected to result in a Mate-
rial Adverse Effect and, in the case of a non-monetary
event of default, which event of default cannot be, or is
not, cured by the Company within the applicable cure pe-
riod under such debt agreement, instrument or arrangement;
(ii) the acquisition by any person or Group other
than Investor or any Affiliate thereof or any person or
Group acting in concert with or at the direction or re-
quest of the Investor or any Affiliate thereof of Benefi-
cial Ownership of more than 9.8% of the voting power of
the outstanding shares of Voting Securities (any such
shares acquired in excess of such 9.8%, the "Excess
-18-
Shares"), unless (x) the Excess Shares are at or im-
mediately following their acquisition deprived of all vot-
ing rights pursuant to limitations on ownership of shares
contained in the Company Charter, as in effect at the rel-
evant time, or in any other legal, valid and enforceable
agreement, plan or other right in effect as such time, or
(y) provided the Excess Shares represent no more than 5.2%
of the voting power of the outstanding Voting Securities,
the Company, no later than the earlier of (aa) sixty days
after the date of such acquisition, and (bb) the record
date for the first meeting of shareholders after such
record date, has caused such person or Group to cease, or
such person or Group otherwise ceases, having Beneficial
Ownership of the Excess Shares;
(iii) any person or Group having a number of Directors
on the Board, or having the right or power to elect a num-
ber of Directors on the Board, equal to or greater than
the number of Directors to which Investor is entitled;
(iv) the authorization by the Company or the Board or
any committee thereof (with all Investor Nominees abstain-
ing or voting against) of the solicitation of offers or
proposals or indications of interest with respect to any
merger, consolidation, other business combination, liqui-
dation, sale of the Company or all or substantially all of
the assets of the Company or any other change of control
of the Company or similar extraordinary transaction, but
excluding any merger, consolidation or other business com-
bination in which the Company is the surviving and acquir-
ing corporation and in which the businesses 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
prior to such merger, consolidation or other business com-
bination (any of the foregoing, a "Covered Transaction");
(v) the written submission by any person or Group
other than Investor or any Affiliate thereof of a proposal
to the Company (including to the Board or any agent, rep-
resentative or Affiliate of the Company) with respect to,
or otherwise expressing an interest in pursuing, a Covered
Transaction; provided, however, that the Standstill Period
shall not terminate pursuant to this Section 5.1(a)(v) if,
as soon as practicable after receipt of any such proposal,
the Board determines that such proposal is not in the best
interest of the Company and its shareholders and for so
long as the Board continues to reject such proposal as a
result of such determination;
-19-
(vi) in connection with any actual or proposed Cov-
ered Transaction, the removal of any rights plan, provi-
sions of the Company Charter relating to staggered terms
of office for directors, provisions of the Company Charter
or the By-laws of the Company relating to supermajority
voting of the Company's shareholders, "excess share" pro-
visions of the Company Charter or the By-laws of the Com-
pany, or any other similar arrangements, agreements, com-
mitments or provisions in the Company Charter or the By-
laws of the Company which would reasonably be expected to
impede the consummation of such actual or proposed Covered
Transaction by action of any Government Authority, the
Board, the shareholders of the Company or otherwise, or,
whether or not in connection with any actual or proposed
Covered Transaction, any modification, amendment, waiver
or repeal of the ownership restrictions in Article 5 of
the Company Charter (except as may be necessary to allow
any acquisition of Company Stock that would not constitute
an Early Termination Event under Section 5.1(a)(ii));
(vii) any breach by the Company of the Stock Purchase
Agreement which 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 Investor or cause a Material Adverse Effect;
(viii) any breach of this Agreement by the Company
which 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 In-
vestor or cause a Material Adverse Effect;
(ix) any violation of any Corporate Action Covenant;
or
(x) any exercise of a conversion right with respect
to shares of Class B Common Stock effected at a time or in
circumstances in which the Percentage Limit (as such term
is defined in the Articles of Amendment to Articles of
Incorporation of the Company, filed on December 20, 1995)
is for any reason not applicable, ineffective or waived.
Any event set forth in subsection (i), (ii), (iii),
(iv), (v), (vi), (vii), (viii), (ix) or (x) of this Section
5.1(a) shall be an "Early Termination Event."
(b) If the Standstill Period shall not have been
terminated prior to the fifth anniversary of the date hereof,
the Standstill Period and any Standstill Extension Term shall
automatically be extended for successive one-year periods (each
-20-
such period, a "Standstill Extension Term"), unless, in the
case of each Standstill Extension Term, Investor provides to
the Company written notice at least 270 days prior to the com-
mencement of such Standstill Extension Term, that such Stand-
still Extension Term and all further Standstill Extension Terms
are cancelled. Any Standstill Extension Term will be termi-
nated upon the earlier of (i) the first anniversary thereof,
and (ii) the occurrence of an Early Termination Event.
Section 5.2 Restrictions During Standstill Period
and Standstill Extension Term. (a) During the Standstill Pe-
riod, if any, and any Standstill Extension Term (and, with re-
spect only to the provisions of subsection (ii) hereof, also at
any other time when Investor owns more than 15% of the then
outstanding shares of Company Common Stock, on a fully diluted
basis), Investor will not, will cause each of its controlled
Affiliates not to, and will use its reasonable best efforts to
cause each of its other Affiliates not to, directly or indi-
rectly:
(i) act in concert with any other person or Group by
becoming a member of a 13D Group, other than any 13D Group
comprised exclusively of Investor and one or more of its
Affiliates;
(ii) sell, transfer, pledge or otherwise dispose of
(collectively, "Transfer") any shares of Company Common
Stock except for: (v) Transfers made in compliance with
the requirements of Rule 144 of the 1933 Act, (w) Trans-
fers pursuant to negotiated transactions with third par-
ties, provided, however, that no such Transfer which would
result in the applicable transferee having beneficial own-
ership of more than 9.8% of the Company Stock shall occur
unless (A) the Company, in its sole discretion, approves
such Transfer, and (B) the transferee acknowledges that it
is subject to the provisions of Article 5 of this Agree-
ment to which Investor is subject, (x) Transfers pursuant
to or in accordance with the Registration Rights Agreement
or otherwise in a public offering, (y) Transfers to one or
more Affiliates of Investor who agree to be bound by the
terms and conditions of this Agreement and who satisfy the
ownership criteria in the definition of "Investor", and
(z) Transfers to a bona fide financial institution for the
purpose of securing bona fide indebtedness of any Inves-
tor; provided, that no such Transfer shall result in the
bona fide financial institution having beneficial owner-
ship of more than 9.8% of the Company Stock unless such
bona fide financial institution acknowledges that it is
subject to the provisions of Article 5 of this Agreement
to which Investor is subject;
-21-
(iii) purchase or otherwise acquire shares of Company
Common Stock (or options, rights or warrants or other com-
mitments to purchase and securities convertible into (or
exchangeable or redeemable for) shares of Company Common
Stock) as a result of which, after giving effect to such
purchase or acquisition, Investor and its Affiliates will
Beneficially Own more than 45% of the outstanding shares
of Company Common Stock, on a fully diluted basis;
(iv) solicit, encourage or propose to effect or nego-
tiate any Covered Transaction other than pursuant to the
Stock Purchase Agreement;
(v) solicit, initiate, encourage or participate in
any "solicitation" of "proxies" or become a "participant"
in any "election contest" (as such terms are defined or
used in Regulation 14A under the 1934 Act, disregarding
clause (iv) of Rule 14a-1(l)(2) and including an exempt
solicitation pursuant to Rule 14a-2(b)(1)); call, or in
any way encourage or participate in a call for, any spe-
cial meeting of shareholders of the Company (or take any
action with respect to acting by written consent of the
shareholders 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 shareholder
proposal or participate in or encourage the making of, or
solicit shareholders of the Company for the approval of,
one or more shareholder proposals; provided, however, that
Investor shall not be prohibited from communicating with a
securityholder who is engaged in any "solicitation" of
"proxies" or who is a "participant" in any "election con-
test";
(vi) seek representation on the Board or a change in
the composition or size of the Board other than as permit-
ted by Article 2;
(vii) Transfer any capital stock of Buyer or any capi-
tal stock of any Affiliate of Buyer that owns Company Com-
mon Stock, or cause Buyer or any such Affiliate thereof to
Transfer any options, warrants, convertible securities or
other similar rights to acquire any capital stock of Buyer
or any such Affiliate thereof; provided, however, that no
such Transfer shall be prohibited if after giving effect
thereto the Beneficial Owner of such shares of Company
Common Stock satisfies the ownership criteria in the defi-
nition of "Investor"; and provided, further, that no
Transfers to a bona fide financial institution for the
purpose of securing bona fide indebtedness of any Investor
shall be prohibited hereby;
-22-
(viii) request the Company or any of its directors,
officers, employees or agents to amend or waive any provi-
sions of this Section 5.2 or Section 5.2 of the Company
Charter or seek to challenge the legality or effect
thereof; or
(ix) assist, advise, encourage or act in concert with
any person with respect to, or seek to do, any of the
foregoing.
(b) At such time as the restrictions on the activi-
ties of Investor contained in Section 5.2(a), 5.2(b) or 5.4
take effect, such restrictions shall supercede any restrictions
on the activities of Investor contained in the Confidentiality
Agreement, dated May 10, 1995, by and between Investor and the
Company whereupon all such restrictions set forth in said Con-
fidentiality Agreement shall cease to apply.
Section 5.3 Investments in Shopping Center Proper-
ties and Purchases of Interests in Shopping Center Companies.
(a) Subject to the provisions of the following sentence, and
excluding transactions which are the subject of paragraph (b)
of this Section, from and after the date hereof until the ear-
lier of (i) the date, if any, on which shareholders of the Com-
pany vote upon and fail to approve the transactions contem-
plated by the Stock Purchase Agreement, (ii) the six-month an-
niversary of the date hereof if a meeting at which the share-
holders of the Company are asked to vote upon the transactions
contemplated by the Stock Purchase Agreement shall not have oc-
curred on or prior to such six-month anniversary date, and
(iii) the 20% Termination Date, if any, Investor and any other
person of which Investor is the direct or indirect general
partner or as to which Investor has the direct or indirect
right or power to elect a majority of the board of directors or
other governing body or otherwise controls (but subject, in the
case of any person other than Investor, to the fiduciary duties
of such person or its general partner, board of directors or
other governing body) (any such person, an "Investor Restricted
Person") shall not, and Investor shall use its reasonable best
efforts to cause Security Capital Group Incorporated ("SCGI")
and any person of which SCGI is the direct or indirect general
partner or as to which SCGI has the direct or indirect right or
power to elect a majority of the board of directors or other
governing body or otherwise controls (but subject, in the case
of any person other than Investor, to the fiduciary duties of
such person or its general partner, board of directors or other
governing body) (SCGI and any such person, an "SCGI Restricted
Person") not to, directly or indirectly, own, purchase, develop
or otherwise acquire, directly or indirectly, any grocery-
store, drugstore, or general merchandise discount-store (such
-23-
as Wal-Mart, K-Mart, Target, TJ Maxx, Steinmart or similar
store) anchored shopping center under 250,000 square feet of
leasable area located in the Geographic Region (a "Shopping
Center Property", and not including within the meaning of such
defined term any enclosed regional or urban mall or other simi-
lar shopping facility). Notwithstanding the foregoing, Inves-
tor, any Investor Restricted Person or any SCGI Restricted Per-
son may own, purchase, or otherwise acquire, directly or indi-
rectly, any Shopping Center Properties if the investment in the
Shopping Center Properties is incidental to an investment made
by Investor, such Investor Restricted Person or such SCGI Re-
stricted Person which investment is not primarily related to
Shopping Center Properties; it being understood and agreed that
any acquisition of real estate properties in which Shopping
Center Properties constitute 30% or less of the purchase price
of all of the real estate properties acquired shall be consid-
ered an investment in which the Shopping Center Properties ac-
quired are incidental to an investment which is not primarily
related to Shopping Center Properties; provided, however, that
if Investor, any Investor Restricted Person or any SCGI Re-
stricted Person determines to make such a permitted investment,
Investor, such Investor Restricted Person or such SCGI Re-
stricted Person shall afford the Company a period of 20 day
after receipt of written notice from Investor describing the
material terms of the proposed investment, in which to provide
Investor, such Investor Restricted Person or such SCGI Re-
stricted Person, as applicable, written notice that it elects
to purchase the Shopping Center Properties constituting a part
of such investment (subject to customary due diligence and
other closing conditions); in the event Investor, such Investor
Restricted Person or such SCGI Restricted Person thereafter
makes such investment and the price and other terms are not
less favorable to the Company than those set forth in the no-
tice of material terms delivered to the Company, the Company
shall promptly acquire the Shopping Center Properties included
therein, at the price allocated to such Shopping Center Proper-
ties in the purchase agreement entered into by Investor, the
Investor Restricted Person or the SCGI Restricted Person, as
the case may be, in respect of such acquisition and otherwise
on terms substantially similar to the terms of Investor's, the
Investor Restricted Person's or SCGI Restricted Person's acqui-
sition of such properties; provided, further, that if Investor,
an Investor Restricted Person or an SCGI Restricted Person
shall have made such a purchase, including the Shopping Center
Properties therein, and if Investor, an Investor Restricted or
an SCGI Restricted Person should thereafter, but prior to the
20% Termination Date, determine to sell any Shopping Center
Properties so purchased, Investor, such Investor Restricted
Person or such SCGI Restricted Person shall inform the Company
of such fact, and the Company shall have 20 days in which to
-24-
give Investor, such Investor Restricted Person or such SCGI Re-
stricted Person written notice that it desires to purchase such
Shopping Center Properties; such notice shall set forth the
terms on which the Company is prepared to effect such purchase;
Investor, such Investor Restricted Person or such SCGI Re-
stricted Person shall be free to accept such offer, or to oth-
erwise dispose of such Shopping Center Properties, but shall in
no event dispose of such Shopping Center Properties on terms
materially less favorable to Investor, such Investor Restricted
Person or such SCGI Restricted Person without first again af-
fording the Company the opportunity to purchase such Shopping
Center Properties.
(b) From and after the date hereof until the earlier
of (i) the date, if any, on which shareholders of the Company
vote upon and fail to approve the transactions contemplated by
the Stock Purchase Agreement, (ii) the six-month anniversary of
the date hereof if a meeting at which the shareholders of the
Company are asked to vote upon the transactions contemplated by
the Stock Purchase Agreement shall not have occurred on or
prior to such six-month anniversary date, and (iii) the 20%
Termination Date, if any, Investor and any Investor Restricted
Person shall not, and Investor shall use its reasonable best
efforts to cause all SCGI Restricted Persons not to, purchase
or otherwise acquire equity securities, or options, warrants,
calls, purchase rights, subscription rights, conversion rights,
exchange rights or similar rights to purchase or otherwise ac-
quire equity securities, representing 9% or more of the equity
interest of any person, other than the Company, if (i) such
person's principal business activity is the acquisition, devel-
opment or ownership for rental purposes of Shopping Center
Properties, (ii) more than 25% of such person's assets are
Shopping Center Properties (but not including as Shopping Cen-
ter Property assets for such purpose any indebtedness secured
directly or indirectly by Shopping Center Properties), or (iii)
more than 25% of such person's revenues are derived from the
purchase, development or ownership of Shopping Center Proper-
ties (any such person, a "Shopping Center Company"); provided,
however, that Investor, any Investor Restricted Person or any
SCGI Restricted Person shall be entitled to purchase or other-
wise acquire less than 9% of the equity interest of a Shopping
Center Company only if no Investor, Investor Restricted Person
or SCGI Restricted Person shall be represented on (or have the
right to nominate representatives to) the board of directors or
similar governing body or shall participate in the management,
of such Shopping Center Company.
(c) The provisions of this Section 5.3 shall not
restrict Investor, any Investor Restricted Person or any SCGI
Restricted Person from, directly or indirectly, (w) providing
-25-
debt financing for Shopping Center Properties or investing in,
owning or acquiring a mortgage REIT or other person substan-
tially all of whose business consists of making mortgage loans
on Shopping Center Properties and other real estate assets, (x)
in connection with the activities described in clause (w), ac-
quiring or owning any Shopping Center Properties through fore-
closure on mortgages or similar instruments or other realiza-
tion on security, or (y) the ownership of any REIT convertible
debt which is passively held and unaccompanied by representa-
tion on the board of directors or participation in management
and which is held by a person of which none of Investor, any
Investor Restricted Person or any SCGI Restricted Person di-
rectly or indirectly Beneficially Owns 20% or more of the out-
standing economic or voting interest.
(d) Notwithstanding any contrary provision herein,
the provisions of this Section 5.3 shall not go into effect
unless and until the transactions contemplated by the Stock
Purchase Agreement shall have been approved by the holders of
the requisite number of shares of Company Stock at a duly
called and held meeting of shareholders of the Company at which
meeting a quorum is present (such approval, the "Shareholder
Approval").
Section 5.4 Notice to Company. From and after the
Shareholder Approval Date, if any, until the expiration of the
Standstill Period or any Standstill Extension Period, if Inves-
tor wishes to sell pursuant to subsection 5.2(a)(ii)(v), (w) or
(x) any shares of Company Common Stock, Investor shall give the
Company 15 days' prior written notice of such proposed sale,
setting forth the number of shares of Company Common Stock that
Investor proposes to sell, the expected timing of the proposed
sale, and the expected selling price of such sale, in order to
enable the Company to make an offer to purchase such shares.
During the period described in the preceding sentence, Investor
shall also notify the Company if Investor reaches a formal
board-level decision to sell shares of Company Common Stock
representing more than 2% of the then outstanding shares of
Company Common Stock.
Section 5.5 Compliance with Insider Trading Policy.
For as long as Investor Beneficially Owns any shares of Company
Common Stock, Investor will, and will use its commercially rea-
sonable efforts to cause its directors, officers, employees,
agents, and representatives to, comply with the written policy
of the Company reasonably designed to prevent violations of
insider trading and similar laws. It is understood and agreed
that no such policy existed as of the date of the Stock Pur-
chase Agreement, and that prior to the adoption or amendment of
any such policy to which Investor will be subject (including
-26-
any such policy proposed to be adopted following the date of
the Stock Purchase Agreement and prior to the date hereof, and
to which Investor would become subject by virtue hereof), the
Company will consult with Investor, and will not adopt or amend
any such policy, nor will Investor be subject to any such
policy, without the written consent of Investor, which consent
will not be unreasonably withheld.
Section 5.6 Compliance with Section 5.2 of the Com-
pany Charter. For as long as Investor Beneficially Owns any
shares of Company Common Stock (unless the Standstill Period or
any Standstill Extension Term is terminated by any of the ac-
tions set forth in Section 5.1(a)(iv), (v) or (vi) (or unless
any such action occurs following the termination of the Stand-
still Period or any Standstill Extension Term) or by any other
willful action by the Company which constitutes an Early Termi-
nation Event (or would constitute an Early Termination Event
during the Standstill Period or any Standstill Extension
Term)), Investor and each Investor Restricted Person will, and
Investor will use its reasonable best efforts to cause the SCGI
Restricted Persons to, comply with Section 5.2 of the Company
Charter and will not seek to challenge the legality or effect
thereof.
Section 5.7 Investment Company Matters. From and
after the Shareholder Approval Date, if any, until the 20% Ter-
mination Date, if any, Investor shall use its reasonable best
efforts to not be or become an "investment company" or an en-
tity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended.
Section 5.8 Waiver of Restrictions and Limits. Pro-
vided that Shareholder Approval is obtained, subject to the
provisions of the third sentence of this Section 5.8, the Com-
pany shall take all actions, including by providing any nec-
essary exemptions from or amendments to (A) any restrictions or
limits contained in Article 5 of the Company Charter or (B) any
agreement or instrument which governs ownership of shares of
Company Stock by any person, necessary to permit Investor to
Beneficially Own up to and including the greater of (i) 45% of
the outstanding shares of Company Common Stock and (ii) the
percentage which represents the number of shares of Company
Common Stock purchased pursuant to the Stock Purchase Agreement
relative to the outstanding shares of Company Common Stock. If
any third party shall be given the right to Beneficially Own
more than 45% of the outstanding shares of Company Common
Stock, the Company shall take all actions (including by provid-
ing the foregoing exemptions and amendments) to waive any and
all restrictions or limits on Investor provided that such
waiver does not result in the disqualification of the Company
-27-
as a REIT. From and after the 15% Termination Date, if any,
the Company shall take all actions, including by providing any
necessary exemptions from or amendments to (A) any restrictions
or limits contained in Article 5 of the Company Charter or (B)
any agreement or instrument which governs ownership of shares
of Company Stock by any person, necessary to permit Investor to
Beneficially Own up to and including 15% of the outstanding
shares of Company Common Stock, but shall not be required to
take any action to permit Investor to Beneficially Own more
than 15% of the outstanding shares of Company Common Stock.
From and after the first date on which Investor does not own at
least 9.8% of the outstanding shares of Company Common Stock,
if any, the Company shall take all actions, including by pro-
viding any necessary exemptions from or amendments to (A) the
ownership limits contained in Article 5 of the Company Charter
or (B) any agreement or instrument which governs ownership of
shares of Company Stock by any person, necessary to permit In-
vestor to Beneficially Own up to and including 9.8% of the out-
standing shares of Company Common Stock, but shall not be re-
quired to take any action to permit Investor to Beneficially
Own more than 9.8% of the outstanding shares of Company Common
Stock. Notwithstanding the foregoing, Investor or the Company
may at any time acquire Beneficial Ownership of the securities
of such other party or its Affiliates to the extent permitted
by applicable law and the provisions of the organizational
documents of such party or its Affiliates, as applicable, and
other agreements from time to time governing the ownership of
such securities.
Section 5.9 REIT Qualification. From and after the
Shareholder Approval Date until the 15% Termination Date, In-
vestor shall annually inform the Company whether Investor be-
lieves, and shall otherwise from time to time, as reasonably
requested by the Company, reasonably cooperate (including by
providing such information and documentation as may be reason-
ably requested by the Company) with the Company to enable the
Company to determine whether, any 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 at-
tribution rules under Section 544 of the Code, as modified by
Section 856(h) of the Code) in excess of 9.8% of the value of
the outstanding equity interest in Investor.
-28-
ARTICLE 6
Limitations on Corporate Actions, Etc.
Section 6.1 Limitations on Corporate Actions. (a)
The Company agrees that from and after the Shareholder Approval
Date, until the earlier of (i) the termination of the Stand-
still Period or any Standstill Extension Term or (ii) the 20%
Termination Date, if any, it will not, and will not permit any
of its Subsidiaries to:
(A) incur total consolidated indebtedness
for money borrowed (including for this purpose
any indebtedness evidenced by notes, debentures,
bonds or other similar instruments, or secured
by any lien on any property or asset, all obli-
gations issued or assumed as the deferred pur-
chase price of property, conditional sale obli-
gations, obligations under any title retention
agreement (but excluding trade accounts payable
and other accrued current liabilities arising in
the ordinary course of business), obligations
under letters of credit, or similar credit
transactions, and obligations which are required
to be accounted for as capital leases) in an
amount in excess of 60% of the gross book value
of the consolidated book assets of the Company
(excluding any minority interests not convert-
ible into interests in the Company) before de-
preciation and amortization, unless the viola-
tion of such ratio is cured within 30 days of
its occurrence;
(B) cause or permit the sum of (w) stocks,
securities, partnership interests or any similar
investments or instruments of or in any other
Person, (x) assets held other than directly by
the Company, (y) loans made by the Company to a
Subsidiary, or loans made by a Subsidiary to the
Company, and (z) assets managed by Persons other
than employees of the Company (excluding reten-
tion of a third party manager that is desisted
prior to the fifth day immediately preceding the
end of the calendar quarter in which it arises
and provided that any asset managed by a third
party shall be considered a passive asset to be
included in the calculations pursuant to Section
6.1(b)), to, at any time constitute more than
30%, at cost, of the consolidated assets owned
by the Company;
-29-
(C) have at any time prior to June 1,
1997, more than 15%, and at all other times,
more than 10%, at cost, of its consolidated as-
sets in property types other than Shopping Cen-
ter Properties or land suitable and intended for
development of Shopping Center Properties; pro-
vided, however, that for purposes of this sub-
section (C) of Section 6.1(a), Shopping Center
Properties shall include any grocery-, drug- or
general merchandise discount-store anchored
shopping center under 350,000 square feet of
leasable area located in the Geographic Region;
(D) in the case of the Company, (1) termi-
nate its eligibility for treatment as a real
estate investment trust, as defined in the Code,
or (2) take any action or fail to take any ac-
tion which would reasonably be expected to,
alone or in conjunction with any other factors,
result in the loss of such eligibility, unless
in the case of a failure to take action, such
action is taken within thirty days; or
(E) except as permitted or required by any
agreements or commitments existing as of the
date of the Stock Purchase Agreement and dis-
closed to Investor pursuant thereto, own any
interest in any partnership unless the Company
is the sole managing general partner of such
partnership.
(b) from and after Shareholder Approval Date, until
the first date, if any, following the date on which the Remain-
ing Equity Commitment shall have been reduced to zero on which
Investor's ownership of Company Common Stock shall have been
below 20% by value of the actually outstanding shares of Com-
pany Common Stock for a continuous period of 180 days (or if
Investor's ownership of Company Common Stock shall, following
the date on which the Remaining Equity Commitment shall have
been reduced to zero, have fallen below 20% by value of the
actually outstanding shares of Company Common Stock as a result
of a Transfer by Investor of Company Common Stock or a failure
of Investor to exercise its rights under Section 4.2 during the
60 days immediately prior to the expiration of such 180-day
period, if any such rights are exercisable during such period,
to the extent necessary to (and provided that it shall be pos-
sible by such exercise to) raise its ownership of the actually
outstanding Company Common Stock above such 20% threshold, then
until such Transfer or failure to exercise its rights under
Section 4.2, as the case may be), the Company
-30-
(i) will not, without the prior written consent of
Investor, either take any action that would cause, or fail
to take any action which failure would cause, (A) the per-
centage of the Company's consolidated gross income that is
considered "passive income" (within the meaning of Section
1296(a)(1) of the Code, and computed using the assumptions
and conventions set forth in Schedule 6.1(c) hereto, to-
gether with such modifications thereto as Investor shall
advise the Company in writing are necessary as a result of
the promulgation of regulations, rulings, or other formal
or informal administrative guidance clarifying existing
law or a change in existing law or interpretations there-
of) to exceed 30%, or (B) the average percentage of the
Company's assets (by value, computed as of the end of ev-
ery calendar quarter) held during any taxable year which
produce passive income or which are held for the produc-
tion of passive income (as such terms are used in Section
1296(a)(2) of the Code and computed using the assumptions
and conventions set forth in Schedule 6.1(c) hereto, to-
gether with such modifications thereto as Investor shall
advise the Company in writing are necessary as a result of
the promulgation of regulations, rulings, or other formal
or informal administrative guidance clarifying existing
law or a change in existing law or interpretations there-
of) to exceed 30%; and
(ii) will otherwise consider in good faith sugges-
tions made by Investor as to the structure of the opera-
tions of the Company and its Subsidiaries in order to per-
mit Investor or any shareholder of Investor to avoid being
classified as a "passive foreign investment company" under
the Code.
The agreements of the Company set forth in subsections (a) and
(b) of this Section 6.1, and Sections 6.3, 6.4 and 6.6 shall be
the "Corporate Action Covenants."
Section 6.2 Provision of Information. For as long
as Investor Beneficially Owns any shares of Company Stock, the
Company will provide to Investor all information and documenta-
tion requested by Investor, and will cooperate with Investor as
requested, as may be necessary for Investor to perform the cal-
culations to be made in connection with and to meet the docu-
mentation requirements pursuant to Sections 1291 through 1297
of the Code, as may be amended from time to time, and any suc-
cessor provisions thereto, and as may otherwise be reasonably
necessary in connection with any other record keeping or re-
porting laws, rules or regulations (including all such informa-
tion, documentation and cooperation as is necessary to enable
Investor to (1) file any Tax Returns it is required to file and
-31-
(2) to determine and document its status, income, asset mix and
other relevant items with respect to the Passive Foreign In-
vestment Company provisions of the Code).
Section 6.3 Compliance with Conflicts of Interest
Policy. Promptly following the date hereof, the Company shall,
subject to the reasonable consent and approval of Investor,
adopt policies typical of publicly traded companies relating to
transactions with affiliates and potential conflicts of in-
terest (such policies, together with the Affiliate Arrange-
ments, as modified or amended from time to time with the con-
sent of Investor, collectively, the "Conflict of Interest Poli-
cies"). From and after the date of adoption of such Conflict
of Interest Policies until the 20% Termination Date, (x) the
Company will, and will cause its Subsidiaries to, comply with
and enforce such Conflict of Interest Policies, and (y) Inves-
tor will comply with the Conflict of Interest Policies; pro-
vided, however, that the provisions of this Agreement, the
Stock Purchase Agreement and the Registration Rights Agreement
and the transactions contemplated hereby and thereby shall not
be limited, amended or modified in any way by, and shall govern
in the event of a conflict with, the Conflict of Interest Poli-
cies; provided further that no Conflict of Interest Policy
shall in any way discriminate or differentiate among any Af-
filiates of the Company.
Section 6.4 Maintenance of Affiliate and Joint Ven-
ture Arrangements. From and after the date hereof until the
20% Termination Date, if any, (x) the Company will, and will
cause its Subsidiaries to, comply with, enforce and keep in
effect each of the Affiliate Arrangements, and (y) the Company
will not, and will cause its Subsidiaries not to, (A) modify,
amend or waive any provision contained in any Affiliate Ar-
rangement without the prior written consent of Investor, in its
sole discretion, or (B) materially expand or increase, or per-
mit to be materially expanded or increased, the scope, type or
quantity of activities performed, or transactions entered into,
by Village Common Shopping Center, a Florida limited partner-
ship, Regency Ocean East Partnership, Ltd., a Florida limited
partnership, or RRC Operating Partnership of Georgia, L.P., a
Georgia limited partnership, or (C) enter into new joint ven-
ture, partnership or similar arrangements with third parties,
or (D) directly or indirectly, own, purchase, develop, or oth-
erwise acquire or finance any Shopping Center Property in con-
junction with any Affiliate which is not a wholly owned Subsid-
iary of the Company or otherwise in a joint venture with any
such party, in each case, without the prior written consent of
Investor, in its sole discretion, provided that in the case of
the proposed joint venture arrangement with WLD Enterprises,
-32-
Ltd. regarding the Deerfield Beach shopping center, Investor
shall not unreasonably withhold its consent.
Section 6.5 Sales of Assets. From and after the
date hereof until the 15% Termination Date, if any, the Company
will, and will cause its Subsidiaries to, use its reasonable
efforts, consistent with prudent management of the Company's
properties and assets in the interest of the Company's share-
holders, to dispose of properties or assets through tax de-
ferred exchanges which exchanges will defer any capital gains
distributions to shareholders of the Company. In the event it
is expected that any capital gains distributions are to be
made, the Company will endeavor to provide Investor with such
advance notice thereof as may be practicable.
Section 6.6 Investments in Shopping Center Proper-
ties and Purchases of Interests in Shopping Center Companies.
(a) Subject to the provisions of the following sentence, and
excluding transactions which are the subject of paragraph (b)
of this Section, from and after the date hereof until the ear-
lier of (i) the date, if any, on which shareholders of the Com-
pany vote upon and fail to approve the transactions contem-
plated by the Stock Purchase Agreement, and (ii) the 20% Termi-
nation Date, if any, TRG and any other person of which TRG is
the direct or indirect general partner or as to which TRG has
the direct or indirect right or power to elect a majority of
the board of directors or other governing body or otherwise
controls (any such person, a "TRG Restricted Person") shall
not, directly or indirectly, own, purchase, develop or oth-
erwise acquire, directly or indirectly, any Shopping Center
Property. Notwithstanding the foregoing, TRG or any TRG Re-
stricted Person may own, purchase, or otherwise acquire, di-
rectly or indirectly, any Shopping Center Properties if the in-
vestment in the Shopping Center Properties is incidental to an
investment made by TRG or such TRG Restricted Person which in-
vestment is not primarily related to Shopping Center Proper-
ties; it being understood and agreed that any acquisition of
real estate properties in which Shopping Center Properties con-
stitute 30% or less of the purchase price of all of the real
estate properties acquired shall be considered an investment in
which the Shopping Center Properties acquired are incidental to
an investment which is not primarily related to Shopping Center
Properties; provided, however, that if TRG or any TRG Re-
stricted Person determines to make such a permitted investment,
TRG or such TRG Restricted Person shall afford the Company a
period of 20 day after receipt of written notice from TRG de-
scribing the material terms of the proposed investment, in
which to provide TRG or such TRG Restricted Person, as applica-
ble, written notice that it elects to purchase the Shopping
-33-
Center Properties constituting a part of such investment (sub-
ject to customary due diligence and other closing conditions);
in the event TRG or such TRG Restricted Person thereafter makes
such investment and the price and other terms are not less fa-
vorable to the Company than those set forth in the notice of
material terms delivered to the Company, the Company shall
promptly acquire the Shopping Center Properties included
therein, at the price allocated to such Shopping Center Proper-
ties in the purchase agreement entered into by TRG or the TRG
Restricted Person, as the case may be, in respect of such ac-
quisition and otherwise on terms substantially similar to the
terms of TRG's or the TRG Restricted Person's acquisition of
such properties; provided, further, that if TRG or a TRG Re-
stricted Person shall have made such a purchase, including the
Shopping Center Properties therein, and if TRG or a TRG Re-
stricted Person should thereafter, but prior to the 20% Ter-
mination Date, determine to sell any Shopping Center Properties
so purchased, TRG or such TRG Restricted Person shall inform
the Company of such fact, and the Company shall have 20 days in
which to give TRG or such TRG Restricted Person written notice
that it desires to purchase such Shopping Center Properties;
such notice shall set forth the terms on which the Company is
prepared to effect such purchase; TRG or such TRG Restricted
Person shall be free to accept such offer, or to otherwise dis-
pose of such Shopping Center Properties, but shall in no event
dispose of such Shopping Center Properties on terms materially
less favorable to TRG or such TRG Restricted Person without
first again affording the Company the opportunity to purchase
such Shopping Center Properties.
(b) From and after the date hereof until the earlier
of (i) the date, if any, on which shareholders of the Company
vote upon and fail to approve the transactions contemplated by
the Stock Purchase Agreement, and (ii) the 20% Termination
Date, if any, TRG and any TRG Restricted Person shall not pur-
chase or otherwise acquire equity securities, or options, war-
rants, calls, purchase rights, subscription rights, conversion
rights, exchange rights or similar rights to purchase or other-
wise acquire equity securities, representing 9% or more of the
equity interest of any person, other than the Company, if such
person is a Shopping Center Company; provided, however, that
TRG or any TRG Restricted Person shall be entitled to purchase
or otherwise acquire less than 9% of the equity interest of a
Shopping Center Company only if no TRG or TRG Restricted Person
shall be represented on (or have the right to nominate repre-
sentatives to) the board of directors or similar governing body
or shall participate in the management, of such Shopping Center
Company.
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(c) The provisions of this Section 6.6 shall not
restrict TRG or any TRG Restricted Person from, directly or
indirectly, (w) providing debt financing for Shopping Center
Properties or investing in, owning or acquiring a mortgage REIT
or other person substantially all of whose business consists of
making mortgage loans on Shopping Center Properties and other
real estate assets, (x) in connection with the activities de-
scribed in clause (w), acquiring or owning any Shopping Center
Properties through foreclosure on mortgages or similar instru-
ments or other realization on security, or (y) the ownership of
any REIT convertible debt which is passively held and unac-
companied by representation on the board of directors or par-
ticipation in management and which is held by a person of which
none of TRG or any TRG Restricted Person directly or indirectly
Beneficially Owns 20% or more of the outstanding economic or
voting interest.
(d) Each of the Company and Investor shall be en-
titled to the benefits of the provisions contained in this Sec-
tion 6.6.
ARTICLE 7
Miscellaneous
Section 7.1 Counterparts. This Agreement may be ex-
ecuted in one or more counterparts, all of which shall be con-
sidered one and the same agreement, and shall become effective
when one or more counterparts have been signed by each of the
parties and delivered to the other party. Copies of executed
counterparts transmitted by telecopy, telefax or other elec-
tronic transmission service shall be considered original ex-
ecuted counterparts for purposes of this Section, provided re-
ceipt of copies of such counterparts is confirmed.
Section 7.2 Governing Law. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF FLORIDA WITHOUT REFERENCE TO THE CHOICE OF LAW PRIN-
CIPLES THEREOF.
Section 7.3 Entire Agreement. This Agreement (in-
cluding agreements incorporated herein) and the Schedules and
Exhibits hereto contain the entire agreement between the par-
ties with respect to the subject matter hereof and there are no
agreements, understandings, representations or warranties be-
tween the parties other than those set forth or referred to
herein. This Agreement is not intended to confer upon any per-
son not a party hereto (and their successors and assigns) any
rights or remedies hereunder.
-35-
Section 7.4 Expenses. Except as set forth in the
Stock Purchase Agreement, all legal and other costs and ex-
penses incurred in connection with this Agreement and the tran-
sactions contemplated hereby shall be paid by the party incur-
ring such costs and expenses. Without limiting the foregoing,
the Company shall pay all costs and expenses incurred in con-
nection with the solicitation of votes of shareholders of the
Company to approve the transactions contemplated by the Stock
Purchase Agreement.
Section 7.5 Notices. All notices and other com-
munications hereunder shall be sufficiently given for all pur-
poses hereunder if in writing and delivered personally, sent by
documented overnight delivery service or, to the extent receipt
is confirmed, telecopy, telefax or other electronic transmis-
sion service to the appropriate address or number as set forth
below. Notices to the Company shall be addressed to:
Regency Realty Corporation
121 West Forsyth Street, Suite 200
Jacksonville, Florida 32202
Attention: Martin E. Stein, Jr.
Telecopy Number: (904) 634-3428
with a copy to:
Foley & Lardner
Greenleaf Building
200 Laura Street
Jacksonville, Florida 32202
Attention: Charles E. Commander III, Esq.
Telecopy Number: (904) 359-8700
or at such other address and to the attention of such other
person as the Company may designate by written notice to Inves-
tor. Notices to Investor shall be addressed to:
Security Capital Holdings S.A.
69, route d'Esch
L-2953 Luxembourg
Attention: Paul E. Szurek
Telecopy Number: (352) 4590-3331
-36-
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Adam O. Emmerich, Esq.
Telecopy Number: (212) 403-2000
Section 7.6 Successors and Assigns. This Agreement
shall be binding upon and inure to the benefit of the parties
hereto and their respective successors. Neither party shall be
permitted to assign any of its rights hereunder to any third
party, except that any Investor shall be permitted to assign
its rights hereunder to any other person who would satisfy the
criteria in the definition of "Investor" which agrees to be
bound by this Agreement.
Section 7.7 Headings. The Section, Article and oth-
er headings contained in this Agreement are inserted for conve-
nience of reference only and will not affect the meaning or in-
terpretation of this Agreement. All references to Sections or
Articles contained herein mean Sections or Articles of this
Agreement unless otherwise stated.
Section 7.8 Amendments and Waivers. This Agreement
may not be modified or amended except by an instrument or in-
struments in writing signed by the party against whom enforce-
ment of any such modification or amendment is sought. Any
party hereto may, only by an instrument in writing, waive com-
pliance by another party hereto with any term or provision
hereof on the part of such other party hereto to be performed
or complied with. The waiver by any party hereto of a breach
of any term or provision hereof shall not be construed as a
waiver of any subsequent breach.
Section 7.9 Interpretation; Absence of Presumption.
(a) For the purposes hereof, (i) words in the singular shall
be held to include the plural and vice versa and words of one
gender shall be held to include the other gender as the context
requires, (ii) the terms "hereof", "herein", and "herewith" and
words of similar import shall, unless otherwise stated, be con-
strued to refer to this Agreement as a whole (including all of
the Schedules and Exhibits hereto) and not to any particular
provision of this Agreement, and Article, Section, paragraph,
Schedule and Exhibit references are to the Articles, Sections,
paragraphs, Schedules and Exhibits to this Agreement unless
otherwise specified, (iii) the word "including" and words of
similar import when used in this Agreement shall mean "includ-
ing, without limitation," unless the context otherwise requires
or unless otherwise specified, (iv) the word "or" shall not be
-37-
exclusive, and (v) provisions shall apply, when appropriate, to
successive events and transactions.
(b) This Agreement shall be construed without regard
to any presumption or rule requiring construction or interpre-
tation against the party drafting or causing any instrument to
be drafted.
Section 7.10 Severability. Any provision hereof
which is invalid or unenforceable shall be ineffective to the
extent of such invalidity or unenforceability, without affect-
ing in any way the remaining provisions hereof.
Section 7.11 Further Assurances. The Company and
Investor agree that, from time to time, each of them will, and
will cause their respective Affiliates to, execute and deliver
such further instruments and take such other action as may be
necessary to carry out the purposes and intents hereof.
Section 7.12 Specific Performance. The Company and
Investor each acknowledge that, in view of the uniqueness of
arrangements contemplated by this Agreement, the parties hereto
would not have an adequate remedy at law for money damages in
the event that this Agreement were not performed in accordance
with its terms, and therefore agree that the parties hereto
shall be entitled to specific enforcement of the terms hereof
in addition to any other remedy to which the parties hereto may
be entitled at law or in equity.
Section 7.13 Investor Breach. In the event Investor
shall have breached (i) its obligation to effect a purchase of
Company Common Stock pursuant to the Stock Purchase Agreement
which breach is neither cured nor desisted from within 30 days
of receipt of written notice of such breach, or (ii) any of its
obligations under this Agreement which breach is neither cured
nor desisted from within 30 days of receipt of written notice
of such breach and which would reasonably be expected to mate-
rially adversely affect the Company, the Company shall no long-
er be required to perform any of its obligations hereunder.
Section 7.14 Confidentiality. Investor agrees that
all information provided to Investor or any of its representa-
tives pursuant to this Agreement shall be kept confidential,
and Investor shall not (x) disclose such information to any
persons other than the directors, officers, employees, finan-
cial advisors, legal advisors, accountants, consultants and
affiliates of Investor who reasonably need to have access to
the confidential information and who are advised of the confi-
dential nature of such information or (y) use such information
-38-
in a manner which would be detrimental to the Company; pro-
vided, however, the foregoing obligation of Investor shall not
(a) relate to any information that (i) is or becomes generally
available other than as a result of unauthorized disclosure by
Investor or by persons to whom Investor has made such informa-
tion available, (ii) is or becomes available to Investor on a
non-confidential basis from a third party that is not, to
Investor's knowledge, bound by any other confidentiality agree-
ment with the Company, or (b) prohibit disclosure of any infor-
mation if required by law, rule, regulation, court order or
other legal or governmental process.
Section 7.15 Public Releases and Announcements. The
Company agrees that until the 20% Termination Date, it shall
endeavor to provide to Investor advance copies of, or, in the
case of oral announcements, advance notice of, any public re-
lease or announcement concerning the Company to be issued, re-
leased or made by the Company or any of its Affiliates, in each
case, if possible, at least one Business Day prior to such re-
lease or announcement.
-39-
IN WITNESS WHEREOF, this Agreement has been signed by
or on behalf of each of the parties hereto as of the day first
above written.
REGENCY REALTY CORPORATION
By: /s/ Martin E. Stein, Jr.
Name: Martin E. Stein, Jr.
Title: President
SECURITY CAPITAL HOLDINGS S.A.
By: /s/ Paul E. Szurek
Name: Paul E. Szurek
Title: Managing Director
SECURITY CAPITAL U.S. REALTY
By: /s/ Paul E. Szurek
Name: Paul E. Szurek
Title: Managing Director
THE REGENCY GROUP, INC.
By: /s/ Martin E. Stein, Jr.
Name: Martin E. Stein, Jr.
Title: President
EXHIBIT 2.2
_______________________________________________________
REGISTRATION RIGHTS AGREEMENT
by and among
REGENCY REALTY CORPORATION
SECURITY CAPITAL HOLDINGS S.A.
and
SECURITY CAPITAL U.S. REALTY
dated as of
July 10, 1996
_______________________________________________________
TABLE OF CONTENTS
Page
Section 1. Definitions............................... 1
(a) "Agreement".......................... 1
(b) "Buyer".............................. 1
(c) "Commencement Date".................. 1
(d) "Company"............................ 1
(e) "Company Registration Expenses"...... 1
(f) "Commission"......................... 2
(g) "Exchange Act"....................... 2
(h) "Exercise Notice".................... 2
(i) "Extraordinary Transaction".......... 2
(j) "Extraordinary Transaction Shares"... 2
(k) "Holdings"........................... 2
(l) "NASD"............................... 2
(m) "Registrable Securities"............. 2
(n) "Registration Expenses".............. 2
(o) "Registration Suspension Period"..... 3
(p) "Securities Act"..................... 3
(q) "Shelf Registration"................. 3
(r) "Stockholders Agreement"............. 3
(s) "Stock Purchase Agreement"........... 3
(t) "Suspension Notice".................. 3
(u) "Tag-Along Notice"................... 3
(v) "Tag-Along Shares"................... 3
(w) "Third Party"........................ 3
(x) "Underwritten/Placed Offering"....... 3
(y) "USREALTY"........................... 3
Section 2. Shelf Registration........................ 3
(a) Obligation to File and Maintain...... 3
(b) Black-Out Periods of Buyer........... 4
(c) Black-Out Periods of the Company..... 4
(d) Number of Shelf Registrations........ 5
(e) Size of Shelf Registration........... 6
(f) Notice............................... 6
(g) Expenses............................. 6
(h) Selection of Underwriters............ 6
Section 3. Incidental Registrations.................. 6
(a) Notification and Inclusion........... 6
-i-
(b) Cut-back Provisions.................. 7
(c) Expenses............................. 7
(d) Duration of Effectiveness............ 7
Section 4. Registration Procedures................... 7
Section 5. Requested Underwritten Offerings.......... 10
Section 6. Preparation; Reasonable Investigation..... 10
Section 7. Tag-Along Rights.......................... 11
(a) Rights and Notice.................... 11
(b) Number of Shares to be Included...... 11
(c) Abandonment of Sale.................. 11
(d) Terms of Sale........................ 12
(e) Timing of Sale....................... 12
Section 8. Indemnification........................... 12
(a) Indemnification by the Company....... 12
(b) Indemnification by Buyer............. 13
(c) Notices of Claims, etc............... 13
(d) Other Indemnification................ 14
(e) Indemnification Payments............. 14
(f) Contribution......................... 14
Section 9. Covenants Relating to Rule 144............ 14
Section 10. Miscellaneous............................. 15
(a) Counterparts......................... 15
(b) Governing Law........................ 15
(c) Entire Agreement..................... 15
(d) Notices.............................. 15
(e) Successors and Assigns............... 16
(f) Headings............................. 16
(g) Amendments and Waivers............... 16
(h) Interpretation; Absence of
Presumption....................... 16
(i) Severability......................... 17
-ii-
REGISTRATION RIGHTS AGREEMENT (the "Agreement"),
dated as of July 10, 1996, by and among Regency Realty
Corporation, a Florida corporation (the "Company"), Security
Capital U.S. Realty, a Luxembourg corporation ("USREALTY"),
and Security Capital Holdings S.A., a Luxembourg corporation
("Holdings") and a wholly owned subsidiary of USREALTY. Cap-
italized terms not otherwise defined herein have the meaning
ascribed to them in the Stock Purchase Agreement (as herein-
after defined).
WHEREAS, the Company, Holdings and USREALTY have
entered into a Stock Purchase Agreement, dated as of June 11,
1996 (the "Stock Purchase Agreement"), that provides for the
purchase by Holdings and sale by the Company to Holdings of
shares of Company Common Stock; and
WHEREAS, in order to induce Buyer to enter into the
Stock Purchase Agreement, the Company has agreed to provide
the registration rights set forth herein;
NOW, THEREFORE, in consideration of the premises
and the covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and suf-
ficiency of which are hereby acknowledged, and intending to
be legally bound hereby, the parties hereto hereby agree as
follows:
Section 1. Definitions. As used herein, the fol-
lowing terms shall have the following meanings:
(a) "Agreement" shall have the meaning set forth
in the first paragraph hereof.
(b) "Buyer" shall mean, collectively, as the con-
text may require, USREALTY and Holdings, and shall also in-
clude any Affiliate of USREALTY or Holdings of which USREALTY
and/or Holdings collectively, directly or indirectly, Benefi-
cially Own 98% or more of the voting power and of the eco-
nomic interests, or any bona fide financial institution to
which any Buyer has Transferred (including upon foreclosure
of a pledge) shares of Company Stock for the purpose of se-
curing bona fide indebtedness of any Buyer. (Capitalized
terms used in this definition and not defined herein shall
have the meanings ascribed to them in the Stockholders Agree-
ment.)
(c) "Commencement Date" shall mean the first an-
niversary of the date of this Agreement, except that, in the
case of any Buyer which is a bona fide financial institution
to which any other Buyer has Transferred (including upon
foreclosure of a pledge) shares of Company Stock for the pur-
pose of securing bona fide indebtedness, the Commencement
Date shall be the date of this Agreement.
(d) "Company" shall have the meaning set forth in
the first paragraph hereof.
(e) "Company Registration Expenses" shall mean the
fees and disbursements of counsel and independent public ac-
countants for the Company incurred in connection with the
Company's performance of or compliance with this Agreement,
including the expenses of any special audits or "cold com-
fort" letters required by or incident to such performance and
compliance, and any premiums and other costs of policies of
insurance obtained by the Company against liabilities arising
out of the sale of any securities.
(f) "Commission" shall mean the Securities and Ex-
change Commission, and any successor thereto.
(g) "Exchange Act" shall mean the Securities Ex-
change Act of 1934, as amended, and any successor thereto,
and the rules and regulations thereunder.
(h) "Exercise Notice" shall have the meaning set
forth in Section 7(a).
(i) "Extraordinary Transaction" shall mean (i) any
merger, consolidation, sale or acquisition of assets, recapi-
talization, other business combination, liquidation, or other
action out of the ordinary course of business of the Company,
or (ii) any sale, issuance or other disposition of capital
stock of the Company representing, in the aggregate, at least
30% of the then outstanding capital stock of the Company.
(j) "Extraordinary Transaction Shares" shall have
the meaning set forth in Section 7(a).
(k) "Holdings" shall have the meaning set forth in
the first paragraph hereof.
(l) "NASD" shall mean the National Association of
Securities Dealers, Inc.
(m) "Registrable Securities" shall mean (i) any
and all shares of Company Stock acquired by Buyer pursuant to
the Stock Purchase Agreement, (ii) any and all securities ac-
quired by Buyer pursuant to Section 4.2 of the Stockholders
Agreement, and (iii) any securities issued or issuable with
-2-
respect to any Company Stock or other securities referred to
in clause (i) or (ii) by way of conversion, exchange, stock
dividend or stock split or in connection with a combination
of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registra-
ble Securities, once issued such securities shall cease to be
Registrable Securities when (A) a registration statement with
respect to the sale of such securities shall have become ef-
fective under the Securities Act and such securities shall
have been disposed of in accordance with such registration
statement, or (B) such securities shall have been sold in ac-
cordance with Rule 144 (or any successor provision) under the
Securities Act.
(n) "Registration Expenses" shall mean all regis-
tration, filing and stock exchange or NASD fees, all fees and
expenses of complying with securities or blue sky laws, all
printing expenses, messenger and delivery expenses, any fees
and disbursements of any separate counsel retained by Buyer,
any fees and disbursements of underwriters customarily paid
by sellers of securities who are not the issuers of such se-
curities and all underwriting discounts and commissions and
transfer taxes, if any, and any premiums and other costs of
policies of insurance obtained by Buyer against liabilities
arising out of the public offering of securities.
(o) "Registration Suspension Period" shall have
the meaning set forth in Section 2(b).
(p) "Securities Act" shall mean the Securities Act
of 1933, as amended, and any successor thereto, and the rules
and regulations thereunder.
(q) "Shelf Registration" shall have the meaning
set forth in Section 2(a).
(r) "Stockholders Agreement" shall have the mean-
ing set forth in Section 2(c).
(s) "Stock Purchase Agreement" shall have the
meaning set forth in the second paragraph hereof.
(t) "Suspension Notice" shall have the meaning set
forth in Section 2(b).
(u) "Tag-Along Notice" shall have the meaning set
forth in Section 7(a).
(v) "Tag-Along Shares" shall have the meaning set
forth in Section 7(a).
-3-
(w) "Third Party" shall have the meaning set forth
in Section 7(a).
(x) "Underwritten/Placed Offering" shall mean a
sale of securities of the Company to an underwriter or under-
writers for reoffering to the public or on behalf of a person
other than the Company through an agent for sale to the pub-
lic.
(y) "USREALTY" shall have the meaning set forth in
the first paragraph hereof.
Section 2. Shelf Registration. (a) Obligation to
File and Maintain. At any time following the Commencement
Date, promptly upon the written request of Buyer, the Company
will use its reasonable best efforts to file with the Com-
mission a registration statement under the Securities Act for
the offering on a continuous or delayed basis in the future
of all of the Registrable Securities (the "Shelf Registra-
tion"). The Shelf Registration shall be on an appropriate
form and the Shelf Registration and any form of prospectus
included therein or prospectus supplement relating thereto
shall reflect such plan of distribution or method of sale as
Buyer may from time to time notify the Company, including the
sale of some or all of the Registrable Securities in a public
offering or, if requested by Buyer, subject to receipt by the
Company of such information (including information relating
to purchasers) as the Company reasonably may require, (i) in
a transaction constituting an offering outside the United
States which is exempt from the registration requirements of
the Securities Act in which the seller undertakes to effect
registration after the completion of such offering in order
to permit such shares to be freely tradeable in the United
States, (ii) in a transaction constituting a private place-
ment under Section 4(2) of the Securities Act in connection
with which the seller undertakes to effect a registration af-
ter the conclusion of such placement to permit such shares to
be freely tradeable by the purchasers thereof, or (iii) in a
transaction under Rule 144A of the Securities Act in connec-
tion with which the seller undertakes to effect a registra-
tion after the conclusion of such transaction to permit such
shares to be freely tradeable by the purchasers thereof. The
Company shall use its reasonable best efforts to keep the
Shelf Registration continuously effective for the period be-
ginning on the date on which the Shelf Registration is de-
clared effective and ending on the first date that there are
no Registrable Securities. During the period during which
the Shelf Registration is effective, the Company shall
supplement or make amendments to the Shelf Registration, if
required by the Securities Act or if reasonably requested by
-4-
Buyer or an underwriter of Registrable Securities, including
to reflect any specific plan of distribution or method of
sale, and shall use its reasonable best efforts to have such
supplements and amendments declared effective, if required,
as soon as practicable after filing.
(b) Black-Out Periods of Buyer. Notwithstanding
anything herein to the contrary, (i) the Company shall have
the right from time to time to require Buyer not to sell un-
der the Shelf Registration or to suspend the effectiveness
thereof during the period starting with the date 30 days pri-
or to the Company's good faith estimate, as certified in
writing by an executive officer of the Company to Buyer, of
the proposed date of filing of a registration statement or a
preliminary prospectus supplement relating to an existing
shelf registration statement, in either case, pertaining to
an underwritten public offering of equity securities of the
Company for the account of the Company, and ending on the
date 90 days following the effective date of such registra-
tion statement or the date of filing of such prospectus sup-
plement, and (ii) the Company shall be entitled to require
Buyer not to sell under the Shelf Registration or to suspend
the effectiveness thereof (but not for a period exceeding 90
days) if the Company determines, in its good faith judgment,
that such offering or continued effectiveness would interfere
with any material financing, acquisition, disposition, corpo-
rate reorganization or other material transaction involving
the Company or any of its subsidiaries or public disclosure
thereof would be required prior to the time such disclosure
might otherwise be required, or when the Company is in pos-
session of material information that it deems advisable not
to disclose in a registration statement.
Once any registration statement filed pursuant to
this Section 2 or in which Registrable Securities are includ-
ed pursuant to Section 3 has been declared effective, any pe-
riod during which the Company fails to keep such registration
statement effective and usable for resale of Registrable Se-
curities for the period required by Section 4(b) shall be re-
ferred to as a "Registration Suspension Period". A Registra-
tion Suspension Period shall commence on and include the date
that the Company gives written notice to Buyer of its deter-
mination that such registration statement is no longer effec-
tive or usable for resale of Registrable Securities (the
"Suspension Notice") to and including the date when the Com-
pany notifies Buyer that the use of the prospectus included
in such registration statement may be resumed for the dispo-
sition of Registrable Securities.
-5-
(c) Black-Out Periods of the Company. Subject to
the conditions of this Section 2(c), Buyer shall have the
right, exercisable on not more than two occasions, to require
the Company not to sell, and to use its good faith efforts to
cause any other holder of common equity securities or secu-
rities convertible into common equity securities of the Com-
pany not to sell, any common equity securities of the Company
or any securities convertible into common equity securities
of the Company under any registration statement or prospectus
supplement relating to an existing shelf registration state-
ment (other than sales of shares of Common Stock upon the re-
demption of limited partnership units of any Subsidiary of
the Company and sales of equity securities issued or granted
pursuant to any employee benefit or similar plan or any divi-
dend reinvestment plan), or to suspend the effectiveness
thereof, during the period starting with the date 15 days
prior to Buyer's good faith estimate, as certified in writing
by an executive officer of Buyer to the Company, of the pro-
posed date of filing of a preliminary prospectus supplement
relating to a Shelf Registration filed pursuant to Section
2(a), pertaining to an underwritten public offering of Regis-
trable Securities, and ending on the date 60 days following
the date of filing of the final prospectus supplement, but in
no event on a date later than 75 days following the date of
filing of the preliminary prospectus supplement. The
Company's obligations under this Section 2(c) are subject to
the continuing satisfaction of the following conditions: (a)
the Registrable Securities to be offered by Buyer in such un-
derwritten public offering shall represent (i) in the case of
Buyer's first exercise of its rights under this Section 2(c),
the greater of (A) at least 20% of the then outstanding
shares of Company Common Stock and (B) at least that number
of shares of Registrable Securities having a market value,
based on the most recent closing price, of $50 million, in
each case determined at the time Buyer exercises its rights
under this Section 2(c); and (ii) in the case of Buyer's sec-
ond exercise of its rights under this Section 2(c), the
greater of (A) at least 40% of the total number of shares of
Registrable Securities then Beneficially Owned by Buyer and
its Affiliates and (B) at least that number of shares of Reg-
istrable Securities having a market value, based on the most
recent closing price, of $60 million, in each case determined
at the time Buyer exercises its rights under this Section
2(c); (b) no black-out period pursuant to Section 2(b)(i)
shall be in effect at the time of Buyer's exercise of its
rights under this Section 2(c); (c) the Company shall not
have suspended sales of Registrable Securities pursuant to
Section 2(b)(ii); (d) the Company shall not have delivered to
Buyer a written notice to the effect that the Board of Direc-
tors has determined in good faith that compliance with this
-6-
Section 2(c) would reasonably be expected to have a Material
Adverse Effect on the Company; and (e) Buyer shall not be in
default of any of its material obligations under the Stock
Purchase Agreement, the Stockholders Agreement, dated as of
the date hereof, by and among the Company, Holdings and USRE-
ALTY (the "Stockholders Agreement"), or this Agreement. In
no event may the Company include in any preliminary prospec-
tus supplement under which Buyer is offering Registrable Se-
curities covered by this Section 2(c) any equity securities
of the Company or any securities convertible into equity se-
curities of the Company.
(d) Number of Shelf Registrations. The Company
shall be obligated to effect, under this Section 2, a minimum
of one Shelf Registration, plus an additional Shelf Registra-
tion for each $50,000,000 of shares of Company Stock pur-
chased by Buyer from the Company subsequent to the Initial
Closing. A Shelf Registration shall not be deemed to have
been effected, nor shall it be sufficient to reduce the num-
ber of Shelf Registrations available to Buyer under this Sec-
tion 2, unless such registration becomes effective pursuant
to the Securities Act and is kept continuously effective for
a period of at least two years (other than any periods during
such period of effectiveness which are Registration Suspen-
sion Periods, and provided that no such Registration Suspen-
sion Periods shall count towards such two-year period); pro-
vided, however, that no Shelf Registration shall be deemed to
have been effected, nor shall it reduce the number of Shelf
Registrations available under this Section 2, if such regis-
tration cannot be used by Buyer for more than 60 days as a
result of any stop order, injunction or other order of the
Commission or other Government Authority for any reason other
than an act or omission of Buyer.
(e) Size of Shelf Registration. The Company shall
not be required to effect a Shelf Registration of fewer than
1,000,000 shares or other units of Registrable Securities (as
adjusted for any stock splits, reverse stock splits or simi-
lar events which occur after the date hereof), except that if
there are less than 1,000,000 (as adjusted for any stock
splits, reverse stock splits or similar events which occur
after the date hereof) shares of Registrable Securities out-
standing, then the Company shall be required to effect a
Shelf Registration of all of the remaining shares or other
units of Registrable Securities outstanding.
(f) Notice. The Company shall give Buyer prompt
notice in the event that the Company has suspended sales of
Registrable Securities under Section 2(b).
-7-
(g) Expenses. All Registration Expenses incurred
in connection with any Shelf Registration which may be re-
quested under this Section 2 shall be borne by Buyer, and all
Company Registration Expenses incurred in connection with any
such Shelf Registration shall be borne by the Company; pro-
vided that Buyer shall reimburse the Company for the first
$25,000 of fees and disbursements of counsel and independent
public accountants for the Company included in Company Regis-
tration Expenses and relating to each such Shelf Registra-
tion.
(h) Selection of Underwriters. Any and all under-
writers or other agents involved in any sale of Registrable
Securities pursuant to a registration statement contemplated
by this Section 2 shall include such underwriter(s) or other
agent(s) as selected by Buyer and approved of by the Company,
which approval shall not be unreasonably withheld; provided
that Security Capital Markets Group Incorporated or any other
Affiliate of Buyer shall in all events be approved by the
Company.
Section 3. Incidental Registrations. (a) Noti-
fication and Inclusion. If the Company proposes to register
for its own account any common equity securities of the Com-
pany or any securities convertible into common equity securi-
ties of the Company under the Securities Act (other than a
registration relating solely to the sale of securities to
participants in a dividend reinvestment plan, a registration
on Form S-4 relating to a business combination or similar
transaction permitted to be registered on such Form S-4, a
registration on Form S-8 relating solely to the sale of secu-
rities to participants in a stock or employee benefit plan, a
registration permitted under Rule 462 under the Securities
Act registering additional securities of the same class as
were included in an earlier registration statement for the
same offering, and declared effective), the Company shall, at
each such time after the Commencement Date, promptly give
written notice of such registration to Buyer. Upon the writ-
ten request of Buyer given within 10 days after receipt of
such notice by Buyer, the Company shall seek to include in
such proposed registration such Registrable Securities as
Buyer shall request be so included and shall use its reason-
able best efforts to cause a registration statement covering
all of the Registrable Securities that Buyer has requested to
be registered to become effective under the Securities Act.
The Company shall be under no obligation to complete any of-
fering of securities it proposes to make under this Section 3
and shall incur no liability to Buyer for its failure to do
so. If, at any time after giving written notice of its in-
tention to register any securities and prior to the effective
-8-
date of the registration statement filed in connection with
such registration, the Company shall determine for any reason
not to register or to delay registration of such securities,
the Company may, at its election, give written notice of such
determination to Buyer and, thereupon, (i) in the case of a
determination not to register, the Company shall be relieved
of its obligation to register any Registrable Securities in
connection with such registration (but not from its obliga-
tion to pay the Registration Expenses incurred in connection
therewith) and (ii) in the case of a determination to delay
registering, the Company shall be permitted to delay regis-
tering any Registrable Securities for the same period as the
delay in registering such other securities.
(b) Cut-back Provisions. If a registration pursu-
ant to this Section 3 involves an Underwritten/Placed Offer-
ing of the securities so being registered, whether or not
solely for sale for the account of the Company, which securi-
ties are to be distributed by or through one or more under-
writers of recognized standing under underwriting terms cus-
tomary for such transaction, and the underwriter or the man-
aging underwriter, as the case may be, of such Underwritten/
Placed Offering shall inform the Company of its belief that
the amount of securities requested to be included in such
registration or offering exceeds the amount which can be sold
in (or during the time of) such offering without delaying or
jeopardizing the success of the offering (including the price
per share of the securities to be sold), then the Company
will include in such registration (i) first, all the securi-
ties of the Company which the Company proposes to sell for
its own account or the account of others (other than Buyer)
requesting inclusion in such registration pursuant to rights
to registration on request, and (b) second, to the extent of
the amount which the Company is so advised can be sold in (or
during the time of) such offering, Registrable Securities and
other securities requested to be included in such registra-
tion, pro rata among Buyer and others exercising incidental
registration rights, on the basis of the shares of Company
Stock requested to be included by all such persons.
(c) Expenses. The Company shall bear and pay all
Company Registration Expenses incurred in connection with any
registration of Registrable Securities pursuant to this Sec-
tion 3 for Buyer, and all Registration Expenses incurred in
connection with any registration of any other securities re-
ferred to in the first sentence of Section 3(a), and Buyer
shall bear and pay all Registration Expenses incurred in con-
nection with any registration of Registrable Securities pur-
suant to this Section 3 for Buyer.
-9-
(d) Duration of Effectiveness. At the request of
Buyer, the Company shall, subject to Section 2(b), use its
reasonable best efforts to keep any registration statement
for which Registrable Securities are included under this Sec-
tion 3 effective and usable for up to 90 days (subject to ex-
tension for the length of any Registration Suspension Pe-
riod), unless the distribution of securities registered
thereunder has been earlier completed; provided, however,
that in no event will the Company be required to prepare or
file audited financial statements with respect to any fiscal
year by a date prior to the date on which the Company would
be so required to prepare and file such audited financial
statements if such registration statement were no longer ef-
fective and usable.
Section 4. Registration Procedures. In connection
with the filing of any registration statement as provided in
Section 2 or 3, the Company shall use its reasonable best ef-
forts to, as expeditiously as reasonably practicable:
(a) prepare and file with the Commission the
requisite registration statement (including a pro-
spectus therein) to effect such registration and
use its reasonable best efforts to cause such reg-
istration statement to become effective, provided
that before filing such registration statement or
any amendments or supplements thereto, the Company
will furnish to the counsel selected by Buyer cop-
ies of all such documents proposed to be filed,
which documents will be subject to the review of
such counsel before any such filing is made, and
the Company will comply with any reasonable request
made by such counsel to make changes in any infor-
mation contained in such documents relating to
Buyer;
(b) prepare and file with the Commission such
amendments and supplements to such registration
statement and the prospectus used in connection
therewith as may be necessary to maintain the ef-
fectiveness of such registration and to comply with
the provisions of the Securities Act with respect
to the disposition of all securities covered by
such registration statement until, in the case of
Section 2, the termination of the period during
which the Shelf Registration is required to be kept
effective, or, in the case of Section 3, the ear-
lier of such time as all of such securities have
-10-
been disposed of and the date which is 90 days af-
ter the date of initial effectiveness of such reg-
istration statement;
(c) furnish to Buyer such number of conformed
copies of such registration statement and of each
such amendment and supplement thereto (in each case
including all exhibits), such number of copies of
the prospectus contained in such registration
statements (including each complete prospectus and
any summary prospectus) and any other prospectus
filed under Rule 424 under the Securities Act, in
conformity with the requirements of the Securities
Act, and such other documents, including documents
incorporated by reference, as Buyer may reasonably
request;
(d) register or qualify all Registrable Secu-
rities under such other securities or blue sky laws
of such jurisdictions as Buyer shall reasonably re-
quest, to keep such registration or qualification
in effect for so long as such registration state-
ment remains in effect, and take any other action
which may be reasonably necessary or advisable to
enable Buyer to consummate the disposition in such
jurisdictions of the securities owned by Buyer, ex-
cept that the Company shall not for any such pur-
pose be required to qualify generally to do busi-
ness as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of
this paragraph be obligated to be so qualified, or
to consent to general service of process in any
such jurisdiction, or to subject the Company to any
material tax in any such jurisdiction where it is
not then so subject;
(e) cause all Registrable Securities covered
by such registration statement to be registered
with or approved by such other Government Authority
as may be reasonably necessary to enable Buyer to
consummate the disposition of such Registrable Se-
curities;
(f) furnish to Buyer a signed counterpart,
addressed to Buyer (and the underwriters, if any),
of
(i) an opinion of counsel for the Com-
pany, dated the effective date of such reg-
istration statement (and, if such registration
-11-
includes an underwritten public offering, dat-
ed the date of the closing under the under-
writing agreement), reasonably satisfactory in
form and substance to Buyer, and
(ii) to the extent permitted by then ap-
plicable rules of professional conduct, a
"comfort" letter, dated the effective date of
such registration statement (and, if such reg-
istration includes an underwritten public of-
fering, dated the date of the closing under
the underwriting agreement), signed by the in-
dependent public accountants who have certi-
fied the Company's financial statements in-
cluded in such registration statement,
covering substantially the same matters with re-
spect to such registration statement (and the pro-
spectus included therein) and, in the case of the
accountants' letter, with respect to events subse-
quent to the date of such financial statements, all
as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to
the underwriters in underwritten public offerings
of securities;
(g) immediately notify Buyer at any time when
the Company becomes aware that a prospectus relat-
ing thereto is required to be delivered under the
Securities Act, of the happening of any event as a
result of which the prospectus included in such
registration statement, as then in effect, includes
an 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
not misleading in the light of the circumstances
under which they were made, and at the request of
Buyer promptly prepare and furnish to Buyer a rea-
sonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of
such securities, such prospectus shall not include
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 in the light of the circumstances under
which they were made;
-12-
(h) comply or continue to comply in all mate-
rial respects with the Securities Act and the Ex-
change Act and with all applicable rules and regu-
lations of the Commission, and make available to
its security holders, as soon as reasonably practi-
cable, an earnings statement covering the period of
at least 12 months, but not more than 18 months,
beginning with the first full calendar month after
the effective date of such registration statement,
which earnings statement shall satisfy the provi-
sions of Section 11(a) of the Securities Act, and
not file any amendment or supplement to such regis-
tration statement or prospectus to which Buyer
shall have reasonably objected on the grounds that
such amendment or supplement does not comply in all
material respects with the requirements of the
Securities Act, having been furnished with a copy
thereof at least five Business Days prior to the
filing thereof;
(i) provide a transfer agent and registrar
for all Registrable Securities covered by such reg-
istration statement not later than the effective
date of such registration statement; and
(j) list all Company Stock covered by such
registration statement on any securities exchange
on which any of the Company Stock is then listed.
Buyer shall furnish in writing to the Company such informa-
tion regarding Buyer (and any of its affiliates), the Regis-
trable Securities to be sold, the intended method of distri-
bution of such Registrable Securities, and such other infor-
mation requested by the Company as is necessary for inclusion
in the registration statement relating to such offering pur-
suant to the Securities Act and the rules of the Commission
thereunder. Such writing shall expressly state that it is
being furnished to the Company for use in the preparation of
a registration statement, preliminary prospectus, supplemen-
tary prospectus, final prospectus or amendment or supplement
thereto, as the case may be.
Buyer agrees by acquisition of the Registrable
Securities that upon receipt of any notice from the Company
of the happening of any event of the kind described in para-
graph (g) of this Section 4, Buyer will forthwith discontinue
its disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securi-
ties until Buyer's receipt of the copies of the supplemented
-13-
or amended prospectus contemplated by paragraph (g) of this
Section 4.
Section 5. Requested Underwritten Offerings. If
requested by the underwriters for any underwritten offerings
by Buyer, under a registration requested pursuant to Section
2(a), the Company will enter into a customary underwriting
agreement with such underwriters for such offering, to con-
tain such representations and warranties by the Company and
such other terms as are customarily contained in agreements
of this type, including indemnities to the effect and to the
extent provided in Section 6. Buyer shall be a party to such
underwriting agreement and may, at its option, require that
any or all of the conditions precedent to the obligations of
such underwriters under such underwriting agreement be condi-
tions precedent to the obligations of Buyer. Buyer shall not
be required to make any representations or warranties to or
agreement with the Company or the underwriters other than
representations, warranties or agreements regarding Buyer and
Buyer's intended method of distribution and any other repre-
sentation or warranty required by law.
Section 6. Preparation; Reasonable Investigation.
In connection with the preparation and filing of the regis-
tration statement under the Securities Act, the Company will
give Buyer, its underwriters, if any, and their respective
counsel, the opportunity to participate in the preparation of
such registration statement, each prospectus included therein
or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such access to
its books and records and such opportunities to discuss the
business of the Company with its officers, its counsel and
the independent public accountants who have certified its fi-
nancial statements as shall be necessary, in the opinion of
Buyer's and such underwriters' respective counsel, to conduct
a reasonable investigation within the meaning of the Securi-
ties Act.
Section 7. Tag-Along Rights. From and after the
date hereof until the earlier of (i) the date on which Buyer
shall own shares of Company Common Stock representing less
than 9.8% of the then outstanding shares of Company Common
Stock on a fully diluted basis, or (ii) the date on which
Buyer shall no longer be subject to the standstill restric-
tions set forth in Section 5.2(a) of the Stockholders Agree-
ment (unless Buyer is not subject to such restrictions as a
result of an Early Termination Event (as that term is defined
in the Stockholders Agreement)), Buyer shall be entitled to
the rights set forth in this Section 7.
-14-
(a) Rights and Notice. The Company shall not di-
rectly or indirectly sell or otherwise dispose of shares of
Company Stock to any person (a "Third Party") in connection
with an Extraordinary Transaction in which the consideration
for some or all of the shares of Company Stock is cash or
cash equivalents (as determined under GAAP), unless the terms
and conditions of such sale or other disposition shall in-
clude an offer to Buyer to include, at the option of Buyer,
in such sale or other disposition the Registrable Securities
owned by Buyer at the time of such sale or other disposition
determined in accordance with Section 7(b) (the "Tag-Along
Shares"). The Company shall send a written notice (the "Tag-
Along Notice") to Buyer setting forth the number of shares of
Company Stock proposed to be sold or otherwise disposed of in
the Extraordinary Transaction (the "Extraordinary Transaction
Shares"), and the price at which such shares are proposed to
be sold (or the method by which such price is proposed to be
determined). At any time within 15 days after its receipt of
the Tag-Along Notice, Buyer may exercise its option to sell
the Tag-Along Shares by furnishing written notice of such ex-
ercise (the "Exercise Notice") to the Company.
(b) Number of Shares to be Included. If the pro-
posed sale or other disposition by the Company in connection
with an Extraordinary Transaction is consummated, Buyer shall
have the right to sell to the Third Party as part of such
proposed sale or other disposition such number of Registrable
Securities owned by Buyer equal to the product of (i) the ra-
tio (which in no event shall exceed 20% for purposes of this
Section 7) of the total number of Registrable Securities
owned by Buyer at the time that Buyer receives the Tag-Along
Notice to the total number of outstanding shares of Company
Stock, on a fully diluted basis, at the time that Buyer re-
ceives the Tag-Along Notice, and (ii) the number of Extraor-
dinary Transaction Shares; provided, however, that if the
number of Tag-Along Shares is greater than the number of Reg-
istrable Securities owned by Buyer at the time that Buyer re-
ceives the Tag-Along Notice, then Buyer shall have the right
to sell to the Third Party as part of the proposed sale or
other disposition to the Third Party by the Company in con-
nection with an Extraordinary Transaction the total number of
Registrable Securities owned by Buyer at the time that Buyer
receives the Tag-Along Notice. All calculations pursuant to
this paragraph shall exclude and ignore any unissued shares
of Company Stock issuable pursuant to stock options, warrants
and other rights to acquire shares of Company Stock and pur-
suant to convertible or exchangeable securities.
(c) Abandonment of Sale. Each of the Company and
the Third Party shall have the right, in its sole discretion,
-15-
at all times prior to consummation of the proposed sale or
other disposition giving rise to the tag-along right granted
by this Section 7 to abandon, rescind, annul, withdraw or
otherwise terminate such sale or other disposition, whereupon
all tag-along rights in respect of such sale or other dispo-
sition pursuant to this Section 7 shall become null and void,
and neither the Company nor the Third Party shall have any
liability or obligation to Buyer with respect thereto by vir-
tue of such abandonment, rescission, annulment, withdrawal or
termination.
(d) Terms of Sale. The purchase from Buyer pur-
suant to this Section 7 shall be on the same terms and condi-
tions, including the per share price and the date of sale or
other disposition, as are applicable to the Company, and
which shall be consistent with the relevant Tag-Along Notice.
(e) Timing of Sale. If, with respect to any Tag-
Along Notice, Buyer fails to deliver an Exercise Notice with-
in the requisite time period, the Company shall have 120 days
after the expiration of the time in which the Exercise Notice
is required to be delivered in which to sell or otherwise
dispose of not more than the number of shares of Company
Stock described in the Tag-Along Notice on terms not more fa-
vorable to the Company than were set forth in the Tag-Along
Notice. If, at the end of 120 days following the receipt of
the Tag-Along Notice, the Company has not completed the sale
or other disposition of Company Stock in accordance with the
terms described in the Tag-Along Notice, the Company shall
again be obligated to comply with the provisions of this Sec-
tion 7 with respect to, and provide Buyer with the opportun-
ity to participate in, any proposed sale or other disposition
of shares of Company Stock in connection with an Extraordi-
nary Transaction.
Section 8. Indemnification. (a) Indemnification
by the Company. In the event of any registration of any Reg-
istrable Securities of the Company under the Securities Act,
the Company will, and hereby does, indemnify and hold harm-
less Buyer, each other person who participates as an under-
writer in the offering or sale of such securities and each
other person who controls any such underwriter within the
meaning of the Securities Act, against any losses, claims,
damages or liabilities, joint or several, to which Buyer or
any such underwriter or controlling person may become subject
under the Securities Act or otherwise, insofar as such loss-
es, claims, damages or liabilities (or actions or proceed-
ings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or al-
leged untrue statement of any material fact contained in the
-16-
registration statement under which such Registrable Securi-
ties were registered under the Securities Act, any prelimi-
nary prospectus, final prospectus or summary prospectus con-
tained therein, or any amendment or supplement thereto, or
any omission or alleged omission to state therein 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, and the Company will reim-
burse Buyer and each such underwriter and controlling person
for any reasonable legal or any other expenses reasonably in-
curred by them in connection with investigating or defending
any such loss, claim, liability, action or proceedings; pro-
vided, however, that the Company shall not be liable in any
such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or ex-
pense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made
in such registration statement, any such preliminary prospec-
tus, final prospectus, summary prospectus, amendment or sup-
plement in reliance upon and in conformity with written in-
formation furnished to the Company by Buyer or any other per-
son who participates as an underwriter in the offering or
sale of such securities, in either case, specifically stating
that it is for use in the preparation thereof, and provided,
further, that the Company shall not be liable to any person
who participates as an underwriter in the offering or sale of
Registrable Securities or any other person, if any, who con-
trols such underwriter within the meaning of the Securities
Act in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect there-
of) or expense arises out of such person's failure to send or
give a copy of the final prospectus or supplement to the per-
sons asserting an untrue statement or alleged untrue state-
ment or omission or alleged omission at or prior to the writ-
ten confirmation of the sale of Registrable Securities to
such person if such statement or omission was corrected in
such final prospectus or supplement. Such indemnity shall
remain in full force and effect regardless of any investiga-
tion made by or on behalf of Buyer or any such underwriter or
controlling person and shall survive the transfer of such se-
curities by Buyer.
(b) Indemnification by Buyer. The Company may re-
quire, as a condition to including any Registrable Securities
in any registration statement pursuant to Section 2 or Sec-
tion 3, that the Company shall have received an undertaking
satisfactory to it from Buyer to indemnify and hold harmless
(in the same manner and to the same extent as set forth in
paragraph (a) of this Section 8) the Company, each director
of the Company, each officer of the Company and each other
-17-
person, if any, who controls the Company within the meaning
of the Securities Act, and each other person who participates
as an underwriter in the offering or sale of such securities
and each other person who controls any such underwriter with-
in the meaning of the Securities Act, with respect to any un-
true statement or alleged untrue statement of a material fact
in or omission or alleged omission to state a material fact
from such registration statement, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or
any amendment or supplement thereto, if such untrue statement
or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written in-
formation furnished to the Company by Buyer specifically
stating that it is for use in the preparation of such regis-
tration statement, preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement. Such indemnity
shall remain in full force and effect regardless of any in-
vestigation made by or on behalf of the Company or any such
director, officer, or controlling person and shall survive
the transfer of such securities by Buyer.
(c) Notices of Claims, etc. Promptly after re-
ceipt by an indemnified party of notice of the commencement
of any action or proceeding involving a claim referred to in
the preceding paragraphs of this Section 8, such indemnified
party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the
latter of the commencement of such action; provided, however,
that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of
its obligations under the preceding paragraphs of this Sec-
tion 8, except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case
any such action is brought against an indemnified party, un-
less in such indemnified party's reasonable judgment a con-
flict of interest between such indemnified and indemnifying
parties may exist in respect of such claim, the indemnifying
party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with coun-
sel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to the indemnified
party for any legal or other expenses subsequently incurred
by the latter in connection with the defense thereof other
than reasonable costs of investigation.
(d) Other Indemnification. Indemnification simi-
lar to that specified in the preceding paragraphs of this
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Section 8 (with appropriate modifications) shall be given by
the Company and Buyer with respect to any required registra-
tion or other qualification of securities under any federal
or state law or regulation of Governmental Authority other
than the Securities Act.
(e) Indemnification Payments. The indemnification
required by this Section 8 shall be made by periodic payments
of the amount thereof during the course of the investigation
or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
(f) Contribution. If, for any reason, the forego-
ing indemnity is unavailable, or is insufficient to hold
harmless an indemnified party, then the indemnifying party
shall contribute to the amount paid or payable by the indem-
nified party as a result of the expense, loss, damage or li-
ability, (i) in such proportion as is appropriate to reflect
the relative fault of the indemnifying party on the one hand
and the indemnified party on the other (determined by refer-
ence to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission relates to
information supplied by the indemnifying party or the indem-
nified party and the parties' relative intent, knowledge, ac-
cess to information and opportunity to correct or prevent
such untrue statement or omission), or (ii) if the allocation
provided by clause (i) above is not permitted by applicable
law or provides a lesser sum to the indemnified party than
the amount hereinafter calculated, in the proportion as is
appropriate to reflect not only the relative fault of the in-
demnifying party and the indemnified party, but also the rel-
ative benefits received by the indemnifying party on the one
hand and the indemnified party on the other, as well as any
other relevant equitable considerations. No indemnified par-
ty guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to
contribution from any indemnifying party who was not guilty
of such fraudulent misrepresentation.
Section 9. Covenants Relating to Rule 144. The
Company will file in a timely manner (taking into account any
extensions granted by the Commission), information, documents
and reports in compliance with the Exchange Act and will, at
its expense, forthwith upon the request of Buyer, deliver to
Buyer a certificate, signed by the Company's principal finan-
cial officer, stating (a) the Company's name, address and
telephone number (including area code), (b) the Company's
Internal Revenue Service identification number, (c) the Com-
pany's Commission file number, (d) the number of shares of
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Company Common Stock and the number of shares of Company Pre-
ferred Stock outstanding as shown by the most recent report
or statement published by the Company, and (e) whether the
Company has filed the reports required to be filed under the
Exchange Act for a period of at least 90 days prior to the
date of such certificate and in addition has filed the most
recent annual report required to be filed thereunder. If at
any time the Company is not required to file reports in com-
pliance with either Section 13 or Section 15(d) of the Ex-
change Act, the Company will, at its expense, forthwith upon
the written request of Buyer, make available adequate current
public information with respect to the Company within the
meaning of paragraph (c)(2) of Rule 144 of the General Rules
and Regulations promulgated under the Securities Act.
Section 10. Miscellaneous. (a) Counterparts.
This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other
party. Copies of executed counterparts transmitted by tele-
copy, telefax or other electronic transmission service shall
be considered original executed counterparts for purposes of
this Section 10, provided receipt of copies of such counter-
parts is confirmed.
(b) Governing Law. THIS AGREEMENT SHALL BE GOV-
ERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF FLORIDA WITHOUT REFERENCE TO THE CHOICE OF LAW PRIN-
CIPLES THEREOF.
(c) Entire Agreement. This Agreement (including
agreements incorporated herein) contains the entire agreement
between the parties with respect to the subject matter hereof
and there are no agreements or understandings between the
parties other than those set forth or referred to herein.
This Agreement is not intended to confer upon any person not
a party hereto (and their successors and assigns) any rights
or remedies hereunder.
(d) Notices. All notices and other communications
hereunder shall be sufficiently given for all purposes here-
under if in writing and delivered personally, sent by docu-
mented overnight delivery service or, to the extent receipt
is confirmed, telecopy, telefax or other electronic transmis-
sion service to the appropriate address or number as set
forth below. Notices to the Company shall be addressed to:
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Regency Realty Corporation
121 W. Forsyth Street, Suite 200
Jacksonville, Florida 32202
Attention: Martin E. Stein, Jr.
Telecopy Number: (904) 634-3428
with a copy to:
Foley & Lardner
Greenleaf Building
200 Laura Street
Jacksonville, Florida 32202
Attention: Charles E. Commander III, Esq.
Telecopy Number: (904) 359-8700
or at such other address and to the attention of such other
person as the Company may designate by written notice to Buy-
er. Notices to Buyer shall be addressed to:
Security Capital Holdings S.A.
69, route d'Esch
L-2953 Luxembourg
Attention: Paul E. Szurek
Telecopy Number: (352) 4590-3331
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Adam O. Emmerich, Esq.
Telecopy Number: (212) 403-2000
(e) Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the parties here-
to and their respective successors. Neither party shall be
permitted to assign any of its rights hereunder to any third
party, except that if (i) Buyer transfers or pledges any or
all Registrable Securities to a bona fide financial institu-
tion as security for any bona fide indebtedness of any Buyer
and such financial institution agrees to be bound by the
Stockholders Agreement, the pledgee of the Registrable Secu-
rities shall be considered an intended beneficiary hereof and
may exercise all rights of Buyer hereunder, and (ii) any per-
son included within the definition of the term Buyer shall be
permitted to assign its rights hereunder to any other person
included within such definition.
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(f) Headings. The Section and other headings con-
tained in this Agreement are inserted for convenience of ref-
erence only and will not affect the meaning or interpretation
of this Agreement. All references to Sections or other head-
ings contained herein mean Sections or other headings of this
Agreement unless otherwise stated.
(g) Amendments and Waivers. This Agreement may
not be modified or amended except by an instrument or instru-
ments in writing signed by the party against whom enforcement
of any such modification or amendment is sought. Either par-
ty hereto may, only by an instrument in writing, waive com-
pliance by the other party hereto with any term or provision
hereof on the part of such other party hereto to be performed
or complied with. The waiver by any party hereto of a breach
of any term or provision hereof shall not be construed as a
waiver of any subsequent breach.
(h) Interpretation; Absence of Presumption. For
the purposes hereof, (i) words in the singular shall be held
to include the plural and vice versa and words of one gender
shall be held to include the other gender as the context re-
quires, (ii) the terms "hereof", "herein", and "herewith" and
words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole and not to
any particular provision of this Agreement, and Section,
paragraph or other references are to the Sections, para-
graphs, or other references to this Agreement unless other-
wise specified, (iii) the word "including" and words of simi-
lar import when used in this Agreement shall mean "including,
without limitation," unless the context otherwise requires or
unless otherwise specified, (iv) the word "or" shall not be
exclusive, and (v) provisions shall apply, when appropriate,
to successive events and transactions.
This Agreement shall be construed without regard to
any presumption or rule requiring construction or interpre-
tation against the party drafting or causing any instrument
to be drafted.
(i) Severability. Any provision hereof which is
invalid or unenforceable shall be ineffective to the extent
of such invalidity or unenforceability, without affecting in
any way the remaining provisions hereof.
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IN WITNESS WHEREOF, this Agreement has been signed
by or on behalf of each of the parties hereto as of the day
first above written.
REGENCY REALTY CORPORATION
By: /s/ Martin E. Stein, Jr.
Name: Martin E. Stein, Jr.
Title: President
SECURITY CAPITAL U.S. REALTY
By: /s/ Paul E. Szurek
Name: Paul E. Szurek
Title: Managing Director
SECURITY CAPITAL HOLDINGS S.A.
By: /s/ Paul E. Szurek
Name: Paul E. Szurek
Title: Managing Director