Item
1.01. Entry into a Material
Definitive Agreement.
Securities
Purchase Agreement
On
January 25, 2008, Centerline Holding Company (the “Company”), and Related
Special Assets LLC, a Delaware limited liability company (the “Purchaser”),
entered into a Securities
Purchase
Agreement (the “Securities Purchase
Agreement”) for the
issuance and sale
of $131,234,548
aggregate principal amount of
11.0%
Cumulative
Convertible Preferred Shares,
Series A-1 of
the Company (the “Convertible
Preferred Shares”)
at a purchase price of 11.70 per
share.
The
closing of the sale of the Convertible Preferred Shares
(the “Closing”) occurred on
January 25, 2008. The Convertible
Preferred Shares have a
liquidation preference of $11.70 per share and a conversion price of $10.75 per
share. The
Convertible Preferred Shares will pay cash
distributions at a
rate of 11% per annum, subject to declaration by the Company’s Board
of Trustees (the “Board”).
Pursuant
to the Securities Purchase
Agreement, the Company
shall
use
its
commercially reasonable efforts to consummate a rights offering (the “Rights
Offering”) to holders of (i) the Company’s Common Shares (including any
restricted Common Shares), vested options exercisable for Common Shares,
Convertible Community Reinvestment Act Preferred Shares, Series A Convertible
Community Reinvestment Act Preferred Shares, 4.40% Cumulative Perpetual
Convertible Community Reinvestment Act Preferred Shares, Series A-1 and/or
Special Preferred Voting Shares, and/or (ii) Special Common Units and/or
Special
Common Interests issued, respectively, by Centerline Capital Company LLC
and
Centerline Investors I LLC, affiliates of the Company (collectively, the “Trust Securities”), in
each case other than the Purchaser, Stephen M. Ross, Jeff Blau, Related
General
II L.P. or any affiliates of the foregoing (collectively, the “Purchaser
Group”), to subscribe for their pro rata share (assuming for this purpose that
the Trust Securities held by the Purchaser Group are not outstanding) of
Convertible Preferred Shares, having the same terms as the Convertible
Preferred
Shares other than the issue date, as promptly as practical following the
Closing.
In
accordance with the Securities Purchase Agreement and the certificate of
designation (the “Certificate of Designation”) for the Convertible Preferred
Shares, the Company will redeem from the Purchaser together with its affiliates
and successors in interest a number of Convertible Preferred Shares equal
to the
number of Convertible Preferred Shares subscribed for in the Rights Offering
and
the Purchaser and its affiliates and successors in interest will retain
the
balance.
In
addition, the Securities Purchase Agreement provides that, if the Purchaser,
together with its affiliates and successors in interest, retain at least
50% of
the Convertible Preferred Shares purchased at the Closing immediately following
completion of the Rights Offering and the associated redemption of Convertible
Preferred Shares then held by Purchaser and its Affiliates and successors
in
interest (the Convertible Preferred Shares so retained, the "Retained Shares"),
then from and after the date of completion of the Rights Offering for so
long as
the Purchaser, together with its Affiliates and successors in interest,
collectively owns at least 50% of the Retained Shares, the Company will,
subject
to and in accordance with the provisions of the Company’s Trust Agreement,
Delaware law and the rules of the New York Stock Exchange the “NYSE”), acting
through the Board, consistent with and subject to their duties under Delaware
law and the Company's Trust Agreement, take all actions necessary to cause
the
nomination by the Board of one representative, designated by the Purchaser
(the
"Designee") for election by the holders of Common Shares and any other
shares
entitled to vote with the Common Shares of the Company in the election
of
trustees to the Board; provided, that, such Designee qualifies as "Independent"
in accordance with applicable listing standards of the NYSE and that in
addition
the Board has affirmatively determined that such Designee had no material
relationship with the Company or its affiliates or any member of the senior
management of the Company or his or her affiliates.
Pursuant
to the terms of the Purchaser’s operating agreement, its investment decisions
must be approved unanimously by a committee of three persons, currently
consisting of Stephen M. Ross, Jeff T. Blau and Bruce A. Beal,
Jr. The Purchaser is managed by The Related Realty Group, Inc., which
is wholly owned by Stephen M. Ross. Mr. Ross is a Managing Trustee of
the Company and the Non-Executive Chairman of the Board. Mr. Blau is
a Managing Trustee of the Company. In addition, each of Messrs.
Ross, Blau and Beal are affiliates of The Related Companies, L.P., which
is a
significant stockholder of the Company.
A
copy of
the Securities Purchase Agreement is filed herewith as Exhibit 10.1. The
brief
description of the terms and conditions of the Securities Purchase Agreement
in
this Item 1.01 is qualified in its entirety by the terms of the Securities
Purchase Agreement.
Registration
Rights Agreement
On
January 25, 2008, the Company and the Purchaser entered into a Registration
Rights Agreement (the “Registration Rights Agreement”). Pursuant to
the Registration Rights Agreement, the Company agreed, subject to certain
exceptions, to file not later than 90 days after January 25, 2008, a shelf
registration statement (the “Shelf Registration Statement”) registering the
Convertible Preferred Shares sold to Purchaser and the Common Shares into
which
those Convertible Preferred Shares convert (the “Registrable Securities”) under
the Securities Act of 1933 (the “Securities Act”). The Company has
also has agreed to use commercially reasonable efforts to keep the Shelf
Registration Statement continuously effective under the Securities Act
for a
period expiring on the date on which all of the Registrable Securities
covered
by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement or the holders of the Registrable Securities are
eligible
to sell such Registrable Securities pursuant to Rule 144(k) promulgated
under
the Securities Act.
In
addition, if the Company proposes to file certain registration statements
under
the Securities Act in connection with an underwritten offering solely by
selling
shareholders of Common Shares for cash, the holders of Registrable Securities
are entitled to notice of the proposed registration and, subject to certain
exceptions, to include their Registrable Securities in the registration
statement.
The
Company is generally required to pay all of the expenses in connection
with the
registration of Registrable Securities, other than underwriting discounts
and
commissions and taxes of any kind.
A
copy of
the Registration Rights Agreement is filed herewith as Exhibit 4.1. The
brief
description of the terms and conditions of the Registration Rights Agreement
in
this Item 1.01 is qualified in its entirety by the terms of the Registration
Rights Agreement.
Item 2.03.
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance
Sheet Arrangement of a Registrant.
Pursuant
to the Securities Purchase Agreement and the Certificate of Designation,
each
referenced in Item 1.01 of this Form 8-K, the Company has an obligation to
redeem from the Purchaser a number of Convertible Preferred Shares equal
to that
number of shares that are subscribed for in the Rights
Offering. In
addition, the Company is obligated to redeem any Convertible Preferred
Shares
that are then still outstanding on January 25, 2018. The information in
Item 1.01 of this Form 8-K is incorporated herein by reference.
Item
3.02 Unregistered Sales of
Equity Securities.
On January 25, 2008, the Company and the Purchaser entered into the Securities
Purchase Agreement for the issuance and sale of $131,234,548 aggregate
principal
amount of the Convertible Preferred Shares at a purchase price of 11.70
per
share.
The Closing occurred on January 25, 2008. The Convertible Preferred Shares
have
a liquidation preference of $11.70 per share and a conversion price of
$10.75
per share. The Convertible Preferred Shares will pay cash distributions
initially at a rate of 11% per annum, subject to declaration by the
Board.
Additional information pertaining to the Convertible Preferred Shares
and the
Closing is contained in Items 1.01, 2.03 and 3.03 of this Current Report
and is
incorporated herein by reference.
The Company offered and sold the Convertible Preferred Shares to the
Purchaser
in reliance upon the exemption from registration provided by Section
4(2) of the
Securities Act.
The Convertible Preferred Shares and the underlying Common Shares issuable
upon
conversion of the Convertible Preferred Shares have not been registered
under
the Securities Act and may not be offered or sold in the United States
absent
registration or an applicable exemption from registration requirements.
This
Current Report does not constitute an offer to sell, or a solicitation
of an
offer to buy, any security and shall not constitute an offer, solicitation
or
sale in any jurisdiction in which such offering would be unlawful.
Item 3.03.
Material Modification
to Rights of Security Holders.
The
following is a summary description of the powers, preferences and rights
of the
Convertible Preferred Shares and the general effect of the issuance of
such
shares on the Company’s other classes of securities. This description is a
summary and, as such, does not purport to be complete and is subject to,
and is
qualified in its entirety, by reference to all of the terms and conditions
of
the Convertible Preferred Shares in the related Certificate of Designation,
which is filed as Exhibit 3.1 hereto. Capitalized terms used herein,
but not otherwise defined herein, shall have the meanings assigned to them
in
the Certificate of Designation.
Holders
of the Convertible Preferred Shares shall be entitled to receive, when,
as and
if, declared by our board of trustees, out of funds legally available for
the
payment of distributions, cumulative preferential cash distributions at
the
annual rate of 11.0% (equivalent initially to $1.287 per share per year),
as may
be adjusted as described in the next paragraph, based on the initial liquidation
amount of $11.70 per share. Distributions on the Convertible
Preferred Shares shall be cumulative from the date of original issuance
and
shall be payable quarterly in arrears on January 31, April 30, July 31
and
October 31 of each year, commencing April 30, 2008, and any accumulated
and
unpaid distribution will be added to the liquidation preference on each
distribution payment date if not declared and paid in cash on such distribution
payment date, such that such accumulated and unpaid distributions will
effectively compound each quarter, or, provided, however, in each case,
if not a
business day, the next succeeding business day in respect of the immediately
preceding calendar quarter ending December 31, March 31, June 30 and September
30, respectively. The initial distribution and any distribution
payable on the Convertible Preferred Shares for any other partial distribution
period will be prorated for the period of time the Convertible Preferred
Shares
are outstanding during the applicable period.
If
we
fail to pay the redemption price on any redemption date, then the dividend
rate
shall increase commencing on such redemption date on the Convertible Preferred
Shares by 4.00% until such date that the redemption price is paid or funds
sufficient for the payment of such redemption price are irrevocably deposited
in
trust by us.
The
Convertible Preferred Shares contain limitations on our ability to pay
distributions on our shares ranking, as to the payment of distributions
or
rights upon our liquidation, dissolution or winding up, on a parity with
or
junior to the Convertible Preferred Shares, including our Common Shares,
for any
period unless full cumulative distributions have been or contemporaneously
are
declared and paid, or declared and a sum sufficient for the payment thereof
irrevocably set apart for such payment on the Convertible Preferred Shares
for
all past distribution periods and the then current distribution
period.
In
the
event of our voluntary or involuntary liquidation, dissolution or winding
up,
which we refer to collectively, as a liquidation, the holders of the Convertible
Preferred Shares will be entitled to receive out of our assets that are
legally
available for distribution to shareholders remaining after payment or provision
for payment of all of our debts and other liabilities, subject to the rights
of any equity securities ranking on a parity with or senior to the
Convertible Preferred Shares and the then existing further liabilities,
a
liquidation preference initially equal to $11.70 per share, plus an amount
equal
to any accumulated and unpaid distributions not otherwise included in the
liquidation preference to the date of payment, before any distribution
of assets
is made to holders of any of our shares ranking, as to the distribution
of
assets upon our liquidation, junior to the Convertible Preferred
Shares. After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of Convertible Preferred
Shares will have no right or claim to any of our remaining assets.
If,
upon
our liquidation, our assets are insufficient to make the full payment due
to
holders of the Convertible Preferred Shares and the corresponding amounts
payable on all other preferred shares ranking, as to the distribution of
assets
upon our liquidation, on a parity with the Convertible Preferred Shares,
then
the holders of the Convertible Preferred Shares and all other such preferred
shares shall share ratably in any such distribution of assets in proportion
to
the full liquidating distributions to which they would otherwise be respectively
entitled.
Except
as
provided below, the Convertible Preferred Shares are not redeemable by
us at any
time prior to January 25, 2018, the final redemption date. Unless
previously redeemed or converted as herein provided, we will redeem all
Convertible Preferred Shares then outstanding at a per share amount equal
to
100% of the liquidation preference plus an amount equal to any accumulated
and
unpaid distributions not included in the liquidation preference to, but
excluding, the final redemption date.
The
Convertible Preferred Shares are redeemable in whole or from time to time
in
part, at our option, for cash at a price equal to 100% of the liquidation
preference, plus any accumulated and unpaid distributions not included
in the
liquidation preference to the redemption date at any time on or after January
31, 2013; provided that (A) the closing sale price of the Common Shares
multiplied by the conversion rate then in effect equals or exceeds 130%
of the
liquidation preference plus an amount equal to any accumulated and unpaid
distributions not included in the liquidation preference for 20 trading
days
during any 30 consecutive trading day period ending after January 31, 2013
and
(B) we have paid all accumulated and unpaid distributions on the distribution
payment date immediately preceding such redemption date.
If
a
fundamental change (as defined below) occurs at any time prior to the final
redemption date, then each holder of Convertible Preferred Shares shall
have the
right, at such holder’s option, to require us to repurchase all of such holder’s
Convertible Preferred Shares, or any portion thereof, for cash on a date
designated by us, which we refer to as the fundamental change repurchase
date,
that is not less than twenty (20) nor more than thirty (30) days after
the date
notice is given in respect of such fundamental change at a repurchase price
per
share equal to 100% of the liquidation preference of the Convertible Preferred
Shares to be repurchased, plus an amount equal to any accumulated and unpaid
distributions not included in the liquidation preference up to, but excluding,
the fundamental change repurchase date.
A
fundamental change means the occurrence of any of the following: (A) the
sale,
lease or transfer, in one or a series of related transactions, of all or
substantially all of our assets, determined on a consolidated basis, to
any
person or group (as such term is used in Section 13(d)(3) of the Exchange
Act of
1934 (the “Exchange Act”)), (B) the adoption of a plan the consummation of which
would result in our liquidation or dissolution, (C) the acquisition, directly
or
indirectly, by any person or group (as such term is used in Section 13(d)(3)
of
the Exchange Act), of beneficial ownership (as defined in Rule 13d-3 under
the
Exchange Act) of more than 50% of the aggregate voting power of our voting
shares, (D) during any period of two consecutive years, individuals who
at the
beginning of such period comprised the board of trustees, together with
any new
trustees whose election by such board of trustees or whose nomination for
election by the shareholders was approved by a vote of 66 2⁄3% of our trustees
then still in office who were either trustees at the beginning of such
period or
whose election or nomination for election was previously so approved, cease
for
any reason to constitute a majority of the board of trustees then in office,
or
(E) the Common Shares cease to be listed on a national securities exchange
or
quoted on an over-the-counter market in the United States.
To
the
extent not prohibited by the rules of the NYSE and any other national or
regional securities exchange or system of automated dissemination of quotation
of securities prices in the United States on which the Common Shares are
then
traded or quoted, the Convertible Preferred Shares shall be entitled to
vote
together with the holders of Common Shares as a single class, together
with any
other securities issued by us that are entitled to vote together with the
Common
Shares with respect to the matter to be voted upon, on all matters that
holders
of Common Shares are entitled to vote upon, with each Convertible Preferred
Share entitled to such number of votes as are equal to the number of whole
Common Shares such Convertible Preferred Share would be convertible into
as of
the record date for any such vote of Common Shares regardless of whether
the
Convertible Preferred Shares are then so convertible.
Whenever
(i) distributions on any Convertible Preferred Shares are in arrears for
six or
more consecutive quarterly periods or (ii) we fail to pay the redemption
price
on any redemption date, in each case, subject to the provisions of and
in
accordance with the company’s Trust Agreement, the holders of a majority in
interest of the Convertible Preferred Shares and the holders of any other
parity
preferred shares upon which like voting rights have been conferred and
are
exercisable, including, but not limited to, our 4.4% cumulative perpetual
convertible CRA shares, if applicable, voting together as a single class
with
all other parity preferred shares upon which like voting rights have been
conferred and are exercisable, will be entitled to nominate and elect two
trustees to our board of trustees for a one-year term.
So
long
as any Convertible Preferred Shares remain outstanding, we may not, without
the
affirmative vote or consent of the holders of at least a majority of Convertible
Preferred Shares outstanding at the time, given in person or by proxy,
either in
writing or at a meeting, (i) authorize or create, or increase the authorized
or
issued amount of, any class or series of our shares ranking, with respect
to the
payment of distributions or rights upon our liquidation, dissolution or
winding
up, senior to the Convertible Preferred Shares, or reclassify any authorized
shares into such shares, or create, authorize or issue any obligation or
security convertible or exchangeable into or evidencing the right to purchase
any such shares or (ii) amend, alter or repeal the provisions of our trust
agreement or the Convertible Preferred Shares, whether by merger or
consolidation, which we refer to as an event, or otherwise, so as to materially
and adversely affect any right, preference, privilege or voting power of
such
Convertible Preferred Shares or the holders thereof.
So
long
as any Convertible Preferred Shares remain outstanding, we may not, without
the
affirmative vote or consent of the holders of at least a majority of Convertible
Preferred Shares outstanding at the time, given in person or by proxy,
either in
writing or at a meeting, incur any indebtedness or issue any capital stock,
the
incurrence or issuance of which would cause a default in the “Consolidated
EBITDA to Fixed Charges Ratio” covenant contained in Section 10.15 of the
Revolving Credit and Term Loan Agreement, dated as of December 27, 2007,
by and
among us and Centerline Capital Group Inc., as borrowers named therein,
and
certain entities named therein as guarantors, Bank of America, N.A. and
other
entities party thereto from time to time as lenders, and Bank of America,
N.A.,
as swingline lender and as administrative agent on behalf of the lenders,
as the
same may be amended from time to time, assuming for purposes of this paragraph
that the ratio of consolidated EBITDA (as defined in the credit agreement)
to
fixed charges (as defined in the credit agreement) required to be maintained
is
measured for the period of the last 12 months then ending and is required
to be
equal to or greater than 1.5 to 1.0.
To
the
extent permitted by the rules of the NYSE and any other national or regional
securities exchange or system of automated dissemination of quotation of
securities prices in the United States on which the Common Shares are then
traded or quoted and upon compliance with the provisions of the Certificate
of
Designations, the Convertible Preferred Shares may be converted into Common
Shares at the option of the holders of the Convertible Preferred Shares
in whole
or in part at any time initially at a conversion rate per $11.70 liquidation
preference equal to 1.0884, which we refer to as the conversion rate
(representing the quotient of 1.0884 obtained by dividing $11.70 by $10.75),
which is equivalent to an initial conversion price of $10.75 per Common
Share
(subject to adjustment in accordance with the provisions of the Certificate
of
Designations).
The
conversion price is subject to adjustment upon the occurrence of any of
the
following events: (i) the payment of distributions payable in Common
Shares on any class or series of our shares or other similar event; (ii)
the
issuance to all holders of Common Shares of certain rights or warrants
entitling
them to subscribe for or purchase our Common Shares (or securities convertible
into or exchangeable for Common Shares) at a price per share (or having
a
conversion, exchange or exercise price per share) less than the average
of the
closing sales prices of a Common Share on the NYSE or any other national
or
regional securities exchange or other over the counter market in the United
States on which the Common Shares are then traded or quoted on the ten
trading
days immediately preceding the date of the announcement by public notice
of such
issuance or distribution; (iii) subdivisions, combinations, reclassifications
or
splits of our Common Shares into a greater number of Common Shares; (iv)
distributions to all or substantially all holders of its outstanding Common
Shares, including any such distribution made in connection with a consolidation
or merger in which we are the continuing company and the Common Shares
are not
changed or exchanged), capital stock, evidences of indebtedness or other
assets,
including securities, including capital stock of any subsidiary of us,
but
excluding dividends or distributions referred to in (i) or (ii) above,
dividends
and distributions paid exclusively in cash and dividends and distributions
of
securities or other property or assets that are dealt with in the next
paragraph; and (v) cash distributions, other than distributions in connection
with our liquidation, dissolution or winding up, distributions on the 4.4%
cumulative perpetual convertible CRA shares or other preferred shares,
ordinary
course distributions or quarterly distributions consisting exclusively
of cash
to all holders of Common Shares equal to or less than $0.15 per share,
subject
to adjustment for subdivisions, combinations, reclassifications or splits
of our
Common Shares.
In
case
we shall be a party to any transaction, including, without limitation,
a merger,
consolidation, statutory share exchange, tender offer for all or substantially
all of our Common Shares or sale of all or substantially all of our assets,
in
each case as a result of which our Common Shares will be converted into
the
right to receive securities or other property, including cash or any combination
thereof, each convertible preferred share, if any Convertible Preferred
Shares
thereafter remain outstanding and are convertible after the consummation
of the
transaction, will thereafter be convertible into the kind and amount of
shares
or other securities and property, including cash or any combination thereof,
receivable upon the consummation of such transaction by a holder of that
number
of Common Shares or fraction thereof into which one Convertible Preferred
Share
was convertible immediately prior to such transaction, assuming such holder
of
Common Shares failed to exercise any rights of election to convert, provided
that if the kind and amount of stock or beneficial interest, securities
and
other property so receivable is not the same for each non-electing share,
the
kind and amount so receivable by each non-electing share shall be deemed
to be
the kind and amount received per share by a plurality of non-electing
shares). We may not become a party to any such transaction unless the
terms thereof are consistent with the foregoing.
If,
and
only to the extent a holder of Convertible Preferred Shares elects to convert
its Convertible Preferred Shares in connection to a Fundamental Change,
we will
increase the Conversion Rate applicable to shares that are surrendered
for
conversion based on the share price of our Common Shares at the time of
such
Fundamental Change. There will be no such increase if the share price
is greater than $25.00 or less than $10.27 per share (such per share amounts
to
be subject to adjustment in certain circumstances).
Item 5.03.
Amendments to Articles
of Incorporation or Bylaws; Change in Fiscal Year.
On
January 17, 2008, the Board duly
adopted resolutions
providing for adoption of the Certificate of Designation creating
the
Convertible Preferred Shares described in Item 1.01 of this Form
8-K. The information contained in Item 3.03 of this Form 8-K is
incorporated herein by reference. The Certificate of Designation is
filed as Exhibit 3.1 to this Form 8-K and is incorporated herein by
reference.
Item 8.01.
Other
Events.
On
January 25, 2008, the Company issued
a press release announcing the Closing of the sale of the $131.2 million
Convertible Preferred Shares to the Purchaser. The Company also announced
the
terms of the previously disclosed Rights Offering regarding the Convertible
Preferred Shares at the same purchase price paid by the Purchaser. The
Company’s
press release is attached hereto as Exhibit 99.1 and is incorporated herein
by reference.